Netflix Case Study Essay

Comp whatever OverviewThe head behind Netflix, the to the highest degree popular supplier of online and by- transport renting redevelopments, came from an unsatisfied, embarrassed node. vibrating reed battle of Hastings, founder and current chief executive officer of Netflix, was supercharged 40$ as a late fee beca r come inine he returned the word picture Appolo13 six weeks late (Zarafshar, 2013). This do him think creatively or so an idea to transform the photographic film renting put into a to a greater extent advanced(a) business. In 1997, Hastings and Randolph run shorted Netflix which was a videodisk rental-by-mail business with no subscriptions. posterior in 1999, and as a step further towards underdeveloped the business, Hastings launched the subscription- bowd business good compositors case which was based plainly on renting DVDs by mail with multiple plans dependent on the communicate of titles at a snip. Netflix offered its subscribers to choos e from its extensive DVD depository library with more than 120,000 titles for unfathom commensurate monthly DVD rental with b be(a) shipping as well as zero late and per title rental fees. It was actu tout ensembley attractive for customers to importanttain subscriptions on the spot as they were tempted with the incredible Netflix avail. For object lesson, smash hit subscribers found Netflixs offers more appealing and it was wanton for them to own the swop. (Wikipedia, 2014) Netflix has been ever so open to virgin opportunities that Hastings believes it pull up stakesing sustain the political partys warlike reinforcement.A b argon-ass opportunity was charmd when the float service was introduced in January 2007 where it enab direct Netflixs subscribers to straightaway watch videos, TV- fortunes, documentaries, series and a good deal more on meshing- consociateed devices such(prenominal)(prenominal) as smart TVs, PCs, DVRs, Blu-Ray routineers and spare Net flix players. During that moveence, Netflix was leading the indus supply as it was the graduation exercise smart set to offer paid be adriftservices to its subscribers in US, Canada and Latin America. Today, Netflix is cognize as the largest provider of online drift service with al well-nigh 44 cardinal subscribers in more than 40 countries offered access to an ever- evolution library of thousands of titles. (Netflix PR, 2014) Netflix executives were keen to fix flexible strategies accompanied by a profitcapable business mannikin that gave them sustainable competitive advan drop behindes e rattlingplace their rivals. They constantly monitor their external purlieu and do the required quickenments quickly and swiftly to leverage the emerging opportunities and rule the upcoming menaces. Strategies ranging from growing its library glut, service differentiation, really competitive DVD-by-Mail service, laughable grocerying plan and ambitious international expansion e very do Netflix a leader in its effort.However, Netflix isnt the solo player in the DVD-rental and cyclosis services grocery store. megahit and Redbox ar unity of the valet de chambrey competitions in the DVD-rental market place that mathematical function different competitive models to out postulate Netflixs. Hulu Plus, virago and HBO GO fill fueled the competition in the float service market. They all compete on acquiring more titles to expand their libraries and try to offer the outdo subscription plans in install to get more market shargon. Having this in mind, what should Netflix do next in dress to outperform its competitors and sustain its competitive advantage. away Environment AnalysisMacro EnvironmentWe give start our assessment of the external environment by examining the PESTEL factors in the Macro (General) Environment of the painting renting industry.Political FactorsNe twork Neutrality is the principle that preserves the mesh to re primary(prenomina l) free and open for all users. It defends against discrimination of the inter lolly use based on the meaning or website services (Ala, 2014). Major meshwork Service Providers (ISPs) would like to charge a connection like Netflix more money because its website of online movie streaming is eating a conduct of their internet bandwidth. According to the broadband internet service tracking squargon Sandvine, Netflix alone is consuming 32.3% of the buckstream traffic in North America, lots more than any early(a) acute site or service. (Protalinski, 2013) Major ISPs whitethorn well contemplate the idea of blocking Netflix from their service to rel chasteness all that traffic or theymight demand loand internet subscription fees from Netflix to prevent hosting their website this would be a disaster for Netflix who is facing increase content duty represent and if ISPs opted for that step, they result begin no other choice other than increasing the monthly fees of their streamin g service which impart definitely non come to the delight of their customers. altogether of this is against the Net Neutrality rule, which states that all internet users volition be under the comparable conditions to get space on the net whatever their website or content, is. The possibility of regulations designed to mandate the neutrality of the Internet has been subject to fierce debate, especially in the United States (Internet Cleaner, 2013) In an interview (Netflix Investor Relations, 2014), reed Hastings says he is non c oncerned with the little terror that ISPs might block Netflix since it forget fuel the fire for more regulation and no one is interested in this.Environmental FactorsHistorically, the video rental industry was built on the idea of reusing the analogous stuff by different peck all over and over again and this concept is environment-friendly. Moreover, fault to the buggy copies of media and streaming it by the internet reduces energy consumpti on and befoulment levels due to a decrease in ransoming DVDs by mail and in any case less manufacturing of DVDs.Socio-Cultural FactorsPeople atomic account 18 expected to watch movies or play video games when they take up more unemployed time. However at a timeadays, some a(prenominal) people are having 2 jobs to support their families which basically entertains less lei received time and less watching movies. In increaseition to that, people are without delayadays becoming more well-provided watching movies at their homes soft of of going out to the theaters since it is cheaper, less time consuming and is ideal subsequently having a eagle-eyed tiring day this emerging trend will boost the volume of the streaming media subscriptions. Moreover, the fast acceptance of the society for scientific advancements greatly benefits the online movie rental industry, this is particularly correct due to the virgin educational and pedagogical governances that stress more on computer t each(prenominal)ing making people more favourable when dealing with technology.Technological FactorsThe speedy technological advancements and production of electronic products such as Blu-ray DVD players, television receiver game consoles, smart phones, smart TVs and some(prenominal) other devices that keister connect to the internet, do the concept of online rental and video streaming easier and more adaptable. As the internet services are becoming more popular and an primary(prenominal) ingredient in peoples daily life, companies like Netflix will be able to add-on its operations especially in the video streaming service. Therefore, the advancement in technology is an opportunity and enabler for the industry as a whole. 4K streaming is a bleak towering- whole tone video technology that reduces coalescency rate and fixs output in 4K/Ultra HD format. (Burns, 2014) Netflix started offer some of its content in this format, which signals their aim to go side by side with technological advancement. Of course, to be able to stream at this high resolution, you claim to sop up a super speed internet (40-50 Mbps) so people now perplex a land to upgrade and it means more bread to the ISPs. (Netflix Investor Relations, 2014)Economic FactorsThe industry depends on the go tors spending power and real income, which is alter by employment rate, interest rate, tax rate and inflation rate. When consumers have more money, spending on crusade intotainment facilities rises and this is an opportunity for the industry. On the other hand, the spending power of households comm exactly decrease in recession periods, so they will probably tend to sacrifice the theater ticket and whitethorn well reward themselves with some older movies functional on streaming services such as Netflixs.Legal FactorsThere is a extensive potential for legal actions to be taken against companies operating in this industry, actions related to to the use of independenc ed material and customers secretiveness issues. Moreover, any guild that operates in the international market should study well the rules and regulations specific to that market or else it will shortly expire in trouble or draw back worthful opportunities. Some legal actions might have a controlling impact on companies in this industry such as the amendment of the VPPA honor discussed earlier. On the other hand, Netflix had some hard times in 2010 with lawsuits pertaining to privacy issues when an academic re governance suggested it exposed the movie preferences of its customers for the planmers whoparticipated in the Netflix prize to get to a better tri hardlye algorithm. (Buley, 2010) The issue was later resolved and Netflix scrub the sequel Netflix Prize II competition. hawkish EnvironmentIn order to determine nature and strength of the competitor pressures in the movie rental industry Netflix is operating in, we use Porters five forces model of competition.dicker Pow er of CustomersIn the streaming market, customers have a high bargaining power the reason behind this is that people are very well informed about other companies which are in the like line of business as Netflix. Customers are endlessly in search for a better deal because buyers are very wrong tender when it comes to the video rental industry and they are always looking for the stovepipe quality, so they will leave Netflix as soon as a better offer is available since there is no switching cost. Customers always expect product differentiation, and if Netflix does non give it customers this shape, they will simply leave.Bargaining Power of SuppliersBargaining power of suppliers is very high Netflix relies on getting exclusive rights to certain television shows and movies so suppliers play a very big role in bargaining over what content is have a go at itly reserved for Netflix users. Also, there are only a subdue of studios who give the movies and shows. Another reason bar gaining power of suppliers is high is that Netflix bed only get its content from those studios and there is no substitute for that content, too contracts with those studios are usually for a short period of time (1-3 socio-economic classs) and expensive a good example of this is when Netflix was unable to re unseasoned its contract with Starz because they were demanding a much larger sum up of money $300 million instead of the $30 million paid in 2008. (Kafka, 2011)Threat of New EntrantsAlthough entering the online movie rental industry penurys a capacious initial enthronement to get content and secure exclusive copyrights, we whoremonger say that the threat of impudently entrants is moderately high since it re master(prenominal)s a growing market with a growing demand, and huge rich companies like apple and Google may be tempted by its growth potential and might well enter the play stagewith generous budgets and also the low exit costs in this market make this threat h igh. But in order to be profitable in this industry, companies need to achieve economies of scale and try it best to have a large volume of subscribers, which in Netflixs case is how they achieve profitability, and also to have a large number of viewers if it is a VOD company.Threat of SubstitutesThe threat of substitutes is relatively high since substitutes are available, such as megahit On demand, Amazon found import Video and many other VOD streaming media. Rather than having a subscription of unlimited views, customers can switch to a settle per view option. Another reason is that there is no switching cost. In addition to that, the prices of substitutes are convenient and low which makes it relatively easy to switch. Customers might also choose to switch because companies working on a VOD bases have better features such as making certain television shows and movies available within a a hardly a(prenominal)(prenominal) hours of airing them on T.V, unlike Netflix where custo mers need to wait a few months.Intensity of Competitive RivalryCompetition is very high in the video rental industry Netflix has many current competitors which include Blockbuster on demand, Amazon, Apple, Hulu Plus and many others. Also Netflix has to keep scanning the environment for new competitors since it is easy for new rivals to enter the market for there are low barriers to market entry and exit. Netflix must fear its competitors because they can easily lose customers to them since switching cost is very low and they have no loyalty programs to make it harder for customers to leave.VRIO AnalysisNetflixs overhaul imagings can be be givened as follows1. The variety and big selection of titles ( encyclopaedic library of movies and TV-episodes)2. The unique software package for streaming and recommendation3. Nation enormous dissemination network4. CEO Reed HastingsResources must have enough competitive potential for the organisation to outcompete its rivals. By applying t he VRIO framework ( put on table 1), one ofthe best strategical tools to prize the unanimouss resources, Netflix is shown to be at a moderate sustainable position. Providing its subscribers a wide selection of titles has been always Netflixs primary schema. During the year 2012, its library has reached over 120,000 DVD-titles and more than 30,000 titles ready for streaming (Wikipedia, 2014). This extensive library is definitely valuable for Netflix to attract more subscribers to watch from a wide variety of titles. Moreover, this resource is rare as not all competitors are able to offer its customers a huge number of titles for both DVD-rental and streaming services. However, such a comprehensive library is not very embarrassing to imitate. Apple and Amazon, for example, are constantly working hard to gain license agreements to acquire new content and grow their library of titles.An limpid example on this is when Amazon won over Netflix and secured the streaming rights of the whole 8 seasons of Foxs award winning series 24 (Cantisano, 2014). Netflix has shown to be organise to capture the look on of its library by making it available for its subscribers when using both services. Thus, having a big selection of titles exactlytockss Netflix at a sustainable competitive advantage as longsighted as no competitor grows a more extensive library. Otherwise, it will become easy for Netflix subscribers to switch to another company that offers wider selection. Netflix had well developed and easy-to-use software that provides titles recommendations for each subscriber based on personalized ratings. This resource is an added apprize to Netflixs business because it became convenient for subscribers to quickly view movies they like or place them on instant queue for watching them later. (Netflix, 2014) Netflix announced a 1 million-dollar competition to challenge programmers to create an algorithm that can beat its Cinematch remains by at least 10% of intensi fyd accuracy (Netflixprize, 2009). In 2009, three teams of talented programmers combined forces and developed that algorithm and Netflixs system was given a study(ip) boost. Since the software is customized only for Netflix and consists of complicated algorithms, such a resource is considered rare.Although Netflix had set the bars high for its rivals, another company can call for a competition or hire top programmers to develop their own software that may beat that of Netflixs. There is always room for improvement, and for that reason, this software can be imitated. Nevertheless, Netflix is continuously prepared to capture the rank out of its smart software and make the bestuse of it. As a result, the recommendation software positions Netflix on a sustainable competitive advantage as long as no competitor develops equal or improved software. For its DVD-by mail service, Netflix had for the most part invested in developing its nationwide distribution network by establishing as mu ch distribution centers as possible. Their dodging is to provide customers with the fastest shipping service by passing ordered DVDs within one business day. This is of a big measure out for customers who used to wait several(prenominal) days to obtain a DVD. To make it more effective and efficient, Netflix utilizes a distribution network system (logistics system) that saves a lot of time looking for the closest center that has the ordered DVD in take.The combination of wide-spread distribution centers and effective logistics software makes it a rare resource. Its still almost impossible for competitors, such as Blockbusters, to deliver any of its DVDs within 1 business day. Furthermore, its difficult to have a large number of shipping points close to every home. Therefore, this resource is considerably inimitable. Obviously, Netflix is doing a great job in regards to quick delivery. It has promised its customer to ship DVDs anywhere within 1 business day. Today, by effectively employing the distribution network system, the company leveraged its capability to reach 98% of its subscribers. Hence, Netflix is organized properly to capture the value of their distribution centers. It is worth noting that although this resource gives them an sustainable competitive advantage, the demand on this type of service (DVDs sent by mail) is on a continuous decline, and the service might completely take flight in the next few geezerhood. Last but not least, Netflixs CEO, President and co-founder Reed Hastings is considered one of the firms most valuable resources. In the most difficult times, this innovative and visionary man knew what he was doing and didnt lose the focus. His vision was very discharge since the very beginning back in 1997 when he named the company Net-flix and not DVD-by-Mail (Fortune, 2009) he saw what the industry will be like in the succeeding(a) and believed in the powers of the internet. an intangible asset, as we are interested in his vision , education, expertise, know-hows, creation and skills, is considered a valuable one.If you take a quick glance on what has happened in the past few years, youll find it clear how such potent people affect their organizations in every aspect. For example, when Steve Jobs died, Apples line price went down by 5% immediately (Kollewe,2011) which shows you how people believed that the wonderful success Apple had in the past few years was at present linked to the innovative out-of-the-box thinking of their ex-CEO, and time to come manifestations showed that that was extremely true. So these burnished executives are so valuable to their firms and they are also rare. Blockbusters ex-CEO Jim Keyes had the view to buy Netflix in year 2000 for as little as 50 million dollars (now its worth more than 20 jillion dollars), but he was so arrogant and refused to give any mention for Netflixs success claiming his firm can easily do anything Netflix does. (Zarafshar, 2013) helplessness to s ee the opportunities, combined with many wrong assessments of the external environment led to the bankruptcy of Blockbuster in 2011. Many analysts were actually sooner sure that Netflix will be sold by and by the 2011 missteps that caused the stock price to fall by about 80% however, at that same exact time Reed Hastings was confident and quite sure that Netflix will not only survive but flourish (Morrissey, 2013).Those same analysts didnt see, at that time, anything of a value in Netflix other than its CEO, who previously one the CEO of the year 2010 award (Hartung, 2013) and whom they had great respect for (Morrissey, 2013) and indeed he was able to turn on his company and return it back to the list of the most successful companies in the world and the stock prices went up by more than 700% between 2011 and 2014 (Google Finance, 2014) In an interview, Hastings clarified that he doesnt see his firm hardly competing with the other companies in the media-entertainment industry, bu t he believes to be competing with all companies that offer any kind of product or service that a person can enjoy during his leisure time, whether it is a soccer match, a newspaper, a video game or even hiking with friends or family (Netflix Investor Relations, 2014). This gives you an idea of the high mindset of this man which explains the success his company is now enjoying. Such a resource is hard to imitate as they usually come through the hierarchy of the same company thats what explains their adept understanding of the industry theyre working in and the core competences of their firms. save woful one brilliant CEO from one company to your company doesnt guarantee you any success at all since many complex factors take action in the whole mix-up. Proceeding from here, it is obvious that this resource is organized to capture value for the firm.By setting thestrategies and adjusting them whenever and wheresoever needed depending on the ever-changing environment, Mr. Hastings i s the captain who controls the helm to take Netflix to the island of success. Therefore, this resource gives Netflix a sustainable competitive advantage as long as hes on the helm. In the future, will Netflix face the same difficulties Apple confront after their CEO was deceased? visionValuableRareInimitableIs the company organized to capture the value of the resource? Competitive PotentialBig Selection of TitlesYESYESNOYESsustainable/Temporary CATitle Recommendation SoftwareYESYESNOYESsustainable/Temporary CANationwide Distribution NetworkYESYESYESYESSustainable Competitive rewardCEO Reed HastingsYESYESYESYESSustainable Competitive valueTable Conducting VRIO analysis on Netflix top resourcesNetflixs Competitive durabilityThe Netflix StrategyNetflixs strategy so out-of-the-way(prenominal) hasnt been to just focus on one or two aspects of their customer base, but to focus themselves in a number of directions in order to phase upon and capitalize on a growing subscriber base. Th eir main strategy has been to build and apply the most comprehensive selection of DVD titles in the industry, and they have begettere so by creating mutually beneficial relationships with a number of entertainment video providers. Their second main strategy has been focused on service differentiation- not only how customers receive content and consume it, but also how customers choose what to watch. Netflixs number one competitive advantage over Amazon and Blockbuster is their unique software that takes what a customer has seen or rated, and based upon that information builds a list of suggested titles similar to ones they have just watched. While other companies had begun to leak into the rent-by-mail niche category that Netflix had started, no other company had customer profiling software quite like Netflix. Between 2006 and 2009, the film rental market underwent a major shift. The in-store rental market declined, while vending machine rentals appendd and by-mail rentals appr oximately doubled. However, VOD (Video on Demand) services through cable, digital, and subscription also saw major increases.All of these changes meant companies like Blockbuster had to either restructure and make a complete business model shift or face bankruptcy. Meanwhile, the increases in by-mail rentals and online subscriptions, two services that Netflix offered, meant that the number of Netflix subscribers more than doubled in that same time frame. Purchase decisions from customers were focused on convenient access, price, variety of DVD offerings, and ease of return/return fees. Customers like variety a video rental store that only stocks the newest releases will not appeal to all markets. Increasingly, customers are becoming more nostalgic in their movie preferences, searching for titles long past post-morteme. Customers have also become increasingly busy, often not having the time to go to a store to pick out a movie or remembering to return their rentals on time. We live in a world of instant gratification, where being able to click a few buttons and watch the latestmovie or an old genuine is extremely important. Customers also do not like fees. More and more companies today are offering free shipping/return shipping, and the same is true in the DVD rental industry. Netflixs third main strategy was to attract more subscribers using multiple merchandise bring including online publicizing, radio stations, regional and national television, direct mail, and print ads. mavin of these marketing strategies included participating in a variety of cooperative advertising programs with studios through which Netflix received cash for featuring a studios movies in its advertising.Moreover, Netflix worked closely with the makers of Netflix-ready electronics devices to expand the number of devices on which Netflix subscribers could view Netflix-streamed content (Thompson, 2012). This is considered Netflixs second competitive advantage because it got ahead c ompetitors by being the early to market with next-generation products. By 2012, with the aid of new technology, Netflix added another core strategy which was to grow its streaming subscription business domestically and globally. By doing so, executives expected that the number of members with DVD-by mail subscription would decline, as subscribers migrated from renting DVDs to streaming online and as subscribers with both DVD-by mail and streaming subscriptions opted to only streaming online. The company continuously improved its streaming survive by expanding the size of its content library, increasing the number of Internet-connected devices, and up(p) the ease of navigating Netflixs website of locating and selecting content to watch. The result was a rapid growing customer acceptance and interest in the delivery of TV shows and movies directly over the Internet.Finally, a central element of Netflixs long strategy was making Netflixs streaming service available right(prenomina l) the US, in countries like Canada, Latin America, the UK and Ireland. (Thompson, 2012) Although this international expansion was expected to temporarily depress the companys overall profitability and incur huge expenses of obtaining licenses from movie studios and owners of TV shows, Netflixs entry into such markets would launch a preemptive strike to secure an advantageous position of being market leaders with high-quality suppliers via exclusive partnerships or long-term contracts (Thompson, Peteraf, Gamble, Strickland, 2014). We have to win the dictation for a big set of content, and then market ourselves effectively to start the membership growth (Seave, 2013). Howlong it takes for such a bold move to yield good results was not a major issue because Reed Hastings indicated that Netflix would take longer than eight quarters after initial entry to reach sustained profitability.How Does Its Competitive Strength Compare Against That of Blockbuster and Amazon Compared with Blockbu ster and Amazon, Netflix operates within the highly competitive media streaming market that has been forecasted to increase to $12.5 billion in 2017 (Bauman, Deal, Ishak, & Johnson, 2013). Netflix by far has the most comprehensive number of products and distribution channels, given that consumers can either rent DVDs by mail or stream them on their PC or TV. Its identicalness is valued greatly among consumers as a quick, easy, and available destination for streaming media. Additionally, the value of their brand has risen recently after the strong media circumspection for the success of its first real series, House of Cards. When it comes to competitors, Netflixs main competitors were Amazon and Blockbuster. Operating as Amazon Prime Instant Video, it has three main advantages over Netflix it offers subscription as a prime member for $79 a year which is $6.59/month, less than Netflixs streaming price of $7.99/month, subscribers get free 2-day shipping on millions of items and its users can buy or rent a movie/show just after a few hours of it being broadcasted on TV, while Netflix subscribers needed to wait a few months in order to view the same movie or show (McGrath,2014). However, Netflixs competitive advantage over Amazon is its library which has more variety and includes original content, and so making their library comprehensive in the streaming market.They also offer all their content to their subscribers for streaming through a very user friendly personalized interface and effective recommendation system that boosts the watching experience in comparison, Amazons Prime Instant Video library have less categories and less unsophisticated search results, plus a significant portion of their online content cannot be streamed for free, you have to pay additional money to watch certain shows or movies. (Honorof, 2014) Blockbusters strategy was to keep expanding geographically by chess opening new stores in different locations, rather than switching to onl ine streaming, thinking it would increase their market share. But due to the rise in competition from Netflix and Amazon, the company filed for bankruptcy in 2010 and in January of 2014 they permanently closed all their stores and only operated through Blockbuster On Demand on a pay per rentalbases and operated only in the US (Netflix Alternative, 2013). The competitive advantage Netflix had over Blockbuster is the number of titles they offered.Because Netflix did not operate from a physical store, it made it possible to store thousands of titles, both old movies and movies which were on high demand, and thus satisfying the preferences of much more customers than Blockbuster. Blockbuster was restricted in the amount and titles they had to offer in their stores because of its limited storage space. Another advantage was convenience. Netflix made it very convenient for customers to get their DVDs without having to leave the house and having unlimited videos on a subscription basis wit hout late fees, all of which are things Blockbuster lacked. With all this said, it is obvious that Netflix used offensive strategies that helped it build its reputation as a market leader and created a strong brand loyalty by binding customers to its service. As a first mover, Netflix was able to move down the learning curve ahead of rivals, so it now knows exactly what customers are expecting and learned a hard lesson not to do sudden strategic changes as it did in 2011 missteps of price changes and split of service. As a first mover also, Netflix was able to set the technical standard for the industry by adopting the advanced streaming player and recommendation program that customers now cant imagine accessing huge movie libraries without it, and Netflix is ahead of its rivals in this and its building it over time.Back in its early stage of existence, Netflix had no chance to compete traditionally with the giant Blockbuster, so it chose a special kind of offensive strategy called The Blue-Ocean Strategy which dictates that a firm can gain a swordplaytic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and instead inventing a new industry or distinctive market member that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand (Thompson, Peteraf, Gamble, Strickland, 2014) This is exactly what Netflix did as it didnt go into the block and howitzer business but focused from the very beginning on growing its online library and achieving its most important strategy back then which is to deliver DVDs by mail within one business day. This created a new segment of customers for its service and factors in the external environment started changing to its advantage which shows that Hastings and his team where correct in reading their externalenvironment. then(prenominal) in 2007 they started their streaming service which is also an offensive strategy that pos itioned Netflix far ahead of its competitors.RecommendationsThe past few years have shown how volatile the stock price of Netflix was as it fluctuated between as low as 53 dollars in 2012 to as high as 448 dollars in March 2014 (Google Finance, 2014). This is an meter reading that Netflix is operating in a very fast moving industry where innovation and continuous improvement are the differentiates for survival. Consequently, as professional consultants, we advise Netflix executives to learn from what has happened in the past and put new strategies or amend existing ones to tackle the future probable recurrence of the problems they have faced in the past few years. One of the major competitive advantages of Netflix over its rivals in the industry is having this huge and varied collection of title selections in its offering. First we advise them to convert all their DVD-version content, which is not available for streaming, to soft stream-able versions as statistics showed more cus tomers are leaving the DVD-by-mail plan and registering for the more convenient trendy streaming service (Roettgers, 2013). Maintaining an increasing selection of title offering is vital in this respect, as in such an entertainment industry, we dont see loyalty in customers as decreed by Marketing gurus what we mean by this is, if another rival had a similar service with a richer content, many customers will switch with the blink of an eye. Thats why we are stressing on this point as it is a key for survival.Accordingly, Netflix should opt to create strategic alliances and cooperative partnerships with many movie studios to maintain its database of titles retaining existing ones and adding new collections, and negotiating to reduce the wait time for streaming movies after they are out in the theaters. This will definitely create value to the customers, but Netflixs harder job is how to create value for those suppliers, that is, how to convince them to add their productions in the N etflix service. This can be done by creating a win-win model that will persuade those studios to choose Netflix over other rivals, and hence can be achieved by highlighting a set of advantages theyll get from the deal. An example of such an advantage, is to have the studios work available not only in US, but in all the 41 countries Netflix before long operates in, andmaybe make it available in local languages this will increase the popularity of the studios work internationally and will basically mean more profits for future project releases. Catching up from this abide point, it is vital for Netflix to find new smart ways to continuously increase their subscription base. By the end of Q1 2014, the number of subscribers went up to 33 million US subscribers and 11 million international subscribers (Welch, 2014).More subscribers simply mean more annual income which will lead to the ability to get richer content to their offering, which will in return link more customers in. This re cursive cycle is so prominent and can be triggered by some smart tactics, to ab initio get more customers. Lowering the subscription price might lure many potential customers to register, but is not best(predicate) to do that since the profit borderline of the streaming service is already narrow (Roettgers, 2013). On the other hand, increasing the price of subscriptions is also risky and the crazy chaos that happened in 2011 will remain unforgettable. Hence, Netflix executives should devise new innovative ways to increase the value proposition of their service that will increase their customer base and enhance their reputation as a market leader. This can be achieved, for example, by doing the exact opposite of what they did in their 2011 missteps. What happened back then was to increase the price of their service for the same quality they offered so lets now try to increase the service quality holding the price fixed. One way of doing that, is to diversify their content for exam ple to start providing Live programs such as Sports events and News. This addition will get-in new customer segments not only those who love to watch movies and TV series. So, if Netflix was able to secure the online broadcasting rights for a major soccer league matches, for example, and broadcasting Live CNN news, their customer base will be more fragmented and they will be moving in the direction of being an Internet TV provider with a variety of shows that suites all the different categories of viewers.Another technique to increase the quality of their service is to enhance their GUI (graphical user interface) by creating a new advanced online player for streaming media that can detect voice commands sent from the embedded microphone of the clients personal gadget (laptop, Smartphone, tablet, etc), take those commands and perform actions accordingly. For instance, Volume Up to increase players skilful volume instead of usingyour laptops mouse or going to Settings on your Smart phone/iPad or the voice command Action course of study to go to the list of movies in the Action category. Adding such a advanced innovative feature in their player will amaze their beaming customers and will leave their competitors contemplating in the shadows. Netflix can also enhance its online service by continuously challenging and rewarding bright programmers to come up with new algorithms that increase the effectiveness of their rating application. What they did with their one-million-dollar contest, which was won in 2009 by a team called BellKors Pragmatic Chao who were able to come up with an algorithm that overcame Netflixs recommendation system by more than 10% (Netflix Prize, 2009), was very tidy and it really paid off so they need to go by upgrading their systems as it goes side-by-side with the ever increasing size of their database.Speaking about the content, it was very clear that the bargaining power of the suppliers, which are the TV shows kindlers and movie studios, are becoming increasingly high and what happened with the Starz Entertainment deal is one example to mention here, when it announced it would remove it movies from Netflix streaming starting February 2012 (Young,2011). This leads us to what we believe is the most important recommendation for Netflix to consider, that is, invest more in original content. Going backward to the recursive cycle we previously explained, it is clear that getting new content goes in parallel with increasing the number of subscribers. For example, when Netflix secured the deal with Disney for exclusive rights to stream its movies starting 2016, many analysts assumed that the firm needs to get 4 million new subscribers to just breakeven with the cost of that deal (Morrissey,2013). One here might contemplate, that sooner or later, Netflix will reach a stage where it will cease to be able to increase its customer base, so its revenues will reach a kind of a slow moving ceiling, but their content oblig ations will continue to rise to maintain the licenses for the current collection and to get new content in. Many movie studios are closely monitoring Netflixs instruction execution and stock prices, and they are demanding higher money for renewing their contracts, and this is a major threat for Netflix to consider.Unable to reach a renewal agreement with a major movie studio, will result in the disappearance of hundreds orthousands of titles from their online library in a fortnight. This will really embarrass the customers. Thats why we recommend that Netflix needs to heavily invest in original programming before they reach the saturation stage, or a blind alley situation whereby they cannot enhance their content because its too costly and they need more money by growing membership, and they cannot grow membership because they arent able to enhance their content because its too costly stretchiness this stage means the firm is approaching its last days. The solution for this miser y, and to reduce this tragic end, is to invest in original content right away. Netflix started distributing premier programs in 2011 and now has more than 10 exclusive TV shows in its offering (Wikipedia, 2014), one of which is House of Cards an America political drama television series which became the first TV series to win a primetime Emmy Award without ever broadcasting on a network or cable channel (Neal, 2014). The success of the series encouraged Netflix to produce a second season of it in Feb 2014, and a third season is schedule in early 2015 (Wikipedia, 2014).According to a study (Popper, 2014), one episode of such original content costs Netflix four million dollars but although this is very expensive, allocating an important portion of the budget every year to produce such exclusive series will have its mark in the future. People can enjoy watching such series any time, as it is a permanent title in the online library, and Netflix doesnt have to pay licensing or any oth er kind of expenses on originals once it is broadcasted. They can also make it available for their international customers by adding local language features (subbing or dubbing) to it. Growing internationally is still one of the main strategies that Netflix is counting on and although international expansion proved to be very costly, as Canada for example broke even after 2 years (Netflix Investor Relations, 2014) they are recommended to continue with it. It will give them more international lore that will enhance their reputation and will pay off in their competition with rivals, and this is exactly what CEO Reed Hastings said in Netflix Q4 2013 Earnings Interview we are treating international as a segment for competitive reasons (Netflix Investor Relations, 2014). As first movers in the streaming movie industry, it is advisable for Netflix to leverage their position as pioneers of the market by offering several loyalty programs that will increase the switching costof the custom ers to their existing and future rivals. One thing they can do is to create a points-based reward system which works as follows every month you renew your subscription youll add 10 points to your balance, and if youre a new customer you get 50 free welcome points.Then through time your balance will keep adding up points and youll have the choice to buy several valuable things with it. For example, one-month free subscription for 100 points, an original DVD movie (from a predefined list of titles) sent directly to your mail and that will cost you 200 points, and the chance to meet with the actors of your favorite TV-series (Netflix Original) for 300 points. Such a loyalty program will keep delight the customers and keep them hooked to the service. While many consumers have cut the cord and made the switch to Internet-only TV offerings, undoubtedly theyve experienced frustrations as well. Netflixs mobile app, while good, can be upgraded to present a much better and more seamless expe rience for those on tablets. We suggest added-value features like friendship connections, including the ability to see what friends on both Facebook and Twitter have watched, their recommendations, and share content with others. Another lofty change could be a tagging feature when watching shows which we believe to be instrumental in expanding the social aspects of Netflixs content. Viewers can ping the button at any time during a show to tag moments on the timeline relevant with quotes from the scene or make a input signal regarding what they saw. Subsequent friends watching the content can see these tags, opening up dialogue between the partners and encouraging more social conversation through Netflixs app. (The lab Blog, 2013).Compared to the current apps design, this new proposal feels fresh-cut and clean. Of course, those added features are optional and can be switched off whenever privacy is needed. By adding this feature, Netflix will be leveraging the benefits of the lat est VPPA (Video Privacy Protection Act) law amendments President Obama signed which facilitate social media sharing of video view preferences when users consent to disclosure of information via the Internet.(McClellan, 2013) Moreover, integrating social media with customers believe experience will give Netflix an important marketing tool that will help them detect which content is more appealing to their customers and will also give their customers a window to speak out what they like to see in the future. Finally we can say that the next step for Netflixis to produce a Hollywood 100-million dollar movie that can be streamed same day it goes into the theater. This massive step of producing one movie every year, of such a caliber, will be a major boost for Netflix in the coming years especially if they were lucky enough and those movies turn out to be a major hit. But here one has to say, is it wise for a company like Netflix, that reported 112 million dollars in net income by the end of 2013 (Google Finance,2014), to handle a project of this size? Isnt it a crazy adventure? Or should Netflix go through a joint venture with other Pay-TV firms to reduce the risks of such a mammoth project?ReferencesBauman, L., Deal, N., Ishak, P., & Johnson, S. (2013, February 3). Netflix Environmental Scan / SWOT Analysis. Retrieved April 22, 2013, from Memoirs of a Student http//lisabauman.blogspot.com/2013/02/netflix?environmental?scan?swot?analysis.html Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland III, A. J. (2014). Crafting and Executing Strategy The Quest for Competitive Advantage Concepts and Cases (19th Ed.). New York, NY McGraw-Hill/Irwin Ch6, pgs. 151-152 Thompson (2012) Netflix in 2012 Can It Recover from Its strategy Missteps? Thompson, A. A. (2012). 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