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Netflix Case

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Case Analysis: Netflix

Tangible Resources

Start up capital- Reed Hastings, CEO of Netflix, co-founded a software company called Pure Software in 1991. After 6 years of rapid success and growth, Pure Software was acquired by Rational Software for $750 million. This gave Hastings plenty of money to start up Netflix.

Distribution Centers- In 2002 Netflix operated 12 distribution centers in different locations. These multiple distribution centers were very vital to Netflix because it allowed them to ship DVDs around the United States faster and more efficiently.

Large Inventory- Netflix has a movie inventory of over 12,000 different movies. This is in comparison to the 7,000 to 8,000 different movies available at most large retail video stores. This allows Netflix to have an advantage on the competition because it gives members more options of movies as well as giving them a better chance of seeing popular movies sooner since Netflix has more in stock than the competition.

Movie Recommendation System (Cinematch)- This is a unique part of their website that adds more value to a customer's membership. It gives movie recommendations to members based on their previous ratings of past movies that they have watched. This will give Netflix's members a better overall experience and will help retain members longer.

Intangible Resources

Management expertise- Reed Hastings and Mark Randolph were both previous software developers. Hasting was also the co-owner of the company. This knowledge allows Netflix to have better insight into designing and maintaining a website better than their competition. Also, Reed's previous success shows that he has effective management skills.

Poor Reputation- After seeing their memberships jump to about 25 million users between 2000 and 2011 Netflix's reputation took a hit after announcements about price changes as well as splitting the online streaming from the DVD mail service. The price change made customers very unhappy because it caused them to have to pay an additional $72 per year if they wanted both services. They lost over one million subscribers as well as lost more than 40% on their stock price. The second announcement about company restructuring caused more public outcry and caused the stock price to lose over 7% in one day.


Adaptable to member's preferences- Netflix has the ability to help adapt to every members needs and preferences through their network and matching system. This allows Netflix's website to be personalized and different for every member. This helps Netflix achieve a better output.

Ability to motivate and maintain employees- Netflix gives their employees more freedom and allows them to make major decisions. Allowing the employees these freedoms will allow



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