Executive Summary
Netflix has managed to outsmart many large companies in the market. This has enabled it to emerge as the market leader. Blockbuster, which is traditionally the leading firm in this industry, has failed to realize the changing trend. Its slow adoption of the emerging technologies makes it lose the market to Netflix.
The internal structures of the firm clearly demonstrate the firm’s ability to lead the market. It is clear that the firm is the market leader. The management has ensured that the firm adopts the emerging technologies in time, a fact that has played an important role in maintaining its market lead.
A detailed SWOT Analysis of the firm reveals that the firm is still strong and has the ability to maintain the lead for some time. However, the firm faces a number of challenges in the market.
Introduction
Reed Hasting and Mac Randolph established Netflix Company in 1997 at Scotts Valley, which is in California. The firm started as a movie rental shop. It entered the market that was relatively young though there were other stronger competitors. The competitors had already established themselves in the market. The two entrepreneurs are very ambitious and work very hard to ensure that the firm gains a larger share in the market.
In April 1998, the firm launched a website through which it could reach its customers. Similarly, customers reached the firm through the site easily. The firm experienced a rapid growth before 2007, especially due to good management. Moreover, the market was friendly to the firm.
Currently, the firm has transformed since it now provides internet streaming in the United States, Latin America, Canada, United Kingdom, and the Caribbean. By 2011, the firm had 23.7 million subscribers within the United States and about 30 million subscribers worldwide.
Within the same year, it registered an income of about $ 1.5 billion. Through creativity and innovation, the firm has acquired a huge market share in the local and international market (Warner 56). The firm appreciates the fact that the market demands creativity. The firm is the undisputed market leader in the service industry. Although other firms have come out strongly, none is yet to rival it.
Problem Statement
Netflix started out as a very small DVD rental firm in Los Gatos in California. Although the management of the firm is ambitious and has various strategies to ensure success, Blockbuster has a very strong grip of the market. It is unbelievable that a small firm can rise to rival and even displace a giant competitor within a decade. Netflix is the leading movie rental shop and pay per view services.
The firm has managed to hold a tight grip of the market in North America and parts of Europe. Such a large firm as Amazon.com, which offers similar products through a daughter company, focuses on the German market. Competitors are keen to avoid rivalry with Netflix in the American market. The firm recently launched a prize competition where firms were invited to help predict the behavior of customers.
The move had positive impacts because the firm managed to come up with strategies that would help it predict customer behavior in the market. The strategy improved its sales in the market. However, the biggest worry is how long the firm will stay in the market. The firm eliminated competition, which in itself is an intensive market research too that is very important in determining marketing future strategies.
Analysis
Netflix experienced massive growth over the past decade. A number of reviews can be used to examine the profitability of the firm. In order to bring to focus the environmental factors influencing the firm, a SWOT analysis would be used.
SWOT Analysis
The strength of the company lies in various factors. One of the major strengths of the firm is its brand name (Grossman 43). Netflix brand is one of the strongest brands in the services industry. The brand has helped the firm in maintaining the market share in the face of an increasingly competitive market. The firm has a financial strength that cannot be compared to any other. It has been in operation for over 15 years.
In the process, the firm has amassed enough wealth. As such, the firm is capable of implementing its key projects, including research and extension project. Moreover, the firm operates in various countries outside the home market. As such, it is capable of balancing its production. For instance, when one section of its market is experiencing economic growth, the other could be facing recession.
Despite the above strengths, Weiss (24) says there are some weaknesses. This is a fact that has seen some of competitors eat up a section of the market. Many people have expressed negative views as regards to the products of the company. Some of its products are meant for adults but can easily be accessed by underage children. It is apparent that the firm is yet to develop a solution to the problem.
The firm has some opportunities. These opportunities have helped the firm experience massive growth. According to Grossman (48), Netflix has exploited a vacuum that existed in many countries in the world, especially in the Caribbean market.
Weiss (26) argues that there was no competition for this firm in the overseas markets. This company was able to make enough profits because of lack of competition. Technological advancements have also enabled the firm to conduct trade easily. This is due to improved means of communication.
Competition is one of the threats that the firm faces. The market is very competitive. Charantimath (46) notes that many firms, such as Amazon.com, have come up with products that are close substitutes of those offered by Netflix. They have eaten up the markets of Netflix.
Political instability in some countries is another threat that the firm faces. When there is an internal strife, such as the one experienced in Egypt and Libya in the recent past, the firm loses millions of dollars due to destruction of assets. During such periods, the firm loses profits acquired from oversees countries. Surprisingly, the firm must pay employees even if profits are not made. This hurts the firm financially.
Competitor Analysis
Although many competitors of Netflix in the movie industry exist, Blockbuster Videos is the main threat. Just like Netflix, Blockbuster is also an American firm. According to Clinton (11), it has a considerably huge market share in the American market, as well as other countries overseas. Blockbuster understands the emerging market trends. Furthermore, it responds to them appropriately.
This has helped it develop a niche in the market. Because of this, it is capable of competing with Netflix. The firm has diversified its production lines as one way of ensuring it is not affected by losses encountered in other areas. Given the fact that it is the world’s leading in-store video renting chain, its customers can now acquire products online.
Market Analysis
The market is getting increasingly competitive. The industry is acquiring new products due to technological advancements. These products are viewed as being more entertaining. According to Clinton (96), this has seen a massive shift from consumption of old products.
People prefer digital products to analogue products. The emerging technologies are completely changing the trend in the market. Given the new trend, Netflix must readjust its operations in order to counter the new challenge.
Environmental Analysis
Environmental analysis takes various forms. The competitive environment has been discussed comprehensively in the previous sections. Other environmental factors include factors such as technology, environmental conservation, and economic growth. The factors might affect the operations of the firm in a number of ways. The issue of sustainable growth affects the company in many ways.
The international environmental law states that all companies must aim at preserving the environment. This means that each company should come up with strategies aiming at minimizing environmental damage. The firm is expected to face challenges from environmental organizations. In fact, the firm has been accused of damaging the environment in various occasions.
Internal Analysis
The internal structures of Netflix clearly demonstrate that the firm is capable of maintaining its market share for quite some time. The firm has the financial strength, as well as the human resource capacity. This would help it further its growth.
Works Cited
Charantimath, Paul. Total Quality Management. New Delhi: Pearson Education, 2006. Print.
Clinton, Hillary. US Department of State, Diplomacy in Action. Washington: Potomac Books, 2011. Print.
Grossman, Richard. “The care and feeding of high-potential employees.” HR magazine 56.8 (2008): 34-53. Print.
Warner, Benson. Organization Change: Theory and Practice. Thousand Oaks: Sage, 2011. Print.
Weiss, Williams. “Building morale, motivating, and empowering employees.” Supervision 72.9 (2011): 23-28. Print.