Chapter 9- Tacit Collusion: Cooperation to Reduce Competition

Collusion results when two or more companies get together to provide cooperation within their industry to reduce the competitive of firms not part of this collusion. Netflix has small areas which could be taken as collusion as to increase their competitiveness within industry. This can be demonstrated by a few of their agreements with other media providers. The one area is in content, where Netflix has made deals with Disney and some of Disney subsidiaries. The original programming Netflix has embarked on is in with full cooperation with Marvel studios, which is owned by Disney.  Netflix has also made deals with cable companies that will host or mirror their video library enabling customers to have greater access to 4k steaming technology. The first one in North America is a deal with Rogers’s media to provide 4k streaming to Rogers’ customers. This is done even though Rogers has a streaming service of their own.  

Chapter 8- Flexibility under Risk and Uncertainty

Flexibility in the business world is when a company can make changes quickly and without great expenditures to adapt to a changing environment. These changes can be technological as well as market changes and competition. Everything changes and recently very quickly. Netflix has been adept to either anticipating or reacting to changes within their industry.

There are many risk factors evaluating Netflix and the industry they are in. This is a very new industry, and even though Netflix is by far the most dominate player in it, there is still possibilities for risk. The biggest risk facing Netflix is if there is more than one major competitor entering the market. This market when fully matured will always be able to handle two major players. As long as, Netflix is one of the players, this risk is reduced. Content can be a major risk factor in this industry. It can become very expensive and difficult to pass along to a customer who is used to paying a very low rate to subscribe. The other problem with content is if it’s no longer available to Netflix, but is available to their competitor.

Chapter 7- Product Differentiation

Product differentiation is another business strategy to gain competitive advantage. This is achieved by offering something different in a product or service. The product or service will differentiation it self within the industry.

Netflix has always distinguished itself from their inception. They have always developed new technologies to further differentiation themselves from competitors that have entered the market place. This can be demonstrated by the brief history of Netflix.

Netflix was founded in 1997 to provide customers with home delivery service of movie rentals on DVDs. This grew into a subscription-based service, which allowed the customers to choose a level of service that determined how many DVDs could rent at one time. A few years later, Netflix added a streaming service to their subscription packages. They believed this was a way of reducing the costs associated with mail home delivery service. The growth of streaming media subscriptions grew so rapidly that they now offer the service to more than 53 million customers in 50 different countries. All content is streamed without commercials. Netflix provides instant streaming of movies and TV shows directly to customer’s TVs, computers, and other mobile devices. Some devices that can stream these movies and shows are gaming systems such as, Xbox, PlayStation, and Wii.  Viewing Recommendations are given based on viewing habits, as well as allowing for multiple profiles, making it possible for every family member to have their own profile. Today, Netflix does not only stream content from other producers, but is now producing their own original TV series and movies. Their latest product differentiation is they added 4K streaming to original programming and some featured films.

Chapter 6 - Cost Leadership

The strategy behind cost leadership is to have cost lower than your competition. This allows a firm a competitive advantage in the market place. There are different ways to achieve cost leadership. Economy of scales is one, that in the simplest of forms, the higher the form of production decreases the cost associated with it. Netflix has the largest subscriber based and content in the industry. This makes it very easy to have a competitive advantage in cost leadership.

The second area deals with experience differences and the learning curve. There is always an advantage to be gained when you have the most experience in a certain industry. Netflix is the originator of this industry and has had to come up with the majority of solutions to problems that have arisen when this industry was in its infancy. Other competitors now have to deal with these new experiences as they arise, while Netflix has solutions on-hand.

The third area is technological advantages. This is where a company has in place systems and technology that other competitors do not have. Netflix is the developer in most of the technologies dealing with streaming media. Their size and experience makes it very difficult for newer competitors to achieve the same technological advances as Netflix.

Netflix has cost leadership as a competitive advantage because they are the originator and longest company in the streaming media business. This coupled with the largest library and subscribers makes Netflix the cost leader in the industry. It will be very difficult for any competitor to pass them in the foreseeable future.