There can be various ways how technology can make or break a business. If used properly, technology can bring an existing business, regardless whether it is directly or indirectly related with the field or not, to higher levels; and if not used properly, it can easily break a business, although the falling out our breaking down of a business would be due to it being left out by other businesses who are using technology to their advantage. This is a case of Netflix, an American online-based internet media streaming service provider that caters primarily to the North and South American market. The main objective of this paper is to discuss the different changes that have been experienced by the company, both positive and negative, as a result of making use of technology.
Describe the Business and Explain the General Pattern of Change of the Particular Market Model in the Business you have chosen in a market economy. Provide Support for your assumptions and conclusions.
Netflix is an internet media streaming service that operates on an on-demand basis. The company is based in the United States and is currently offering internet media streaming services to a wider range of area particularly in the United States, Mexico, Canada, South America, Ireland, Nordic Countries, the United Kingdom, and Ireland, among others. It has been founded in 1997 by founders Marc Randolph and Reed Hastings. Later on Reed Hastings was the only one left to manage the company and lead it towards a path of success as Marc Randolph eventually got employed by Borland International. The company only had a startup cash of 2.5 million USD . The idea behind the company’s services, which basically serves as its backbone was given birth when Hastings, one of its founders, was forced to pay an overdue fine for returning Apollo 13 well past its penalty date amounting to $40. His frustration has led him to the idea of starting an internet media streaming service that offers online pay per rent model. This was then branded as the online pay per rent model. Later on, more media viewing and payment models were created in order to accommodate a larger patronage of customers, which would of course mean larger profits. Some of the other service models that Netflix has offered in its more than ten years of existence in the market include but may not be limited to the monthly subscription model (where users would get access to a rental media on a monthly basis) and the single rental model (where users would only be allowed to visit rental media links and view the contents once) and the flat free unlimited rentals model. The flat free unlimited rentals media servicing model appeared to be the one that is most effective. This may be due to the fact that it does not include all the hassles of due dates, shipping and handling fees, late fees, and additional payments for every additional time that the video or the media has been played. The flat free unlimited rentals media servicing model also appeared to be the one that propelled the company to its greatest heights, thanks to the public’s acceptance of Netflix’s newly reconstructed business model.
The general pattern of change of the company’s business model indicate that the company always yearns for the business model modifications that carry the greatest possibility of attracting the highest volume of customers . In the case of their medial rental services, for example, the company has eventually decided to let go of its single media rental services after realizing that people did not get particularly attracted to the idea of paying a rental fee and being able to watch the media that they rented only once. This was eventually changed to the flat free unlimited streaming model which was of course more appreciated by the customers as it offered a higher value for their rental money. Another significant patter of change in the company’s business model includes the addition of new services.
Explain the major factors that affect the degree of competitiveness in your business. Use available data to develop one to two measures to show how the industry is evolving. Provide evidence supporting your rationale.
Compared to other computer, internet, and information technology-related businesses such as Intel (involved in the manufacture of semiconductors and microprocessors) and Cisco (involved in the manufacture of communication and networking products), among others, the internet-based media streaming industry, the one which Netflix is in, is relatively new. In Netflix’s case, there can be three main factors that affect its degree of competitiveness: the variety of products and services offered, the competitiveness of the pricing policies, and the quality of the products and services offered .
The decision of the market consumers, which in this case would be the internet media viewers, on which internet media streaming service provider to patronize would more often than not revolve around these three. Naturally, a viewer would prefer the products and services of an internet media streaming service provider that has the highest level of quality and variation, and at the same time, the lowest level of price. This is, however, an ideal condition that is not always met, especially considering that Netflix is already one of the top international companies in the industry. Often, the tradeoff of an affordably-priced product or service is a low level of quality and or variation and then vice versa for products or services that are not priced so affordably. In Netflix’s case, the company’s services and products are somewhat in the middle in terms of affordability, variety, and quality. Now, this may go against the preferences of people who really love high quality media contents such as high resolution videos and high kilobit rate audio contents who, at the same time, can afford to pay a steep price in exchange for renting rights for such contents, but this business model actually exposes Netflix to a larger market composed of people who subscribe to internet media streaming services to watch videos and listen to music for recreational and often, non-enthusiastic level of services. In a business like Netflix where the revenue and profit per customer are not that high, volume would only turn out to be the company’s key to lock in higher amounts of profit.
Unfortunately, high levels of volume or in this case, market share, would be almost impossible to obtain without appropriately tweaking the services and or the business model in such a way that would make them more accessible to a larger group of people, cater to their needs, and eventually earn their loyalty.
Two measures that we can use to determine whether the industry is evolving or not would be the variety and the quality of media contents being offered not only by Netflix but by other competitors as well. A higher level of media variety and quality only means that more and more medial developers, song artists, and movie rights owners are becoming more willing to trust service providers such as Netflix and that more and more people are starting to appreciate the services products and services being offered.
Research two of the business’ closest competitors to determine the pricing strategy for each business indicating how knowledge of this information may influence pricing decisions in your business. Provide support for your rationale.
Two of Netflix’s biggest competitors would be Hulu and Spotify. Hulu is the bigger one among the two because it started earlier, at almost the same period when Netflix started gaining traction in the industry. Also, Hulu is more diversified; it offers both audio and visual medial contents that are highly updated. In terms of pricing strategy, Hulu offers its products and services compared to both Netflix and Spotify, which of course, can be considered a good thing for Netflix. Spotify, on the other hand, is an internet-based audio streaming service that is priced way lower compared to both Hulu and Netflix. However, the tradeoff is that it only offers audio media content, something which can be a major turnoff for those who have already been used to the products and services offered by Hulu and Netflix. This information should influence the Netflix management’s future decisions about their pricing policies. Ideally, they would want to offer competitive prices as much as possible, considering also their expenses per product or cycle and the quality and variety of services they offer compared to their competitors. This is because in a relatively new industry, it is common to see businesses competing for the largest share of the market so that when the market becomes more saturated or expanded in the future, they would get more volume or an even higher share of the market, which of course would translate to bigger profits .
The recommendation for Netflix is for it to continue following the trend of the internet based media streaming industry—that is, continuously adding meaningful products and services to its line and keeping the quality level high, and its pricing policies competitive, but not to the point that would be harmful to the company’s growth.
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