Case Anaalysis 3: Netflix’s Distribution Goes Beyond Disks - 92679

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  • Posted on: Mon 03 Aug, 2015
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Case Anaalysis 3: Netflix’s Distribution Goes Beyond Disks



Case Summary

            Netflix was originally founded in 1997, as a competitor to the traditional video rental store. They initially charged per DVD rental along with shipping charges and late fees. It was soon found that this system was not competitive in the market. Netflix decided, instead of charging per rental, to instate a monthly subscription fee. They used tiered levels of subscriptions offering one video at a time to 4 videos at a time, using a cue to allow customers to select the movies they want to see the most. This model did away with late fees and expensive movie rental charges, and gained popularity among the masses, allowing Netflix to expand their archive. Netflix soon added a play instantly feature, enabling customers to watch movies right away, creating a satisfying experience for the consumer, and saving on shipping charges for the company. There are 58 Netflix distribution centers around the country where they process more than 600 DVDs an hour, allowing for a 24-hour turn around. Netflix continues to expand, now offering streaming video through many devices such as Xbox 360, Playstation 3, Nintendo Wii, and even certain Blu-ray DVD players. Although the majority of customers prefer the rent-by-mail system, digital streaming is gaining in popularity, and in time could become the standard. Through its continued adaptation to market demands, Netflix had grown into an industry power with 23 million members and $2.2 billion dollars in revenue, all while diminishing its competitor