Netflix Business Plan Essay
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Founded in 1997, Netflix is the world’s leading Internet subscription service for enjoying movies and TV shows. Globally, the company has over 23 million streaming members. Netflix is in the Video Entertainment Industry. Some of the many streaming devices include: the Xbox 360, Wii, PS3, iPad, and iPod, to name a few. In all, there are more than 700 devices that are available for streaming from Netflix. Corporate Headquarters is located on 100 Winchester Circle, Los Gatos, CA 95032.
The company has over 900 employees at the corporate headquarters.
Netflix, Inc. trades under the NFLX symbol on the Nasdaq stock exchange. Netflix’s vision for the future is to become the best global entertainment distribution service, license entertainment content around the world, create markets that are accessible to film makers, and help content creators around the world to find a global audience. Management Team Netflix senior management team includes eight key players.
Reed Hastings the Co-Founder and CEO, Neil Hunt the Chief Product Officer, David Hyman the General Counsel, Jessie Becker the Interim Chief Marketing Officer, Patty McCord the Chief Talent Officer, Ted Sarandos the Chief Content Officer, David Wells the Chief Financial Officer, and Jonathan Friedland the Chief Communications Officer.
Most of Netflix’s management team share many roles. Reed Hastings, along with being the CEO of the company, he is also a member of the board of directors of Microsoft and of Facebook.
Reed is also an active educational philanthropist and served as President of the California State Board of Education from 2000 to 2004. He received a BA from Bowdoin College in 1983 and an MSCS in Artificial Intelligence from Stanford University in 1988. Neil Hunt leads the product team, which designs, builds, and optimizes the Netflix experience. Neil holds a Doctorate in Computer Science from the University of Aberdeen, U. K. and a Bachelor’s degree from the University of Durham, U. K. Patty McCord and her team maintains the unique culture at Netflix, hire new talent, and keep the organization lean and flexible despite its growth. David Wells currently took over the position of Chief Financial Officer after he spent seven years at Netflix in a variety of strategic planning and analysis roles. He earned his Master’s degree from the University of Chicago’s Booth School of Business and Harris School of Public Policy and a Bachelor’s degree in Accounting and Finance from the University of Virginia.
Each member has a specific role that helps the company to continue to grow and the help the overall organization to succeed. The Business Netflix has revolutionized the way people watch TV shows and movies. Online streaming in the Video entertainment industry is rapidly growing and in order for Netflix to sustain competitive advantage Netflix continuously tries to improve what they have to offer. The core strategy at Netflix is to grow their streaming business domestically and globally as Mail-in DVD dies down. How the company achieves the strategic plan is setting a goal that is correlated with their strategy.
The goal of Netflix is to maintain customer’s satisfaction while staying in the scope of the business parameters. Netflix tries to achieve its goal by continuously improving the customer experience, focusing on expanding their content, enhancing their user interface and extending out streaming service to even more Internet-connected devices. Being in the scope of business parameters to Netflix is to consolidate net income and operating segment contribution profit target. There are two main critical success factors that Netflix has achieved. The first is pioneering online streaming since 2007.
Netflix was really the first company to successfully introduce online streaming to the video industry, which has transitioned the whole entire video entertainment industry. The second critical success factor is Netflix team of experts being able to enhance customer experience by offering customized recommendations based on what the consumer has watched. With critical success factors comes past achievements. Some of the major past achievements that Netflix has noted is the successful launch of the company going IPO in 2002. The initial public offering of 5,500,000 shares at $15. 00 per share on the Nasdaq.
Secondly, not only was it a critical success but a major achievement to the company. In 2007 Netflix introduces streaming, which allowed members to instantly watch TV shows movies on their personal computers and since that time Netflix has been the leading company in doing so. However, with achievement comes a challenge the company has faced. The major challenge that Netflix has faced is the company rebranding attempt. Back in July 2011 Netflix announced that Netflix was dividing their services to two separate brands. The online streaming was going to remain Netflix and the Mail-in DVD was called Quixter.
This would in turn increase member’s subscription. After the initial launch many customer where dissatisfied of Netflix choice and ultimately subscribers cancelled their subscription. As a result. Netflix is having a hard time gaining those customers back as well as gaining new subscribers. Another challenge that Netflix has is establishing an international presents. Back in 2010 Netflix initiated its international segment by starting to the north of United States, in Canada. Then in 2011 Netflix launched in Latin American and the Caribbean. At this point Netflix had a huge contribution margin loss of 103. million dollars. Then in the beginning of 2012 Netflix launched in the UK and Ireland, with even more of a contribution loss. Netflix is focusing on two major aspects of the business the first is to try to gain the subscriber’s hey have lost and to bring in new one by heavily marketing what the business has to offer. The second focus is that Netflix has also realized that they have not established a strong international presence and as a result the company has frozen future international launches until the given goal that was set out is achieved.
Upon analyzing Netflix in the Online streaming industry there are many strengths that Netflix has. One is that Netflix revolutionized the industry by Differentiation. It is key to this industry being able to distinguish the company from its competitors. Secondly, Netflix is known for their recommendation system. This is more of their Niche strategy. They saw that now companies were doing this and from their research and development team they found that there was a market for this. However there are prevalent weaknesses that Netflix has such as: Customer loyalty, Market Vulnerability and relying heavily on one person set of skills.
There are many competitions and many of Netflix customers are also customers at other online streaming websites. Secondly Netflix has not been around as long as Blockbuster and does not have the brand recognition that Blockbuster has. The online streaming industry has market vulnerability. The online streaming industry is rapidly changing, and Netflix solely depends on the partnerships and licensing they form. If contracts are not renewed that could adversely affect the business. Secondly, there are tons of competitors in the industry and Netflix may not be able to hold their subscribers.
Netflix to maintain a competitive advantage Netflix must continue to build and maintain brand identity, increase customer loyalty by sustaining customer satisfaction. Product and Services The product that Netflix offers is a one month trial membership. The perks of having a Netflix subscription is there is no annual fee a year and you do not have to subscribe to it for one a whole year. It is a month-to-month subscription there is no cancellation fees. Initially Netflix had list of different subscription offers, currently when you sign up Netflix offers one main subscription offer that is 7. 9 a month for unlimited streaming of movies and TV shows then for an additional $7. 99 per month you can add the DVD by mail feature. Netflix is distributed two different ways online streaming and Mail-in DVD. The online streaming is via internet, smart devices, tablets or gaming consoles such as: internet TV’s, iPad, Android, PS3, Wii, and the Xbox 360. Currently, Netflix can be streamed from more than 700 devices. Industry Analysis The market value of the Video entertainment industry is at about 53 billion dollars and the competition is intense.
The industry is rapidly changing due to the exponential growth of online streaming. The technical advances is a corporate to the exponential growth The technological advancements provides internet access virtually anywhere, the video process gets faster it seems like every couple month. With all the technical advances the online streaming business is more accessible and convenient to consumers. The size of the industry is rather large. it is about $56 billion dollars. This has a promising forecast for more profit.
As you can see there is a lot of potential growth in the Video Entertainment industry. The Video Entertainment industry as a whole is in the early stages of the Mature Stage; however the online streaming sub-component is in the growth stage of the lifecycle and according to the Netflix financial statement the Barriers to entry is rather low. Competitors can launch a new business in the industry at a relatively low cost. The government regulations on the video entertainment industry are rather relaxed so that there are major risk involved such as Piracy and cyber security.
Piracy is a major issue in this industry and although it is still a big problem. The United States has shut down one of the biggest piracy website: Megavideo. Which arguably has cost copyright owners 500 million dollars in lost revenue Cyber security is an issue because the internet can be a vulnerable place and as the technology gets more advanced the hackers get smarter. Cyber security remains an issue that U. S government is trying to minimize. Lastly, If the government were to heavily regulate the industry then copyright laws can change adversely affecting the industry.
For example, Netflix like many business in the industry rely on the copyright, licensing and partnerships that they obtain if the U. S copyright laws changed then this can adversely affect the industry. The first sale doctrine provides individuals who knowingly purchase a copyrighted work from the copyright holder receives the right to sell, displays, or otherwise disposed of that particular copy, notwithstanding the interest of the copyright owner. The first sale doctrine plays a vital role in the United States copyright law.
So the morale of the story is the government needs to find a happy medium where the industry is being a little more regulated than it is now to reduce piracy and cyber insecurity however, still allows business to obtain copyrights. Other factors that affect the industry or globalization and the political and social factors. Globalization has affected this industry. Many of the pirated movies that are available come from China and India. Secondly, for international segment the Political and Economic factors differs from United States. Failure to manage any of the risk associated with those factors could harm the overall business.
Market Analysis We have determined that the industry is divided into two types of customers; the picky customers and the convenience customers. The picky customers are the ones who are looking for a specific movie or genre and are willing to wait a few days to get what they want. They also enjoy a rich movie watching experience and are unwilling to substitute for a different movie. The picky customer tends to be the older generation due to the time spent on choosing a movie. On the other hand, the convenience customers are those who want immediate access to a wide range of movies.
They also want to be able to watch movies on multiple platforms such as on their phone, PS3, or their iPad. Since they use a lot online streaming to most of their movie watching, they are willing to substitute if the video they want is not available. The convenience customer is more tech-savvy which tends to be the younger generation. The trends that have been happening in the industry focus mainly on three aspects, convenience, cost and selection. Consumers want to be able to have a wide range of videos to choose from which are easy to obtain, at a low cost.