Netflix Inc. Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Netflix Inc. Case Study Solution

This case introduces Netflix, a company engaged in the business of providing entertainment services via DVD distribution and online video streaming. It can be assessed that, the company had seen tremendous growth since in incorporation in the year 1997 by its founders Marc Randolph and Reed Hastings headquartered in Scott’s valley, California. Reed got the inspiration for the business, when he paid $40for an overdue video. The main business model of Netflix was to provide movies on $6 per rental initially. Later, the company moved to monthly subscriptions by the year 1999 and then towards single rental model. This, in turn, enabled them to develop a strong reputation among the customers. Allowing its customers to incur flat fees unlimited rentals per month without any late fees or shipping and handling charges. However, it was illustrated in the case, that Netflix was faced by an adverse situation, when it decided to separate its DVD distribution division from its online streaming and rebrand it as Qwikster. This exposed them to customer’s outrage and confusion, adversely affecting its profitability and position in the market. Furthermore, its price spikes cause the loss of 800,000 subscribers in the U.S alone by the year 2011 and it was expected these number would increase in the future. Despite the adverse effect of Rebranding debacle and price spikes to cover increasing content costs, the company was optimistic about the future and believed that by providing cheaper and commercial free streaming of movies and TV shows. It would be able to reach its strategic objective of becoming, the leading provider and distributor entertainment platform in the world. Therefore, it was evaluated that, the senior management of the company needed to develop effective and efficient strategies that would align the business function to its strategic objectives, while allowing the company to gain significant share of the market.

Background

Netflix was established in 1997 by Marc Randolph and Reed Hastings in Scott’s valley, California. After its incorporation and experiencing significant growth, the company went public and offered its IPO. Which enabled them, to sell 5.50 million shares at $15 per shares, which contributed towards raising $82.5 million in share capital. It can be assessed, despite facing losses during its initial period of operation, it was able to generate a profit amounting to $6.50 million in 2003. Furthermore, it can be evaluated that, it’s subscriber’s growth from 1 million in 2002 to 27 million in 2012. This allowed them, to enhance their financial as well as market position, while gaining appeal amongst the customers available in the market. It can be assessed that, by 2012 it had 100,000 titles distributed through 50 shipment centers, with minimal delivery time amounting to 1-2 business days. Therefore,enabling the company to become a profitable and successful venture. Netflix was able to employ and sustain around 4,100 employees. However, it can be evaluated that, Netflix expanded its first international operation to Canada, offering online streaming service and later expanded to other parts of the world.

Governance

Reed Hastings was the founder and CEO of Netflix and was responsible for making key decisions for the company and was responsible for aligning the strategies of the company to its strategic goals. Most recently, its chief marketing officer was Kelly Bennett and Chief Communication Officer was Jonathan Friedland. Along with, Tawni Cranz appointed as its Chief Talent Officers, Neil Hunt as its chief product officer and Greg Peters as its international development officer. Furthermore, Ted Sarandos working as its Chief Content officer and David Wells appointed as its Chief Financial officer. Moreover, as the Director, Richard Barton holding the Executive Chairman of the Board along with Timothy Haley, A. George (Skip) Battle, Jay Hoag, Leslie Kilgore, Ann Mather, Brad Smith and Anne Sweeney.

Content Analysis

External Analysis

It can be determined that, due to the increasing content cost, the company had to increase its prices,which had significantly harmed the user subscription base of the company, showing a decline in the number of subscribers amounting to 800,000 and this number was expected to increase in the future. However, it can be evaluated that, the senior management of the company did not anticipate the upsetting results their strategic decision had on their profitability and position in the market. Therefore, the decision of increasing their service prices damaged their overall growth prospect in the market and exhibited a steep decline in their subscriber base. Which they had gained over the years, by maintaining and sustaining strong reputation in the market. This had allowed them to secure sufficient share in the market, while increasing their services appeal among the customers.

Netflix Inc. Harvard Case Solution & Analysis

Furthermore, it can be evaluated that, the senior management didn’t anticipate the adverse effects their inflated pricing policy would have on the brand image of the company and its future implication. It was estimated that, the subscribers would continue to decline, if the company maintains the same pricing policy. This could be attributed to the customer’s perception regarding its services. The customers gave preference to Netflix over going to the theater, in an attempt to save cost. Therefore, when the company increased its prices, this perception of the subscribers was challenged and resulted in them losing interest in the services provided by the company. Most of the customers could have regarded the increase, in a way, where they preferred theaters over the high prices of Netflix. Which, in turn, exposed company to certain risks and gave its competitors an opportunity to secure sufficient share of the market for themselves, as the brand image of Netflix was compromised in the market..................

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