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An overview of Netflix

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  1. Overview
  2. Impacts on Netflix's trademark
  3. Critical issue
  4. Analysis tools
    1. Porter's five competitive forces model
    2. Market turbulence
    3. Learning organization
    4. Mass customization
    5. Process reengineering
  5. Recommendation
  6. Conclusion

Reed Hastings founded Netflix in 1997 during the emergent days of Internet retailing, to offer home delivery of DVD rentals through the U.S. Postal Service. The company has grown at a rapid pace since to the point that in 2006, subscribers could use Netflix's website to choose from over 70,000 different titles held on over 55 million DVDs. The company has 44 distribution centers across the country, allowing it to deliver to more than 90% of its 6.6 million subscribers within a single business day. Netflix's primary subscription plan offered unlimited monthly rentals allowing customers to hold up to three movies in their possession at any one time for a monthly fee of $17.99. At the close of the 2006 year, Netflix had achieved revenues of nearly $1 billion, generating free cash flow of $64 million.

[...] Recommendation: In considering the aforementioned critical issue and analysis tools, it is evident that Netflix must innovate in order to maintain it's large market share of the movie rental industry. ?Video-on-demand? technology has created an environment in which movies are a click away from customers via the internet and digital cable, thereby rendering Netflix's DVD-by-mail service obsolete to customers willing to download movies online. Netflix is torn between three options for future growth. In brief, the first option involves a licensing arrangement with cable providers to use Netflix as a provider. [...]

[...] Taking all of these prospective competitors into account, the potential threat of new entrants to the movie rental industry is a very significant factor. Bargaining Power of Buyers Although customers cannot directly influence prices or structure their rental plans, given the high number of industry players that customers can rent their movies from, customers in the movie rental industry have substantial bargaining power. Movie renters can get their movies from brick and mortar stores, online mailing companies, internet downloading websites, or from cable company servers. [...]

[...] The first step of developing and integrating the business model for Netflix was giving the customer true value. Through mass customization, Reed Hastings and Neil Hunt developed a prepaid subscription service that provided better value to the customer base. With a subscription plan, customers could have up to four videos at home at any one time, which turned the longer delivery problem of sending away for movies into a positive. Netflix also was able to fix the main problem of over-demand of new releases by using mass customization. [...]

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