Case Analysis

1. Case Analysis ERIKA GUTIERREZ CORTNEY FLORES ISABEL LICERIO ANGELICA GARCIA

2. Netflix, Inc. was one of the very first companies to offer renting DVD’s by mail. Netflix was founded in August by Reed Hastings and Marc Randolph in 1997.

3. Netflix has struggled since the company took off in 1997. They kept digging themselves into debt by the millions over the years. When Netflix began to make profit they started changing their services and prices that made them losing customers and losing money which to this day the company faces many challenges.

4. Netflix currently offers no late fee movie rentals and streaming on any capable media device.

5. Communication Errors Netflix has made many communication errors to their customers that have made them lose customers and money.

6. Communication Error # 1 The 60% rate increase was made automatically without ample notification to customers. When it was officially announced, Netflix presented as a bargain to their DVD and Video streaming customers causing outrage by subscribers, resulting in customer loss and as mass amount of customer bogs and comments.

7. Communication Error # 2 Creating a separate entity for DVD rentals called Qwickster and also charging customers for a subscription to that site. Stating that they would give ample justification as to why they were in the position to do so, but not justifying it immediately upon announcing it.

8. Communication Error # 3 A failure on the part to take into account the customer feedback and comments prior to and after making the announcements to change Netflix services. Netflix appeared to disregard customer’s opinion when making their decisions initially.

9. Despite Netflix communication errors there are strengths and weakness to the company.

10. Strength # 1 Netflix is currently the top media player on online media streaming with more than 30 million subscribers.

11. Strength # 2 Netflix is attracts a customer due to their low subscriptions prices. Even if customers do not use their service they will still pay and keep the subscription.

12. Strength # 3 Netflix is available on many media devices where internet is available. Amazon, Apple, Barn and Noble, D-link Boxee Box, Insignia, LG Electronics, Logitech Revue, Microsoft Xbox 360, Nintendo Wii, Panasonic, Philips, Popbox, Rokum Samsung, Seagate, Sharp, Sony, TiVo, Viewsonic, Vizio, and Western Digital. Software that is supported by web browsers are Microsoft Windows, OS X, Android, Boxee, Google Crome OS, iOS, Linux, MediaProtal, Playon, Plex, Windows Media Center, and Windows Phone.

13. Strength # 4 Netflix has been able to establish a strong brand name and its brand value is helping Netflix gain more subscribers in International Markets.

14. Weakness # 1 The customers to Netflix are sensitive to and price changes due to their expedited price changes with no explanation or understanding of the price changes in the past.

15. Weakness # 2 The Netflix business model works by adding substantial amounts of premium content, pricey marketing campaigns, and then subscribers tune in. This cycle has worked out for Netflix so far, but if subscribers jump ship in large numbers, it can pose material threats to Netflix's business due to substantial amounts of cash outlays, before revenues come in, and these capital expenditures are funded with large amounts of debt

16. Weakness # 3 Having international operations requires heavy capital expenditures before Netflix can generate subscribers and sales.

17. Weakness # 4 There has been a decline in the DVD Business has customer consumption changes.

18. Netflix faces many challenges.

19. Challenge # 1 Netflix faces the challenge of a risk of new entry potential competitors. The are dominant in the streaming content. But many others challenge Netflix with better prices and/or content availability.

20. Challenge # 2 Amazon has become a real threat to Netflix as they provide unlimited streaming as part of their prime membership and continue to expand their digital content. Redboxand Blockbuster compete with Nexflix to provide consumers with DVD movies. As of today Netflix does have the highest amount of content to provide to customers but with growing competition it may change.

21. Challenge # 3 Due to the growing number of video streaming alternatives, buyers now have more alternative options which encourage companies such as Netflix to come up with free trial offers or discounted prices to attract and keep new customers.

22. Challenge # 4 Being able to bargain with suppliers to make it more content available.

23. Challenge # 5 As demand grows for digital entertainment so does the amount of companies to provide those services.

24. What can Netflix do to gain profit and customers?

25. Recommendation # 1 Netflix need to explain their product to the customer. And explain any changes and the reason for price changes.

26. Recommendation # 2 Valuation looks full, and it is not expected to roll out a sizable net income and Free Cash flow will be negative for at least the next few quarters. With a decent run up for the stock, a wait-and-watch approach for Netflix sounds about right. 

27. Recommendation # 3 Reviewing feedback and comments made by their customers following any announcement they make about changes to the subscribers plan.

28. Recommendation # 4 Netflix should come up with different video streaming subscription because customers will pay more money for a bigger library and newer recent videos which will mostly likely pay for the cost of them having to buy the product to place it in their media library.

29. Recommendation # 5 Netflix should consider monthly newsletters that can be sent out to customers with any news concerning the company and any changes they have.