Competition in the Movie Rental Industry in 2008: Netflix and Blockbuster Battle for Market Leadership
Competition in the Movie Rental Industry in 2008: Netflix and Blockbuster Battle for Market Leadership
Although the corporate strategies implemented by Netflix and Blockbuster have allowed them to become leaders of competitive advantage in the movie rental industry, they sometimes encounter strategic issues that slow down their product and services process. My research of Netflix and Blockbuster will enable me to present a SWOT analysis and recommendations for each company.
Netflix, founded in 1997 by Reed Hastings, has achieved its goal of becoming the largest online movie rental service in the world. By the end of 2007, Netflix recorded revenues of $1.2 billion. With a library of 100,000 movie titles and a subscriber base of over seven million, they had become the leaders of the movie rental industry (Gamble & Thompson, 2011). Netflix’s business model of internet subscription enabled them to compete in the movie industry. Consumers love going to the movies, but with increasing theatre prices found it too expensive to attend public viewings. Netflix provided an inexpensive way to view movies which could be done from the comforts of home. According to the text, (Essentials of Strategic Management, 2010), “Netflix’s success is due to its six-pronged strategy of providing comprehensive selection of DVDs, easy way to choose movies, fast delivery, no return due dates, and convenient drop in mail movie returns” (Gamble & Thompson, 2010). In an online survey by Nielsen Online, Netflix was rated number one for three years and for nine consecutive periods by Forsee/FGI Research (Netflix, 2009).
Netflix Strategic Issues
Blockbuster, Netflix’s fiercest competitor, experience many rental issues until 2007 when they regained market shares forcing Netflix to reduce subscription prices. Not only did Blockbuster gain presence, other competitors like Redbox also gained presence in the market due to new technologies (VOD & DVR) that are influencing the business environment.
Although the corporate strategies implemented by Netflix and Blockbuster have allowed them to become leaders of competitive advantage in the movie rental industry, they sometimes encounter strategic issues that slow down their product and services process. My research of Netflix and Blockbuster will enable me to present a SWOT analysis and recommendations for each company.
Netflix, founded in 1997 by Reed Hastings, has achieved its goal of becoming the largest online movie rental service in the world. By the end of 2007, Netflix recorded revenues of $1.2 billion. With a library of 100,000 movie titles and a subscriber base of over seven million, they had become the leaders of the movie rental industry (Gamble & Thompson, 2011). Netflix’s business model of internet subscription enabled them to compete in the movie industry. Consumers love going to the movies, but with increasing theatre prices found it too expensive to attend public viewings. Netflix provided an inexpensive way to view movies which could be done from the comforts of home. According to the text, (Essentials of Strategic Management, 2010), “Netflix’s success is due to its six-pronged strategy of providing comprehensive selection of DVDs, easy way to choose movies, fast delivery, no return due dates, and convenient drop in mail movie returns” (Gamble & Thompson, 2010). In an online survey by Nielsen Online, Netflix was rated number one for three years and for nine consecutive periods by Forsee/FGI Research (Netflix, 2009).
Netflix Strategic Issues
Blockbuster, Netflix’s fiercest competitor, experience many rental issues until 2007 when they regained market shares forcing Netflix to reduce subscription prices. Not only did Blockbuster gain presence, other competitors like Redbox also gained presence in the market due to new technologies (VOD & DVR) that are influencing the business environment.
References: Blockbuster. (2010). Company overview. Retrieved January 5, 2011 from http://www.blockbuster.com/corporate/ news Gamble, J., & Thompson, A. (2011). Essentials of Strategic Management: The Quest for Competitive Advantage (2nd ed.). New York: McGraw-Hill Irwin. ISBN: 9780078137143 Miniwatts Marketing Group. (2009, September). World internet usage statistics. Retrieved January 5, 2011 from http://internetworldstats.com/stats.htm Netflix. (2009, January). Factsheet. Retrieved January 1, 2011 from http://files.shareholder.com/downloads/NFLX/823470738x0x295021/422b46fb-ca67-47a6-be19-36879cf977fe/IR_Fact_Sheet_05_15_09.pdf Xie, Y., & Lin, I.. (2008). Strategic Analysis: Blockbuster Case Study. The Business Review, Cambridge, 9(2), 68-75. Retrieved January 1, 2011, from ABI/INFORM Global. (Document ID: 1617904771).