Reed Hastings founded Netflix in 1997 during the emergent days of Internet retailing, to offer home delivery of DVD rentals through the U.S. Postal Service. The company has grown at a rapid pace since to the point that in 2006, subscribers could use Netflix's website to choose from over 70,000 different titles held on over 55 million DVDs. The company has 44 distribution centers across the country, allowing it to deliver to more than 90% of its 6.6 million subscribers within a single business day. Netflix's primary subscription plan offered unlimited monthly rentals allowing customers to hold up to three movies in their possession at any one time for a monthly fee of $17.99. At the close of the 2006 year, Netflix had achieved revenues of nearly $1 billion, generating free cash flow of $64 million.
[...] In addition, by implementing videos on demand, Netflix was able to add to its online movie rental success. Netflix improved these processes by using a decision matrix showing how customer satisfaction and online services were continually scoring very highly. Netflix also sought to improve its processes by allowing customers to make recommendations and comments that fostered improvements across Netflix's core business processes. In addition to improving processes, allowing customers to have an input by making recommendations made the customers feel as though Netflix valued its customers' opinions. [...]
[...] The principle of team learning is a very important facet of a learning organization. This deals with the collective developing of teamwork and synergy among the employees of an organization who are working for a common goal. At Netflix, this consisted of cooperative effort among programmers and engineers to develop the intricate search and recommendation systems that allowed the company to attain success. The final tenet of a learning organization is the principle of building a shared vision. For Netflix, this meant building a common identity that bound the company to the shared vision of customer satisfaction. [...]
[...] Mass customization is particularly relevant in that the first firm within this turbulent service market that can effectively mass produce a convenient, inexpensive, video rental service will be able to dominate the market. Because no single provider has established itself as the industry leader for movie downloads, the firm that can effectively mass customize this service will emerge within the market. Finally, considering the concept of “process reengineering” bears considerable relevance to the critical issue. Netflix has undertaken efforts of reengineering various processes to gear for the future. [...]
[...] If the firm believes that movie distribution through cable television is the next “wave” within the rental industry, Netflix must take every measure possible to secure a share of this market. Licensing through the largest cable providers appears to be an effective way to secure a share of this market. If Netflix manages to secure a licensing agreement with a cable company, and manages to maintain rights to distribute movie rentals through the internet separately from the cable companies, a website that centralizes various means of movie rentals should be established. [...]
[...] Perhaps there was an opportunity to license the strongest part of the business model and effectively outsource delivery to the cable companies. Second involved a streaming online video feature into their core offering. By offering this at no additional cost, Netflix could increase its penetration of the young VOD market simply by continuing to grow its existing business. Lastly, Hastings considered the merits of building a stand-alone online video business, similar to what was being offered by Vongo or MoveLink. [...]
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