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Central Issue
For a long time the Video and DVD rental industry was dominated by Blockbuster and Hollywood stores. That was until Netflix popped on the scene by offering an online rental service which delivered movies right to the customer’s home, and which could be returned simply by dropping them into the mailbox. This new system was much more convenient for most people and the fact that it virtually eliminated late fees made it an easy choice for most. Practically overnight Netflix threatened to take down the two rental giants, Blockbuster and Hollywood. Blockbuster realized the threat and reacted quickly by adopting a “no more late fees” policy, and by starting Blockbuster Online, an online rental service which was almost completely identical to Netflix. Hollywood has yet to introduce an online service but Amazon.com and Video On Demand services have been successfully competing with Netflix. Netflix is currently the industry leader and has been trying to maintain its market share through aggressive advertisement, price wars, and lawsuits.
Recommendations
To maintain and grow its market share Netflix must focus on building its brand recognition, becoming the cost leader, differentiating its product, and expanding into new geographic regions.
1. Building brand recognition through clever advertising along with superior customer service will help Netflix attract new customers and retain current ones.
2. Netflix should become the cost leader by outsourcing some of its divisions and by possibly forming partnerships or making contracts with delivery service providers.
3. Differentiate by offering more “watch instantly” options and by creat ...