STRATEGIC ADMINISTRATION TASK

Netflix is an online subscription movie rental service, it was conceived

initially by Hastings after he discovered a copy of the movie in his closet
Apollo 13, which had been rented and not returned on time. After paying 40 dollars for
the delay began to consider alternative ways to provide a service of
home movies that would best satisfy customers. The business that arose from
Reed's frustration was a rental company that used the postal service of
United States to deliver the films to its subscribers. By the end of the year
2006, los suscriptores podían utilizar el sitio web de Netflix para escoger entre más de
70,000 different titles, maintained in over 55 million movies. Through
with 44 distribution centers across the country, Netflix was able to deliver the movies
more than 90% of its 6.6 million subscribers on a weekday. The main
Netflix's subscription plan offered unlimited monthly rentals, allowing for
a los clientes disponer de hasta tres películas a la vez por una tarifa mensual de 17.99
dollars. For the year that ended on December 31, 2006, Netflix had achieved
revenues close to 1,000 million dollars, generating a net cash flow of
64 million dollars.
Nowadays, the business model is based on sending movies over the internet.
legally, this company is very well positioned with 70% of the current market.

1.- How powerful are the competitive forces in the rental market?
About movies? Conduct an analysis of the five forces to support your response.
Threat of new competitors
In the technology entertainment industry, the entry of new competitors is
very latent because there is a high percentage of customers who use these means to
access movies. But this entry is hindered by some barriers such as:
piracy, high costs of copyright and broadcasting rights for movies and series,
current and future technologies, among other barriers.
Bargaining power of suppliers
Suppliers have a high bargaining power, as they control prices and
the quality of products and services.
Bargaining power of consumers
Consumers influence the profitability of these companies since they choose
to that which has lower costs which leads the sector to a constant
price competition.
Threat of entry of substitute products
To the number of substitute products currently available for this type of company, such as
YouTube, Amazon, among others.
Rivalry between competitors
This industry has multiple companies currently participating in it.
constant battles of discounts or prices to attract customers
consumers.
This rivalry can be considered strong in terms of the battle for participation.
of the market and prices.
 Cuadro resumen de las 5 fuerzas de Porter
Threat of new competitors entering LOW
Bargaining power of suppliers HIGH
Bargaining power of consumers HIGH
Threat of entry of substitute products HIGH
Rivalry between competitors HIGH

The bargaining power of buyers is higher when the costs of switching

the competing brands or substitutes are relatively low. The buyers who
they can easily switch brands or source from multiple vendors.
more bargaining power than buyers with high costs of this type. The
exchange costs limit the profitability of the industry, fundamentally, because they impose a
ceiling to which producers can raise the price or reduce quality before
lose customers.

The buyer's power increases when the goods of the industry are
standardized or their differentiation is weak. In these circumstances, buyers
they decide based on the price, which intensifies the price competition among
sellers. When the products are differentiated, the options of the
buyers are more limited and focus less on getting low prices, which
which indicates low quality.

Buyers have more power when they are large and few in relation to the
number of sellers. The smaller the number of buyers, the more they will have
that competing vendors for customers and it will be less easy for them to find other clients
when they lose them to a competitor. The prospect of losing a customer that does not
is easily replaced often leads to the seller being more willing to
make concessions of one kind or another. The larger the buyer, the more
operations will be important for the seller and more will be willing to do
concessions.

The buyer's power increases if their demand is weak and sellers...

they strive to ensure more sales of their products. A weak or declining demand
create a 'buyers market', where bargain hunters can
press to obtain better conditions and special treatment; otherwise, a
strong or growing demand creates a 'seller's market' and shifts the power
from negotiation to the sellers.

Los compradores ganan poder si están bien informados de los productos, precios y
seller costs. The more information buyers have, the greater their power
will have negotiation. The abundant availability of product information
the internet gives individuals more bargaining power. Consumers
they compare prices and features of vacation packages online, to buy
according to the best mortgage interest rates and find the best prices in
expensive items, such as digital cameras. Bargain hunters can research
on the internet and with that information they negotiate a better deal from local retailers;
this method is becoming popular in the purchase of new and used vehicles
2.- What forces drive change in the movie rental industry?
The combined impact of these driving forces will have an effect
favorable or unfavorable in terms of its effects on intensity
competitive and the future profitability of the industry?

Although many types of environmental change affect industries in one way or another.
Another, it is important to focus on the most powerful agents of change, those who
They have the greatest influence to reshape the landscape of the industry and modify the
competition conditions. Many drivers of change originate in the ring
exterior of the external environment of the company, but others originate in the environment
more immediate from the industry and its competition. Although some drivers of
changes are exclusive and specific to the particular situation of an industry, such
as:

The most frequent use of internet TV, where people can download
directly from the web to their TV screens as long as they have
Wi-Fi technology and of course an internet connection.
Increasingly advanced technology in TV screens. The so-called technology of
future in 4K and up to 8K that will substantially increase screen resolution
moving from over 2 million megapixels of current technology to more than 8 million
of mega pixels, very close to the cinematic technology used in the industry
cinematographic.
The increasingly frequent use of mobile devices (smartphones, tablets, etc.) with
which one can access the movies.
Changes in consumption habits, with a more sedentary society, the way of life
so accelerated, spending more time in workplaces and spending more time
In traffic due to the population increase, people prefer to rent a movie for
internet and staying at home to avoid dealing with traffic again. The insecurity in the
streets also play an important role in people's preference to rent movies.
The possibility of being able to rent the releases shortly after the premiere in the
cinemas.
The need to relax, have a moment of pleasure, entertainment, and distraction
to set aside work and have a good time with family or friends. To have a
moment of escape when immersing oneself in a movie story, simply relax
and enjoy those moments of pleasure

These driving forces will have a favorable effect on competitive intensity,

seen from the customer's perspective as competitors will have to develop
a better service to attract and retain their customers, as well as they will have to
to be at the forefront in technology, which will also help customers to
to have access to it at better prices. The risk in the industry will increase already
that, due to the investment required for technology development, the improvement in the
devices and in broadband (or other internet technology) there will be a greater
competition in technological intensity and few companies will be able to continue competing
en el mercado. La rentabilidad futura será menos atractiva debido a que se deben dar
substantial improvements more frequently in the service offered by the industry, there
internet networks must be improved and, given the extensive use of mobile devices,
the service will have to be offered to subscribers anywhere in the world that
I requested it; all of the above requires a greater investment in research and development.
better contracts and licenses with suppliers as well as greater expenses in
marketing.

3.- What is the strategic group map of the industry like? How attractive is it?
What is Netflix's position on the map? Why?

To define the strategic group, the main asset identified is the movies and/or
series offered by this service, therefore, movie rental companies, such as
for example Blockbuster, would be part of this group, but over time, these
recently have lost market share due to free access to the internet and
download movies online at a lower price or even for free.

The segment of this business is within the clients who use the key or
they download movies from various websites that the internet offers, mainly it is
aimed at people who enjoy spending their time watching movies, over time it
I could say that it has changed, since NETFLIX is expanding the service it offers,
now finally having telenovelas available, which is directed
mostly to women who enjoy it.

The main competitors for Netflix correspond to websites that do not

requires a subscription to download movies and series online, such as:
[Link]

MAP STRATEGIC

4.- What key factors will determine the company's success in the industry?
from the rental of movies in the next 3 to 5 years?
The key factors of this company are:

The factors are:

a) Extensive collection of titles: It is the most important factor because customers
they want to have a wide variety of options to choose from, if that is not available
A wide variety of subscribers will recognize that the company is attractive. NETFLIX
it has the highest rating because it actually has the largest number of titles
available, BB was restricted to the number of DVDs and the premieres were rented
quickly, in the case of VOD, cable providers commonly do not offer
so many payment options for the event.
b) Bajo costo de suscripción: Los clientes siempre queremos el menor costo con los
best products especially for customers looking for comfort and enthusiasts
they want to download the greatest number of movies at the lowest cost, just like the
times they need them. The membership and rent of BB was cheaper for that reason.
its highest rating. Event payments are very expensive.
c) Tecnología de vanguardia: Estamos en la era de la tecnología en donde queremos
to do more things in less time, at the lowest cost. We want the experience
watching movies is getting better, with greater clarity, screens becoming more and more
large, etc. NETFLIX has invested a large amount of money to develop
new technology such as 4K and cloud service for easier downloads
fast and ensure the watch instantly strategy.
d) User-friendly selection platform. The use of algorithms to perform the
recommendations to subscribers has ensured that every time customers
enter their page, make a download, the recommendation system
developed by NETFLIX, as well as the ease and friendliness of its platform
make sure I have a good grade. For the VOD service everything is also
friendly since through the remote control we can make the selection of the
programming, however that is about to disappear.
e) Marketing: We are in the era of holistic marketing where not only
it is not enough to meet the needs of customers but to offer them a better one
 experience, the marketing of experiences, long live the stories, may it be felt
within them and now not only is 3D and 4D technology enough, now it is being
developing 4K technology, in which NETFLIX is leading by far.

Definitely, NETFLIX is better positioned than the other companies and this
has reflected in the growth of its subscriber base that by 2014 already totals
the 48 million around the world, only below HBO.

5.- What is Netflix's strategy? Which of the five competitive strategies

generic views in Chapter 5 are more aligned with the strategic stance
What has Netflix adopted? What type of strategic advantage is it trying to pursue?
get Netflix?
Netflix has a multi-strategy approach to building a foundation.
always growing number of subscribers, which includes:
Offer subscribers a wide selection of DVD titles.
Acquire new content by creating and maintaining relationships,
beneficial for both parties, with video entertainment providers.
Help subscribers identify movies that they are sure to enjoy.
to like
Offer subscribers the option to view content transferred to their devices or to
receive DVDs by mail delivered quickly.
Spending a lot on marketing to attract subscribers and create awareness
generalized branding and service of Netflix. The company uses channels of
marketing to attract subscribers, including online advertising (lists of
paid searches, banner ads, text on popular sites like AOL and
Yahoo and requested emails), radio stations, television
American and regional, direct mail and printed advertisements.
Gradually move subscribers to video transfer instead of
utilizar la entrega por correo, a medida que aumente la popularidad de contenidos
transferred by internet.
Netflix developed its own software that allowed it to offer to the
subscribers, every time they visited their website, detailed information about each title
from their collection, as well as personalized recommendations about the movies. The
information related to each title included duration, rating, cast and
créditos, formato de pantalla, avances de la película, sinopsis de la trama y reseñas
written by Netflix editors, by third parties, and by subscribers. It also used the
ratings from subscribers to determine which titles to present in places
most prominent on the company's website, to generate title lists
similar and to select the promotional advancements that the subscriber would see when
will use the Advances option. Netflix management believed that more than 50% of the
Titles selected by subscribers were due to the generated recommendations.
for its software.

Netflix's strategy uses referrals, as the company seeks

recommendations from subscribers to their friends and family based on a
social media system and allowing them to learn about their service through the
demonstrations, which in this case would be the trial month, offered by the company,
I also use a market penetration strategy to attract customers from the
competition and seeking new clients, in my view the growth of
Netflix branched out to offer a quality service at a fair price and to get to know
more deeply the immediate needs of the consumer and with this offer advantages
superior to what is offered by competitors.

Within competitive advantages, we can recognize 5 strategies. Netflix is

guide in at least one to take your business model to success. Given the above
we can identify your strategy as 'DIFFERENTIATION STRATEGY'

Since it has several participants in its strategic map quadrant, Netflix

it must incorporate differentiating characteristics that make buyers
they prefer the company's products or services over the competition. On the other
On the one hand, the success of their strategy was achieved through ways that added value.
towards their end customers and that likewise their direct competitors were unable to
equalize.

On the other hand, Netflix's competitive advantage is based on a low-cost service.

easily accessible and through any device with internet access, free of any
advertisement, free of contracts therefore the disconnection of the service can be
at any time. All of the above leads Netflix to have a model of
successful business.

Finally, Hastings' goals for Netflix were very simple: to create the best
world service in the field of movies on the internet, providing its services to
a growing subscriber base and, each year, achieve higher profits from
action. He himself created the strategy and business model of the company based
in subscriptions, creative but simple, which catapulted Netflix and the
they became the largest online entertainment subscription service
of the world, revolutionizing the way many people rented movies.
6.- What does a SWOT analysis of Netflix reflect about its attractive situation?
general?

STRENGTHS
F1: Own recommendation system
F2: Positive cash flows.
F3: Brand Recognition.
F4: High market participation

OPPORTUNITIES
License cable providers. And qualification.
O2: Subcontract the delivery to the cable company
O3: To enter the cable subscriber market
O4: Technology with accelerated growth.

WEAKNESSES
Lack of customer base
D2: High costs for copyright fees.
D3: Stagnation of income
D4: Uncertainty about the pace of
growth of technologies.

THREATS
A1: User technology difficulties
A2: Various competitors in the market
Expanding the market may cannibalize the current one
business
A4: Existence of piracy
7.- What is your assessment of operational and financial performance based on
the data from figures 2, 3, and 4? What positive and negative aspects do you see in it?
Netflix performance? Use the financial ratios from table 4.1 of chapter 4.
as a guide in the preparation of the necessary calculations to arrive at a
analytical response in its evaluation of recent financial performance of
Netflix.

8.- How does the competitive strength of Netflix compare to that of Blockbuster?
And that of Amazon? Using the method presented in table 4.4 of chapter 4
to support your answer. Does Netflix have a sustainable competitive advantage?
about Blockbuster or Amazon? Why?

The high growth of VOD has allowed Netflix to experience a loss of users as
The VOD format is different, economical, fast, convenient, etc. The customer always
He will seek more convenient solutions for his benefit, therefore Netflix after the
VOD growth would be declining.

After the above, we cannot overlook the success of NETFLIX, which is due to the
the flexibility provided by each of its users, the problem persists due to the rise and
growth of VOD, therefore the benefit of downloading products directly,
users see it as a differentiating attribute, achieving in this way a
considerable decrease in the use and loyalty of NETFLIX.

Following the above, Netflix's business model would need an adjustment to avoid losing.
clients due to this market inconvenience. Netflix manages to understand what it is that
clients are looking for and adapted to the new market needs by changing their
strategy to the current requirements. A different thing happened with Blockbuster where
the movie rental company did not realize that its market was
changing, that there were new consumption trends that led its users to
another time and towards the future. Consumers discovered a new way of
access entertainment by downloading free content through others
platforms like NETFLIX. It consumed their time searching for movies on
in their language, but that it was free was too attractive, it also gave it a sense
of power to the consumer that they had never had before. It did not depend on any brand to
choose what you wanted to see and at what time.

Finally, NETFLIX has a competitive advantage over BLOCKBUSTER y

AMAZON for adapting to the market that was approaching at a rapid pace and in
where television stopped being the medium where one could enjoy a movie.
Perhaps Blockbuster thought that the multiplication of mobile phones had nothing to do with
your business, as telecommunications and entertainment are different industries but
History has shown us that they are already one and where Netflix knew
take advantage of and improve, adapt and implement a new commercial strategy.

Netflix

The value chain of NETFLIX was consolidated as the number of

licenses with major film studios and television networks, thus
like the investment that every year is made in research and development to offer to you
client advanced technology and a user-friendly platform so that every time
Log into your system and make a selection. In the case of BB, he bet to continue.
offering the customer rental and sale points for DVDs but definitely was no longer
what the market needed so much, coupled with its debt problems and
the company's lack of liquidity could no longer maintain its large structure of
6,500 stores around the world and less their strategy of the machines
vending machines, was what the customer no longer valued about the company.
Definitely the most profitable company is NETFLIX, as it has maintained its
liquidity over several years and has repurchased shares to remain healthy,
Moreover, it has not been necessary to incur significant debt and has maintained its investments.
in marketing, research and development as well as in the search for new
cutting-edge technologies to offer the customer better options for
entertainment.

9.- What two or three priority issues should the administration of Netflix face?

The main problems are:

10.- What recommendations would you give to Netflix CEO Reed Hastings? How
minimum, your recommendation should address how to face each of the
priority themes identified in question 9.

1) Launch a strong advertising campaign on social media, television or

ads in newspapers and magazines to make the brand more known, it is true
word of mouth recommendations among family and friends have worked
Well, as in the case of Google, in the case of Netflix this is directed to a
a segment of the population that enjoys watching movies as a form of entertainment,
but not necessarily a good percentage of them use the internet as a way of
achieving them, they are more unaware of such potential as a virtual library of great
size.
2) Develop a different subscription system, perhaps through free access,
this will make it more attractive, the one-month free trial system makes it that
the client constantly creates different accounts to access the month of free service, for
I don't see it as an effective form of promotion.
3) Lower the costs of the movies and compensate with a higher income with
paid advertising, just like it is done in movie theaters every time people go to
to present a movie.
4) Implement download platforms for Software, for example from Google.
Play for mobile teams, iPhone, tablets, and others, this mobile technology may
interesting for the Netflix market, as mobile devices are cheaper
that Smart TVs can also be used as a bridge or anchor and connect to
through an HMI cable to an LCD or Plasma TV.