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He admitted that the company did not clearly mention the reasons of new policy to its subscribers (Netflix c). However, the increasing competition has been a real concern for the company and with the growing market and increasing marketing budgets and campaigns of competing firms, Netflix has been facing threats from the competitors. In addition to this, competitors have been able to attract customers of Netflix by offering them different deals that could meet their needs in a better way and in the year 2011, the company lost almost one million subscribers.The DVD rental industry in USA is very intensive. Major competitors such as blockbuster and Redbox are using various strategies to capture other’s market share. The separation of businesses was a good strategy of Netflix however the company should reduce the increased price of its services to retain its customers.Netflix was actually formed with the idea to provide Rental DVDs to customers without taking any charges from the customer for returning the DVDs late. Initially the company was taking late charges from their customers but after two years, Netflix changed their strategy and no late payment was charged for returning the DVDs late. The company also introduced the subscription services in which customers could select 4 movies rentals per month for a fee i.95 per month. After few months, company offered unlimited plan for rental DVDs in which subscriber can have as many DVDs as they like for only a flat fee $19.95 per month. This scheme led to the success of company and its website volume grew by more than 300 percent. Company also made IPO of 5.5 million shares to raise capital of $82.5 in 2002 in order to expand its business.The company had several direct and indirect competitors in entertainment industry such as Blockbuster, Redbox etc. These competitors were able to increase their market share. In 2007, company entered into the business of online streaming in which customers could watch movies and television shows on computers. The company also lowered the subscription charges to $10 per month for both services i. online streaming and DVD mail in service (Market Research report, 2009).In 2011, company divided its two businesses separately and also changed their pricing structure. This new policy was not accepted by the customers and company lost one million

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Netflix. (2010). Annual Report. Retrieved from http://ir.netflix.com/common/download/download.cfm?companyid=NFLX&fileid=460274&filekey=17454C5B-3088-48C7-957A-B5A83A14CF1B&filename=132054ACL.PDF

Netflix. (2009). Annual Report. Retrieved from http://ir.netflix.com/common/dar/dar.cfm?DocumentID=2789&CompanyID=NFLX&zid=d940c238

Netflix. (2008). Annual Report. Retrieved from http://www.shareholder.com/visitors/dynamicdoc/document.cfm?documentid=2609&companyid=NFLX&PIN=411852592

Netflix. (2007). Annual Report. Retrieved from http://ir.netflix.com/common/download/download.cfm?companyid=NFLX&fileid=188779&filekey=A5DE0034-8320-4D49-B13B-80C9845E49D4&filename=AR_10K_final.pdf

Netflix a. Company Facts. Retrieved October 11, 2011 from https://signup.netflix.com/MediaCenter/Facts

Netflix b. Company Overview. Retrieved October 11, 2011 from https://signup.netflix.com/MediaCenter

Netflix c. Company Timeline. Retrieved October 11, 2011 from https://signup.netflix.com/MediaCenter/Timeline

Comscore (2010). US online video market continues ascent as Americans watch 33 billion videos in December. Press Release. Retrieved October 19, 2011 from http://www.comscore.com/Press_Events/Press_Releases/2010/2/U.S._Online_Video_Market_Continues_Ascent_as_Americans_Watch_33_Billion_Videos_in_December

Market Research report. (2009). Movie rental industry drives home entertainment market. Retrieved from http://www.marketresearch.com/product/display.asp?productid=2578264

Netflix d. Historic Stock Lookup. Retrieved from http://ir.netflix.com/stocklookup.cfm

Market Watch. (2011). Netflix expected to post strong earnings. (2011). Retrieved from http://www.marketwatch.com/story/netflix-expected-to-post-strong-earnings-2011-04-21?link=MW_latest_news

Whitehouse , D. (2011). Netflix to Expand in Europe, Starting With Spain, Figaro Says. Bloomberg. Retrieved from http://www.bloomberg.com/news/2011-06-03/netflix-to-expand-in-europe-starting-with-spain-figaro-says.html


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Figure 2: Shaping Strategy

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  • Pages: 16 (4000 words)
  • Document Type: Essay
  • Subject: Marketing
  • Level: Undergraduate
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