Analysis of Netflix

Netflix is an online movie rental service-company; the company has a client base of over 20 million customers in the United States and a collection of over 75,000 title collections. Netflix offers a wide selection to its clients; clients are able to select a movie on the internet, the movie is then emailed to the client (Mueller, 2010); the clients can return the movies via prepaid mailers provided by the company. The company, unlike its competitors, offers a unique service, it does not impose deadlines or late fees. Once a client has returned a movie, the company sends the next movie on the client’s list of preference. Therefore, the clients have an initiative to return movies, to access the next movie on their preference list. Furthermore, the company prides itself for a large movie base; this allows clients to watch thousands of movies at no additional cost.

The company also operates in the Video On Demand market. This has enabled the company to offer video streaming, a service that has differentiated the company from its competitors, and cut on price competition. Furthermore, the company offers movie streaming as opposed to the conventional movie downloads. Initially, the video streaming service would be offered as a compliment to the DVD rental service offered by Netflix. However, once clients are accustomed to movie streaming, the company can separate the two services, and offer them under two different plans. This strategy is critical for the company since as innovations in technology are adopted, the home movie market is anticipated to shrink; however, movie downloading and streaming are anticipated to dominate the market (Motley, 2005). The company plans to evolve slowly from a DVD rental company to a digital entertainment distributor.

Netflix’s SWOT Analysis

Strengths

Netflix offers an excellent consumer experience. The delivery of movies to the clients’ homes is a key convenience offered by the company. The failure to offer such services has led to the reduction of business of such competitors as Blockbuster. Though there is a little waiting time, the company’s clients always have a movie to watch. Furthermore, the company accepts customers’ recommendation, a movie streaming service, and an excellent customer support service (Cohen, 2007). These valuable services have effectively attracted and retained loyal clients to the company.

Netflix as opposed to its clients offered competitive prices. The clients are charged a monthly fixed fee of as low as $8.99 to watch as many movies as they desire. The charge is for both home delivery and streaming movies. Furthermore, for an additional cost, the company’s clients have access to a higher number of DVDs (Dykman, 2011). This offers clients a wider variety to choose from at a cheaper price compared to cable television.

Weaknesses

Similar to the brick-and-mortar companies, the company faces challenges in offering new popular movies. This is the main source of consumer dissatisfaction, and the company’s inability to meet the rush for new movies. Additionally, Netflix has not established any direct connections with movie studios; thus, it is forced to purchase all its collections through the consumer market.

The rent-by-mail also creates a challenge for the company; clients are forced to wait for several days before they can watch a movie. In many instances, by the time the movie reaches the client, they are no longer interested in watching it. Furthermore, a client may be willing to watch a movie for a night; thus, the rent-by-mail is not an option; they opt for the brick-and-mortar retailer or obtain the movie from such competitors as iN DEMAND or Pay-Per-View.

Opportunities

There are numerous opportunities available to Netflix presently. Previously, mailing of movies to clients was seen as the in-thing in the rental movie industry. However, delivering the movies to the clients’ computers is the likely progression that the movie rental industry is likely to adopt. Lucky for Netflix, the service is only available through per-viewing feature. Therefore, Netflix can capture the opportunity if it can successfully provide the service to clients on a time usage basis instead of peer viewing basis. Furthermore, effective management, similar to the one the company has enjoyed for years, can enable the company to absorb some of the current providers of the service such as Movielink.

Threats

The most apparent threat facing Netflix is the competition the company faces from Blockbuster and other established movie renting businesses. Furthermore, companies such as Apple, through their services to the clients’ computers, which can be ported to a television, can pose a substantial threat to Netflix. Netflix is less suited to compete with firms offering hardware innovations, such as Apple TV due to its inexperience in the area; however, this can act as a compliment rather than competition (Cohen, 2007). Piracy and illegal downloads also pose a substantial threat to the company (Motley, 2005).

In conclusion, Netflix is better positioned in the movie rental industry compared to its competitors. The company’s able management, technological innovations, and valuable partnerships, even with potential competitors have enabled the company to edge off any form of competition. Furthermore, the company has a valuable room for expansion into the provision of movie rental services on a time usage basis. Though there are numerous challenges in form of competing firms, the company prides itself for having a valuable management that has ensured its success. Good leadership will ensure that Netflix maintains its market leadership in the movie rental industry.

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