MGCR 331 - Information Systems
Technology and Strategy -
Netflix
Session 5
Animesh (Ass. Prof. of Information Systems), Desautels
Faculty of Management, McGill University
Key points from last class
- Five forces model: helps describe an industry competition and attractiveness
- Zara's tech-enabled strategy and resources that provide competitive edge
- In markets where commodity products are sold, the Internet can increase buyer power by increasing price transparency
- For more differentiated and valuable offering, the Internet shifts bargaining power to sellers; sellers can advertise to a wider customer base and can demand higher prices
Today' ClaSS
-
Gallaugher Chapter 4 : Netflix
- How technology helps firms craft and reinforce a competitive advantage
- Technology and Long Tail
NetFLIX
-
Pure Play – focus on Internet Channel
- DVD rental – by mail
- Flat rate vs . per-disc; no mailing fee; no late fee;
- Request Queue
- Highly successful business
*
Blockbuster
and
Walmart
also
could not compete
Sources OF COMPETITIVE ADVANTAGE
SCALE
- Huge subscriber base
- How?
- Created differentiated service
- Provided great customer experience
- selection, recommendations, timely delivery, convenient, low cost
- So?
- Lower avg. cost => tough for rivals to compete on price
- $300m for 14m subscriber vs. $300m for 2.2m subscriber
Bonus Slide
VALUE CHAIN
-
Network of ultra high-tech distribution channel
- Custom built sorters, send emails, scanners reroute incoming DVDs, presorts outgoing DVDs (lowers postal rate)
- Monitors and record failures
-
Located
close to USPS facilities
- Allows serving 97% base within 2 day window
- Monitors and record failures
-
Connected
to
Cinematch
software
- To avoid recommending movies that are not in stock
DATA
- Cinematch Software (recommendation system)
- Matches content with consumers -> increase efficiency
- Gross average user rating vs. ratings from users who are similar to you ( collaborative filtering )
