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1 - Term Paper Example

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In the first part, the study will describe briefly about the company and then in the second part the term paper will discuss the internal strength, weakness, opportunity and…
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Brief summary of discussion and conclusion will also be integrated in the term paper.
Netflix is a renowned American organization, which specializes in renting and selling on-demand DVDs to customers through post. The company is headquartered at Los Gatos, California, USA. Netflix was established by Reed Hastings in the year 1997 (Netflix, “Company Facts”). The company has changed its business model quickly and shifted to renting DVDs to customers rather than selling DVDs. In 1999, Netflix had introduced a subscription based business model which is complemented with multi-tier distribution channel in order to increase their market penetration (Carroll, Menenberg and Kwok, “Strategic Report for Netflix, Inc”).
Netflix is the industry leader in online DVD rental market and market share of the company is more than 75%. Huge DVD inventory accompanied by 72 million discs of 0.1 million titles have given Netflix the strength to cater to multilevel demand of customers. Netflix uses subscription fee structure backed by multitier distribution channel in order to achieve high profit with the help of price discrimination.
Growth opportunity for Netflix is dependent on Subscriber Acquisition Costs (SAC), churn rate and Average Revenue Per User (ARPU). Lack of switching cost has decreased ability of Netflix to control above mentioned three verticals.
Netflix has already entered into digital distribution of video content in order to create a bridge between physical DVD formats and digital streaming. Netflix has already established strategic partnership with Microsoft in order to launch “Netflix compatible Xbox”; such product diversification strategy will definitely open new revenue earning paths for the company.
Many customers prefer to watch movies on premium movie channels such as HBO, Showtime, Starz and Cinemax instead of renting movie from Netflix. HBO has launched HBO Go which is a ... Read More
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