Netflix: Entering a Brave New World

With more than 30 million streaming members in the United States, Canada, Latin America, the United Kingdom, Ireland and the Nordics, Netflix, Inc. is the world’s leading internet subscription service for enjoying unlimited movies and TV shows. For one low monthly price, Netflix members can instantly watch movies and TV programs streamed over the internet to PCs, Macs and TVs and much more devices. One of Netflix’s core competencies is content delivered to your home. Their change in business model from DVDs only to DVDs and streaming reflected this competency and allowed them to access the streaming video market.

Content delivery to the home and thru streaming online allowed them to put Blockbuster out of business and many other companies in the market.

The latest business decision, then, actually breaks their core competency in half. The decision splits down a method of delivery, creating two companies with the same core competency – content delivery to the home. I think that this is a competitive advantage, valuable, rare and non-substitutable about Netflix but not difficult to imitate and in the next paragraph I’ll explain more about that.

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The new Netflix as a streaming video company now faces a tremendous amount of competition that is imitating or improving all the time, from Amazon Prime to Google to Apple. The DVD mail business may or may not survive but the streaming business leads to an incredible direction. Its core competency was getting content to the home in an incredibly convenient way.

That said, there were still some content types they did not carry.

Exploring new forms of content and new content delivery methods would have leveraged their core competency of getting content to the home and been even more difficult for competitors to imitate, rather than easier. Knowledge of the customer is a critical component of actions taken for Netflix. In 2006 Netflix launched the Netflix Prize, promising $1 million to the first person or team who can achieve certain accuracy goals in recommending movies based on personal preferences.

The company releases 100 million anonymous movie ratings ranging from one to five stars, the largest such data set ever released. Using knowledge about customers, the firm ensures that its raw materials are appropriate quality to build a product that meets or exceeds customer needs. With today’s new technologies, some primary and support activities are being performed in new and more efficient ways. For example, Netflix uses the Internet to communicate with customers and learn more about their customer needs.