Netflix
1. Blockbuster was able to create a strong position in the traditional video rental industry due to a couple of factors. It was initially based on the idea that “movie rentals were largely impulse decisions.” With this being the case, the assumption was that consumers would want the newest releases. In order to cater to this, Blockbuster grew quickly in order to expand geographically and to increase share in existing markets. The size of Blockbuster became its major source of advantage. By being the biggest player it could build a film library with enough copies to serve the public so that they would be able to find what they wanted. Even though the rise of DVD’s made it cheaper to obtain a library, revenue sharing made it mostly irrelevant. Blockbuster’s size and clout allowed it to secure more favorable terms that other stores, especially independents, could not match. The costs, though less for everyone, was even less for Blockbuster. The big chains, like Blockbuster, could now guarantee that a new movie was in stock because it could afford to purchase enough copies of a title. This pushed out competitors and left Blockbuster in the lead position. Although this mainly contributed in pushing out the independents. Also, the notion that Blockbuster could guarantee that new movies were going to be in stock was it source of differentiation. There was no reason to venture to another store if Blockbuster was assured to have it. Thus, by having low costs, pricing competitively because of those costs, and having a large library, Blockbuster was able to outperform its rivals. Since some of these items are also true of Hollywood Video, it is no surprise that that store is also still around. Though Blockbuster’s beginning size and clout allowed it to retain the lead position.
2. Netflix changed the rules of the game by changing how things were done. It wasn’t a physical store. It wasn’t beholden the inventories of particular stores. And, it wasn’t beholden to customer traffic the way that Blockbuster was. It could offer more movies more conveniently at a cheaper price point for consumers. These are its competitive advantages. The monthly fee is low enough that it isn’t hard to rent enough movies to make it cheaper than Blockbuster.
In 1985, Blockbuster opened its first store in Dallas, Texas. After the first few stores opened, founder David Cook built a six million dollar warehouse, which could pull and package multiple stores in a day. Blockbuster’s ability to customize a store to its neighborhood, loading it up with films geared specifically to demographic profiles in addition to the popular new releases, and a sizable collection of catalog titles. Blockbuster had instant success. In the early 1980’s and 1990’s Blockbuster put neighborhood mom and pop video stores out of business by offering better selection and convenience. However, success like that enjoyed by Blockbuster can foster arrogance. For Blockbuster, arrogance meant they believed they could do anything within their stores. For example, Blockbuster purchased Sound Music and Music Plus chains. This move took Blockbuster from movies to music. Secondly, this Blockbuster Music meant they were no longer renting now they were selling.
Blockbuster LLC is a video rental company that was founded in 1985 by David Cook. In 1986, Blockbuster went public and was sold to Viacom in 1994. Blockbuster was able to maintain high ratings through 1980s and 1990s, but as the millennium approached competition arose and Blockbuster’s market value began to decline.
Therefore, Netflix has fewer problems predicting revenue. ? Netflix enjoys lower fixed costs due to the fact that it is an online DVD rental company. As an internet business, Netflix incurs less overhead costs than competitors such as Blockbuster, as well as having fewer employees to operate the physical locations, thus labor costs are greatly reduced. ? Netflix gives customers unlimited access to the largest selection of DVDs. Netflix?s video library consists of over 45,000 titles, making their selection the worlds largest, beating out Blockbuster, Movie Gallery, and Hollywood Video. ?
As the firm moves forward, top managers must pay attention to staying unique to sustain a competitive advantage. Netflix does not own their content, nor do they have any tangible assets. Netflix is a part of a broad range of network users. As technology continues to grow exponentially, Netflix will have to be readily adaptive to change and innovation. Technology never stops growing and evolving, therefore, Netflix’s business platform should never stop growing and evolving. At the same time, they must be careful to remain user friendly and customer centric by keeping the technology at a level where users will not have to obtain a certain set of technological skill sets.
Gamble, J., & Thompson A. A. (2013). Redbox's Strategy in the Movie Rental Industry. In Essentials of strategic management: The quest for competitive advantage (pp. 295-303). New York, NY: McGraw-Hill/Irwin.
From its inception, Netflix has become a business based on superior customer service and has subscribed its business to the market marketing management philosophy. The main purpose behind Hasting’s idea of a better way to rent and enjoy movies was how to provide that service to their clients and not have any late fees. In other words, their customers could enjoy their rentals from Netflix for as long as they wanted, and they would never have to worry about late fees again, so long big movie rental chains! This aspect alone of Netflix’s marketing plan indicates that Netflix has based their marketing plan on market orientation, “a philosophy that assumes that a sale does not depend on an aggressive sales force but rather on a customer’s decision to purchase a product,” (Lamb, 2009, p.7). Many companies that take on this philosophy are said to implementing the market concept. The marketing concept states: “The idea that social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting orga...
As of 2015, Netflix is in 1/3 of American households, whereas Amazon Prime is only used by 13% of American Households. Moreover, when looking at market shares, Netflix has a 37% market share. In contrast, services such as Youtube have only 17% and Amazon has 4% market share (Fortune).
Blockbuster's origins date back to the mid 1980's when the video cassette recorder (VCR) was the new hype and families all over America were quickly turning to movie rentals as a form of in-home entertainment. David Cook, who previously started David P. Cook and Associates, Inc. to offer consulting and computer services, saw an opening in the quickly expanding movie rental business. Eager to start a business, he jumped in making Blockbuster the Wal-Mart of movie rentals offering a wide variety of movies to customers in a family environment with standout buildings and bright lights. From there, Blockbuster growth exploded bringing in external investors and national attention.
Movie theaters are conglomerates in the film industry. Only a few competing firms. Offer the same ticket prices and provide the same products and roughly the same services to customers.
Although Hastings vowed to be divergent from other video retailers, his goal was to use an identical pricing strategy; however, one that would “appeal to customers [. . .] who used online shopping as an alternative to traveling to retail outlets” due to ease of access and more preferences (Shih, Kaufman, & Spinola, 2009, p. 3). Furthermore, Netflix launched its business at a time DVDs had barely hit the marketplace as the firm anticipated the new technology to be a promising venture. Nonetheless, within a year DVD players became so vast...
...verage, up-to-date selection, and convenient service. The movie rental market is not bad, but it will require a good market strategy. As Jay Abraham once said, "If you're attacking your market from multiple positions and your competition isn't, you have all the advantage and it will show up in your increased success and income.”
The idea inspired Reed Hastings and Marc Randolph, and then they founded Netflix in Scotts Valley, California in 1997 (Netflix, 2014). The company comes into play by developing a subscription-based streaming platform for movies and television shows. Unlike the traditional movie rental businesses such as Blockbuster and Redbox, Netflix’s innovation offers service via Internet, and it does not have any physical stores but instead delivers DVDs through postal mail in the U.S. Since then, Netflix has become the world’s leading internet television network with constant growth of customers to over 48 millions members in more than 40 countries in the North America, Europe, and the Latin America (Netflix, 2014). In this analysis, the main focus is examining the current market environment for Netflix. It identifies the type of market structure that Netflix is currently competing. The analysis also expands on the competitions, product differentiation, pricing strategy, and measuring the level of easy entry-and-exit.
1) Netflix’s currently does not have a user-friendly method for customers to stream videos onto television sets. Netflix is entering agreements with the manufacturers of game systems, Blu-ray disc players, and televisions to include software capable of streaming Netflix videos. 2) There is strong competition with other companies that offer video streaming at no extra charge. Additionally, Netflix and its competitors are attempting to enter the digital world.
Netflix was established by Marc Randolph and Reed Hastings in 1997 in California. Initially, the company offered a DVD-by-mail service for a monthly, flat rate subscription fee. Videos were sen...
Netflix and movie theaters each have their advantages, but when it comes to the four factors discussed Netflix is the clear winner. Netflix has a larger variety for a better price, while being convenient for the viewer. While