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Case Analysis of “Netflix in 2011”by Strategic ManagementBUSI 4701U - 002 Mehdi Hossein-NejadDate: November 3, 2020Word Count: 1362
Industry AttractivenessThe advancement of technology in the last decade has made it easier than ever to access entertainment such as TV shows, movies, and documentaries, etc. Netflix operates in the entertainment industry and strives to allow for the best home video viewing for its customers (p. 12). To assess the attractiveness of the entertainment industry, specifically the video-on-demand market we will be conducting Porter’s Five Forces analysis. Competitive rivalry In early 1998 the home video rental market did not have many competition as it was underserved (p.4). As time passed, the video-on-demand market attracted multiple competitors (p.11). There were stand-alone online VOD services, aside from Netflix that included Vongo, CinemaNow, and Cisco. The other channel was set-top box, which brought films directly to the user's television, bypassing the computer. This included MovieBeam by Walt Disney which was then acquired by Movie Gallery Inc., the second-largest video retail chain in the U.S. The last channel was traditional cable and satellite providers that offered on-demand delivery. The rivalryfor online VOD services increased as high definition televisions were more vastly adopted and customers were unwilling to pay the same price for movies that could only be viewed on computers (p.12). Another factor that affected the rivalry of online VOD services is the low differentiation, Netflix along with Apple and Amazon were all experienced in licencing deals to stream movies (p.87), without differentiation, companies would have no advantage over those of its start-up competitors (p.86). Overall competitive rivalry in this industry is moderately high dueto its number of competitors, low differentiation between companies and low/equivalent switching costs.
Threat of new entrantsA new entrant in the VOD market would face barriers such as customer acquisition, which was a major expense (p.10). Established companies such as Netflix had little worry about threat of new entrants because they had a good reputation and large subscription base (p.12).