Business Strategy

Out of the three generic business strategies, the main one used by Netflix is overall cost leadership or simply low cost. They offer their service at a price lower than what any of the competitors could offer at that moment.Netflix came to the market with the goal of offering their service at the lowest cost possible and with most efficiency. It is also important to keep in mind that another of the strategies used is differentiation. It service at the moment was unique and innovative in the marketplace due to the fact that none of the movie rental business like Blockbuster, which at the time was offering in store rental, were offering the online rental service like Netflix does, making them number one in the DVD rental market.In the on-line video renting market Netflix customers buying power is low. The company holds a large share of the market, which enables them to manipulate their suppliers to get the most out of their dollar spent. Although the market is growing Netflix is perceived as a treat by other video rental companies because it takes the hassle out of rentals. Since the customers buying power is low the supplier power is high, which benefits the company greatly. The supplier will have to “give in” to make that sure that there merchandise gets the best possible exposure. If the supplier merchandise does not get the exposure their profit goes down.When Netflix was first introduced into the market place it did not have many possible substitutes or threats in the industry, because they held the advantage edge at the time. Currently other video rental companies, such as Blockbuster, are creeping in on the market making it challenge for Netflix. Netflix needs to keep that advantage edge, but times will become tougher with new innovations around the corner. Some of the new innovations that Netflix is currently using are to have consumers downloading a movie directly at home, which eliminates any wait time at all. When consumers are happy they return to the service and continue to use what works best for them.The switching costs of going to another video rental service would not be beneficial to the consumer. Netflix has created its market to suit what people want in the video rental service, which is cheap, fast and hassle free service. Netflix has taken another step forward and created a database which takes your past rentals and recommends rentals that will suit your likes, which again gives the consumer more options. The threat of new entrants is on the lower side, but it is possible as it is in any market. Innovation is everywhere, but Netflix entry barriers are large which makes it harder for other companies to compete. One of Netflix entry barriers is that they have established shipping facilities to allow them to reach the consumers in just one business day along with downloading rental directly at home. Netflix must keep their barriers high if they wish to continue to hold the advantage over other rental companies.Netflix took the initiative in broadcasting their movies online and made it easy to access their movies at your own home. No longer do you have to go to the store to rent a movie. Netflix is innovative because it took renting movies to the next step. Netflix embraced technology instead of ignoring it and that is why it is becoming the world's largest online movie rental service providing more than seven million subscribers access to more than 90,000 DVD titles plus a growing library of more than 5,000 choices that can be watched instantly on their PCs. The company offers nine subscription plans, starting at only $4.99 per month. There are no due dates and no late fees ever. All Netflix plans include both DVDs delivered to subscribers' homes and for no additional fee, movies and TV series that can be started in as little as 30 seconds on subscribers' PCs. DVDs are delivered free to members by first class mail, with a postage paid return envelope, from over 100 U.S. shipping points. Nearly 95 percent of Netflix subscribers live in areas that can be reached with generally one business day delivery. Their business initiatives are top of the line because no one else has been able to compete with their technology or prices.Netflix uses Customer Relationship Management Systems to fully maximize the efficiency of their business. A CRM system uses information about customers to achieve insights on their needs and wants in order to try and serve them better. This in turn can allow Netflix to predict what the customer needs before the customer themselves may realize it. One of the most resourceful technologies Netflix uses is their intelligence software. For example, Netflix uses a recommender system; this interactive application gathers data about a person and draws conclusions from them. From there, this recommender system will suggest movies based on previously viewed items or on the user’s similarity to other users. Netflix also uses Business Intelligence software for their company known as Micro Strategy. Netflix uses “Micro Strategy for reporting and analysis of financial data, marketing campaigns, and movie recommendations” (Micro Strategy Selected by Netflix). Micro Strategy will allow Netflix to achieve valuable insight with personalized movie recommendation data and significant marketing data, this will allow Netflix to better evaluate and create extraordinary marketing campaigns. Netflix provides adequate customer support to their customers, which proves to be a great philosophical and successful approach. Effectively responding to their customer’s needs will prove to build loyal and long lasting relationships with their customers.Netflix uses the Fully Integrated approach within its organization. In this approach, IT personnel are located within the other functional units of the company even though there is still usually a separate IT department. These integrated IT people may have their own budget; they can also approve division plans, and can initiate the end-user development of smaller projects, ad hoc reports, etc. Netflix uses a Decentralized philosophical approach throughout their company. Employees are encouraged to try new and upcoming technologies in the hopes of finding some that may provide a great competitive advantage. Netflix encourages its employees to stay innovative, avoid rules as they try and grow, but use process to grow in an effort to drive proficient execution of their current model.For the consumer, it is relatively easy to appreciate the importance of e-commerce. Why waste time fighting the very real crowds in supermarkets, when from the comfort of home, one can shop online at any time in virtual Internet shopping malls, and have the goods delivered home directly. Netflix goes along with digital because of its low cost inventory and shipping. There isn’t another company that ships their movies for free and has them come at an exceptionally fast rate. Netflix adopts e-commerce enabling customers and consumers to form a powerful relationship by selling their product and services with the use of the internet, facilitating its costumers to break down barriers as time and location at a very low cost.Netflix uses Business to Consumers, B2C, e-commerce allowing them to sell their products to customers and not other businesses. B2C is basically a concept of online marketing and distributing of products and services over the Internet. It is a natural progression for many retailers or marketer who sells directly to the consumer. The general idea is, if you could reach more customers, service them better, and make more sales while spending less to do it that would the formula of success for implementing a B2C e-commerce infrastructure. Netflix also follows the B2C Mass Customization e-commerce model. With this model it allows the customer have the opportunity to tailor the product to their specifications.A company uses marketing to create customer relationships. Netflix uses a marketing mix which includes pop-up and online ads. They are also affiliated with many searching engines like Google, Yahoo, MSN, and AOL. Viral marketing may have played and important role when the company first launched. Netflix benefited enormously through word mouth. As of today it may not be the most important one for Netflix but word of mouth is always useful to help the company grow.Companies must create systems that enable their customers to pay in an easy and securely manor for their purchases. B2C allows customers to pay from their purchases in a variety of electronically methods. Customers have the choice of paying using credit cards, financial cybermediaries, electronic checks, Electronic Bill Presentment and Payment, or smart cards. Netflix’s customers must register using a major credit or debit card for finalize transactions. The company expands their opportunity by gaining cliental with offer gift subscriptions for various renting intervals.

Netflix Benefits as Gamemakers Cut Prices

This article states that Sony, along with other companies, has cut its price in there gaming system. Since the companies have cut their prices they have increased there sales. Netflix has partnered with Microsoft and by doing so Netflix will be streaming movies exclusively through their Xbox console. Although Microsoft is not the leading gaming system with this agreement it hopes to increase their sale even more. Netflix is positioned to take a chunk of the 45% of the video rental market controlled by Blockbuster. Netflix has creating bonds with a variety of other companies to create even more growth and create a stronger hold on the market. Netflix's biggest competitor will be the studios if they create other partnerships that will compete with Netflix. Netflix recently stated that they would like to see Netflix in "all the game consoles, all the Blu-ray players, all the Internet TVs”, which at that point will not give Microsoft a leading edge since it would like a variety of different systems.