Netflix Inc. the 2011 Branding/price Increase Debacle

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Hoffman, Alan N., (2015) Netflix, Inc., The 2011 Rebranding Price Increase debacle. Pages 12-1 – 12-12

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EXHIBITS

EXHIBIT “A”

PORTERS FIVE FORCES

Bargaining Power of Suppliers

Strong

Licensing Agreements

Limited suppliers of quality content

Supplier’s content key to industry success

Threat of Substitutes

Strong

Theater

Television

Cable/Video on demand

Video games

Reading

Web surfing

Rivalry Among Existing Firms

Strong

Few providers

Aggressive competition

Price sensitivity

Increased product differentiation

Increased original content

Threat of New Entrants

Weak

High costs of capital to entry

High cost of licensing agreements

Branding/reputation takes time

Very strong industry leaders

Bargaining Power of Buyers

Moderate

Price sensitivity

Little to no switching costs

Similar services within the industry

Change in customer preferences

Buyer may have brand loyalty

Buyers may prefer more than one subscription

EXHIBITS

EXHIBIT “B”

PORTER’S COMPETITIVE STRATEGIES

Industry Focus

Cost Leadership

Differentiation

Focus

Barriers to Entry

Netflix market share could make it difficult for a new entrant to compete on price due to high cost of entry

Netflix has gained brand awareness and loyalty which could discourage new entrant

Focusing on a particular market segment would make room for entries into the industry

Power of Buyers

Netflix offers low prices and subscription options for price sensitive buyers

Netflix offers quality and unique products for changing preferences which creates loyalty

Focusing on a narrow market would reduce Netflix competitive strategy

Power of Suppliers

Strong negotiating power with suppliers keeps prices low. Not all suppliers will accept negotiated rates and will be removed as option

Netflix has quality and unique products that are more likely to have success at passing higher prices on to customers

Focusing on a niche market and therefore niche product would increase power of suppliers and increase costs

Threat of Substitutes

Lower prices and convenience reduces the impact of substitutes

Customers appreciate quality and unique content which will reduce issue of substitutes

Focusing on niche market increases threat of substitutes

Rivalry Among Existing Firms

Large market share provides ability to compete on price

Brand loyalty will keep customers at Netflix

Rivals might not be able to meet the needs of niche customers but focusing on niche will reduce Netflix overall market share and increase costs