Establishing Strategic Direction: Ansoff Matrix - Netflix Existing products New products Market penetration strategy Product development strategy Existing markets U.S.A.- more purchasing and usage from existing customers across all product categories Develop new products such as video and computer games. (20% increase in sales in 2008) New markets Market development strategy Diversification strategy Investigate optimum markets in North America i.e. Canada, and adjacent countries such as Mexico, moving on to Argentina, Chile and Brazil and later –U.K. Australasia, and India (Bollywood factor).

Generates demand for older, cheap films BCG Matrix - Netflix Generates demand for older, cheap films Dogs software to enable commercials to be avoided Streaming Subscribers Movie downloads Question Marks Stars Market share (relative to largest competitor) High Low High Market growth Low Cash Cows

Firm’s Infrastructure Firm’s Infrastructure Technology Development Understanding how Netflix adds value to its business and its place within the value system Support Activities Firm’s Infrastructure Open and transparent culture. Interesting adult attitude to staff. Progressive organisation. Firm’s Infrastructure Open and transparent culture. Interesting adult attitude to staff. HR Management Innovative approach to staff management. Black and white to some extent. Slackers are fired and great staff are rewarded by having open ended annual leave arrangements. Margin Technology Development Large scale digital distribution via streaming and downloading service Procurement Strong buying power. Sources the latest DVD’s , blu ray discs from producers /manufacturers. Inbound Logistics Assume effective systems in place as operations, inbound logistics/service all run smoothly. Operations Online distribution is working well Outbound Logistics Supply chain functioning well. No problems encountered with distriibution /supply of products to customers Marketing & Sales Brand mgt – need to measure awareness and position the products more memorably in a crowded marketplace Service Prides itself on good customer service and innovative staff policy Margin Primary Activities

Competitor Analysis: Netflix Porter’s Five Forces Map Threat of new entrants - High Crowded marketplace. Barriers to entry are low. Key competitors are Apple, Amazon, Google, Walmart, Hulu, and Redbox, Buyer power – High Consumers today have so much choice in buying dvd’s blu ray discs, video on demand etc. so prices have to be competitive Supplier power- Medium Suppliers will always try to drive up prices but equally they need to sell their products and are under pressure from recessionary factors Industry rivalry - Intense Competition in all product commodities is increasing. Supermarkets have immense buying power. Category killers such as Walmart can compete effectively on price Threat of substitutes – Medium Technology grows at a fast pace. DVD’s are expected to be around for a while but the internet will become the principal vehicle for distributing films in years to come.

Matching Assets and Competencies – Netflix’s sustainable competitive advantage in U.S.Market Netflix’s Assets/Competencies Sells DVD’s and Blu ray discs that consumers need Strong brand recognition in U.S.A Quality product Wide product range Fairly strong customer service – high levels of customer satisfaction. Services are tailored for individuals-onscreen welcome, recommendations Offers high speed streaming of movies and TV programmes via the internet Internet service includes movie recommendation algorithms Customer Requirements Consumers always need and enjoy home entertainment Brand recognition/brand long- term stability Quality over competition Large selection to choose from Attentive customer service Personalisation Good distribution network – mail, video kiosks, vending machines, downloading, streaming, etc. Advice on which films to watch Best Fit Match

International Decision making model Business Portfolio Model – Harrell & Kiefer. Selection of Markets and Product/Market development Netflix Compatibility/capability Country attractiveness/priority High Medium Low Primary Canada Secondary Mexico Argentina Colombia Brazil U.K. Australasia Tertiary India

Product analysis - Netflix High popularity Low popularity High Price Low Price PREMIUM STRATEGY GOOD VALUE STRATEGY Streaming and discs for rent, both Blu-ray and DVDs Older films OVER CHARGING STRATEGY ECONOMY STRATEGY DVD Boxed sets

Product Perception Grid - Netflix Quality High 1 = 2 = 1 3 3= 2 4 = 5 = Price High Low 4 6= 5 7= 6 7 Low