When a firm is trying to gain a competitive advantage, they will indure environmental threats. According to Jay B. Barney, an environmental threat is any individual, group, or organization that could potentially threaten the firm's performance. The most famous model used to evaluate environmental threats is the five forces framework, developed by Professor Michael Porter of the Harvard Business School. The five forces are the threat of entry, the threat of rivalry, the threat of substitutes, the threat of powerful suppliers, and the threat of powerful buyers.
The Five Forces Framework for Netflix:
The Threat of Entry - Hulu seems to be the most recent entrant into the movie industry. Hulu competes with Netflix because it also offers movies and television shows via internet access. Despite this new entrant, customers seem to be loyal to the brand they already know.
The Threat of Rivalry - Netflix's rivals include Hulu, Redbox, On Demand, and others. This is due to the fact that the industry growth was slow. This is why we saw video stores rapidly closing. There are cheaper, quicker, and easier ways to access television shows and movies.
The Threat of Substitutes - The firms aforementioned offer products that meet customer needs in a different way thatn Netflix. Hulu offers television shows the day after they air. Redbox offers movies and video games in a vending machine style. On Demand offers the option to order movies through your television.
The Threat of Powerful Suppliers - This does not appear to be an issue.
The Threat of Powerful Buyers - There is a threat of powerful buyers when they don't watch many movies or television shows in a given month. To some, payment a low monthly fee is worth it because they watch several movies and television shows. If they do not watch much in a month, Redbox may be a better option because they are only paying $1.00 per rental. On the other hand, buyers recognize the name Netflix and probably have many friend who are buyers.
You can find a five force analysis for Netflix here.
Source: Jay B. Barney's Gaining and Sustaining Competitive Advantage
Netflix was created in 1997 by Reed Hastings and fellow software executive Marc Randolph and offered only online movie rentals. Netflix shortly introduced the subscription service for a low monthly fee, which could predict choices for members. Netflix continued to grow and was able to offer streaming in which members could instantly watch movies and television shows on their computers. Shortly after streaming was introduced, Netflix partnered with various electronic companies which allowed them to stream on the Xbox 360, blu-ray players, television boxes and Apple computers. A couple of years later, Netflix was also streamable on the Play Station 3 as well as devices that were connected to the internet including the television. As technology advanced, so did Netflix. They can now stream on the iPad, iPhone, and iPods as well as the Nintendo Wii. Netflix has made it possible for users to access movies and televison shows in virtually any way they prefer. Netflix claims to be the world'd leading internet television network. They have over 33 million members residing in 40 different countries. Each member is able to access their favorite movies and television shows for one low monthly price.
Due to the success Netflix and other pioneering companies, we have slowly seen video stores become virtually nonexistent. Netflix has not only a continuing success, but also continues to grow as technology advances as well as expands to reach more viewers. This has led to Netflix to possess sustained competitive advantage which means that it has a long-lasting competitive advantage in that Netflix has created more value than its rival form. Consumers view Netflix has having a high economic value, meaning the benefits they gain by purchasing Netflix are greater than the economic cost.
The ultimate priority of a company is to insure that its shareholders' wealth is maximized. Netflix has a shocking growth of 13 cents per share on Wednesday. Netflix's financial profile including shareholder information an be found here.
Sources: Netflix.com and Jay B. Barney's Gaining and Sustaining Competitive Advantage
Welcome to my blog! Over the course of this blog, I will be evaluating various management aspects of Netflix.
After a web search and two phone calls to Netflix, I have concluded that Netflix does not have an actual mission statement. One Netflix Customer Service Representative asked, "What is a mission statement?" The other asked everyone in the call center, to which one person replied with Company Overview that can be found on the Netflix website. The Company Overview says:
"Netflix is the world's leading Internet television network with more than 30 million members in 40 countries enjoying more than one billion hours of TV shows and movies per month, including original series. For one low monthly price, Netflix members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments."
The second Netflix Customer Service Representative and I came across what seems to be the best answer. According to About.com:
"Netflix doesn't have an "official" published mission statement, but at the Dublin Founders conference in October, 2011, co-founder and CEO Reed Hastings expressed a clear vision for the future of Netflix which includes...
- Becoming the best global entertainment distribution service
- Licensing entertainment content around the world
- Creating markets that are accessible to film makers
- Helping content creators around the world to find a global audience
Netflix did, at one point, referred to its brand promise as a "quest," which many would equate with a mission statement. The published that Brand Promise was...
We promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact.
Additionally, Netflix has published its company values, which provide further clarification about the principles which guided its employees in their daily decisions and activities. The Netflix Company Values were published as...
- Judgment
- Productivity
- Creativity
- Intelligence
- Honesty
- Communication
- Selflessness
- Reliability
- Passion"
