NETFLIX (1) - Julia Covello Charlotte Hamburg Anna Rubin...

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Unformatted text preview: Julia Covello, Charlotte Hamburg, Anna Rubin, Mia Silva and Emily White Agenda 1. 2. 3. 4. 5. 6. Issue Statement Situational Analysis – 3 C’s Alternatives Analysis Decision Matrix Recommendation Action Plan Issue Statement Netflix is currently profitable but risks losing their position as a technological leader in the home video market if they do not update their current business model. Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Company Analysis First Mover Profitabl e since 2003 Recommen Recommen dation System Netflix Large Market Share of Online Custome rs Issue Statement Situational Analysis Alternatives Analysis Brand Awarene ss Recommendation Action Plan Competitor Analysis Netflix Blockbuster Convenience Varied Selection Good Customer Relationship (Search engine) High Brand Recognition Convenience Varied Selection Good Customer Relationship (Search engine) High Brand Recognition $6 $4 Rental + $2 Shipping Fee Issue Statement Situational Analysis Alternatives Analysis $3-$4 Recommendation Action Plan Competitor Analysis Mass Market: New Entrants: Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Customer Analysis Convenien ce Personalize d 6.6 Million Subscrib ers Value Selection Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Alternatives 1. 2. 3. 4. Status Quo License Recommendation System to Cable Providers Integrate Video on Demand Service and DVD Rental Service Launch Stand-Alone Video on Demand Service Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Status Quo Continue to offer DVD Rental Service Online Revenues 199 8 199 9 2000 2001 2002 2003 2004 2005 2006 585 4854 3589 4 27041 0 50061 1 68221 3 99666 0 730 % 639% 107% 103% 79% 85% 36% 46% Growth Rate Avg Rate 19982006 228 % Avg Rate 20032006 62% Issue Statement Situational Analysis 7425 5 15081 8 Alternatives Analysis Recommendation Action Plan License to Competitors License off the strongest part of the business Opportunity Cost What could happen if VOD is embraced by the market? With $64 million in free cash flow, should we take a risk? Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Integrate VOD with DVD Services Advantages Disadvantages Convenience Movie-Watching Technological Improvement Issue Statement Situational Analysis Alternatives Analysis Confusion Cannibalization Giving Away Revenues Recommendation Action Plan Establish Stand Alone Video on Demand Advantages Disadvantages Non-Rivalry Good First-Mover Reputation Less Physical Capital Convenience Strengthened Issue Statement Situational Analysis Alternatives Analysis Piracy Concern Small Initial Market Heavy Programming Investment Connectivity Recommendation Action Plan Decision Matrix Status Quo License Off DVD Rentals + VOD VOD Only Δ Value (10%) 0/10 0/10 10/10 5/10 Δ Selection (20%) 0/20 0/20 20/20 20/20 Δ Convenienc e (20%) 0/20 0/20 20/20 10/20 Δ Profits Quantitativ e Analysis (50%) Rev Additional stays the Rev from same licensing fees 0/50 20/50 Rev stays the same but costs increase Rev stays the same but costs decrease 10/50 Issue Score Statement Situational 0/100 Analysis Alternatives 20/100 Analysis -10/50 Action Plan Recommendation 45/100 40/100 Recommendation We recommend that Netflix invest in establishing Video on Demand Service, while phasing out their existing DVD delivery operations Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Short Term (0-2 yrs) Continue with delivery of DVDs Establish Programming for online library Getting licenses for movies online Investment of $40 million for VOD in 2007 Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Medium Term (2-4 yrs.) Promoting online streaming availability through current advertising methods Phase out the DVDs Update the online library Develop a promotion plan -HDMI coupon Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Long Term Plan (4-6 yrs.) Sell distribution centers Use extra cash flow to acquire popular movies online Focus on R&D of website for most user friendly navigation possible Develop relationships with movie producing companies Issue Statement Situational Analysis Alternatives Analysis Recommendation Action Plan Action Plan Matrix Short Term Sales of DVDs Programmin g Investment Sale of Distribution Centres Video On Demand Promotions Update Online library Medium Term Long Term Questions ...
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