CASE #3 Rewind and Replay There\'s no doubt that people like to watch movies, bu
ID: 1131022 • Letter: C
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CASE #3 Rewind and Replay There's no doubt that people like to watch movies, but how they watch those movies has changed. Although many people that Blockbuster probably wasn't going to launch a competitive still prefer going to an actual movie theater, more and more are settling back in their easy chairs in front of home entertainment systems, especially now that technology has improved to the point where those systems are affordable and offer many of the hought... well they won't put much money behind it. We t Over the past four years, they've invested more than $500 million Blockbuster (it filed for against us." Not wanting to suffer the same fate as bankruptcy protection in 2010 and was same features as those found in movie theaters. Along with the sold to Satelite TV service provider DISH Network in 2011), Netflix is brac defending his misguided decisions in 2011 said, "We did so many difficult things this year that we got overconfident. Our ng for other onslaughts. In fact, CEO Hastings, changes in where people watch movies, how people get those movies has changed. For many, the weekend with defending his a trip to the video rental store to search the racks for something good to watch, an approach Blockbuster built its business on.big obsession for the year was streaming d used to start with s consumers can choose a movie by going to their com not die with DVDs. site The in-home filmed entertainment industry is intensely com- where the movies come to the customers-a model invented petitive and continually changing Many customers have multiple providers (e.g. HBO, renting a DVD from Red Box, buying a streaming a movie from providers such as Hulu, Apple Launched in 1999, Netflix's subscriber base grew rapidly. DVD, s t now has more than 24.4 million subscribers and more and Amazon) and may use any or all of than 100,000 movie titles from which to choose. "The com- pany's appeal and success are built on providing the most extremely competitive expansive selection of DVDs, an easy way to choose movies, same month. Video-on-demand and streaming are becoming To counter such competitive challenges, Hastings is focus- ing the company's competitive strengths on a select number of ocused on it. DVD is going to do whatever it's going to do. We don't want d fast, free delivery." A company milestone was re ached in late February 2007, when Netfix delivered its one bil initiatives. He says, "Streaming is the future; we're f lionth DVD, a goal that took abou t seven-and-a-half years to accomplish "about seven months less than it took to hurt it, but we're not putting much time or energy into it. s Corporation to sell one billion hamburgers after Others include continually developing profitable partnerships with content providers, controlling the cost of streaming con- in the tent, and even licensing its original series. In fact, it just licensed h he pioneered and set some ambitious goals for his its first original series called "House of Cards" and starring Kevin t Internet movie service and Spacey With other companies hoping to get established in the . Does Netflix have the script it needs to be a dominant player? CEO Hastings says, "If its true loudly. Netflix's troubles began when it announced that you should be judged by the quality of your competitors, we ope Netfix founder and CEO Reed Hastings believed company: build the world's best service and grow earnings per share (EPS) and subscribers every year. In 2011, though, Hastings made a decision that had customers market, the competition is intense separate prices for its DVDs-by-mail and must be doing pretty well. it would charge streaming video plans. Then, it decided to rebrand its DVD ser- vice as Qwikster. Customers raged so much that Netflix reversed that decision and pulled the plug on the entire Qwikster plan. As 1. Describe what you think Netflox's competitive strategy is using Miles and Snow's and Porter's frameworks. Explain ix regained its focus with customers, it was once again ady to refocus on its competitors Success ultimately attracts competition. Other businesses 2. What competitive advantages) do you think Netflix has? Have its resources, capabilities, or core competencies con- want a piece of the market. Trying to gain an edge in how cus- omers get the movies they want, when and where they want ributed to its competitive advantage(s)? Explain. did to Blockbuster, Blockbuster and other competitors are do- ing to Netflix. Hastings said he has learned never to underes timate the competition. He says, "We erroneously concluded them, has led to an all-out competitive war. Now, what Netflix 3. How will Netflix's functional strategies have to support its competitive strategy? Explain. 4. What do you think Netfix is going to have to do to maintain its competitive position, especially as its industry changes?Explanation / Answer
Answer 1. According to Raymond Miles and Charles Snow’s strategy a firm can choose to be a Prospector, Defender, Analyzer or Reactor. In the case of Netflix the company was the first to come up with an idea where people can subscribe online and can get the DVD’s at their door step. This removed the early hassle of going to the DVD store and looking for movies from the shelves and then finally coming out with a good movie. Netflix has also this system where people can search for their movies in the search bar and can also watch it online at the comfort of their home. Thus, the strategy they followed is of Prospector. As in case of a Prospector the firm has to come up with innovative ideas and to grab all the available opportunities. Also the risk involved in this strategy is high as there is no test of strategy conducted by any other firm. Another risk that may be there is of other firms imitating the same strategy. According to the porter’s four strategy of cost leadership, differentiation, focus and differentiation focus, the company is following the differentiation strategy as it is providing the same services but in some different way in which it is convenient for the customers thus, giving them the competitive edge over other firms.
Answer 2. The competitive strategies are those that gives the firm a competitive edge over all the other firms in the market and thus putting that respective firm In the league of leaders. Netflix being the first company to come up with an idea of watching movies online gave the firm a competitive edge also the services that it provided was much better than the other firms who were selling the DVD’s in the stores. The resources that Netflix has is the internet and a hard working staff who is working round the clock to provide and uninterrupted services to the customers. The core competency of Netflix is of providing movies on demand at a reasonable cost and so that people who don’t have time to go to the cinemas can watch movies online at the leisure of their home.
Answer 3. Functional strategies refer to the strategies of each and every function of the organisation like human resources, marketing, accounts etc. The funtional units of Netflix like the team who are responsible for maintaining the security over their website so that no data is leaked and the payments made by customers is made in a secure manner. Also the software and hardware team that helps in maintaining as well upgrading the Netflix website so that their customers get what they want and also their is an uninterrupted service.
Answer 4. Since the business in which Netflix operates is very dynamic and thus the firm must keep improving itself in order to stay ahead in competition. As Netflix was the first firm to come up with an idea to streaming movies online thus many other firms imitated such strategy and thus the market share is now divided into many such firms. So, Netflix must come up with such movie packages or more reasonable subscription as well as getting movie into their system before it comes into someone else's system. It must also offer discounts for people who subscribe for more nummber of months than their standard number of months. Such things might help Netflix in maintaing and improving their competitive position.
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