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Netflix versus Blockbuster versus Video-on-Demand
Case Analysis by Ken Akerman
Strategic Issues in the Case
Founded in 1999, Netflix is an online DVD rental service whose strategy and market success were predicted on providing an expansive selection of DVDs, an easy way to choose movies, and fast, free delivery via postal mail. The company’s strategic intent was to be the world’s largest and most influential movie supplier. The goal of the company was to make it a lot easier for customers to select and rent movies and to eliminate the hassles involved in picking up and returning them. Its strategy incorporates customer convenience and a wide selection of entertainment selections. Netflix provides extensive information to its customers to help them make good selections and identify films that they may like to rent in the company’s vast library.
Netflix’s growth strategy comprised three primary strategic issues. First, Netflix continued to pursue its reputation for innovation and to maintain the high quality level of service that its customers expected. Second, Netflix intended to use its preeminent position in the industry to lead the transition to high-definition DVD’s and eventually to digital downloading of movies on the Internet. Third, Netflix focused on rapidly expanding its subscriber base to maintain its market leadership and to realize economies of scale that will drive down costs.
Netflix’s strategy was to create a blue ocean of uncontested market space within the video rental industry, an industry dominated by Blockbuster for over 20 years. Blockbuster was the world’s market leader in the videocassette, ...