Netflix & Qwiksters Market Strategy - Essay Example

?Netflix & Qwikster Organizations’ external environments play important roles in shaping operational scopes and decisions that organizations can make. Consumers, for example, offers demand for product and organizations are bound to meet their expectations in order to attain a significant market share towards sustainability. Investors and suppliers are other factors in the external environment that influences decisions. The case of Netflix & Qwikster illustrates potential effects of these factors and this paper discusses the case. Summary of the situation Effron explains the situation with the Netflix and Qwikster along the separation and reunion of the two businesses in the traditional Netflix. The author explains the organization’s changes in its service delivery was too fast and elicited negative responses from its customers. The organization’s Chief Executive Officer, Reed Hastings admitted this in one of his interviews with Nightline. Netflix never reviewed the plan before its launch and it admits to have made a mistake in its communication of the change. The organization also offered an apology to its customers even though at least 600000 of the customers had recalled their subscriptions. The announcement that restricted Netflix to streaming and established Qwikster to handle DVDs-by-mail drew negative comments on the organization’s Facebook page and was fast because the organization had not even acquired ownership of the @Qwikster Twitter account. The company’s chief executive however explained that despite the weaknesses in communicating the change plan, an internal change to separating the two services was significant to improving the organization’s service delivery. Netflix’s competitors such as amazon.com also utilized the period to make deals with content providers. The organization had however been successful since its establishment in the year 1997 with such milestones as DVDs-by-mail services in the year 1999 and live-streaming in the year 2010 (Effron, 2011). Woo also explains the case and offer complimentary details. Netflix was a highly regarded company and its Chief Executive Officer renown in the industry before the announcement to split itself into two independent organizations. This followed a previous announcement that increased the organization’s prices by about 60 percent. These factors had adverse effects on Netflix’s market control that transferred to its share prices. This influenced a change from the separation decision but the raised prices were retained. In addition to the fall in stock prices, that dropped by up to 60 percent, investors exerted direct pressure on the CEO because of the changes that were announced. Analysts also degraded marketability of the organization’s shares, following the announcement, a speculation that could add to the declining stock prices at the time. Effects of such decisions that force an organization to make rescissions have however occurred in the past with organizations such as Coca-Cola, Pepsi, and Delta air (Woo, 2011). How Netflix chose to convey the business model change and what went wrong with the communication plan Netflix chose to communicate the business model through a formal decision by its executives. This is the company’s approach to decision making and informed the initial decision to split the company. The formal approach to the communication, as opposed to informal communications that the Chief Executive Officer makes in social media also communicates the official approach of the decision that must have been handled by the company’s executives. Deliberation among the executives, as occurred in deciding on the split, was therefore the strategy to deciding on the strategy for communicating the change model (Bevin122, 2011). Reaction to Netflix’s strategy to handling the public outcry, success in alleviating the perceived problem, and the organization’s image following the attempt to alleviate the perceived problem I believe that Netflix’s decision to rescind its initial plans for separating its services succeeded in handling the outcry. The fact that it was the major cause of the negative reactions meant that reversing it would as stop the outcry and even reverses the negative consequences that the organization was already realizing such as cancellation of members’ subscriptions and decline of the organization’s marketability towards decline in stock prices. An increase in the organization’s stock prices, following announcement of cancellation of the split also suggest that separating the two services was the major cause of outcry. Consumers also hailed the move (Woo, 2011; Effron, 2011). The organization succeeded in alleviating the outcry and consumers’ responses together with changes in stock prices supports this. Effron reports a positive feedback from a consumer following the change in prices. In addition, increase in stock prices following the decision not to split the company shows that the concern was resolved (Woo, 2011; Effron, 2011). The organization gained a positive image after the initial attempt to alleviate the problem. Positive feedback from consumers and positive perception among investors towards higher stock prices explains this (Woo, 2011; Effron, 2011). Opinion on efforts by Netflix’s communication team to in helping the ublic to understand why the change was taking place and possible strategy that would have minimized severity of the outcry The organization’s communication team did not do all that it needed to do to help the public understand reasons for the change. A single communication approach, the CEO’s announcement, was used but it failed to offer reasons for the change. Further, the communication team was ineffective because it failed to influence consumers’ psychological perspective towards the change. In delivering the decision, the organization should have improved on its services and then convinced the consumers that the changes were pertinent to the improved value that required such changes for sustainability. A research approach to identify consumers’ value in the industry would have aided this approach. The organization should have also applied multiple communication approach that would facilitate interactive forums for explanation of reasons towards the change. Behavioural approaches and social marketing would have helped to understand and forecast reactions and ensured development of management strategies before the outcry erupted (Lehman and Dufrene, 2010). The organization’s progress since the decision was reversed The organization has been improving its performance since reversal of the decision. Its revenues as well as net income took time to recover after the announcement and have since reported continuous growth since the year 2012. The progress is attributed to the decision because of the decline in revenues and profitability that the organization suffered immediately after the announcement to split its services (Netflix, 2013). References Bevin122. (2011). Netflix communication strategy. Wordpress. Retrieved from: http://bevin122.wordpress.com/2011/10/31/netflix-communication-strategy/. Effron, L. (2011). Netflix CEO Reed Hastings say company has ‘sincere regret’ over handling of service changes. AbcNews. Retrieved from: http://abcnews.go.com/Business/netflix-ceo-reed-hastings-company-sincere-regret-customers/story?id=14608865&singlePage=true. Lehman, C. and Dufrene, D. (2010). Business communication. Mason, OH: Cengage Learning. Netflix. (2013). Quarterly earnings. Netflix. Retrieved from: http://ir.netflix.com/results.cfm. Woo, S. (2011). Under fire, Netflix rewinds DVD plan: Company backs off plan to split mailed DVD, streaming service. The Wall Street Journal. Retrieved from: http://online.wsj.com/news/articles/SB10001424052970203499704576622674082410578. Read More