Netflix, Inc. introduction Netflix is a company provide online movie rental. The company is able to provide thousands of DVDs, also free deliver customers quick and easy to select videos. Netflix found a market segments and use DVD form to rental film. According to the distribution of DVD`s number, they charge customer monthly fee 5. 99-47. 99 dollars. They do not count DVDs in each but they use the monthly basis. Customers have no need to deal with the amount of money they rent for their DVDs. They can rent as many as they want.
Reduce ship cost and shrewd sales can make the company have more activity The company’s business model has two characteristics: one is the advanced distribution network in the United States that Netflix have 41-distribution center. It can realize one-day delivery to most of customers. Second is online film recommending system, customers can choose their favor film from Netflix. com. Netflix is one of the light spot in online business. It successfully combined the traditional video leasing business, modern marketing type and advanced IT network technology.
Thus created the new situation of online video rental. Netflix through integration of its own marketing means and recently IT network technology, successfully changed the consumption habits and build its brand advantage. According to the manner of information retrieval, the development of the Internet can be divided to three stages. First stage is the web portal, they provide navigation for important information on the Internet, a typical representative is yahoo. The second stage is search engine, they returned website relation with keywords to the user based on their input.
Next is personalized Recommended stage, according to the user`s characteristic and needs to provide personalized service. Netflix belong to the third stage. Porter`s models in Netflix We all know the high-tech products industry is really a competitive industry in recent years. We can use the Porter’s model to analyze Netflix. First is the generic strategy of the company, At this part, cost advantages play an important role, most company use it make profit, make their products special, and difference between other competitors. Netflix choose cost leadership strategy be their generic strategy.
They offer a very particular service to their costumers but also ask for frequent renters become a low cost instead to a traditional video rental shop. Netflix`s distribution channels very efficient and famous on their innovation. Amazon has a cost leadership strategy and they have very competitive prices. So Amazon would be a big competitor to Netflix. Also they have a focus strategy different from Netflix. The Porter’s model five forces analysis is a framework for industry analysis and business strategy development, customers’ competitive environment, competitive situation of an industry based on the different factors together.
In the case report of Netflix, first for the threat of new entrants, Entry this area have capital requirements and content costs money; new entrants have some superiority like low barrier and high technology. But at Netflix much of the process of opening return envelopes and filling outgoing mailers with DVDs was still performed manually. Secondly, the bargaining power of suppliers Content is an important Input in Netflix. For example Time Warner, CBS. Thirdly is bargaining power of buyers. Nowadays, there have a lot of cheaper and convenience way to watch movie and TV.
Netflix Revenue is majority customer sales based, so the customers not as loyal as before. Netflix have many Competitors like Apple TV, Amazon on Demand, Verizon. In the meanwhile, compare with any other competitors, Netflix unveiled its “no late fees” program in 2005. That change in business strategy cost $60 million of marketing and implementation. Furthermore, each section in this system was called the value chain, which involves supply, producers, distributors, retail and customers. In the customer section, retail provides the products to customers; meanwhile, customers give the feedback information to retail.
That is a useful tool for working out how you can create the greatest possible value for your customers. For the value system, the Netflix has a value chain to support activities that are good for the company technological development. How to minimize the cost? Netflix inventory is unlimited so the only threat of bottlenecking is bandwidth. That`s why Netflix development their bandwidth that they can provide more movies to the costumers. For Netflix, reduced logistical costs should be the main goal. Netflix will target Service as a primary focal point to improve its competitive advantage.
In addition, for the information matrix, it can be divided physical and information. At the same time, information involves the product itself which is the content of the product, and the intensity that the company produces the products. Netflix Prize Netflix has five times being customer most satisfaction website. It can watch movies; TV shows via PC, TV, and the ipad, iPhone, Wii, Xbox360, PS3 and other devices connected to TV. Netflix Grand Prix from October 2006 and they disclosed about 100 million anonymous movie ratings , the data set contains the movie name, the evaluation star rating date, no evaluation of any text.
Netflix prize competition`s final goal is based on recommendation system got a 10% improvement, the prediction accuracy measure by RMSE. Netflix provide a bonus of one million dollars for the first got 10% improvement team and fifty thousand for the first team in the annual ranking. Netflix Prize data set structure consist of complete Netflix Prize; First part of training set; Held out set ;Whole training set; Quiz set and Test set. All of them base on Netflix strong database. There have three kinds of recommend system classification. First one is content-based filtering (CBF).
According to the prior extraction products or user`s characteristics produce recommended, but it have a main drawback is need pretreatment products to get their characteristics, and can’t found that users unfamiliar with but have potential interested products. The second is collaborative filtering (CF). Collect user actions to get the product obvious or hidden information. The advantage is they don’t need pretreatment products or the user’s characteristics, so that`s not depend on a specific application field, the main drawback is for the new users or new products that unable to generate a reliable recommended and have scalability.
The third one called hybrid that is combination of CBF and CF. That can overcome their shortcomings, and fusion their own advantages. Finally, the team of BellKor`s Pragmatic Chaos (BPC) got 0. 8558 prediction error and first improve over 10%. Netflix Prize announced the BPC become the competition winner also get Grand Prize. E-business development Netflix`s operation is e-business. That`s include network, conducting business transaction and using computer networks. Full service, such as some bookstore, they have limit space and economic plan so they can`t like e-business.
In Netflix`s E-business, protocol is a important part that meaning controlling the transmission. Company have a lot of way to development their e-business such as TCP/IP; FTP; VOIP; Streaming; Can be further subdivided into Internet, intranet and extranet. Also cloud computing service can be used to storage and computing power. e-business consist of four types. Firstly,B2B (Business To Business) Secondly,B2C (business to consumer)usually meaning one seller many buyers, for example Amazon. Thirdly, C2B (consumer to business) usually meaning one buyer many saler.
Finally,C2C,such as EBay. For Netflix, they are a typical B2C model e-business company. In the field of streaming media services, Netflix has a strong competitive advantage. Compared with other cable television subscriptions, Netflix have more unique streaming media users. They also complete use their strong databases to improve their service, like recommend new DVDs that the costumers interest in. That`s all rely on their database record the customers` flavor. They have accurate multi dimension analysis to record the customer’s name, location, what time and which DVD they rent.
They also use cloud computing to manage their storages and collect and file the documents relative with warehouse. Netflix through its website netflix. com proceed online customers demand management. The new user through the registered credit card number that can select the favor movie from more than 12,000 DVDs. Also consumer choice list will be stored online. When the consumer return the DVD of last borrow to any Netflix regional centers, Netflix automatically sent the next one on the list that consumer saved. And they have something different from other competitors.
Netflix also developed a customer relationship tracking and management system for the free account. At the same time IT departments track their situation after the consumption. Then make the appropriate data to support decision-making for the marketing department. These data help marketing departments quickly understand the company’s current and potential customer`s preferences and behavior characteristics. That makes the company’s customer relationship management more targeted. Netflix`s problem There have two ways: explicit and tacit to answer the question.
One project need a lot of information like problems, it realization on the part of the decision maker that there is a better state than the current. Solving problems is meaning make decision. Netflix has become one of the biggest companies of rental service. With the scale increase of course Netflix have more problem need solve. First one is the company’s internal management problem. The IT department and Marketing Department have a lot of differences. Enterprise in order to make marketing activities successful, must put the Marketing Department and IT department combined.
And two departments’ misunderstandings and conflicts often put them into two worlds. Marketing researchers are confident that they have turn the marketing business requirements to IT needs and told IT department, but the IT department`s low efficiency and low understanding that makes the marketing activities and the corresponding IT support out of touch. On the opposite,the understanding of the IT department is not like that.
IT engineer always complain that the marketing personnel can not accurately describe their IT needs – “those who do marketing only can find fault to the system, but don’t know what they really wan. There have a pyramid that consists of three types of problems, they are unstructured, semi structures and structured. For the unstructured, we also call it strategic, that always being long-term problems. Semi structures called technical and the last one is structures also called operational, that is day-to-day happen. For the unstructured, Netflix long-term strategy is global streaming business, with mail DVDs in the U. S. They hope this kind of consumer-paid to watch TV shows and movies can bring continue grow rapidly and profitably.
Secondly, semi structures, Netflix launched Video-on-demand (VOD) to follow the development of science and technology. The VOD was viewed as the marriage of pay-per-view programing combined with Internet downloading of entertainment, including TV shows and movies. There is no doubt through VOD Netflix have got huge profit. Thirdly, Structured, that is about operational. From the Netflix founded that`s day-to-day happened. Every single decision and problem makes Netflix looks like today. Some people think the Netflix must begin to provide film download business.
Otherwise, they will lose the competitive advantage. Netflix also announces it will make the film download detailed business plan. There are two big core assets that Netflix have: one is recommend film website for customers; the other is a rapid distribution DVD system. After this, Netflix use management information system (MIS), Transaction processing system (TPS), Decision support system (DSS), Group decision support system (GDSS) continuous improvement. Such as “no late fees”?focus on their service and development video-on-demand. MSRP and ERP system in Netflix
Usually a typical store have MSRP (Manufacturer’s suggested retail price) and sale price. MRP meaning manufacturing retail planning. This is a easy way to plan all resources to a manufactory firm and it not only be a function of software, but also collect information to database and make the company`s human resources more productively has a simulation capability to answer “what-if” problems and extension of closed-loop MRP. Netflix need MRP system lead them to find a better way that can save costs and make more profits. The MSRP guidance them to find a better DVD suppliers.
ERP meaning the system has huge database and integrates all departments and functions through an organization into a single IT system so workers can make decisions by firm information. And the ERP system can help integrate their huge data information and make it easy to analysis. Than can lead Netflix`s management do a better decision. Netflix use Oracle be their business management system that also the Cinematch system recommend. That can help them manage financial, inventory and consumer data. As well as managing business data, the entire DVD library is represented and is represented in the website along with customer data.
Company performance and logistics are also managed through the Oracle system. The company was built from the ground up using this system. CRM system in Netflix But time passed, online videos have become the main consumption pattern that should not be neglected. Obvious Netflix also followed the trend and all of online videos must use wireless to connect. CRM(Customer Relationship Management)systems decide by management; relationship and customers. There have two primary components of a CRM strategy are operational CRM and analytical CRM. Their relationship is interaction. CRM systems also very useful to Netflix.
Because they are B2C model business, so they need focus on what consumer`s want. They use this system management and analyze the relation between their customers and themselves Looking forward to get better future. But in the 2012 summer, Netflix lost many customers due to the management did not foresee the negative impacts of rising prices and other service changes. The fail of Netflix let people aware that nowadays the dissatisfied customer not only can put their business transfer to other company, but also can use social media tools to express their dissatisfaction that affect other customers.
So the social CRM maybe a good way to help them recovery Netflix CRM crisis. For example on Facebook response to customer’s bad review and service problems. Networks in Netflix Netflix need a strong network system to help them collect data from customers. That can build their database. Netflix can use LAN inside the building, LAN can help Netflix’s internal management and prevent information leakage, while facilitating employee communication, improve work efficiency. And prevent a lot of unnecessary waste of time.
Netflix also use MAN Contact different distribution in different cities that can manage and collect information. MAN also can help Netflix to expand the business scope, development other parts of the business. In the future, Netflix should target Service as a primary focal point to improve its competitive advantage. Their first attempt was the “suggestions for things you may like”, but it can be improved. If the company is able to find new ways to add value to the customers it can ensure future profitability.
They also have Netflix Apps on the iPhone and other mobile to improve their business, which means totally over 800 devices that stream from Netflix, are available. In conclusion Netflix really do a good job at stream online video business and they have some outstanding system. But they still need to improve the system to adapt market change. Like they have some new system like HYSTRIX now. That system through isolation access to remote system, service and third party library point, stop cascade failure, so that the complicated distributed system more elastic.
