For the past decade, the entertainment industry has undergone a full reconceptualization. Specifically, the movie and TV programs sphere has been severely influenced by the rise of Internet and related services. This case study focuses on the organizational change in the company Netflix, which has been marked by innovation, user empathy, but also by severe market failures that needed correction. Despite fierce competition, Netflix managed to position itself on the movie rental market through an innovative strategy. While Blockbuster, for example, was offering DVD rentals from a bricks-and- mortar location, Netflix decided to 2 make use of new technology. The DVD-by-mail service did not only save time for customers, but also made the entire experience effortless and more entertaining. By waiving the late fee (fee for returning a DVD too late) and introducing the subscription service, the company changed not only itself, but also the entire industry. By adjusting to customer needs and utilizing new technology, Netflix managed to reach equilibrium, as illustrated in the Adaptive Cycle of Resilience. The crisis period for Netflix started around 2005, other video streaming websites were introduced and started to become popular. This, in combination with the significant growth in Internet speed, created a strong shift in consumer preferences. Users interest in DVD rental plunged, thus affecting the entire business strategy of Netflix. The companys management was rather quick in detecting the new trend and deciding to change the strategy accordingly. Soon after, Netflix announced its plans to focus on online streaming and move its DVD-by-mail service to a separate website called Qwikster. This plan, however, was severely criticized by both media and users. Less than one month after the announcement, the companys cofounder Reed Hastings declared that the separation plan would be abandoned. The external circumstances of rising Internet streaming, combined with controversial company decisions, lead Netflix into the phase of deep crisis. Following the period of crisis, Netflix understood the need to reinvent the company. The new market of online streaming, however, was not easy to adjust to. The company struggled with its content strategy large media companies would not agree to license their popular movies and TV programs on attractive terms. This led to a poor content on the Netflix website. Considering the problems encountered with obtaining licenses for highly demanded content, Netflix decided to adopt the backward integration strategy. In other words, the company started created its own content. The new strategy of Netflix is still being rolled out, however the initial results are promising: the stock price is growing, as is the customer base. In the first quarter of 2013, Netflix attracted two million new US subscribers. Through trial-and-error, but also through empathy, transparency and determinacy, the company managed to overcome the crisis and reach the entrepreneurship phase for a second time, steadily moving towards a new equilibrium. Adapted from: RMITNEXT. 2021. Adaptive cycle of resilience: Netflix case study. [Online]. Available at: https://next.rmit.edu.au/inspiration/adaptive-cycle-of-resilience-netflix-case-study/ Accessed 18 Jan 2023 3

2.1 Referring to the Netflix case study, discuss how Netflix can achieve strategic fit between its supply chain strategy and its competitive strategy by maintaining the reconceptualization strategy. (12)

2.2 Identify and discuss the three major drivers of Supply Chain Performance in the Netflix case study.