MIS Exam 2 Chapt 4 (Netflix)

What are some of the technologies that Netflix uses in its operations to reduce costs and deliver customer satisfaction and brand value

-Collaborative filtering (Cinematch) -internet streaming and DVDs Ultra high-tech distribution centers located close to USPS facilities (all linked to (Cinematch) -trucks collect shipments from USPS and and returns DVDs to nearest Netflix DC -scanners pick out incoming titles for users -presort mail before dropping it off at USPS -can monitor circumstances surrounding failures -trust and security -always creating better algorithms -customer satisfaction

Why does long tail work

-cost of production and distribution drop -gives firm a selection advantage over physical stores -geo constraints go away and untapped markets are available Studio alliance offer more selection and Netflix gets DVDs at low costs

brand VS advertising

Brand- built through customer experience Advertising- consumer awareness of that name

What is Netflix's business model

Chose a DVD, delivered in mail in Mylar envelope, returned back to DC and sent another one Instant streaming

How does Netflix use collaborative filtering to match movie titles with the customer's taste, and in what way does this software help Netflix help Netflix garner sustainable competitive advantage

Collaborative filtering matches one persons movie interests with another and cross-recommends Advantage because switching cost, offers new movies (trends), Netflix firm examines inventory available in warehouse closets to customer's taste and tailors instead of waiting frustratingly Developed revenue-sharing system with studios for DVDs at whole sale price for cute of sub revenue (back catalog)

Why did analysts doom Netflix to fail

It was easy to copy and when larger firms came into market they thought they would overpower Netflix

How does "long tail" concept relate to Netflix's ability to offer the customer a huge selection of movies?

Limitless supply of movies because of internet retailers -choices attract customers -internet allows for more choices than physical store

What role do economies of scale play in Netflix's strategies? How do scales pose barrier to entry to potential competitors?

NETFLIX IS HUGE $300M....14M subs....$21 per sub...78% margin scale allows it to lower prices and spend more on customer acquisition, new features, or other efforts 1. DC 2. Selection 3. Customers Competitors fight uphill battle and large firms ned up straddling physical and online stores Walmart had the money but would require massive investment and long periods and of lost to be Netflix

Why is branding particularly important for online firms? What factors have contributed to Netflix's exceptional brand strength?

Not built through advertising but built through customer experience -important because competition is juts click away Netflix always ranked best, early market entry and effective execution, first one to be synonymous with DVD-by-mail -also from large economies of scale and long tail selection, lots of trust

What downside of Netflix's IPO

Once it was public every firm could see its financial position and learned it was on a profit march with growth trajectory -drew in BlockBuster and Walmart

Why did other firms find Netflix's market attractive

Saw financial profit and growth potential easy to copy, nothing differentiates it

What are the various key issues holding back streaming video models? How is Netflix attempting to counteract the challenges?

Streaming access limited by access to certain movies or shows and licensing costs are getting increasingly higher and higher and bandwidth caps Attempting to counteract by cutting deals with Internet providers and making partnerships with cable providers (like Starz) Quikster was supposed to improve streaming and DVD but too quick to jump gun

How is the concept "atoms to bits" impacting wide range of industries

Transition of physical to digital -lots of stores are having to transition or straddle -aren't kept up with technology (newspapers are struggling to keep up, Spotify>CDs) -content availability, content acquisition costs, legal and regulatory environments, potential opportunities for revenue and expansion, potential partners , competitors and their motivation marginal costs are 0 because computers can make duplicates of digital content and internet can instantly distribute content middlemen, creators, distributors, basically everyone is affected advantage: eliminates huge chunk of shipping and handling costs and bandwidth costs are minimal con: DVDs are becoming liability