Company Analysis Of Netflix Essay.
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The internet has created new ways to do business for organizations with much less capital planning as opposed to the high capital needs of traditional brick and mortar organizations. Based on this, how should management and leadership be addressed for each type of business? Research successful traditional and online retailers and address the following issues: Discuss the organizational structure of one traditional and one online retailer. Identify two management or leadership challenges for each type of retailer. Are the challenges basically the same or different? In what ways are they the same or how are they different?
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1.0 Company Background
Netflix was founded in 1997 by Reed Hastings. The founder and CEO had previously founded Pure Software in 1991, a company that grew to be among the top 50 largest software companies in the world. In 1999, Netflix launched the online subscription service that realized a subscriber base of over 1 million in three and a half years. The company’s business strategy was grounded in the fact that they had pioneered the online DVD rental industry at a time when DVDs would be very rare, thus realizing an overwhelming customer base, brand recognition, and revenue. In response to immense competition, the company obtained a patent in June 2003, this patent covered the most of the company’s business model, and it could be used to downplay future competition or demand licensing fee for its services. Netflix entered the online DVD rental market when the barriers to entry were minimal, but the barriers to profitability were overwhelming. One of the major operating challenges was the notion that DVDs would soon cease being the major medium of choice. Currently, the company is the largest online movie rental company in the world. Based in Los Gatos, California, the company has movie collection of over 100,000 titles and its still growing. According to the company corporate fact sheet, the company has more than 17,000 titles accessible through internet streaming or instantly to the user TV through an external Netflix-friendly device. The movies can also be accessed directly through any computer, with zero shipping fees, due dates, or late fees, the company is an optimal provider of movie rental service.
The vision of Netflix is to change the way people access and view movies they love. According to Hastings, this strategic vision is the major driver in the route the company intends to take in developing and strengthening its business (Hastings, 2003). To achieve this vision, the company has operated with a long-term goal of achieving 5 million subscribers in the US, with a revenue generation of over $ 1 billion. The company’s mission states “our appeal and success is based on provision of the most expansive selection of DVDs; easy ways of selecting moves; and fast, free delivery.” Through achievement of the mission, Netflix is able to grow and make new goals for itself.
2.0 Industrial analysis
Technology convergence may be viewed as the most significant industrial trend affecting Netflix. Convenience customers have been demanding immediate access to TV and film titles. This may be accessed through VOD and pay-per-view services. However, in the advent of new set-top boxes, different types of media playbacks may be integrated irrespective of the origin. Newer still, some TV set have direct access to broadband connections that have enabled streaming of videos directly from internet hubs such as Netflix, iTunes, and Amazon. With this convergence, consumers can play into the online segment due to the growing capability of the broadband connectivity that has enabled full access via the internet, without having to undergo the hustle of procuring hardcopies. Convenience consumers have started to dominate the industry due to the fall in weekly leisure time. The time that would be used for searching and waiting for titles is decreasing as the need for relaxation increases. Additionally, the general consumer has been greatly affected by the global economic recession; this has decreased the propensity for going to movie theatres and increased home video watching. However, one thing that does not seem to change is the craving for big screen entertainment and an unyielding need for a bigger, clearer TV. Consequently, customers are increasingly buying bigger and more sophisticated TV with video streaming capabilities; this has boosted the online entertainment industry (MacKinlay, 2007).