Netflix’s Situation and Environment Case Study

Netflix Case Study

Netflix’s Situation and Environment

        Netflix is a multinational media-services provider that focuses on content and has successfully managed to penetrate the streaming market from the lower end whilst expanding the subscriber base significantly. Essentially, prior to Netflix’s popularity, Blockbuster was at the top of the video rental industry with numerous retail stores and a substantial customer base. However, unlike Blockbuster, Netflix eschewed retail outlets thus lowering operational costs. It also allowed its subscribers to pay for a subscription fee as opposed to charging a late fee for its customers (Afuah 256). Today, Netflix continues to experience a significant growth in the number of subscribers from different parts of the world (Afuah 253). The future of Netflix is also promising because the contemporary media consumption continues to digress further away from the traditional approach of watching television and movies. In this regard, it will be equally important for Netflix to always be keen on emerging technology and take advantage of technological tools to meet the changing needs and expectations of its subscribers. This is because being complacent and having a rigid business model can be detrimental as it was the case with Blockbuster.

        In regard to environment, Netflix has been a huge success in the entertainment industry owing to the fact that it enables its consumers to watch their favorite shows anytime and from anywhere. Much of this can be attributed to the fact that Netflix has created new dimensions for performance. However, just like any other industry, the entertainment industry has been growing as exemplified by the various streaming services that are available today. In this regard, such streaming services are a major competition for Netflix with one of the most dominant competitors being Hulu (Burling 40). The competitive environment within the video streaming services is dependent on the fact that there is a very low product differentiation between the various video streaming services or providers. This is why the providers often compete on the basis of selection as opposed to content. In this context, the selection is when certain television shows are on one video streaming provider and not the other. For example, the show, Weeds, is not available on Amazon Prime yet it is available on Netflix. What gives Netflix a competitive advantage is the wealth of information pertinent to customer’s preferences as well as their behaviors. In fact, the information is what acts as a major barrier to entry for new entrants that are looking forward to emulating Netflix’s business model. The other barrier to entry is licensing considering it is a prerequisite for a streaming service to have third party intellectual property to stream content.

        One of the factors that are most critical to the organization is competitive positioning. This is because Netflix is currently ahead of the competition and has to keep reinventing its business model so as to continue staying ahead of the competition. This is of paramount importance considering the entertainment industry is dynamic whereas the rules are always changing. As of now, the main strategy for Netflix is producing local content and exploring partnerships. This is why the company is currently involved in partnerships with notable media companies such as BBC (Pallister 49). Similarly, the company also produces content in places such as Denmark and makes sure the content is availed to the global audience. Besides, despite an increase in the monthly revenue, Netflix spends more on content as part of competitive positioning.  In essence, spending more ensures the company is able to develop content that will help it maintain and increase its subscription base. Competitive positioning is not easy because video streaming providers charge almost similar amounts and it is thus easy for a content consumer to switch from one streaming service to another.