The dilemma which Netflix currently faces is to develop a strategy which will allow them to survive in this competitive industry. They must formulate a plan which allows them to achieve sustainable growth and protect their position in the DVD rental industry.
Analysis Industry The DVD rental industry is extremely fierce. DVD rental revenue is expected to be $9574 million by the end of 2006 (Thompson et al, C-66).
The market growth rate for the industry is steadily decreasing, expecting only 12% growth by the end of 2006 (Thompson et al, C-66).
The rivalry amongst sellers in the industry is deeply intense. Due to the innovative nature of the industry, increasing amounts of differentiation leads to greater amounts of competitors to enter the market, such as Blockbuster, Wal-Mart and Movielink. In turn, firms in other industries are offering substitute products which are taking away from Netflix’s subscription base.
Although Netflix has earned $359,947,000 revenue through subscriptions in 2004 (Thompson et al, C-69), the growth rate of DVD rental is slowly declining from 23% to an expected12% over a period of the next 2 years (Thompson et al, C-66).
The Term Paper on Hospitality Industry 5
“Oxford Dictionary defines hospitality as “receiving and hosting customers, visitors and strangers with cordiality and good reputation.” Receptors hospitality services perceive this service sector accompanied by food and friendly service good drink and familiar atmosphere. On the other hand, those who provide these services sometimes have the impression that, despite their ...
As new technology develops, consumers tend to embrace it. Technological change plays a vital role developing market trends. Competitors such as Movie Gallery have introduced Movies on Demand, which allow consumers to use a service called MovieBeam to transmit a digital-quality movie to a receiver, creating revenue of $692,395,000 in 2004 (Thompson et al, C-75).
Competitors in the industry have strategically been advancing their systems in order to distribute their services by any means possible which plays a huge role in the path to success.
Netflix Netflix aims at changing the way people access and view movies by setting a long term goal to acquire 5 million subscribers in the US in the next 4 to 7 years (Thompson et al, C-77).
Netflix has been doing extremely well in regards to their online subscriber base, acquiring over 2 million in just 4 years (Thompson et al, C-64).
The fact that they were pioneers of the online DVD rental industry helped develop a strong lead of customers, revenue, and brand recognition.
Financially, their goal is to keep prices low and generate profit, all the while maintaining industry leadership, and sustaining competitive advantage. They decreased their monthly subscription price from $21.99 to $17.99 (Thompson et al, C-78) which in return created a price war with Blockbuster who in retaliation reduced their prices to match it. Their lack of innovation, slowness in accommodating consumer tastes and their e-commerce capabilities are lacking. Based on the competitive strength analysis done in Appendix B, it was determined that Movielink was the most successful in the industry, with Netflix following closely behind. Netflix is looking to regain their competitive strength in the industry and yet again become industry leaders.
Recommendation In order for Netflix to sustain its competitive advantage the most important factor which they must attend to are the growing needs and preferences of consumers which are slowly changing as technology advances the industry. Technological change is fast paced and competition revolves around rapidly evolving product features.
The Essay on Sciology Federal Public Service Commission Competitive Examination
SOCIOLOGY FEDERAL PUBLIC SERVICE COMMISSION COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS IN BPS-17 UNDER THE FEDERAL GOVERNMENT, 2009 SOCIOLOGY TIME ALLOWED: NOTE: (i) (ii) (PART-I) 30 MINUTES (PART-II) 2 HOURS & 30 MINUTES MAXIMUM MARKS:20 MAXIMUM MARKS:80 Roll No. First attempt PART-I (MCQ) on separate Answer Sheet which shall be taken back after 30 minutes. Overwriting/cutting of the ...
It would be suggested that Netflix enhance their services to include options such as downloadable movies from their website and also extend their product line by adding additional services such as renting and/or downloading video games. Since only a few firms are following a similar differentiation approach, this move would allow Netflix to match services available by their competitors.
By providing consumers with all the possible services as other competitors in the industry, it would allow Netflix to sustain their competitive advantage and maintain industry leadership.
Reference: Thompson, Gamble & Strickland. Strategy Winning in the Marketplace. 2nd ed, McGraw-Hill, 2006
