Executive Summary

The case discusses the success of Netflix on revolutionizing the video rental business. It clearly shows the companys ability on utilizing superior customer service, emerging technologies, strategic partnerships, empowerment of employees and creating an ever growing subscriber base to transform the traditional video rental in to a 21st century ondemand concept. Video-on-Demand is the recent video streaming technology where payper-view programming merges with Internet downloading. Netflix, an online subscription-based DVD rental company, entered the video industry with disruptive technology of offering online video rental while the incumbent competitors like Blockbuster were offering retail rentals. The incumbent competitors eventually followed Netflixs direction when their core competencies were sabotaged by Netflixs strategy.

In this case study, we would be trying to figure out the possible problems faced by Netflix, the solutions generated by the company, as well as the various ways through which the problems can be handled. The introduction part of the case presents short history of the company and some theoretical aspects. The second part i.e. analysis will build up on the problems identified from the case, the possible solutions created by the company and how the solution affected the company. The last part will conclude the case by discussing the lessons gained from the case and recommending ways through which the case can be handled.

Introduction
Netflix was founded in 1997 and has truly revolutionized the way people rent movies. It launched its online subscription service in 1999 and has now become the worlds largest online movie rental service. The company has more than 55 million discs and, on average, ships 1.9 million DVDs to customers each day. On February 25, 2007 Netflix announced its billionth DVD delivery. Two years later, on April 2, 2009 the company announced that it had mailed its two billionth DVD delivery. The company recently announced the availability of a free Netflix app for the iphone and ipad allowing users to instantly watch TV episodes and movies. The company is experiencing amazing growth in subscribers and revenues. For fiscal year 2009, revenues

exceeded $1.6 billion with net income rising above $123.5 million. (Netflix, 2010) Strategic management is what managers do to develop an organizations strategies. It is an important task that involves all the basic management functions-planning, organizing, leading, and controlling. Organizations strategies are plans for how the organization will do whatever its in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. (Robbins and etal, 2010)

Why strategic management is so important? There are three reasons It can make a difference in how well an organization performs. That is why some organizations succeed while others fail facing the same environment. That is what makes Netflix different in its industry, a strong strategy. Research found a generally positive relationship between strategic planning and performance. The second reason is the fact that managers in organizations of all types and sizes face continually changing situations. They cope with this uncertainty by using the strategic management process to examine relevant factors and decide what actions to take. Here the strategy used by Netflix using an online subscription-based DVD rental can be taken as an example Finally, strategic management is important because organizations are complex and diverse. Each part needs to work toward achieving organizations goals; strategic management helps do this.

Analysis: Possible problems

Video-on-demand (VOD), a service that allows users to select and watch video and clip content over a network as part of an interactive television system, is going to be the next biggest thing in the internet. It is going to become a norm in the industry or public and also a threat to Netflix existing business model, an online subscription-based DVD rental service, which depends on the internet to send out physical DVDs to their customers. How could Netflix utilize the first mover advantage gained in the online subscription? Any decision made on this issue would impact not just the Netflix existing business model but its ability to sustain its position as a giant in the media industry.

How Netflix Tackled the Problem

1. Renowned customer service Netflix continued focus on providing customers with what they want allows the company to differentiate itself from the competition. Some practical examples from the case include. Beating Amazon, Apple, Netflix crowned number one in seven straight ecommerce customer satisfaction surveys conducted by Foresee Results

Netflix provides customers with movie recommendations based on the customers own reviews, renting habits, and location. This gave an opportunity to show its customers how far it can stretch to fulfill customers needs. The case describes to improve the tool used to generate these recommendations, Netflix organized a contest to gather its members ideas, the prize one million dollars. What an investment!!!!!!!!

2. Quick adaption of technology Netflix innovation and ability to link its services with the pace in technology enabled the company to provide differentiated service, which combines DVDs delivered quickly by mail and movies streamlined instantly over the internet. The case outlines Netflix recently introduced instant viewing, which streams any of 10,000 movies and television shows to customers computers. Within thirty seconds of beginning a download, customers can roll the opening credits.

This implies Netflix is capable of giving customers what they want at a better price (unlike customers at the Apples iTunes store, Netflix customers can wait as long as they want before they finishing the streamed movie, without extra payment) , by integrating its service with advanced technology and adding value to their business.

3. Formation of Strategic Partnership Netflix, future oriented and flexible approach lead to partnering with consumer electronics companies such as Roku to bring to the market a range of devices that can instantly stream movies and TV episodes from Netflix directly to members TVs

This important strategic move is explained by David Cohen, executive vice-president and US director of digital communication as, the ability to have thousands, if not millions, of content options delivered to your box is certainly the way of the future. This gives us enough information on how creative and strategic thinker the company is. This conclusion leads us to the next strategy which is the treatment of company employees.

4. Empowering people One of the important aspects for managers is attracting and retaining qualified employee or having people who are fit for the positions. Netflix is one of the companies that is cable of hiring and retaining talented employees, this is created by the organizational culture based on freedom, responsibility, innovation, and self discipline, coupled with high remuneration and perks.

The company believes that one outstanding employee does more and costs less than two adequate performers. Thus they pay the top of the market and strive to hire only outstanding employees. The case describes the human resource plan of the company as pay higher-than average salaries; let employees choose how much of tier compensation is paid in cash and how much in stock options; encourage each employee to recruit three other they would love to work with; let employee take as much time off and vacation as they think they need; limit work rules, maximize work freedom, and make everyone responsible for the choices they make

Evaluating Netflix Strategy

In general, our group concluded that the company has done its home work on solving its problem by creating a creative strategy. Being the first company that venture into the online DVDs rental retailing, Netflix gain a first mover advantage. Netflix has gained a good reputation as well as a large base of customers over the years. Beside, having a good and strong relationship with several major studios which enable them to acquire latest releases at a faster time and lower cost, Netflix also successfully gain resources

from independent film studios whereby creating a niche in the market. Therefore, customers can get a whole wide range of movies from Netflix as compared to other competitors.

Another strong aspect is the ability of the company to go beyond limits and trying to meet each and every needs of it customers, for that purpose the company created strategic partnership with many companies and adapted latest technology. Netflix also offers a web portal with powerful features such as a proprietary recommendation system that was very accurate in recommendations, due to exploiting the knowledge of the choices made by the masses in its web portal as well as having the largest collection of movie ratings. Customers are recommended to movies based on their preferences as well as the availability of the movies.

Although the company strategy was effective and revolutionized the existing video rental system, the strategy has got some drawbacks. The prepaid subscription service did help Netflix to gain new customers and revenue, yet this model does not work with low volume customers (i.e. customers who rent a DVD once in a blue mood). High replacement inventory cost will occur since DVDs might get lost or damage during the mail transit.

What the future holds for Netflix

The group evaluated the case and come up with the following suggestions and ideas regarding the Netflix future.