(A) Identify key issues, problems and opportunities facing Netflix. It may be helpful to consider the fact that the Netflix business model evolved through many strategy revisions. What caused them to make each shift? Were the shifts driven from the top or bottom? Is this easier for a small or large company?
The key issue that was facing Netflix early on was the selective market of people that were into the DVD market. Most were still with VHS market at this time and it gave them a small problem during start-up. But, with that changing market they knew that consumers will soon turn to DVD’s and leave behind their old technology of VHS. They also faced the problem of most Blockbuster being a 10 minute drive from at least 70% of U.S. populated homes. This makes their whole sales pitch of people not having to leave their homes to rent movies even harder due to the number of available Blockbusters. With Netflix no late fee policy this made it easier for them to get more sales because Blockbuster charged late fees.
Also, they came across the problem of half the movies they shipped were the new releases. This made under stocking when customers wanted them and overstocking when the movie was not new anymore. They fixed this problem by making the recommended movies for consumers because this expanded their horizons on other movies other then the new ones. They also had a distribution problem because they only had one distribution center.
All these shifts were driven from the top. With the growing customers and profits they have learned what consumers wanted. They held surveys to find out what movie a customer wants and the movie recommendation system helped expand the consumer’s movie choices. They even got special packages and were tied into the USPS for their delivery services that got perfected over time. This is easier for them as they became a large company and made deals and expanded with the profit and knowledge they had about customers from their...
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