Netflix Case Study Analysis Executive Summary: Netflix Inc. (Netflix) is currently the largest online provider of DVD rentals in the US. Founded by Reed Hastings in 1997, the company offers monthly prepaid rental services utilizing its online search engine, where the company then mails DVDs to subscribers via the United States Postal Service (USPS). Since the company’s inception, Hasting has been exploiting disruptive innovations as a means of creating a competitive advantage over incumbents within the industry. Netflix faces stiff competition within the movie rental industry that includes Blockbuster Video and traditional “mom and pop” video rental stores. Now, Netflix must develop a new strategy in response to the competitive moves
Also, Netflix offers convenience to the customer; both in terms of geographic coverage and the pick up/drop off of the product. Netflix established 44 distribution centers across the country and developed a close relationship with the USPS, whereby the postal services would drop off DVDs to the nearest Netflix distribution centers rather than the distribution center of origin. The combination of the two activities allow for 90% of Netflix’s 6.6 million subscribers to receive their movies within one business day. The introduction of a subscription-based model also provides great value to customers of Netflix, while the company’s 70,000 different titles on over 55 million DVDs offer a vast selection of movies. These tactics allow Netflix to provide the customer base an “all you can eat” model for movie rental services and increased value to the customer by turning the process of renting a movie for a “Movie Night” experience into a continuous life experience. Even though Netflix is highly successful, they do have several weaknesses that they must address. First, Netflix is unable to completely supply demand for all new release popular movies. As a result, a main cause of customer dissatisfaction is Netflix’s inability to completely satisfy the initial rush for a new movie. However, the company has been able to utilize another tactic of Frances X. Frei through the use of a customer management system. . Netflix is able to circumvent this by