Strategy and Case Analysis

This paper sheds a light on two entertainment companies, Netflix and Blockbuster, and assesses the innovations and strategies that helped Netflix gain a competitive advantage in the market.

Running head: STRATEGY AND CASE ANALYSIS
STRATEGY AND CASE ANALYSIS
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STRATEGY AND CASE ANALYSIS
Executive summary
This paper sheds a light on two entertainment companies, Netflix and Blockbuster. This paper
reflects on the reasons of the growth of Netflix and the failure of Blockbuster. The paper assess
the innovations and the strategies that Netflix made that helped the company gain a competitive
advantage in the market and helped the company to be one of the largest internet companies in
the market.
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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Historical overview of Blockbuster.............................................................................................3
Historical overview of Netflix.....................................................................................................4
Strategic models of Blockbuster and Netflix...............................................................................4
Business elements of Netflix and Blockbuster............................................................................7
Innovation of Netflix...................................................................................................................9
Dominance of Netflix in the future............................................................................................10
Recommendations......................................................................................................................11
Conclusion.....................................................................................................................................11
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Introduction
Strategy models are vital aspects taken up by a business that contributes to the success of any
business. Strategy models consist of strategic plan or models that are designed to enhance and
improve the operations or a process in order to satisfy and meet the goals of the organization
(Frow et al. 2015). The use of strategic models gives a sense of direction to the organizations and
helps in gaining a competitive advantage in the market. This paper sheds a light on the growth of
Netflix over Blockbuster and how it will continue to dominate the entertainment market in the
coming years.
Discussion
Historical overview of Blockbuster
Blockbuster LLC, previously known as Blockbuster Entertainment, Inc is a video game
and home video rental services that provides their services through rental shops by streaming,
cinema theater and also by mail. It’s an American based company founded by David Cook in the
year 1985 in Dallas, Texas. The company revolutionized the entertainment industry by their
services becoming an instant hit with the customers in America that led them to grow their
market by opening stores across America (Hiller 2017). However in 1994 the company was
bought by Viacom Inc, and allowed financial resources that helped Viacom to proceed with their
bid for Paramount Communications. Blockbuster faced problems in the late 90’s due to new
ownership, the soft market for rental video shops and growing competition (Hiller 2017).
Nevertheless, Blockbusters coped up by refocusing on their core element that was video renting.
In the late 1990’s Blockbusters, boasted about stores near almost all the neighborhoods with the
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aim of providing entertainment including videos of new and latest movies. In 2010, Blockbuster
filed for Bankruptcy protection (News, 2019). In 2011, Blockbuster was acquired by Dish
Network Corp announced that they will be shutting down the retail stores in the U.S in January
2014. The increase in online streaming services and the operations of the company negatively
affected Blockbuster resulting in only 2 stores left in the world (News, 2019).
Historical overview of Netflix
Netflix is media service provider. The company was founded in the year 1997 in Scotts
Valley, California. The company initially started as a video rental service giving a heavy
competition to Blockbusters back then. The company now follows a subscription model and had
about 3.6 million followers in the year 2005 (Bbc.co.uk, 2019). The company had the vision of
online streaming long before however restricted themselves from investing in this due to the
internet speed that was relatively low during that time. The company expanded in the year 2010
by providing their services in Canada. Netflix later started making original content House of
Cards being the first one in the year 2013 that garnered appreciation and increased the demand of
original series (Bbc.co.uk, 2019). Since then Netflix has been producing successful original
series. The subscription model provided with different pay structure has helped the company
attract more consumers that has led the company to dominate the global market. This has
resulted in Netflix currently operating in 190 countries around the world making the company
the seventh largest internet company in terms of revenue (Bbc.co.uk, 2019).
Strategic models of Blockbuster and Netflix
Blockbuster and Netflix both followed strategic models that helped in the operations of
the business.
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Blockbuster was a major hit in the mid 1980’s till the beginning of the 1990’s.
Blockbuster had succeeded in the market in the USA during that time because of the positioning
of their services. Blockbuster strategically positioned their services on the basis of the price and
on the benefits of the customers. Blockbuster emerged as a video rental company and the price
for renting was affordable by the people that made people rent movies for their leisure time and
relaxation. Another factor that made Blockbuster a major hit was their core service that was
rental services. Renting was cheaper than going to watch movie at the theatre. Blockbuster had
benefited the customers with its services not only because of the affordable prices but also video
rental as a service. The customers did not have to buy and shell out more amounts moreover they
paid according to the time. Moreover the company provided home delivery services and emailed
CD’s to the customers directly to their houses that made the company popular and successful.
Netflix on the other hand positions their services on the basis of customer benefits, customer
application, and price and product class. Netflix provides a subscription model that is beneficial
for the customers as the people pay once a month for the various content they receive (Tiggers,
can derStelt and Volk 2018). This helps in terms of price as well customer service. The service
and the quality of the company is impeccable providing people with various premium contents
original as well as movies and other television series to cater to the different choice of the people
in one app where they can choose the content they want to consume any time and at any place.
The application is segregated in terms of genres and that is easy to use that has attracted
customers all over the world.
The main strategy of Blockbuster was to open video rental stores across different areas in
order to capture a vast market share. Initially Blockbuster did get a huge share in the market
however the strategy did not work in the long run due to the dynamic change in the society and
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operating of so many stores became difficult for the company. However the dynamic change in
the society was the advent of internet that Netflix used efficiently by making effective change in
their operation that proved to be beneficial for the company in acquiring a huge market and
making a change in the entertainment industry in recent times.
Blockbuster initially had an effective strategy in order to succeed in the market however
Blockbuster failed drastically later. Blockbuster did not have a concrete action plan to support
the company. With growing competition the company made changes in their prices and charged
late fee however the company was in debt and filed for bankruptcy protection that made the
condition worse for Blockbuster which led to only two stores operating in the US currently
(Stern et al. 2017). On the other hand the action of Netflix proved to be fruitful for the company.
The company assessed the change in the society because of the advent of internet and the change
in the needs of the people. Netflix made effective changes in the operations of their business and
enhanced their services to cater to the needs of the people. Their action plan was to change their
services from video rental to online streaming services to cater to the people with all the facilities
that helped them gain a competitive advantage in the market (Worley, Williams and Lawler
2016). Netflix has become popular since then and has expanded and dominated the global
market.
Netflix has been constantly evolving and has made effective strategic plan in order to
satisfy the customers. The decisions made by the company Netflix to make changes in their
operations were vital as the demand of the people and the society was changing and Netflix
brought a successful change in the entertainment industry (Chao, Hegarty and Fray 2016).
However, the strategic decisions made by Blockbuster did not work in the long run because of
failure of implementing change, ineffective operations of the company and the wrong decisions
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the company has affected the company negatively that has resulted the company into bankruptcy
and the shutting down of the stores.
Business elements of Netflix and Blockbuster
Netflix has developed immensely since their start with change in their operations, the
quality of their services and their pricing. Netflix has been a revolution in the entertainment
industry and has become one of the top internet companies today. Netflix has succeeded in this
market not only because of the internal strengths of the company but the change of the
environment and technology has had a major role to play in this part. The change in technology
that has resulted in digitalization of the world has changed many industries. With new advanced
technological devices like mobile and tabs people are carrying their world in their hands. The
invention of internet has been a game changer because of the speed and the fast transmissions of
information at one go. People these days are mostly on the internet and the demand has resulted
in many companies changing their operations and coming up with a new strategic plans of
introducing a division that operates through the internet and many companies are starting up as
internet companies due to the high demand and the profitable future.
The rise of internet has paved way for online operating companies gain a competitive
advantage over retail outlets. Online services provide many advantages to the person that is
making people resort to online services. Operating online becomes much cheaper when
compared to retail outlets. In the case of Blockbuster and Netflix it can be seen that Netflix
provides a huge variety of content at a fixed cost after the subscription however Blockbuster
provided video rental services where people paid for a particular content. People these days are
attracted to quality services when compared to cheaper rate which is the buyer perception these
days (Buell, Campbell and Frei 2016). Online services are not only convenient for the customers
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but for the companies as well as they market and deliver what they want to at a short span of
time and reach out a wide range of audience at a less time. In case of Blockbuster they provided
rental strategy and the use of VCR and DVD’s have become obsolete and people usually watch
movies and shows online or in the television (Yu et al. 2018). Online services are easily
accessible at any given time and in the context of video rentals and operating online people resort
to sticking to online services these days when compare to retail outlets. People not only consume
online content these days but also do other basic works online like grocery and other product
shopping, pay their bills and many more. This lets them do all the work in an easier manner from
their home or any other place when compared to retail outlets where people have to give a queue
for the payment of the bill and walk around stores to find their products however there are people
who enjoy retail outlets but the majority of the people are resorting to online.
Pricing strategy is very important as people are attracted to high quality at affordable
rates. In this context, pricing strategy has been another factor that has resulted Netflix to
dominate the global market apart from their premium services. Netflix follows a subscription
model and provides different amount of subscription fee based on the number of screens that are
shared in the app which makes convenient for people to choose and shared accounts are also
convenient for people in terms of the prices offered (Shuen 2018). This model has attracted many
customers to subscribe to Netflix. Blockbuster on the other hand provides rental services and
people pay rent for one CD. This has made people subscribe to Netflix when compared to
Blockbuster as Netflix provides people with a variety of content according to different genre that
cater to the different preference of the consumers at a fixed rate and the consumers can watch as
many content they want to consume at the fixed rate rather than paying for single content which
becomes more expensive for people.
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Innovation of Netflix
Netflix has helped in bringing a revolution in the entertainment industry and the
innovations have helped Netflix gain a competitive advantage in the market and helped in
gaining appreciation from people all around the world. Netflix had applied disruptive innovation
in order to make their way in the market. The introduction of the new operations of the Netflix
slowly disrupted the video rental services that have resulted in video rental services almost
fading away (Forrester 2018). The innovations of Netflix have been highly successful and have
helped in attracting many customers. Netflix is one of the first companies that have introduced
people with original content (Adamou 2016). This is one of the biggest innovation of Netflix is
this that has come up with original content of supreme quality that has changed the way people
watch television these days. The subscription model has provided people to access a variety of
unlimited content for month in a particular amount that has been beneficial for the people all
over the world (Wayne 2018). Netflix queue is another innovation that has helped to curate and
populate the list of TV shows, cartoons, movies and other content that are DVD based that are
scheduled for people to view (Adamou 2016). This provides people to determine which shows or
movies are mailed next in order to inform the viewers what to watch rather than searching
manually. The app provides a personalized system for the recommendation. The system
determines what movies have been watched previously and on the basis of the reviews provide
suitable recommendation to the viewers so that it is easier for them to choose which content they
want to consume (Gomez-Uribe and Hunt 2016). Original programming and exclusive content is
one of the important innovations that have helped Netflix to grow. The company has cultivated
an enormous library that has been built on deals that are exclusive with the famous entertainment
companies that are currently enjoying the top positions in the market (Adamou 2016). The
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unlimited access and the global reach of Netflix is because of their innovative design model that
has helped the company to become one of the largest internet companies in the world. Netflix
provides customers and their viewers with movies and shows of different and the regional
languages of the countries they operate in, in order to diversify their content and their market
(Adamou 2016). Netflix takes strict measure to protect the content that are provided online so
that they do not get leaked and thus when trying to take a screenshot of a show or any scene the
picture goes blank because of the strict guidelines that are made to prevent piracy and maintain
copyright laws (Adamou 2016).
Dominance of Netflix in the future
The above analysis proves why Blockbuster could not sustain their position in the market
and why Netflix has grown over the years and has become successful. Netflix has constantly
been changing their services and making innovative changes to their services that show their
dedication to enhance the experience of their viewership every time. The innovative changes
help the customers in a big way that has attracting customers paving way for the increase in the
subscription level. The premium service and quality of the content provided by the company will
help the company dominate the near future despite of other online streaming companies like
Amazon Prime, Hulu and many more.
Netflix in 2011 hiked the prices of their services as they planned to combine streaming
and DVD service. Qwikster provided DVD services by mail that included video games. Qwikster
did not provide any good will to the company Netflix. Qwikster was introduced to offer
convenience for the people however it showed that Netflix was trying to force customers with an
online and DVD streaming accounts and to create different accounts to pay for both. This did not
attract customers and Netflix failed in implementing the plan resulting in Netflix to axe out
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Qwikster (Huffingtonpost.in, 2019). However the effective decision and change made by CEO,
Reed Hastings proved to be a great move and has helped Netflix to grow in the market. Now
Netflix with their service continues to dominate the entertainment industry bringing new changes
that is helping the company grow in the near future.
Recommendations
Netflix has gained a top position in the market because of the effective and efficient
innovative changes in the market that has helped the company grow however there are some
changes that Netflix can adopt to make the service more palatable to the viewers.
 Netflix because of the high video quality uses a lot of internet data. Netflix should
innovate and come up with new technologies that help people saving internet data.
 Netflix should help viewers to connect with internet services like IMDB or Rotten
Tomatoes in order to acquire information about the movies, shows and ratings.
 Netflix should come up with features where people can search movies and shows based
on directors and actors.
Conclusion
Netflix has been dominating the entertainment industry because of the premium quality
of content, service and pricing that has garnered appreciation and has attracted people to
subscribe to Netflix. Netflix has being growing because of the sheer dedication and efforts to
make innovative changes in their services in order to enhance the experience of the viewers. The
changes have played a huge role in the success of the company unlike Blockbuster, which failed
miserable because of the wrong decisions taken by the company and failing to implement change
in the operations. The change in society and in the demands of the people has contributed to the
success of Netflix however Netflix mainly has become successful because of the strategies
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implemented in the business that has led the company to become one of the largest internet
companies in the world.
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