Netflix helped change the face of the movie rental industry by making it possible for people to rent movies over the Internet without having to visit the local video store. This meant that people had access to far larger selections than their local store could possibly carry. Netflix also eliminated late fees, which further enhanced its competitive position. However, just as Netflix put pressure in industry leaders such as Blockbuster, Netflix itself now faces strong competition from new technologies and new approaches to renting movies and games. This research provides a SWOT analysis (strengths, weaknesses, opportunities and threats) of Netflix.
Netflix's strengths begin with its business model, which allows for almost fixed overhead costs due to its online presence. Staff, property and administrative expenses are low, and the 36 distribution centers throughout the country enable the company to send DVDs quickly to customers. The company also has the largest selection of DVD movies, and has developed software that allows customers to set up a "wish list" and queue so that movies are automatically sent out when the previous rental is returned. The company also set up several subscription plans allowing customers to choose the subscription program that is right for them based on their expected usage (Borrelli, 2009).
Another key strength for Netflix is its relationship with content providers. Although Netflix itself was viewed as a threat by some Hollywood studios that were concerned about consumers waiting until DVDs were available on Netflix rather than going to the theater, it has formed strong licensing and distribution agreements that other companies in this industry do not have. These relationships will be important to the company's long-term success (Kramer, 2011).
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