Strategic Analysis of Netflix and Blockbuster: How Netflix Beat Blockbuster

Running Head: BUSINESS STRATEGY AND PLANNING 1
Strategy and Case Analysis: Netflix

BUSINESS STRATEGY AND PLANNING 2
Table of Contents
1. Introduction.........................................................................................................................................3
2. Institutional Background......................................................................................................................3
2.1 Brief History of Blockbuster...............................................................................................................3
2.2 Brief History of Netflix.................................................................................................................4
3. How Netflix Beat Blockbuster..............................................................................................................4
3.1 Changing Technology.........................................................................................................................5
3.2 Retail Outlets versus Operating Online..............................................................................................5
3.3 Pricing Strategies...............................................................................................................................6
3.4 Netflix Innovations.............................................................................................................................6
4. Netflix as a Dominant Provider of Online Video Streaming.................................................................7
4.1 Netflix Stumbles: The Demise of Qwikster.........................................................................................7
4.2 Netflix Rebuilds: The Rise of Original Content...................................................................................8
4.3 The Future of Netflix..........................................................................................................................9
5. Conclusion.........................................................................................................................................10
References.................................................................................................................................................11

BUSINESS STRATEGY AND PLANNING 3
1. Introduction
Strategic analysis of an organization is a significant process for maintaining and improving its
position in the industry. It helps the company to understand different strategic aspects and adopt
effective strategies to gain competitive advantage against its competing brands. There are several
frameworks and tools such as PEST analysis, SWOT analysis etc. that can be used by the
organization to analyze the environment strategically (Grant, 2016). The main aim of this report
is to discuss the strategic analysis for case study Netflix and Blockbuster. Netflix is an US based
organization that offers television and movies by streaming online media and delivery by mail.
The report discusses about the history about both Blockbuster and Netflix. Furthermore, it
examines that how Netflix is able to beat Blockbuster via its effective strategies and technology
advancements. The last section of report analyzes about the dominance of Netflix in the sector of
online video streaming. After this analysis, it talks about the future of Netflix in online video
streaming industry.
2. Institutional Background
2.1 Brief History of Blockbuster
Blockbuster Inc. is a US based organization that provides entertainment services and offers video
games and home movie rental services through DVD mail delivery, media streaming, video
rental shops, on-demand video and cinema theatre. In the era of 90s, the company has become
internationally known. In 2000, it had offered acquisition to Netflix, but it had denied the offer.
Netflix is running its operations as the biggest rival of Blockbuster. After its establishment by
David Cook, the company has recruited more than 84,300 people across the world that include
around 58,500 from United States and 25000 from other countries. Now, the company is
operating its business through 9094 stores all over the world (Blockbuster, 2017). The
organization is facing various risks and challenges such as Redbox automated kiosks, on-demand
video services and competition threat from Netflix. These are the reasons behind the final demise
of Blockbuster. During 2000s, Blockbuster started to drop in its revenues and it demanded for
bankruptcy prevention.

BUSINESS STRATEGY AND PLANNING 4
2.2 Brief History of Netflix
Netflix is also an America based firm that has started its operations in the year 1997 by Reed
Hastings and Marc Randolph. It is an entertainment service provider which was established in
Scotts Valley, California. The company provides different services which are related to
streaming video on media. It offers its customers different opportunities to stream the movie and
TV episodes via internet. In the starting phase, the model of Netflix included DVD rental and
sales. Though, Hastings unrestricted the sales of DVDs after a year of its foundation so that this
could emphasize on rental DVD delivery by mail. From past few years, the company is running
its business in foreign markets by providing more and better services than its competing brands.
Presently, it has its operations in over 190 nations and it has 109.25 million subscribers across
the world including 52.77 million in United States (Netflix, 2017). Along with the TV episodes
and range of movies, Netflix’s series is also available on the internet for its potential customers.
In today’s competitive business environment, Netflix is operating its business with the mission to
increase its subscriber base for video streaming in both national and international markets. For
this, it is continuously enhancing customer experience by increasing the range of its services. By
emphasizing on its mission and using effective strategies, Netflix wished to be one of the best
entertainment service providers globally. Additionally, it helps the content developers across the
world so that it can increase its customer base on international level. It adopts many corporate
and marketing strategies to generate more profits and revenues than its rivals (Netflix, 2017).
3. How Netflix Beat Blockbuster
From its establishment, Blockbuster Company had administrated the rental movie business for so
many years. In the year 2005, the value of organization was more than $8 billion. In the
meantime, Netflix began using postal service for the delivery of DVDs. By implementing
effective marketing strategies, it has been operating the business as an industry leader and soon
Blockbuster has sued for bankruptcy. In 2010, it had lost $518 billion and locked its stores. After
that, Netflix achieved 16 million subscribers by running its online video business (Sicoli, 2018).
Its effective leadership has enabled it to beat the blockbuster. The major factors behind this beat
are given below: