Chapter 2- Firm Performance and Competitive Advantage

A competitive advantage in simple terms is an advantage that a company has over other competitors. This advantage makes it possible to generate greater number of sales and customers. In theory competitive advantage should wane over a period of time, but in reality companies that have a large advantage at the beginning seem to be able to maintain this in the long run. Netflix is a great example of this in the streaming media market place.

Netflix was the originator of the subscription based streaming service back in 2007. Fast forward eight years and things have changed as other services have entered into the market. This market has been growing over the years; at the present time 40% of the US households subscribe to one or more streaming service. Netflix has all but 4% of this market. This translates to 36% of US households subscribe to Netflix. This is three times greater than the next closest service, which is Amazon Prime. See below for a comparison chart. As this market matures, there will be room for probably two major players, which at the present time appear to be Netflix and Amazon Prime. The other players in this market will be smaller and more specialized services that most streaming subscribers would treat as an add-on to their primary service.