Netflix SWOT Analysis

S.W.O.T. Analysis

Strengths:

? Netflix provides a subscription-style e-commerce service. Over 95% of customers pay at least $17.99 a month which includes unlimited rentals with up to three titles at a time. A comparably low monthly fee, allows Netflix to lead market share of online DVD rentals while competing with traditional brick and mortar rental stores. Meanwhile, Netflix might keep the customers who try the service and happy with it continue paying the monthly fee. Therefore, Netflix has fewer problems in predicting revenues.

? Netflix enjoys lower fixed costs due to the fact that it is an online DVD rental company. As an internet business, Netflix incurs less overhead costs than competitors such as Blockbuster, as well as having fewer employees to operate the physical locations, thus labor costs are greatly reduced.

? Netflix gives customers unlimited access to the largest selection of DVD?s. Netflix?s video library consists of over 45,000 titles, making their selection the worlds largest, beating out Blockbuster, Movie Gallery, and Hollywood Video.

? With over 35 distribution centers across the United States, Netflix has the fastest delivery time of any online DVD rental company. Through the use of the United States Postal Service over 90% of DVD?s are received by customers within one day of ordering.

? Netflix?s easy to use website allows customers to browse the video library by category such as action, romance, drama (sixteen total categories) or by using a comprehensive internal search of the library.

? Netflix uses the technology of Cinematch to give customers even better service. Cinematch studies past selections made by members, and begins to recommend titles that would likely be enjoyed by the customer based on previous selections.

? Charging a monthly fee for unlimited rentals, Netflix eliminates due dates and late fees, as well as eliminating the long lines of a brick and mortar store.

? Netflix uses their great customer service to keep customers happy which intern keeps customers from canceling there subscription to the service. If there is a problem that arises during the rental process such as a damaged DVD, or lost DVD during the shipping process, Netflix addresses the problem immediately, and never charges the customer for the problem.

? Netflix was the first company to offer DVD renta...

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...fering similar services, either directly or as a partnership with another organization.

§ Emerging competition from digital cable and satellite companies that offer movies on demand. Time Warner digital cable offers video on demand library consisting of a few hundred selections and growing. Users can purchase a movie with the touch of a button for about $4.00. Customers have access to the movie for up to 24hours. Many video on demand services are now offering technologies that allow users to pause, fast forward and rewind the movies they purchase. Though the selection offered by cable companies is extremely small in comparison to Netflix, it will only be a matter of time before the number of selections will increase drastically.

§ There are a large number of substitute products. Netflix is in the business of providing personal entertainment at an affordable cost. Since any other form of entertainment is considered a substitute, Netflix?s industry is in direct competition with all other forms of entertainment, whether it be reading, physical exercise, regular television, etc. If trends in popular culture move away from those related to movies, revenues may be affected.