Netflix: David Becomes Goliath

Netflix is considered a classic example of innovative strategic planning. From the outset, it was designed primarily as an internet-based company, unlike its principal rival, Blockbuster. The early history of Netflix is a study in looking forward to gaining and keeping a competitive advantage. Remember Porter's Competitive Forces Model as you read this chapter. The pressures of all five forces are present as Netflix tries successfully to enter and eventually command a competitive advantage in the rental film industry. As you read the case of Netflix, consider the following question: What are the long-term threats to Netflix? (Hint: Consider changes in technology and copyright/patent/media law). How would Netflix overcome or avoid those threats and continue to have a competitive advantage?

Introduction

Key Takeaways

  • Analysts and managers have struggled to realize that dot-com startup Netflix could actually create sustainable competitive advantage, beating back challenges from Wal-Mart and Blockbuster, among others.
  • Data disclosure required by public companies may have attracted these larger rivals to the firm's market.
  • Netflix operates via a DVD subscription and video streaming model. Although sometimes referred to as "rental," the model is really a substitute good for conventional use-based media rental.