Netflix Company’s Initial and New Strategies

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Significance strategy changes at Netflix

In the early stages when Netflix was conceived, it had a competitive advantage over its competitors thus; it only needed sustainable innovations in its business to enhance its growth. Netflix pioneered online DVD rental market while its competitors were doing it manually; this was a great competitive advantage. The competitive advantage created a barrier between Netflix and its competitor. This enabled it to flourish very well in the online DVD rental market. The first section of this paper will address the early strategies which Netflix employed to beat its competitors. These strategies will be analyzed in the following table:

Table 1.0: Early Strategies

STRATEGY ACTIVITIES/EXPLANATION
Marketing
  • Involving manufacturers and sellers of DVD players in their promotional programs.
  • Targeting new buyers of DVD players.
  • Providing a source of content for the customers.

Note: There was no stiff competition at the time because the market was under-starved.
Customer classification
  • Netflix identified three characteristics which were meant to attract the customer. The three characteristics included: convenience, value, and selection. These three characteristics were used to clarify the customers.
  • The value characteristic clarified the eBay customers.
  • Selection and convenience clarified the Amazon customers.
Price adjustment
  • No-late subscription services were introduced to counter late delivery.
  • Introduction of unlimited DVD rental.
  • Introduction of a DVD library due to the faster growth of DVD player use.
Inventory Management System
  • An up-to-date inventory management system was implemented to help in the management of films availability.
Revenue Sharing Agreements
  • There was an introduction of revenue sharing agreements between Netflix and the major studios to help the organization in timely rent of new releases.
Recommendation System
  • Implementation of a recommendation system. It assisted in selecting a movie for a customer.
Expansion
  • More distribution centers were opened across the region to enhance faster delivery of the orders.
Red envelop entertainment
  • Netflix gained an advantage when it was given the mandate of distributing independent films. This helped the organization to build its reputation as the best source of independent films.
  • This contributed to its popularity.

As Netflix was preparing to enter online video market popularly known as Video on Demand (VOD), more competitors were already in it. This posed a great challenge to the organization thus; there was a need to come up with new core competencies so that it can out-do its competitors. Due to the stiff competition on VOD, Netflix had to employ new strategies in its business activities. The following table discusses the new strategies the organization had decided to implement so that it can build a competitive advantage over its customers.

Table 1.1: New strategies

STRATEGY ACTIVITIES/EXPLANATION
Investment and development In this process the organization had three alternatives:

  • Advertising-supported video.
  • Digital file ownership which will allow clients to download the films.
  • Pay TV and online video rental.
VOD Services limitations
  • Come up with new technologies which will counter these limitations.
  • Content availability.
VOD Alternatives
  • Licensing arrangement.
  • Introducing a streaming online video feature into their core offering.
  • Building a stand-alone online video business.

The intended and emergent strategy making at Netflix should employ disruptive innovations. This will assist Netflix to retain its customers despite the emergence of new competitors in the business. Netflix will also be in a position of improving its services as well as creating unexpected sets of values to it VOD services.

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