Renting and Netflix free essay sample

At the moment a lot of people are downloading and watching movies online. Some of them it’s free no monthly payments required. There are also pirating movies online for free and other free sources are available. It is available through online piracy to get the same movies which are offering Netflix. Five -force analysis: Threat of substitutes: Probably other websites which offer to watch movies online for free and satellite companies. Walmart, Blockbuster, Sky store online. Also pirating movies on the Internet which is for free and illegal. Substitutes price availability. Suppliers Bargaining Power: It is very High. There are not a very big choice of suppliers. It is important to chose the right supplier fo your demand. Suppliers has the power on the movies. It is important to maintain good relationship with movie providers. Barriers to entry: Netflix has the leadership position in the market at the moment. The other competitors are not so strong as people not renting DVD’s as much, as few years ago. We will write a custom essay sample on Renting and Netflix or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Netflix outcompeted his competitors because provide high quality, high definition and wider product selection, advanced technology. Actually entry into movie market and attract the customers it’s not so easy. Buyer Bargaining Power: Buyers is the most important and powerful in this type of business. If the buyers has no money movie rental business will go down. Or if the buyers has alternative options to rent DVD’s in store or stream. Also piracy affecting Netflix. If the price is not suitable for the subscriber he/she will switch to competing company. Furthermore rights of the buyers for e. g. Netflix allows to cancel subscription any time, so you don’t have to sign any contracts. It is necessary to avoid delays in orders, because can increase customer dissatisfaction and affect the company. Competitors: There are increase in competitors at the moment. Blockbuster, Netflix, Redbox, Hulu Plus, iTunes, HBO, Amazon, Wudu and TV providers. And these competitors are very active, because every company has to attract the customers and to increase the revenues. Netflix offering one month for free, unlimited streaming. The main factors competitors has to focus on technology, price, various availability provide different packages. 2. What forces are driving changes in the movie rental industry and are the combined impacts of these driving forces likely to be favorable or unfavorable in term of their effects on competitive intensity and future industry profitability? The economy is the main reason what drives changes in the movie rental industry. In nowadays less and less people are renting movies. As there are other options available for them. Now most of the people have internet at home, so they can download movies online and is more cheaper and more convenience. And it is faster it can take just few minutes, only fast broadband is required. There are a lot of movie providers online one of them is Netflix. They offer for monthly fee to watch movies or TV programs online. There are few companies offering unlimited watching for the same price. Also Internet is getting faster so quality of movies will be better, higher standards. Furthermore could be cheaper price availability from other companies. The unfavorable effect in the future will be more competitors in the same market. Also competing for the license with the same entertainment video providers. Difficult can arise to guess each country subscriber’s taste, lifestyle. The subscriber’s taste can change time after time. Netflix will have to spend on marketing wich required of a lot of money. The favorable effect will be expanding internationally, as will lead to increase in customers, which lead to increase in company’s profits. 3. What key factors will determine a company’s success in the movie rental industry in the next 3-5 years? There are factors which will help to survive Netflix in the movie rental industry: Technology will be one of them (allow streaming movies on new devices), the price is very important. Keep providing easy convenience service to the customers (streaming and DVD’s by mail). Blockbuster provide service online and has many stores across, but Netflix has a huge audience even don’t have any stores. To keep the stores open it’s costly, have to pay to the staff, for the rent and other bills. Furthermore the key success of the business is their customers. Netflix company has to keep them happy and also make new recommendations to them. Employees should be trained how to communicate to the customers and make sure that the right deliveries are made on time. It is important to have a large choice of movie available and for the different segments. To maintain strong relationship with movie suppliers, as poor relationship can destroy the business. The cost of plans in the future must be compared with other companies, because customers might switch to others if they provide the same quality and cheaper price. In 2012, when Netflix signed an agreement with Apple TV, it was an increase in streaming of movies. Also company to has to promote and to spend on marketing to attract the customers. Furthermore, to work more with other electronic partners, where subscribers could watch Netflix movies. 4. Netflix’s strategy -Netflix trying to be different than other companies. Transformed into worldwide online international subscription provide service for people rented movies and and previous broadcast TV shows. Goals of Netflix- build the world’s best Internet movie service, keep improving and offer faster service than rivals, attract the customers and grow long term earnings per share and strengthen the brand name and reputation. Subscribers could enjoy unlimited rentals, without the added worry of late fees or shipping handling. The warehouses are located in various places and helps reduce time of delivery. Netflix is collecting of reviews by subscribers. Netflix members can instantly watch unlimited movies and TV episodes streamed over the Internet to PCs, Macs, Gaming consoles, and TVs. Makes easier for subscribers to identify movies or TV programs and trying to attract as many as possible customers. Delivering as quickly as possible. Advertising campaigns for new entered countries for example offering one month free trials. Also promoting US customers to stream movies than order by mail. Moreover Netflix is trying to expand more globally. Which five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Netflix is taking? The most closely fit from 5 approach is differentiation strategy. Using this competitive strategy requires to study os subscriber’s behaviour and needs. What will be important for the customers and what they will pay for it. Netflix offers subscribers online delivery or through mail receive movies or TV programs and return them whether they want. There are a big choice of movies in the library for different segments of buyers. Moreover people can stream movies quicker and watch through different mobile devices, computers, TV’s. This is a big advantage for the Netflix to provide movies and entertainment to all types of Internet connected devices and an anywhere, and anytime. Additional Netflix is the leader in Internet streaming segment in the VOD (video on demand). What type of competitive advantage is Netflix trying to achieve? The customers is very important for the business as without customer business won’t survive. Moreover Netflix is trying to be different than the competitors. Convenience for the customer’s and customer information was very important competitive advantage. In 2010 Netflix offered an app for the Apple iPad, iPhone and iTouch. Also added an app for the iPad just for kids and offering movies for kids for age 12 and younger and entered mobile movie market. DVD was mailed to the customers with prepaid return envelope which came with each movie ordered. People could keep DVD’s as long as they want no late fees, no shipping fees. Netflix focus on offering movies on tablets and smartphones. The other competitors as Amazon, Hulu reduced the prices, but Netflix increased by 60% , because Netflix established leadership position in the market. Also software technology scan movie’s length. The movies were rating , also customers can watch a preview of the film. 5. What does a SWOT analysis of Netflix reveal about the overall attractiveness of its situation? SWOT Analysis: Strengths-convenience for the subscribers, developed software (helps for various types of audience), low price plans no annual fees, quick delivery DVD’s to the customers, large selection of movies available. Netflix is a leader in the movie market, so has a good reputation and strong brand name. Netflix provide service widely geographically. Established strong relationship with entertainment and movie providers, which allows them to get new release as early as possible. Weaknesses- that still advertise movies by mail, limited streaming, make sure that new release movies will be available as quick as possible. Keep subscriber confidence is important for the company also keep safe from the hackers. Not all the movies subscribers can stream. Weakness for the company, as they have to pay delivery and return cost themselves. As increase in subscribers from 2010-2011 in this case the movie supplier also increased fees for streaming rights. Movies by mail if post service is increasing postal charge will affect Netflix financial position. Opportunities: expand relationships with movie/entertainment providers. Also to find to offer more new ideas for subscribers, not only movies and TV programs, but also various types of games. As technology changes Internet is going faster everything you are able to get on internet cable TV replace to Internet TV. Satellite subscribers will be fewer. As the main competitor HBO is thinking about HBO app its allow customers to watch movies and other programs and it’s more convenience for the customers. Create new apps Netflix online. Threats: piracy of movies it’s increase a lot, people trying to avoid monthly subscriptions. Another important factor technology changes. Nowadays there are more options available to watch movies for e. g. Sky, Hulu, Blockbuster, Redbox. The competition is rising for streaming movies. The biggest competitor at the moment HBO. Also Amazon and Youtube entering in movie rental market. If company cuts movies by mail will lose part of the customers. Or Netflix will lose supplier contract also can decrease companies revenue. 6. What is your appraisal of Netflix’s operating and financial performance based on the data ? What positives and negatives do you see in Netflix’s performance? Netflix revenue increased in 2011 comparing with previous years. The large amount of money came from subscribers (Exb. 2). The company managed to increase the customers over recession time. Company spent a lot of money to grow their brand name. Compare all previous years in (Exb. 2). Company invested more money in technology and development. The money were used to improve technology, because there was a number of â€Å"Netflix-ready† devices. For e. g. PlayStation 3 consoles, Wii, Xbox. Expenses for Marketing increase dramatically in 2011 it is a little bit concerning, as Netflix used different marketing channels for advertising to attract more customers. Advertisement was used in new entered countries. There is increase in investment since 2010. Probably were bought large amounts DVD’s, it was required to keep customers also if would like to provide quicker delivery to the customer company need to have more DVD’s. Company’s cash flow look positive. Customers was disappointed and many subscribers canceled. But in the third quarter this mistake was corrected, which lead to an increase number of people again. Operating expenses: Technology and Development- 2011-2010- increased by 58. 6%. 2010-2009-increased by 42. 6%. From 2010-2011 were rapidly changes in technology, so Netflix spent money for technology improvements. 2011- 8% of revenue 2010-8% of revenue 2009-7% of revenue 2007-6% of revenue Marketing- 2011-2010-increased by 37%. 2010-2009-increased by 23. 6% 2011-12. 5% of revenue was spent in marketing. 2010-13. 5% of revenue 2009-14. Company spent in advertising to attract more customers. Also expanded worldwide (UK, Ireland). But these expenses spent its the most worried thing, because Netflix don’t know will these will help to increase in numbers of subscribers and will increase company’s profits. Net Income: 2011-2010-40. 6% 2010-2009-38. 7% 2009-2007-73. 8% Its just slightly increase in net income, because tax provision amount increase and interest slightly increase. Also net income was affect as a lot of money was spent in marketing, in technology and development and others. From cash flow data: Net Investment in content library: 2011-2010 Netflix invested large amount in movies and TV entertainment. Which lead an increase in assets Working Capital 2011-2010-Netflix Working Capital increased by 352. 6m. By selling 2. 86m shares of common stock. Company increased the capital for safety reason as cash on hand and future cash flows from operations are squeezed. (Exhibit 4) Comparing monthly subscription plans the highest price were 2010 through June 2011. From September 2011-2012 Price plan slightly decrease. Also 2011-2012 Netflix added unlimited streaming services plus DVD’S. What 2-3 top priority issues does Netflix management need to address? First issue will be poor advertisement. Should advertise clear that Netflix is for all ages and there are not only movies, but there TV programs. And the other issue will be that for older generation is not so easy to use the internet especially streaming the movies. Piracy of movies it’s the main factor which affected movie industry. DVD’s delivery and return cost What 2-3 top priority issues does Blockbuster management need to address? The Blockbuster has few major competitors- Netflix, HBO, Amazon The other issue that main business is renting DVD’s in stores. There is an extra cost for the business to pay rent, pay salaries for the staff, others bills. In first half of 2012 Financial Statement showed weak performance. Piracy of movies online and pirating DVD’s were sold in the markets. 7. What recommendations would you make to Netflix CEO Read Hasting? Advertising is the main thing to attract more subscribers. Advertise everywhere on TV, newspapers, magazines and suggest that this is for different ages starting from young age to older generation. Moreover increase availability of DVD’ and streaming library availability. Also revise how long rented DVD in store could be kept provide various promotions for the customer in store. Create more contracts with movie suppliers to increase variety of movies or TV shows, this will attract more people. In addition to this they should create customer loyalty cards online for long term customers. Improve the website of Netflix. One thing could be done, that for kids won’t be available to watch certain kind of movies. To continue expand worldwide, build strong world of mouth (only positive), improve customer experience, brand awareness. 8. What recommendations would you make to Blockbuster CEO James Keyes ? There are few recommendations to the CEO James Keyes: Company has high debts, has to find the way to reduce the debts. To operate more money for the business and to survive in the movie market first has to change business strategy. Next focus more on new release movies, different subscription deals or different segments. Also expand they business worldwide as Netflix does.