Netflix Case Analysis

CHANDAN AHUJA

2118442399

Chandan.ahuja.2016@marshall.usc.edu

GSBA 529 – Strategic Formulation for Competitive Advantage

Case Brief ‘A’ on Netflix

August 26th, 2015

Key strategic issues and challenges

Netflix is in danger of missing on the big business opportunity (VoD). The company needs to change its course and thus implements following strategy:

• Netflix’s management to hive-off DVD mail business into a separate business.
• Management has also re-engineered the pricing strategy.

• Customer prices of DVD by mail offer has been increased.
• Price for VoD offer has been increased.
• Price of new customers who want only VoD only have been reduced.

The strategy has received sever criticism from customers, business analysts, financial markets and media forcing the company to roll back the division of companies. The company and Reed Hasting are now faced with challenge of running two entirely different models from one business.

Summary of Analyses

Reed Hasting had envisioned Netflix as a company that would provide movies over internet. However Netflix had evolved as company which delivers DVDs with help of technology and internet. VoD market is witnessing growth and many players are entering the market. Consumer tastes and preferences are also changing with time. In order to stay relevant in the future, Netflix to reinvent itself. The strategy to split the business is appropriate. The company is making a ‘Trade Off’ decision. In anticipation of future growth the company has decided to focus on fast growing VoD business and reduce its focus from its existing profitable DVD delivery business. The pricing strategy is also appropriate. The strategy to Increase the price of DVD by mail business will act as a deterrent to customers and would encourage switch over to VoD. The strategy to price VoD in same range as DVD by Mail will position of VoD as substitute with equal benefits. The pricing strategy also aims at converting new customers for VoD at invitation pricing.