Background info on Netflix

Junior (College 3rd year) ・Management ・APA ・5 Sources

Netflix company Background of the Company

In 1997, Reed Hastings and Marc Randolph launched Netflix in California. Hastings and Randolph had previously collaborated at Pure Software, a different company. Hasting founded Pure Holding, however he later sold his company's 700 million dollar worth of stock and spent the remaining 2.5 million in Netflix. Randolph, on the other hand, was the creator of the automated mail company Micro Warehouse ("Netflix: Overview," 2017). Later, Randolph held the position of vice president of Borland International Company. Hasting came up with the idea when he was fined 40 dollars for failing to return a movie by its due date. The two founder launched the website in 1998. The method of payment was, however, a traditional one, the pay per rental method. The monthly subscriptions were later on introduced in 1998. From that point in time, Netflix has built a stronger reputation for flat-fee unlimited rentals that do not come with many complications such as handling fees, late fees, shipping fees and due dates.

By 2015 Netflix had accumulated 35000 different films

that were available, and in a single day it shipped out one million DVDs. In 2007 the company managed to deliver its billionth DVD, and that was the point when it began restructuring business processes by introducing a video demand via live streaming, the internet. The firm has licensed and distributed independent films in detachment referred to as the Red Envelope Entertainment.

Netflix operates in a highly competitive market

with its main competitors being Comcast and Blockbuster. When it comes to market segmentation, Blockbuster holds the largest market share of 52%, it is followed by Netflix which a market share of 13%, Comcast hold the smallest market share of 3 percent (2nd KDD Workshop, 2008). Netflix, however, adds some value to its customers through low input costs and low capital. The company also offers a convenient video streaming.

Environmental and Organizational Pressures Currently Driving Organizational Change

The adverse foreign exchange rate fluctuations is a factor that negatively affects Netflix. The organizations operate in 190 countries around the world. All the countries have various monetary policies. Netflix's monthly streaming around the world ranges from 6 to 19 dollars. The company prices the monthly subscription at 10 dollars in the United States (Schatzker & Bloomberg News (Firm), 2013). The economic fluctuation can adversely reduce the corporation's global revenue. The exchange rate fluctuation is caused by the economic factors that are beyond the Netflix's control. The exchange rate fluctuations affect the enterprise's assets that are owned in abroad and also affects the amount of money that it receives from its subscriptions.

Other factors affecting the company

include loss of subscribers, cost of operations and increased competition. The firm lost millions of customers after it altered its pricing policy by an increase in the monthly subscription that is paid by clients. The level of competition has also been rising. Netflix faces stiffer competition from companies such as Amazon. The speedy growth of Amazon has created the unfavorable environment where Netflix is struggling to retain customers and acquire new market. Other competitors in this industry include HBO and Showtime (Lüsted, 2013). The stiff competition in this market arises because the market is a perfect competition. Competition denies the vitality of this organization because it reduces its revenue a fact that hurts its general profits.

Prediction of the Organizational Changes

The increasing level of competition in the United States will push Netflix to acquire other overseas markets. At present, the company has taken various initiatives to expand its video services relative to what the competitors offer. The firm has also announced that it intends to broaden its services to other markets for instance China. Netflix has also embarked on using social media to reach out to some potential subscribers. Despite the stiff competition it faces, Netflix has established market dominance, brand equity, and reputation (Shih, Kaufman, Spinola, & Harvard Business School, 2009). While Netflix may face competition from the new entrants, it is still unpredictable whether these new companies will pose any threat.

The organization has resorted to strengthening its position

in this industry by improving the quality of services it offers. The quality of service that is offered is likely to retain and attract new clients. Netflix entered into a deal with Walt Company with the objective of diversifying its operations and gaining greater market share.

Support for the Analysis

The investors in this corporation should hold their stock because Netflix will see increased global operation a factor that will lead to rising profits. The integration of social media and expansion of the video library will increase the number of subscribers, therefore, increasing the amount of revenue that is raised. The company has no control over the global currency fluctuations however property diversification will mean that volatility of the currency in one country won't hurt its operations. The firm's expansion in China will lead to an increased market base a factor that will lead to the increased revenues.


2nd KDD Workshop. (2008). Proceedings of the 2nd KDD Workshop on Large-Scale Recommender Systems and the Netflix Prize Competition - NETFLIX '08. doi:10.1145/1722149

Lüsted, M. A. (2013). Netflix: The company and its founders. Minneapolis, MN: ABDO Pub.

Netflix: Overview. (2017). Retrieved from

Schatzker, E., & Bloomberg News (Firm). (2013). AT & T versus Hulu, Netflix? New York: Bloomberg.

Shih, W. C., Kaufman, S. P., Spinola, D., & Harvard Business School. (2009). Netflix. Boston, MA: Harvard Business School.

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