IBM 200 Summer 210 Prepared by Dr. Eduardo M. V. Jasson

Speaking of large modern multimedia companies, it is necessary to

allocate Netflix as one of the largest suppliers of films and serials in the world. Its audience in 2014 reached the mark of 50 million users. Many leading publications call Netflix the most successful distributor of streaming multimedia in history.

The company was founded in 1997 by Reed Hastings and Mark Randolph.

They noticed in the video distribution market a free niche associated with the inconvenience of existing salons and services. Thinking about this, the future founders of Netflix set about creating a more convenient method for renting movies and TV shows. The model of the work was built in such a way that a person could rent a movie without going to the store or office. Everything was easy to make out with the help of mail and bank payments. The cost of one week was $4.

Thus, Netflix can be thought as a business searching for an unoccupied place and developing a new model of service, which would be more convenient to customers.

There were several major competitors on the market, among which was the Blockbuster network with annual revenues of up to $ 5 billion. They have not worked online yet, but they could start and easily destroy a start-up business.

Hastings understood that in such conditions it is necessary to act quickly. To attract the audience to the site, the founders began to create special promotions for users. In the first year of work, a trip to Los Angeles was donated to a random customer, and those who rented more than two disks received a discount of 30%. Apparently Netflix case study tried to show how to bypass the main competitor in the short term and grow own audience simultaneously.

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IBM 200 Summer 210 Prepared by Dr. Eduardo M. V. Jasson

In the same way, one more problem of the company in the first year of existence was solved a low percentage of DVD users. As a result, the company went the favorite way of providing bonuses to clients. For this, an agreement was concluded with the Japanese company Toshiba: every buyer of its players in the US received a free rental of three disks. So the company increased not only the number of DVD users but also its own audience.

This unique business can also be learned. It represents a mutually beneficial bilateral deal, each side of which only wins.

Blockbuster was offered to buy Netflix at the start up stage for $ 11 million Dollars. But the Blockbuster executives thought it was too advanced and the customer will reject the use of a computer to streaming a film.

While Blockbuster work on tits own stores where people can go and select the movies they want for a few days rental, its executives disregard the power and potential of internet and the digitalization of entertainment.

You could consider that a great error of vision, but blockbuster supported in the market for several years using kiosks, automated machines at supermarkets, and many other systems that were based on the traditional form of DVD platform.

At the end after 2010 blockbuster cannot survive without becoming digital and network based and declared bankruptcy.

At the beginning of its history, Netflix had to face several problems that could destroy it. One of them was the delivery of disks intact and secure with the help of mail. All the mail was sorted by special machines, working with a huge number of letters, and after this sorting, the disk would be damaged. Therefore, Netflix was faced with the necessity to develop a solution on how to save its product.

The development of a unique envelope began, and about 150 versions of different materials were created. They stopped on a version of the thick paper with a special partition, which protected the disk from damage. This solution shows how a company may act in conditions that cannot be changed but only adopted.

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IBM 200 Summer 210 Prepared by Dr. Eduardo M. V. Jasson

Based on the feedback from customers, the scheme of the service was gradually changed. Instead of a weekly lease, a one-month lease was introduced, while the company continued to offer its customers a variety of discounts. Everyone can take 4 DVDs for only $15.

Gradually, a new service option is gaining momentum an online subscription developed in 1999. Initially, its cost was $ 19.95 per month for four drives, while there were no time limits and the user could take the discs for at least a year. For new customers, there was a trial subscription for six days.

This Netflix case study solution can be researched from the perspective of an adaptation of the business to changing conditions, following trends, the correct definition of the needs of consumers and the formation of a demanded proposal, combining all this with pleasant bonuses and opportunities to test the service. In 2007, Netflix began to distribute streaming video, which turned it into one of the largest companies in the world. The transition to the new model was due to the fact that Hastings understood DVD is not the only way to distribute content, and with the advent of cloud services, most of the information has been stored on the Internet. There was a new niche that his company could fill. The founders of the company second time caught the current trend and were able to infiltrate into a virtually empty niche.

Netflix is a great example of a company with a flexible business model that managed to conquer a selected market. From the very beginning, the service, despite the presence of strong competitors, was able to grope its niche and the advantages that ensured its further development. This applies, for example, to a very loyal system of change, when any change, before entering into force, passes through an audit of the audience. With negative reviews, innovation is mostly canceled. This approach from the very beginning has served the company a good service and continues to be useful until now.

Another important feature of Netflix is the high-quality selection of content, taking into account the users interests. Everything is analyzed: from user preferences to the service itself to the most popular movies from pirated sites. As a result, the company perfectly understands its own audience and offers it the most popular products.

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IBM 200 Summer 210 Prepared by Dr. Eduardo M. V. Jasson

Questions to be answer

1. There is a real advantage in trying to establish a strategic alliance between Netflix and Blockbuster? Why? Explain?

2. It could be a good idea for blockbuster to acquire Netflix in the start up stage, knowing that executives were not familiarized with the digital streaming technologies?

3. Since blockbuster had revenues of 5 billion dollars a year in the peak moment of the company there was other strategic alternative for the company?

Instructions

You can use any mean to explore the history of blockbuster and Netflix. Internet articles or any other source you may find usefu, including slides of any class for this course

You must write a case report of no more than two pages with the answers to the questions above using letter size arial 12, margins of 1.5 cm per side, excluding images or charts or diagrams.

This is a group assignment, and each group cannot have more than Five students. You need to submit the report until Sunday July 10th, 2022. One member of each group needs to submit the report, using google classroom.

It is expected to work in this assignment during all the time assigned to this Fridays class. Another professor or Supervisor will be present during the class period. If you have any question, send me an email and I will answer ASAP.

Use professional writing etiquette and edit your work before submitting. You can use the guide for writing cases I provided at the beginning of the course. Each report must contain the cover page included in this assignment.