• Business model: Economic logic. How does the company make money? o Netflix makes money by renting movies to customers via mail order and video on demand (VOD) through the Internet. • Value Propositions: What’s in it for the customer? Why do customers purchase the product/service? Why do they purchase from the company being analyzed versus competitor firms? o Netflix is a subscription service which allows subscribers to have unlimited access to movies with the caveat that subscribers may only have three movies at a given time in their possession. o Netflix has a broader selection than most competitors; customers can rent movies without leaving their homes and receive them within one day. o Netflix provides access to hard-to-find movies that other video businesses may not be able to provide. (Old movie or New) o Netflix Provide more than 1 user (sharing more then 1 users with family or friend) , Kids user , Family movie and all kind in movies) • Strategy: On what basis does the company compete, vis-a-vis their competitors? What is unique about the firm, compared to their competitors? (Include all strategies in this section, not just distinctive competencies.) o Netflix solved the lag generally associated with mail delivery by opening up strategically located distribution centers to facilitate speedy delivery. o Netflix eradicated late fees but some competitors such as Blockbuster followed suit. o Netflix provides unlimited movies for a single subscription fee. o Netflix proprietary recommendation system made new releases visible and promoted other movies based on customer preferences. Generally, new releases make up approximately 70% of rentals but using it propriety system Netflix has reduced that to 30%. o Recommendation system screen movies out of stock and movies customers had already rented. o Netflix did not try to retain customers who stopped their subscriptions but retained their information on file to speed up the return of loss subscribers. o Netflix created revenue-sharing relationship with major studies, thereby lowering its investment in movies. o Netflix used a national inventory rather than the local inventory that its competitors used. o Netflix developed strategic relationship with USPS to shorten return and delivery times. o Netflix built a film library containing low-profile and independent films which enhanced its reputation for these hard-to-find films. o Netflix prepared for an impending Video on Demand surge to secure its place in the event that the market shifted as expected • Major Issues: List three (in priority order) major issues, questions, or dilemmas. o A major issue was the cash infusion required upfront to purchases movies to rent to customers. o The next major issue initially for Netflix was delivering movies quickly to customers to support its business model. o The third major issue was the high demand for new movies which impacted its bottom line, especially in the early years when Netflix did not have relationships with the major movie studios.
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