netflix: assessing the strategies of a digital retailer

ASSESSING THE STRATEGIES ASSESSING THE STRATEGIES OF A DIGITAL RETAILEROF A DIGITAL RETAILER

Katie Jennings, Sonia Galvez, Jessica Dietrich, Christina Walthour, and Fadi Abubaker

NEED FOR RESEARCH

• E-Commerce is new way of retailing

• Shifting consumer preferences and consumption habits

• Evolving business functions and practices

Katie

OVERVIEW

• Company Profile

• Utilized Retailing Strategies and Marketing

• Strengths, Weaknesses, & Advantages

• Operations & Environment

• Proposed Alternatives

• Recommendations

Katie

NETFLIX MISSION STATEMENT

"To revolutionize the way people watch movies and become the world's leading internet subscription service for DVD rentals"

Katie

NETFLIX COMPANY PROFILE

• Public corporation founded in 1997

• E-Commerce company

• Provides on-demand internet streaming media and DVDs by direct mail

• Nearly 24 million subscribers to goods and serviceso DVD rentalo Instant Streaming Services

Over 700 capable devices

• Recent contract expirations and unfavorable strategies

Katie

NETFLIX FINANCIALS

EBITDA Netflix

2004 107.6

2005 108.0

2006 216.8

2007 302.0

2008 358.0

2009 446.6

2010 617.6

Katie

MARKETING STRATEGIES

Sonia

MARKETING PROMOTIONSTraditional and Digital Media

Sonia

Sonia

STRENGTHS & WEAKNESSES

Comprehensive Library 50,000+ Titles Increase Revenue and Market

Size Strong Market Position Personalized Merchandising Strong Financial Positioning

Lack of Geographic Diversification Heavily relies on one segment

of the market Not largely global

Lower Profitability Operating margin :

Company stands = 8.0 Sector's average =9.75 Industry's average =15.09

Strengths: Weaknesses

Jessica

COMPETITIVE ADVANTAGES

• First-mover advantage in online rental

• Patented method of online DVD selectiono Personalization and recommendations

• Aligns with consumers' need and preferenceso Varietyo Convenience

• Digital option in a digital world

• Innovative and efficient operations tactics

Jessica

DAILY & SHORT-TERM OPERATIONS

Fast, next-day shippingProvide shipping costs unattainable by competitorsProvide DVD rental service and online streaming options Maintain customer relationships

Christina

OPERATIONS CONT’D

Provide half-fulfillment center/half marketing center

Virtual pooling Inventory management system Maintaining partnership w/ Amazon web

service Cloud-based infrastructure

Product quality check system

Christina

Christina

CHANGING ENVIRONMENT Loss of contracts Loss of customers and loyalty Pricing strategy Compromised competitive advantages

What was their response to the

changing environment?

Christina

RESPONSE TO ENVIRONMENT Eager to provide reliable service to consumers Changed prices to appease frustrated consumers Separated DVD operations and on-line streaming services Eager to rebuild damaged customer loyalty Trying to re-establish competitive advantage over Amazon,

Wal-Mart, & RedBox

Christina

PROPOSED ALTERNATIVES Strengthen supplier relationships and content acquisition Obtaining market share by penetrating minority markets

Fadi

PROPOSED ALTERNATIVES Expanding Internationally to

continue growth Stay on the offensive while

defending market position

Fadi

PROPOSED ALTERNATIVES Continuous improvement in functional level Netflix entering

VOD market

Fadi

RECOMMENDATIONS Provide consumers with an al a carte plan Rebuild relationship with major movie studios

Fadi

THANK YOU!

Questions?