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Netflix: An Industry Revolution

Netflix: An Industry Revolution. Group 2: Kevin Lehman Lori Miller Barbara Mitchell Wes Morris. Agenda. Netflix History Strategy Triangle Competitive Advantage Blockbusters failure Redbox’s Success Core Competencies Effects of VOD Partnerships to Prioritze

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Netflix: An Industry Revolution

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  1. Netflix: An Industry Revolution Group 2: Kevin Lehman Lori Miller Barbara Mitchell Wes Morris

  2. Agenda • Netflix History • Strategy Triangle • Competitive Advantage • Blockbusters failure • Redbox’s Success • Core Competencies • Effects of VOD • Partnerships to Prioritze • Recommendations to Management

  3. Netflix History • Est. 1997 • Initially a rental-by-mail service • April 2013-36.3 million subscribers • Competition: • Initially Blockbusters • Also Amazon & Wal-mart • Now some from Redbox • Uses big data to personalize customer experiences • Video streaming began in 2007

  4. Business Strategy Differentiation from traditional video rental stores Focus on customer preferences Netflix: Strategy Triangle Organizational Strategy Selection: greater diversity across genres; fewer mainstream titles Convenience: DVDs mailed; films kept indefinitely Price: subscription fee; late fees already included Leaner Operations: no brick-&-mortar stores; smaller inventories; lower costs Big Data: predict customers’ preferences; data mining IS/IT Strategy Cinematch software: rating exercise Internet video streaming Mobile devices

  5. Competitive Advantage • Differentiation • Movie Selection • Wider selection of genres • New & old movies • Convenience • No late fees • Keep movies as long as needed • Revenue Model • Membership fees, monthly • Lean Operations • Low operation costs • Minimal Inventory • No Brick-and-Mortar location • Customer Preferences • Uses Big Data to personalize • Cinematch algorithm • Development of own series • Able to promote with little advertising

  6. Where did Blockbuster Fail? • Flexibility • Return Dates • Very strict, customers could not hold movie as long as need be • Inventory • Customer choice was limited to what was on hand in the store • Mailing service never fully integratedwith the brick-and-mortar stores • Blockbuster should have: • Focused on customer preference • Could have used big data to do so • Focused on technological advances • Developed subscrition models to rival Netflix • Integrate fully with brick-and-mortar stores

  7. How is Redbox Succeeding? • Rentals available faster • 30 to 45 days • Beats even Amazon’s availability • Pricing • Only charges $1.20/day compared to $3.99 or more per day • No extra fees for 4 days, except that $1.20/day charge • Expanded quickly with more locations • Targeted supermarkets and gas stations • Customers want the newest movies fastest

  8. Core Competencies of Netflix • Understanding customer preferences • Data mining • Early success with Big Data • Used information to cultivate studio relationships • Information gathered was valuable to entertainment supplier’s

  9. The Effect of VOD on Netflix Effects Potential Competitive Advantages • Instant access to millions of shows • Consumers able to switch viewing on a dime • No delay time • Netflix split • Qwikster for DVD, Netflix for streaming • Not accepted by subscribers • Didn’t want two bills • Netflix must look to value innovation • Competitive advantages • Customer Preference Target • Ease of use & directed marketing based on previous interests • Able to give customers what they want • Platform availability • VOD can easily transfer to any of the current Netflix platforms • Xbox, PlayStation, internet • Challenges: • Availability of New releases • TV shows and movies alike • Amazon does night after TV shows for $.99

  10. Partnerships to Prioritize • Develop and Prioritize: • Content providers • Continue to create own shows • VOD suppliers • Many Netflix subscriptions are supplemented with Redbox, Amazon, or Hulu • Netflix should work to get new releases faster from TV companies • Maintain: • Hardware and device manufactures • Kindle, Apple, Wii, Xbox, Android, PS3, and many others

  11. Recommendations to Management • Increase Convenience • Adapt to and embrace VOD • Add to Video Streaming selection • Hurt when lost contract with Starz • Responded by creating and marketing Netflix only shows • Used Big Data to determine who would be interested • Success! • Pricing • Changed policy in 2011 • Should offer bundles and more simultaneous users • Continue with Big Data and Cinematch • Enhance focus on customer preferences and needs

  12. Questions? Thank you for your time

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