FINANCIAL STATEMENT ANALYSIS: RETAIL APPAREL

42Assignment #1: Netflix, inc. Case analysis Causley 42

assignment #1: Netflix, Inc. case analysis25

Florida A&M UniversitySchool of Business & Industry

Assignment #1

Netflix, Inc. Case Analysis

MAN 5721

Business Policy & Strategic Management

Prepared By:

Nathaniel Russell Causley, III

Submission Date:

January 17, 2015

Netflix, Inc. Case Analysis

This report contains an in-depth analysis of the 2011 Baldwin-Wallace College case on Netflix, Inc. In alignment and relevance to the material discussed through Chapters 3-6 of Davids Strategic Management book, my analysis and suggestions will include the data incorporated within the case and the strategic procedures suggested throughout the Strategy Formulation process in order to create a strategic plan for the firm Netflix.Netflix Table of ContentsExecutive Summary4Internal Analysis6Company Background6Mission Statement6Suggested Mission Statement7Vision Statement8Core Values8Company Objectives and Current Strategies8External Audit10Opportunities10Threats10PEST Analysis11Porters 5 Forces12Bargaining Power of Suppliers12Bargaining Power of Buyers12Industry Rivalry13Threat of Substitutes13Threat of New Entrants13Competitive Analysis14Internal Audit15Strengths15Weaknesses16Internal Factor Evaluation (IFE) Matrix17Strategy18SWOT Matrix18Strategic Position and Action Evaluation (SPACE) Matrix19External Factor Evaluation (EFE) Matrix20Grand Strategy Matrix21Suggested Strategies22Strategic Recommendation22Strategic Implementation23Product Positioning Map24Balanced Scorecard25Evaluation & Control26Conclusion28Works Cited29Appendix30Figure 1.1: Netflix Balance Sheets30Figure 1.2: Netflix Income Statement31Figure 1.3: Netflix Statements of Stockholders Equity32Figure 1.4: Netflix Statement of Cash Flows33Figure 1.5: Organization Structure, 201034Figure 1.6: Netflixs Revenue and Cost per Subscriber34Figure 1.7: Netflix Income & Expenses35Figure 1.8: Netflixs Stock Prices 2010-201135Figure 1.9: Netflix VS. Top Pay-TV Operators 2010 Subscriber Ads36Figure 2.1: Netflixs Subscribers by Quarter (2008 Present)37Figure 2.2: Netflix Exponential Growth37Figure 2.3: United States DVD Market 1038Figure 2.4: Netflix Vs. Hulu Traffic Comparison38Figure 2.5: Netflix Revenue VS. Blockbuster Revenue (2004 2010)39Figure 2.6: Netflix Revenue VS. Blockbuster Revenue (2004 2010)39Figure 2.7: Netflix Competitive Advantage40Figure 3.1: Netflix Interface via Apple TV41Figure 3.2: Netflix Interface via X-Box 36041Figure 3.3: Netflix Interface via iPhone42

Executive Summary

The underlining purpose of this strategic plan is be to provide a thorough evaluation of the firm based on the information provided for the firms 2010 fiscal year and to develop suggested strategies the company could conduct in order to ensure a successful future for the longevity of the company. Current day, Netflix, Inc. is the worlds largest and leading subscription service provider that offers the ability for its consumers to stream movies and TV episodes over the Internet. Within a decade of existence, Netflix began to soar above its competitors and eventually explored new markets.The time setting for this case, takes place within the year of 2011. The market for streaming video, of which Netflix exists in, can be divided into three different segments: video-on-demand (VOD), ad supported, and subscription. The competitors that stand against Netflix within the VOD segment include Amazon, Apple, and Microsoft. Video-on-demand (VOD) is a service that customers pay for that allows them to select and watch clip and video content over a network as part of an interactive experience.The competitors that existed within the ad support segment included Hulu and YouTube. Unlike most of Netflixs rival companies, the firm offered many various subscription plans with no fees for late returns, no due dates, no shipping, or pay-per-view fees. Subscription plans, for the firm, started as low as $7.99 per month and by the summer of 2011 the firm possessed a database of over 25 million subscribers. Although Netflix sits on top of the mountain as the primary provider in the subscription segment, the company was still experiencing some hard pressure from outside competition to figure out how to stay innovative and maintain their competitive advantage as consumers shift to Internet delivery of videos. The I want it now mindset of consumers for instant-gratification video within on-demand streams is changing the media industry to gain a major concern over Netflix. Constantly trying to find new ways to improve their subscription experience, the competition within the industry is concerned that Netflix is removing the reason for consumers to pay for expensive cable TV. With the shift of industrys attention upon VOD, Netflix must figure out how its company will move from an online-subscription based DVD rental service to positioning itself in sustaining its current position as a monster within the media industry.

Internal AnalysisCompany Background

Founded on the date of August 29, 1997 in the state of Delaware, the firm Netflix, Inc. provides and offers DVD home delivery to home and Internet based subscribers within the United States, Canada, Mexico, and Latin America. Due to complaints from consumers about how the video streaming industry was charging for returning videos late, Netflix decided in 1999 to launch a No late fee policy to its consumers. Netflixs customers, who received DVDs by mail, now had the ability to hold onto their media for as long as they wished without receiving any consequences. During the early years, very little competition for DVD rentals existed. Many of Netflixs indirect competitors were still selling VHS.In 2001, the firm decided to move into the Video-on-demand industry. As many of the firms competitors felt the sabotage of the Netflix virus, they too decided to follow Netflixs direction into the VOD industry. In May of 2002, the company completed its initial public offering to the world, running under the ticker symbol of NFLX. By 2007, company leadership decided that the firm would begin streaming content over the Internet. This opened the airways for Netflix to be a downloadable app within any warranting device and thus growing the firm tremendously. By December of 2010, Netflixs workforce had grown to over 2,180 full-time employees and 2,197 part-time employees, also possessing revenues of up to $2.4 billion. Mission Statement

Our appeal and success are built on providing the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery.

Suggested Mission StatementOriginal Mission Statement

9 ComponentsExcerpts from Mission Statement addressing the component

1. Customers

2. Products & Servicesproviding the most expansive selection of DVDs

3. Markets

4. Technology

5. Survival, Growth, Profitability

6. Philosophy

7. Self-Concept

8. Public Image

9. Employees

Revised Mission Statement

As the world leader in the home video entertainment market (3, 7) Streaming entertainment content straight to the interested consumers device, making viewing interactive, easier, and available whenever the consumer wants it (4). Serving TV and movie viewing customers (1) with topnotch entertainment (6). Leading by example as a responsible, caring, and sustainable company making difference in the communities we serve (8) and inspiring our employees to do their best, offering opportunities for personal development and success (9). Netflix continues to develop the frontiers of home entertainments by continuously growing their content library in order to stand out in the industry (5) and providing the most expansive selection of DVDs (2).9 ComponentsExcerpts from Revised Mission Statement addressing the component

1. CustomersServing TV and movie viewing customers

2. Products & Servicesproviding the most expansive selection of DVDs

3. Marketshome video entertainment market

4. TechnologyStreaming content straight to the consumers television, making viewing interactive, easier, and available whenever the consumer wants it

5. Survival, Growth, ProfitabilityNetflix continues to develop the frontiers of home entertainments by continuously growing their content library in order to stand out in the industry

6. PhilosophyServing customers with top notch entertainment

7. Self-Concepthome video entertainment market

8. Public ImageLeading by example as a responsible, caring, and sustainable company making difference in the communities we serve.

9. EmployeesInspiring our employees to do their best, offering opportunities for personal development and success

Vision Statement

Becoming the best global entertainment distribution service.Licensing entertainment content around the world.Creating markets accessible to film makers.Helping content creators around the world to find global audience.Core Values

Netflix has the following core values:1. Judgment 2. Productivity 3. Creativity4. Intelligence5. Honesty6. Communication7. Selflessness8. Reliability9. PassionCompany Objectives and Current Strategies

Netflix first offered its services through mail to its customers. The strategy to stream a selection of movie titles began in January of 2007. Initially, Netflix anticipated that there would be a very slow adoption to their newly innovative online streaming, but to their surprise the idea immediately took of. This caused Netflix to rise to the world leader in online streaming content and its subscriber based grew tremendously. Within 5 years of implementation, Netflix reported 23.8 million subscribers, of whom about 21.4 million were accessing the online database for some sort of movie entertainment. The trial of the company to use streaming had become so successful that competitors started to make attempts at adopting the companys new strategies. Netflix only had the cost of paying transmission fees in order to strengthen the signal associated with their site to ensure that their customers were able to have a smooth viewing experience. If Netflixs subscriber base continues growing at current rates then content manufacturers may soon be compelled to seek Netflix as their primary content distributor for movies and TV, similar to Apple Inc. in the music industry. Netflixs ultimate objective is to effectively conduct operations that assist the company in maintaining their current position within the industry while continuing to be innovative.As the U.S. moves forward to predictions of a weak economic period, it is of high importance that Netflix prepare their selves accordingly. They must continue to conduct building partnerships to increase their overall accessibility and availability of its streaming service. The current market challenges their organizational strategies, as Netflix must constantly change and diversify its features in order to have a better chance of adapting to their impending competitors and the shifting innovation within the industry. Within the cases time period, Netflix was a dominant force within its industry, but failure of the firm continuing to be innovative within its Research and Development Department could be detrimental to their overall growth and future success.

External AuditOpportunities

Existing within a fairly fast-paced and constantly changing content streaming business, there exists many opportunities for Netflix to maintain their current position within the industry. In the early stages, the company entered the movie rental business by providing similar services as Blockbuster but for a considerably lower price. The streaming of content online is fairly new to the industry, but overall causes a significant drop in costs that were associated with packaging and shipping out DVDs. With VOD being looked at as the wave of the future, Netflix has decided to survey the field before entering. This gives the company a chance to closely examine competitors as they undertake the new venture. With problems arising as they go, Netflix can sit back and closely strategize on how they could infiltrate this market effectively and efficiently. The use of single user accounts, which allow single movie streaming to one location, are now being used by Netflix and VOD competitors. To combat this, Netflix considered creating a family price that would encourage multiple accounts all within one household creating a greater customization of viewing media content. Threats

There existed many threats that Netflix faced during this time period. Netflix competed within the fiercely contested web/cable/television industry that was constantly changing by the cause of many various technological advances. The overall evolution of video streaming technologies point attention to the future of VOD. Along with competition, Netflix is perfectly aware that VOD can possibly become the common format used for viewing media in the near future. This risk causes the company to stay innovative and constantly change the direction of the companys operations. Netflix has also been strongly considering going global and is trying to get outside of the western hemisphere. With this exploration, Netflix is open to many unknowns, which include: international trade laws, copyright and patent laws not being accepted in certain areas, potential negative economic downturn, and currency fluctuations. Within the case, Netflix does a trial of expansion into Canada. This venture ultimately surpassed initial growth estimates. Trying to global requires the company to conduct a significant amount of research, acquire mass resources, greater attention upon management, and ultimately exposes the company to regulatory, economic, and political risks. In the international market in particular, Netflix will also face challenges of content licensing and identifying the most effective marketing channels.PEST AnalysisPolitical

EconomicSocial

Technological

E-commerce safety International Taxation Changing laws in regards to patents, trademarks, copyrights Confidentiality Agreements to protect companys proprietary software and website Dependency upon content licenses in order to distribute content Legal complexities of international trade Complex tax effects Intellectual Property Laws

Negative Economic Downturn Currency fluctuations Industry based on disposable income of customers Exchange Rate Risk New Competition International Financial Operations

Online & Social Networking Ethical & Religious Issues Subscriber ratings Streaming movie rentals on Facebook Word of mouth recommendations Cultural adaptations to user interfaces Identifying most effective marketing channels

Consumer search process search engines Order processing Fulfillment operations Software interfaces on allowing syncing with ready devices: Blu-ray disc players, Microsofts Xbox 360, Nintendos Wii, and Sonys PS3 consoles Content Library Utilization Inventory management Customizing subscribers experience Apple now uses Netflix to stream movies to its Apple TV, iPhone, and iPad Subscriber access via: PCs, Macs, Internet-connected TV, home theater systems, digital video reorders, and Internet video players; Apples iPhone, iPad, and iPod touch, as well as Apple TV and Google TV.

Porters 5 ForcesBargaining Power of SuppliersThere exist three major suppliers within Netflixs business: the film industry, transaction processing services, and delivery services. Within the case, Netflix does not create or supply their own content, which makes the bargaining power of the studios extremely high. When it comes to Hollywood, Film Industry studios have the ability to sign licenses over to Netflix or not. This puts Netflix in a potentially vulnerable state as these studios gain a favorable amount of leverage when it comes to negotiating contracts. Transaction Processing Services are used with the official purchasing of subscription plans of customers for a very small minimal fee per payment transaction. Delivery Services were more so used in the beginning of the companys start. Within the days of Netflix shipping DVDs to customers, the power of the U.S. Postal Services were very pivotal in the make or break of the companys operation. Once the product left the possession of Netflix, it was strictly in the mail services hands of whether the customer would be satisfied by a speedy delivery. The success of the overall operation and customer satisfaction would rely solely upon the success of the transportation. Bargaining Power of BuyersNetflixs main buyers are the companys real consumer, which leaves the firm with positive sovereignty. Through an interactive user interface, customers are able to recommend titles as well as give feedback of their overall satisfaction with the service that they are provided with. Also the avenue is open for customers to protest against certain material found prejudice or insensitive, which could potentially cause harm to potential customers. Industry RivalryDuring the date of the case, the competition of the video streaming industry was very high. Competitors in the VOD segment include Amazon, Apple, and Microsoft: while key players in the ad-supported segment are Hulu and YouTube. In the beginning stages of the DVD rental business, Netflix ran head to head with Blockbuster and Hollywood Video Entertainment. Main competitors of Netflix include: Video-on-Demand devices Internet movie providers Online DVD sites Movie rental retail stores Cable providers Direct broadcast satellite providersThreat of SubstitutesWithin Netflixs industry, there exist many various substitutes for customers to potentially choose over the companys service. Customers of this industry want access to the media of their choice as fast and as easy as possible. This opens up the avenues for a quick home video to be popped in or the title found on-demand through a customers cable provider. Consumers can also possibly take on to other options to solve their entertainment needs such as surfing the world-wide-web, reading magazines, or playing video game consoles. Threat of New EntrantsEntry within this industry is relatively unrestricted. Any entrant obtaining a large volume and collection of movies and/or TV series could potentially become a threat if they can successfully market their services. The big determinant of the success would be their ability to successfully obtain licenses to use titles within an era of increased regulation and copyright law enforcement. Competitive Analysis

NetflixRedboxAmazon

Critical Success FactorsWeightRating ScoreRatingScoreRatingScore

Advertising0.0930.2730.2740.36

Content Inventory0.1140.4450.5540.44

Customer Convenience0.0850.450.430.24

Customer Loyalty0.0420.0840.1630.12

Customer Service0.1250.620.2430.36

E-Commerce0.1420.2820.2840.56

Financial Position0.0830.2430.2440.32

Global Expansion0.0720.1410.0750.35

Management Experience0.0330.0920.0630.09

Price Competitiveness0.1120.2230.3320.22

Product Quality0.0850.450.430.24

Sales Distribution0.0520.120.120.1

Totals1.003.263.103.40

After conducting a Competitive Analysis, it is very visible that Netflix has close competition to Redbox, but still has a ways to go if they plan on catching up to Amazon. Netflix received a final score of 3.26; Redbox score totaled 3.10; Amazons score totaled 3.40. Netflixs lacking success factors are customer loyalty, e-commerce, sales distribution, price competitiveness, and global expansion.

Internal AuditStrengths

Netflix, being the first company out of its industry that choose to venture into the online DVDs rental retailing, created a strong head start to position itself effectively. The companys main strength is their availability to give superior convenience and service to their consumers. The firm offers convenient and quick access to an extensive list of titles for multiple viewing options including delivery to over 200 Netflix ready devices. The average Netflix customers experience is uniquely customized for ease of TV or website use, title selection, and super fast and convenient delivery. The company strategic creates a unique experience for their subscribers by generating user interfaces on its website and Netflix-ready devices that are tailored to a subscribers individual rental and ratings history. This customization allows consumers with the opportunity to gain access to their lastly viewed content, while also providing them with titles of recommended content according to genre and actor. Possessing a fairly large DVD title inventory coupled with nationwide distribution centers and streaming titles available for viewing without commercial interruption provides fast delivery, which in turn allows the firm to gain high customer satisfaction rates. In December 2010, the American Customer Satisfaction Index (ACSI) named Netflix the number one e-commerce company for customer satisfaction. Bold strategic moves and aggressive bartering to acquire rights to air original series programs by chairman and CEO, Reed Hastings, have pushed Netflixs subscriber base, earnings, and stock price up every year. With over 100,000 DVD titles for rental by mail and more than 20 million members in the United States and Canada, Netflix subscribers can instantly watch streaming content without commercial interruption on their PCs, Macs, Internet-connected TVs, home theater systems, digital video recorder, and Internet video players; Apples iPhone, iPad, and iPod touch, as well as Apple TV and Google TV. Streaming is delivered using Netflix software that runs on more than 200 Netflix ready devices including: Blu-ray disc players, Internet-connected TVs, digital video players, and game consoles such as Microsofts Xbox 360, Nintendos Wii, and Sonys PS3 consoles. WeaknessesOver the years discussed within the case, the price for the highest subscription plan has noticeably decreased. With consumers of this industry on the constant search for lower priced avenues to be entertained, Netflix, and the rest of industry competitors, had to lower their prices thus lowering the overall sales revenue collected per month per customer. Netflix stock price suffered as in July of 2011 when the firm was at $304 but dropped to $240 the next month. Amid worries about the economy and heightened competition played apart in this also. With an overall low retention rate of customers, Netflix also neglected to have an effective reward customer loyalty program. Also, if a customer were to cancel subscription there would not be call or hand extended to retain the customer. This absence of this allowed Netflix to gain no useful information as to why a consumer was discontinuing their services as well as gaining suggestions on how to improve their business service.When it comes to streaming content, Netflix can only use certain DVDs that they can obtain licenses too and only once a particular movie is out in the market. Netflix must actively continue to expand their inventory as competitors are also gaining access to the same titles and are challenging the company with competitive prices. Sites such as Hulu and YouTube are able to offer a more extensive list of streamed content to its consumers for free, while Netflix charges a fee and provide way less content. According to Nielsen estimates, there exist up to 116 million households with at least one television and Netflix has only been able to achieve a penetration rate of 14.5 percent. Among the online video content providers, Hulu ranks second behind Google as of mid-year 2010 in the total number of videos viewed. A distinct weakness in this list is that Netflix did not even rank in the top ten. Netflix must figure out a way to obtain more content in order to look more appealing to competitors who are offering more for the price of nothing. Internal Factor Evaluation (IFE) MatrixStrengthsWeightRatingWeighted Score

10.0750.35

2Strategic Partnerships0.0640.24

3Customer Convenience0.0550.25

4Several subscription plans w/ no due dates or late fees0.0750.35

5Innovative subscriber experience0.1050.50

6Database0.0840.32

7Compatible with other devices0.0640.24

8Collection of data from subscribers0.0430.12

9Involved in long-term contractual agreements with distributors and suppliers0.0130.03

10CEO Reed Hastings "Business Person of the Year"0.0230.06

WeaknessesWeightRatingWeighted Score

1Global Expansion0.1110.11

2Never paid a cash dividend0.0210.02

3Lack of Original Content0.0620.12

4Relies upon channel providers for delivery of content0.0220.04

5Absent from top 10 list of videos viewed0.0410.04

6Obtainment of New Releases0.0920.18

7Netflix required not to offer new DVD releases until 28 days after retail sale date0.0410.04

8Reliability upon computer systems and third parties0.0120.02

9Effective plans to market in other countries0.0230.06

10Increase in overall cost of operation0.0310.03

Totals1.003.12

The IFE Matrix assesses Netflixs current internal strengths and weaknesses within the company. Netflixs total score was 3.12, which signifies that they higher than the average company. Netflix has always looks to maximize their internal strengths, while coming up with strategies to minimalize their current weaknesses from majorly affecting their business operations.StrategySWOT MatrixSO StrategiesWO Strategies

1. Partnering w/ manufacturers to have Netflix within TV features1. Explore new global markets

(S2, O1) (W1, O6)

2. Partner with Walt Disney to create a Kids Selection w/ Disney content2. Explore creating Netflix Original Series and Movies

(S2, O9) (W3, O5)

ST StrategiesWT Strategies

1. Diversification of product, offer Pay-Per-View options for events1. Paying out Dividends to increase chances of investment

via Netflix (W2, T3)

(S1, T1)

The SWOT Matrix outlines the firms key strengths, weaknesses, opportunities, and threats for the company. From the actual analysis, I was able to conclude 6 new potential strategies the firm could include within their current business plan.Strategic Position and Action Evaluation (SPACE) Matrix

The Strategic Position and Action Evaluation Matrix displays for a company how they are effectively competing and growing within their market. Netflixs coordinates show that the company is destined to be in Quadrant 1, being a strong competitor gaining rapid market growth. Being this Quadrant shows that the firm is doing an excellent job at competing within the marketplace.

External Factor Evaluation (EFE) MatrixOpportunitiesWeightRatingWeighted Score

1Innovative Devices compatibility with streaming0.0850.40

2DVD Rental Outlets industry losing profitability0.0330.09

3Netflix "Family Plan"0.0650.30

4Internet ready TVs with streaming capabilities0.0950.45

5Films seeking Netflix as primary distributer0.1050.50

6Commitment to grow its streaming entertainment business0.0840.32

7Apple incorporating Netflix within devices.0.0550.25

8Cable TV subscriptions declining0.0540.20

9Walt Disney will soon extend its reach into the content delivery industry0.0140.04

10Streaming via Social media sites0.0220.04

ThreatsWeightRatingWeighted Score

1Pay-per-view and VOD content cable providers0.0920.18

2Direct broadcast cable providers0.0420.08

3Declining Economy0.0520.10

4Telecommunication providers0.0220.04

5Current insurance does not cover expenses related to attacks0.0410.04

6International laws0.0310.03

7Inability to acquire preferred content0.0410.04

8Product Substitution is very high0.0330.09

9License agreements0.0630.18

10The growth of online commerce may lead to more regulation0.0310.03

Totals1.003.40

The EFE Matrix assesses Netflixs current external opportunities and threats. Netflix scored 3.40 meaning they are high within the industry leaders and above the average company. If they are to ensure their success, the company must make sure that they capitalize on every opportunity possible.Grand Strategy Matrix

Based on Netflixs strong competition position within a rapidly growing market, it is apparent that the company fits within Quadrant 1. The firm could use this matrix to formulate and adopt alternative strategies in contrast or in align with firms current objectives. The strategies of which Netflix should consider researching are the following: Product and Market Development, Market Penetration, Backward Integration, Forward Integration, or Concentric Diversification.

Suggested Strategies

After analyzing Netflixs position and room for development, I derived at 6 suggested strategies to push forth the firms growth within the marketplace.1. Product Development; Partnering with Manufacturers to create TVs w/ Netflix within the features

2. Related Diversification: Partner with Walt Disney to create a Kids Selection w/ original Disney content

3. Market Development: Explore New Global Markets

4. Product Development: Creating Netflix Original Series and Movies

5. Related Diversification: Offer Pay-per-view options for events via Netflix

6. Paying out dividends to increase chances of investmentStrategic Recommendation

After reviewing all six strategies, I would recommend that Netflix plan to implement Strategy 4: Product Development with the Netflix Original Series and Strategy 2: Related Diversification of partnering with Disney. Partnering with Walt Disney to create a Kids Selection w/ original Disney content section within the Netflix interface will ensure great advantages for the future. Undertaking this partnership will allow Netflix the opportunity of grabbing users from the infant to adolescent stage. Parents are the ultimate spenders within the United States and will do virtually anything that is feasible in order to keep their child happy. Opening this avenue will increase overall household use of the product and could be beneficial to Disney in terms of distribution of their products. This will also allow parents the opportunity to save up the money involved with buying their children Disney movies for the convenience of simply paying for a Netflix subscription.Exploring the development of Netflix original series will also prove to be quite innovative for Netflixs operations. Redbox and Blockbuster do not have any original content of which they present to the public. There exist many film directors who are looking for outlets but do not have an adequate budget to support the movie theaters but having amazing products. Netflix could strategically give these film directors outlets while gaining another revenue stream if it becomes big enough to hit cable TV. This strategy will prove to be highly effective and cause strict use of the firms product to view the movies also. Strategic Implementation

As far as implementation, costs could possibly fair out to be relatively cheap depending on factors unforeseen. With Netflix creating company owned original series, Netflix has major flexibility in terms of implementing this plan. I would suggest that the firm look into film directors at underground circuits such as the films broadcasted at the Sundance festivals. Picking up on series or movies that have yet to be contractually inclusive, but are already finished products, will allow Netflix the opportunity to pick up on films or series to broadcast inclusively as well as possibly adding another stream of income to the firm. Once a T.V. Series or movie starts to take off, Netflix will then need to promote the product. Marketing costs would budget to be up to $2.5 Million as Netflix pushes the word out that they now hold their own titles, of which could only be viewed through their devises. If a T.V. series proves to be successful, Netflix would then need to finance the future projects in order to ensure the continued success of the series. If Netflix chooses to support the continuation of a title or additions of a T.V. series, projected costs would be about $20 Million. With the addition of continued growth within subscriptions, Netflix will be able to continue to profitable but will see an initial drop in overall revenue of about 13% for the first two years then eventually growing back upwardly.As far as implementing the new Walt Disney venture added to the Netflix interface, this could prove to be very costly in terms of obtaining licensing for all the years of endless Disney content. Another route Netflix could undertake is trying to establish a joint venture with Walt Disney in order to cut costs and gain the licenses quickly. Netflix could also benefit if they are able to get Disney to use their technology within their facilities, thus spreading the overall publicity of the brand to a whole new demographic. The forecasted amounts for Option 1 would at least $55 Million in total, as Netflix pays the necessary amounts in order to gain access to Disneys endless titles. Option 2 would prove to be more cost effective and beneficial for the long run by Netflix conducting a joint venture with Walt Disney. Costs would equate to being $20 Million as Netflix incorporates their technology within Disney facilities and adding their interfaces to the T.V.s within Disneys hotels. Product Positioning Map

With the added addition of these two strategies, it would position Netflix to over dominate the market. Gaining the upper hand by partnering with Walt Disney and adding their own content will prove to be very beneficial for the firms product positing within the market. The firms overall selection quality would boost up dramatically. Personalization would stay the same.Balanced Scorecard

Strategic Theme: Profitable Expansion w/ Product Development

ObjectiveMeasureTargetInitiative

FinancialIncrease % of revenue from new strategies % Revenue from added content> 5% year 1> 14% year 3Marketing to new target markets

Avg. # of days to breakeven< 200 days year 1< 130 days year 3Operations review strategy implication

Pay out dividends% of profit gained each fiscal year

> 3.5% of profit year 1> 4.5% of profit year 2Increase # of potential investors and investor loyalty

CustomerAcquire new target marketsAvg. # daily customers> 500,000 in first 6 mos., > 1.4 Million in first year,> 12.5 Million by year 3Local marketing/PR campaigns

# of repeat customers> 125 Million in first 6 mos.,> 800 Million in first year,> 2.5 Billion by year 3Customer loyalty program

Increase % of Subscriptions> 7% year 1> 15% year 2Coupon programIn-store promotions & classes

ProcessFact-based site selectionDays lag between market selection and site acquisition< 90 days year 1< 70 days year 3Increase market penetration

Increasing Convenience Boosting Connection Speed< 1.4% year 1< 3.4% year 3Partnerships with internet providers

Addition of new devices>13 new devices year 1> 100 new devices year 2Web-based project management and strategic partnerships

Learning & GrowthUse business intelligence systems% Eligible employees trained>95% year 1>99.7% year 2

In-house system training

Integrated knowledge management# Paper forms used< 200 year 1< 100 year 2< 5 year 3Corporate digital nervous system

Evaluation & Control

In order to effectively evaluate the status of the implementation of the strategies presented, Netflix should conduct several assessments. 1. Competition Reactiona. Being that Netflix has continued to stay innovative in the market, it is eventually made apparent if the companys rivals create an alternate to combat the strategy or try their best to duplicate it. If the competition changes up their strategies to combat, Netflix should pinpoint solutions to their weaknesses in order to better improve their strategies.b. People Involved: CEO, Board of Directors, Marketing, and R&D 2. Measuring Successa. Within taking on an additional strategy, Netflix must figure out how exactly it is that they are going to measure the effectiveness of their venture. Will the overall guidelines for success be labeled under market share, increased subscriptions, lowered costs, or innovativeness to the industry?b. People Involved: CEO, Board of Directors, and AccountingIf Netflix continues to actively improve and develop their services, they can possibly blow many of their competitors out of the water. I believe that these will open the door of opportunity for Netflix to broaden their overall offerings and also possibly draw lines to additional revenue streamlines that the company has yet to think about for extremely minimal costs. With the TV series and movies, they should focus on already finished products in order to negate having fork out and money if the film or TV series isnt appealing to their consumer market. Possibly becoming the first licensed streaming company would most likely be fairly expensive but would prove to be very effective in the long run. I would predict the overall subscription base to increase by 15% within the first month of implementation. If they are able to properly integrate my recommended strategies while keeping costs low, then the firm should see an immediate growth in profit and market share. Overall, the company possesses many of the necessary skills to pull forward within their industry as long as they continue to stay innovative.

Conclusion

This case study focused and examined on the rise of the Netflix in becoming the largest and leading subscription service provider in the world. After dissecting the case, it was made apparent that the firms growth and overall profit margin dropped dramatically once CEO Reed Hastings made the executive decision for the company to separate from the original business operations of DVD rentals and move towards the online streaming market. Before this the growth for the company was marvelous, but eventually this decision would prove to be exceptional as the companys subscription base and profit skyrocketed up, even till present day. Although this decision proved to be very costly, the firm was able to establish a more dedicated and bigger world wide following and customer base because of the affordable monthly rates and super convenient service. Overall, the company Netflix has been able to maintain its dominant position within the market. As long as the firm is able to stay innovative in the way that they deliver their services, then Netflix should be able to grow larger and continue to dominate the market.

Works Cited

Basic Info. (n.d.). Retrieved January 18, 2015, from http://netflixcompanyprofile.weebly.com/Barr, A. Amazon Prime vs. Netflix vs. Hulu Plus: New Monthly Option For Prime Should Scare Other Services. Huffington Post. 6 Bov. 2012. Retrieved January 20, 2012, from http://www.huffingtonpost.com/2012/11/06/amazon-prime-vs-netflix-vs-hulu-plus_n_2082871.htmlBeaubien, G. Now Playing: Netflix Consumer Backlash.PR Tactics, p.4. Oct. 2011.Becker, J. Netflix Introduces New Plans and Announces Price Changes. 12 July 2011. http://blog.netflix.com/2011/07/netflix-introduces-new-plans-and.html Gurley, Bill. "Understanding Why Netflix Changed Pricing." Above the Crowd. N.p., 2012. Web. 20 Jan. 2015. Netflix Long Term View. (2014, October 15). Retrieved January 18, 2015, from http://ir.netflix.com/long-term-view.cfmNetflix Official Website. (n.d.). Retrieved January 18, 2015, from https://www.netflix.com/us/"Netflix Raises Prices, Offers Streaming-only Option." CNNMoney. Cable News Network, n.d. Web. 20 Jan. 2015.Siegler, MG. "Netflix Now 15 Million Users Strong With Over 60 Percent of Them StreamingContent." TechCrunch. N.p., n.d. Web. 20 Jan. 2015.

AppendixFigure 1.1: Netflix Balance Sheets

Figure 1.2: Netflix Income Statement

Figure 1.3: Netflix Statements of Stockholders Equity

Figure 1.4: Netflix Statement of Cash Flows

Figure 1.5: Organization Structure, 2010

Figure 1.6: Netflixs Revenue and Cost per Subscriber

Figure 1.7: Netflix Income & Expenses

Figure 1.8: Netflixs Stock Prices 2010-2011

Figure 1.9: Netflix VS. Top Pay-TV Operators 2010 Subscriber Ads

Figure 2.1: Netflixs Subscribers by Quarter (2008 Present)

Figure 2.2: Netflix Exponential Growth

Figure 2.3: United States DVD Market 10

Figure 2.4: Netflix Vs. Hulu Traffic Comparison

Figure 2.5: Netflix Revenue VS. Blockbuster Revenue (2004 2010)

Figure 2.6: Netflix Revenue VS. Blockbuster Revenue (2004 2010)

Figure 2.7: Netflix Competitive Advantage

Figure 3.1: Netflix Interface via Apple TV

Figure 3.2: Netflix Interface via X-Box 360

Figure 3.3: Netflix Interface via iPhone