Strategic Management Report: Netflix's Competitive Strategies

This report provides a detailed strategic analysis of Netflix, examining its rise to dominance in the online video streaming market. It begins with an executive summary, followed by an introduction outlining the report's objectives. The institutional background section offers a brief history of both Blockbuster and Netflix, highlighting the key differences in their business models. The report then delves into the rise of Netflix, discussing the impact of changing technology, the shift from retail outlets to online operations, and the evolution of its pricing strategies. Netflix's innovations are explored, including its impact on the market. The report also addresses the challenges faced by Netflix, such as the Qwikster debacle, and analyzes its rebuilding efforts. The future of Netflix in the competitive landscape is considered, and the report concludes with a summary of key findings and insights. The report emphasizes the importance of technological advancements, innovative strategies, and effective pricing in Netflix's success and provides a comprehensive understanding of Netflix's strategic decisions and their impact on the market.

Running head: STRATEGIC MANAGEMENT
Strategic Management
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Executive Summary
The report helps in analyzing the different strategies that has been used by Netflix in order to be
more competitive in the market. The advancement in technology and innovative strategies will
help in solving the different issues in the market. The role of the pricing strategies adopted by
Netflix has been discussed in such a manner that will help in becoming dominating in the
market.
The main aim and purpose of the report is to identify the different weaknesses of Netflix as they
have introduced Qwikster in the market. The different issues relating to the different issues in the
market relating to the adoptability of different services that has been discussed along with future
of Netflix in the competitive market.
The structure of the report includes the different pricing strategies and adoption in the
advancement in technology by Netflix. The different issues faced by Netflix have been
addressed, as this will help them in solving such queries in an effective manner.

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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. Rise of Netflix..............................................................................................................................4
3.1 Changing technology.............................................................................................................4
3.2 Retail outlets versus operating online....................................................................................6
3.3 Pricing strategies....................................................................................................................6
3.4 Netflix’s innovations.............................................................................................................7
4. Assumption whether Netflix will be dominating the online video streaming market.................8
4.1 Netflix stumbles: The demise of Qwikster............................................................................8
4.2 Netflix Rebuilds.....................................................................................................................9
4.3 The future of Netflix............................................................................................................11
5. Conclusion.................................................................................................................................12

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1. Introduction
The report helps in analysis of the different technological advancements along with
pricing strategies that has been adopted by Netflix in order to compete with Blockbuster in the
entire competitive market. The different strategies of pricing will be discussed in the next
sections along with innovative strategies adopted by Netflix. The innovations of Netflix will be
considered in order to remain the dominant provider of online streaming of video.
The main aim and purpose of the report is to discuss the different technological
advancements along with innovative strategies used by Netflix. The future of Netflix will be
discussed in the next chapters and the rise of the Netflix in comparison to Blockbuster.
The conclusion is based on brief history of Blockbuster and Netflix along with analysis of
the different innovative strategies that helped Netflix in beating Blockbuster. The different
pricing strategies will be discussed in an effective manner in order to understand the dominance
of Netflix in the entire economy.
2. Institutional Background
2.1 Brief History of Blockbuster
Blockbuster LLC is known as Blockbuster video was American based supplier of video
games rental service, streaming along with video on demand. The Blockbuster became
internationally known throughout the year 1990s and in the peak of 2004, the respective
company employed more than 84,300 employees worldwide. The first Blockbuster store opened
in the year 1985 in the month of October 19, in Dallas, Texas. The respective company
Blockbuster often custom tailors the inventory of store that is based on local demographics, it

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became multibillion-dollar organization, and in the year 1993, it merged themselves with
Viacom (Sawhney 2017).
2.2 Brief History of Netflix
Netflix is American entertainment organization that was founded by Reed Hastings along
with Marc Randolph in the year 1997, in the month of August 29 in California. It generally
specializes in providing streaming data along with video on demand. There was international
expansion of Netflix that commenced in the year 2010 along with the year 2007; it started with
streaming of videos as well. In the year 2010, Netflix split DVD mails and streaming service and
due to this, the customers were not happy and the price of the shares plummeted as well. There
was an expansion of the original programming wherein the price of the shares started rising in a
steady manner. Furthermore, it can be seen that Netflix is dominating the entire online streaming
market wherein the main competitors are Hulu, Redbox and Amazon (Rayna and Striukova
2016).
3. Rise of Netflix
3.1 Changing technology
Netflix has implemented different kind of strategies in order to change the technique of
selling their products (Rogers 2015). The changing technological advancements in the company
implemented different innovative strategies that helped them in beating Blockbuster. The digital
transformation is intensity of the different digital initiatives in corporation to adopt in the digital
age. The Netflix is the best example of the evolution of the company wherein the technology has
changed in a drastic manner (Lobato 2017).

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Netflix has adopted and evolved in the market when developed a game plan for covering
the demand in an effective manner. In the year 2006, Netflix introduced online service and
DVD market rapidly shrinked And Netflix continue to grow. However, for a respective
organization evolution is not enough in nature and it is essential to respond to the disruption that
is digital in nature. While disruption digitally is challenge for related sector, it is an opportunity
for different other sectors. When the social media is related, it can be seen that social media
gravely disrupted the media sector; however, social media provides essential opportunity for
small and medium enterprises (Pittman and Sheehan 2015).
The widespread usage of the internet along with WEB 2.0 has drastically changed the
different habits especially through the different networks on TV were affected by such change.
Netflix helped in gradually increasing the online library in order to provide the better service for
the subscribers who are online in nature (Marchand 2016). In the year 2010, Netflix reached
five-year agreement with the Starz entertainments and they entered into agreement with
Paramount pictures. The Netflix constructed successful business model with the rental service
wherein they have foreseen different changes in the organization (O'brien, Knight and Harris
2017).
The disruptive innovative strategies of Netflix resulted in creating new market along with
value network. This has disrupted the entire existing market and this will be displacing the
established market leaders along with alliances (Gomez-Uribe and Hunt 2016). The best example
if of Netflix wherein previously it appealed to few customers, however later on Netflix launched
mail in subscription wherein they appealed the Blockbuster’s audiences by providing them wider
view and selection of the content in an effective manner and this affected Blockbuster collapsed
in front of Netflix in the entire market (McDonald and Smith-Rowsey 2016).

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3.2 Retail outlets versus operating online
With the implementation along with rise of online streaming and rental by email,
Blockbuster could not able to compete with Netflix. Netflix offered different online DVD rental
service wherein there is no requirement of physical location. It was seen that the online
streaming model do not require any kind of retail stores. Due to the technological advancements,
Blockbuster lost their brand identity and they did not follow such strategic decisions as Netflix.
The innovative strategies were not followed by Blockbuster like Netflix, they still followed the
concept of retail stores, and they were not being able to compete with them. The rental by email
and online streaming were not done in an effective manner by Blockbuster (Siegel 2017).
3.3 Pricing strategies
Figure 1: Pricing Strategy of Netflix
(Source: McKenzie and Smirnov 2017)
From the graph, it can be analyzed that Netflix introduced monthly subscriptions service
that helps them in providing unlimited access to the content. There are no such late fees and the
rental by email and online streaming arms of the Netflix. The monthly pricing strategy of Netflix
is wherein $7.99 (one DVD out at a time); $9.99 (one DVD or Blu-ray) and up to $43.99 for

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eight DVDs. The key differentiator of Netflix is wherein there is unlimited online streaming of
the movies along with TV shows available as well. It can be analyzed that for relatively low
subscription that is monthly in nature, the customers need to access and library of content of
video that even included programming that is online in nature.
3.4 Netflix’s innovations
There are different kind of innovative strategies that has been adopted by Netflix in such
a manner that this has helped them in performing better and gain competitive advantage in
comparison to Blockbuster. Netflix will help the users in navigating in an easy manner and an
entertainment company in America that specializes on demand streaming video. The entire
company made proper effort in replacing the different old styles that was used by them in the
future and they tried to implement different strategies that did not include any kind of specific
hardware (McKenzie and Smirnov 2017). The different advantages of the improved along with
faster connection of the broadband is done as this will help them in ruling the entire market in an
effective manner.
The effective pricing strategies that has been used by Netflix is such that it provides the
customers unlimited access to the internet and there is no late fees for the customers. The one
operates online in such a manner that this helped them in competiting with Blockbuster in an
effective manner. Blockbuster uses the different hardware that is specialized in nature that
included television sets that is limiting in nature. Netflix does not perform such actions and they
do not have such techniques in order to generate specialized hardware, rather than they focus on
providing specialized and innovative strategies that helps them in meeting the different hurdles
in the competitive industry.

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4. Assumption whether Netflix will be dominating the online video streaming market
4.1 Netflix stumbles: The demise of Qwikster
In the year 2011, in the month of July, Netflix announced hike in the prices of DVD
along with the streaming service. The previous kind of subscription that was $9.99/mo
subscription was now more than $15.99/mo. Netflix was ready in streaming with the different
kind of new innovative strategies that helped them in building more adjustments; however, the
customers were not ready in order to accept the same kind of strategies. The Qwikster was the
DVD by mail that was the only service that included different kind of video games. This was
seen that both Netflix and Qwikster had different websites along with credit card chargers. The
main reason for not integrating both of them was Reed Hastings the chief executive of Netflix.
Qwikster did not work for different kind of reasons wherein the change of the name was
one such reason that the customers did not like such innovation. The split of the two websites
was the other reason wherein the credit card chargers were different for Netflix and Qwikster.
The hike in price and assumptions of the mail orders were put to backburner as they focused on
something else. The Qwikster used to force Netflix users with the combination of the video
streaming and subscriptions of the DVDs in order to create separate kind of accounts for the two.
The different websites did not combine in any manner and this included separate bills along with
different rating for both Netflix and Qwikster.
Qwikster was designed in an effective manner but it failed, as the idea was not
completely satisfactory in nature. However, Reed Hastings could have implemented few
strategies in Qwikster in such a manner that this will help in making the entire design more
effectively and this idea would not have failed. The name of Qwikster was not accepted as the

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customers felt it was easy to misspell such names. The new users of Netflix did not feel that both
Netflix and Qwikster were same and this even confused the users in using such systems in two
different manners. The different kind of services of Netflix were user friendly in nature in
comparison to Qwikster, however the decision of the split confused the consumers along with the
new users in the market as they felt it were two different companies. The Qwikster application
did not offer the consumers any kind of DVDs along with video game titles for Wi-Fi and they
were optional in nature.
Qwikster was not an easy solution to the different subscribers of Netflix as Qwikster did
not lower the prices for the different consumers, but they had to pay for the other services in a
separate manner. Netflix should not have been combined with Qwikster, as the ideas that were
made and thought by Reed Hastings were not accepted in an effective manner. They felt that it
would be a positive idea and response from the different customers in the market; however, it
was flopped created a mishap for them in the entire competitive market.
4.2 Netflix Rebuilds
The strategy that has been followed by the Chief Executive Officer of Netflix Reed
Hastings was flopped and it was a big mishap for the entire company by introducing Qwikster in
the competitive market (Rigby et al. 2016). The Netflix needs to rebuild different other strategies
in such a manner that this will help them in understanding the tastes and preferences of the
consumers in the market in an effective manner (McDonald and Daniel 2016).
Netflix could have branched in to sub companies that include Netflix DVDs and Netflix
streaming. This could have helped the customers in identifying the different issues in the
unofficial manner. Netflix should have kept the different same website in an effective manner as

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this will help the customers in understanding the different requirements of the customers in an
effectual manner (Aversa, Haefliger and Reza 2017). The Netflix Company could have used both
Qwikster and Netflix in such a manner that this will help them in promoting the different kind of
DVDs and online streaming in the effectual manner (Matrix 2014). Netflix would have better in
announcing the different prices hike or split in the two companies in such a manner that it would
have been able to receive fewer backlashes in the entire competitive market. They could have
allowed the customers in the entire competitive market in such a manner that this will allow the
different consumers between the three kind of plans that would be simpler solution in nature.
For instance- “Stranger Thing, Black Mirror, Modern Family and this is us” are the
different examples that can be used in order to understand that there are different techniques that
has been used by these shows wherein they have used their own original content (Jenner 2016).
However, Netflix needs to use such different original strategies in such a manner that this will
help them in maintaining proper and effective advantage in the entire competitive market. Netflix
requires to stream different shows in such a manner that this will help in understanding the
different activities in such a manner that they are not copied from other sources (Cox 2014).
From the different examples of different shows, it can be understood that the flop idea of
Qwikster was a huge mistake from Netflix as they thought it to be big hit; however, it flopped as
it confused the customers in the competitive market. Netflix could implement such strategies in
such an effectual manner that this will help the company in gaining competitive advantage in the
entire market.

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4.3 The future of Netflix
The Netflix requires expanding their market in the future in such an effectual manner that
this will help them in lowering the slowing down of the international expansion in the market.
The pricing strategies have to be revised in the market, as this will help in attracting more
customers in an effectual manner (Cox and Kaimann 2015). Netflix needs to revise the pricing
strategies in an effective manner, as this will help them to increase the subscribers in the market.
The availability of the original programming is required to be provided by Netflix in such
a way that this help them in future to compete with other services in the same line. The
availability of the programming that is original in nature is essential in nature, as this will help
Netflix in maintaining their position in the competitive market (Davis 2016). The Netflix in the
present is increasing their original programming in such a manner that this will help them to
dominate the entire market (Aversa, Furnari and Haefliger 2015). The original programming
along with diverse library is the dominant model that will help Netflix in gaining sustainability in
the entire market.
Netflix has to work in such a manner that this will help them to be a potential threat to
other subscribers in the competitive market. This is essential for Netflix to understand the tastes
and preferences in such a manner that this will help in solving the different issues that has been
faced by Netflix in introducing Qwikster in the competitive market (Sorescu 2017). The
Qwikster was a flop idea as this could not attract and convince the customers in the market in an
effective manner. Lastly, it is seen that Netflix needs to understand the preferences of consumers
to dominate the market and satisfy the requirements of the customers (Aversa and Haefliger
2017).