For two decades, Netflix has been the leader at providing quality at-home entert

Question

For two decades, Netflix has been the leader at providing quality at-home entertainment for reasonable prices. Starting as a mail-order DVD rental service and transitioning with the times and technology to an online streaming service, Netflix has always offered hours of programming each month for less than the cost of a date night at the movies. In 2011 and just a few months after a price increase, Netflix announced plans to focus solely on their streaming business and to shift DVD rentals to a new business called Qwikster. Customers were upset about the change to their user experience (they would have to use separate websites, requiring separate logins for streaming and DVD rental) and a perceived change in price. (The two separate services did cost the same as the combined services offered by Netflix, but they appeared as two transactions on credit card statements.) Amid vocal customer outrage and a four percent loss in subscriptions, Netflix quickly reversed this decision. "Consumers value the simplicity Netflix has always offered and we respect that," Netflix co-founder and CEO Reed Hastings said. "There is a difference between moving quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case." While Netflix has further separated their disc rental and streaming services over the years, the company does continue to offer both. However, many customers are no longer even aware that they can still rent discs. A 1-disc plan is $7.99/month for DVDs and $9.99/month for Blu-rays. A 2-disc plan is $11.99/month for DVDs and $14.99/month for Blu-rays. A 3-disc plan is $14.99/month for DVDs and $19.99/month for Blu-rays, and the limited plan of 2 discs/month is $4.99 for DVDs and $5.99 for Blu-rays. In May 2014, Netflix was in the headlines again when it announced it would be increasing the price for its streaming services from $7.99 to $8.99. Established customers would continue at the $7.99 price for two years after the announcement, but all new customers would enter at the increased rate. With the two-year window, Netflix subscriptions continued to grow. Then in October 2015, another announcement. The price for new users would be increasing to $9.99. This change still didn’t impact existing subscribers. A few months before May 2016, Netflix emailed customers to remind them of the notification from two years prior. Many did not recall and saw this as another price increase. Netflix encouraged customers to check their account settings page, where plan details clearly stated how long a customer’s established price was guaranteed. By viewing their account settings and seeing their selected plan, customers were reminded that not only did Netflix still have disc plans available, but they had streaming options to select from if they did not want to pay $9.99/month for the standard service. Basic streaming is $7.99/month and allows for standard-definition streaming on one screen at a time. Standard streaming is $9.99 per month and allows for high-definition streaming on two screens at a time. Premium streaming is $11.99 per month and allows for high-definition and ultra-high-definition streaming on four screens at a time. Netflix has recognized that their subscribers have a variety of needs, sometimes share their plans with friends and family, and may need lower price options available as the standard service price rises. Since the May 2016 price increase went into effect, Netflix has not made mention of any additional pricing changes, but they may not be out of the question. A survey conducted by TiVo’s Digitalsmiths United reported that 21 percent of Netflix customers would be willing to pay at least $16/month for the service. While Netflix did not reach their 2.5 million new customer goal after it announced the price increase, they were able to generate $520 million in increased revenue. (They added 1.7 million new customers, a little over half of their goal.) So as they plan for future business decisions, Netflix will have to weigh the pros and cons of additional price increases. Sources: B. Katz, “Will Netflix customers see another price increase in near future?,” Forbes, August 31, 2016, accessed October 24, 2016, http://www.forbes.com/sites/brandonkatz/2016/08/31/will-netflix-customers-see-another-price-increase-in-near-future/#16a22806818c (Links to an external site.)Links to an external site.; C. Welch, “Netflix’s longtime customers will stay paying $9.99 per month in May,” The Verge, April 11, 2016, accessed October 24, 2016, http://www.theverge.com/2016/4/11/11410590/netflix-price-increase-hits-longtime-customers-may (Links to an external site.)Links to an external site.; L. Burruss, “Netflix abandons plan for Qwikster DVD service,” CNN Money, October 10, 2011, accessed October 24, 2016, http://money.cnn.com/2011/10/10/technology/netflix_qwikster/ (Links to an external site.)Links to an external site.; R. Grozanick, “How much does Netflix cost these days? Here’s the lowdown,” Digital Trends, May 14, 2016, accessed October 24, 2016, http://www.digitaltrends.com/movies/netflix-cost-pricing-plan-breakdown/ (Links to an external site.)Links to an external site.. Case Analysis Question Competition varies during the product life cycle, of course, and so at times it may strongly affect pricing decisions. Although a firm may not have any competition at first, the high prices it charges may eventually induce another firm to enter the market. Explain the stages of the product life cycle for Netflix and how pricing changed with each stage and the cycle. Include competition in your explanation.

Explanation / Answer

In 1997 when Netflix was introduced to the market it became a sensational success. Very first time some service was providing rental DVDs over the post in which a customer doesn't have to move from the couches to get the DVDs at their home.
There was a very large involvement of the video stores during definition growth of Netflix. Netflix ended that growth of the stores by providing services to the customers at the doorstep. Later Netflix launched its internet-based subscription service in 1999 and provide a huge number of movies to its customers. The specific change in the strategy of Netflix made him the undoubted king of the industry.

Blockbuster was the initiator of the rental service in the America. But blockbuster never replied new technology to its organisational structure. This specific mistake lead blockbuster to bankruptcy. Blockbuster had it stores all over the America which was very famous for distributing DVD and also had the bending machines which were overcome by the Netflix new technologies and web based streaming.
Major environment shift was shifting from the store based rental system to online Internet based rental system which benefited the Netflix for getting better viewership over the blockbuster.Later blockbuster filed for the bankruptcy which made Netflix a leader in the industry.

According to the McGahan model if a company is going through and industrial change environment then it should also change in the same way otherwise it will go bankrupt. It is obvious to change the company is overall strategies as well as technological advancement according to the market. If a company doesn't see the upcoming clues and arise that the fall conclusions for all the time then the overall loss of the company is very big. Same thing happened with Netflix, when industry was shifting towards the Internet Netflix went with the flow and chose to shifting with the Internet which lead it to be a market leader.

As Netflix enter the market they have successfully gain subscribers by using the escalation to the commitment technique. After they have been the specific market with using the same technique, believe that backing by the name of the Netflix Quickter would also gain the same profit and become an identity in the media world. Online content named The quickster failed drastically people wasn't able to related to the Netflix authentic name.
Group thinking played an important role in deciding this is specific name for the company subsidiary. Name company directly separated itself from the mainstream and the people's mind. A different name people wouldn't be able to relate this to the Netflix quality content. Thinking let this is specific idea to run for several months and which directly result it did Netflix to lose it valuable customers. After losing the valuable customers Netflix got a direct hit by 8 million subscribers. As the company was hit by a great margin top management decided to shut down the specific initiative and revert back netflix original identity.
Netflix leadership team has define their overall decision after discussing it towards the top management as well as looking at the statistics of the previous success of sticking to escalation of the commitment technique. By giving in priority to the escalation of the commitment, netflix has successfully grown its business previously. What is the current time the Marketplace has changed and the leadership team of that Netflix stored at the traditional method of their thinking and got a big surprise from the subscribers.
Blue thinking played an important role in decision making for the specific job. Group thinking lead the overall campaign to a disastrous position where it was very hard to come back but the companies with name helped in reviving it back to the situation of being profitable.
In 1997 when Netflix was introduced to the market it became a sensational success. Very first time some service was providing rental DVDs over the post in which a customer doesn't have to move from the couches to get the DVDs at their home.
There was a very large involvement of the video stores during definition growth of Netflix. Netflix ended that growth of the stores by providing services to the customers at the doorstep. Later Netflix launched its internet-based subscription service in 1999 and provide a huge number of movies to its customers. The specific change in the strategy of Netflix made him the undoubted king of the industry.
Netflix is one of the best companies available in the market which provide entertainment services directly to your home.

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