Netflix is a an interesting company to review as they broke into the market full force and produced very high numbers. What makes the case so interesting is that the eventual stock price drop was due almost in whole to changes in the companies strategy. How and why did the original strategy work so well.
What was the Original Strategy?
Netflix’s original strategy was straightforward and simple. They made a subscription based business model that met a market need. Original they were a DVD rental company that used the internet so as to provide a mailing service. Plans were monthly with differently priced memberships based on the number of max DVD titles out at any given time.
What Market Need were they Addressing?
When Netflix first came out DVD rentals were what was being used. Netflix tried to get rid of the biggest problems that came with renting DVDs. By making an online platform in which a large movie selection was available They got rid of the hours spent going to DVD rent-al stores and trying to pick a movie. With long descriptions, one could easily search for a spe-cific movie or browse from the comfort of their home. The other and most important need ad-dressed was that of high late fees. By offering memberships in which no late fees were issued many people were drawn to try their services.
How Did They Adapt to the Changing Market?
With DVD rentals costing more to provided they began with said service but pushed people to use their video streaming feature. Because of the how easy and fast the movie stream-ing was people quickly began using the service. This meant that Netflix was able to reduce their costs as well as provide a new service. People began to prefer the streaming feature more and more allowing Netflix to further lower the costs of DVD mailings. Eventually the company separated the two movie watching forms by rolling out the company Qwikster.