Answered By: Peter Z McKay
Last Updated: Oct 29, 2014     Views: 258

Follow the steps in the Company Research Tutorial to look for information on NetFlix's supply chain. The most likely sources will be articles in the business press, the company’s 10-K, and research reports: http://businesslibrary.uflib.ufl.edu/companyresearch

 

For example, here’s is an excerpt from the company’s latest 10-K.

 

Competitive Strengths

We believe that our revenue and subscriber growth are a result of the following competitive strengths:

 

 

 

Comprehensive Library of Titles.     We have well established relationships with major studios and distributors, enabling us to maintain a broad and deep selection of DVD titles. We also offer our subscribers access to a smaller library of titles available for streaming. Because of our scale, national footprint and Internet based subscription model, we believe that we can efficiently acquire and provide subscribers a broader selection of DVD titles than DVD rental outlets, DVD retailers, and cable, satellite and telecommunication providers. In addition, by providing both DVD and streaming content as part of the Netflix subscription, we are able to offer subscribers a uniquely comprehensive selection of movies for one low monthly price. To maximize our selection of DVD titles, we continuously add newly released DVD titles to our library. Our DVD library contains numerous copies of popular new releases, as well as many DVD titles that appeal to narrow audiences.

 

 

 

Personalized Merchandising.     We utilize various tools, including our proprietary recommendation service, to create a custom interface for each subscriber to effectively merchandise our library. Subscribers rate titles on our Web site, and our recommendation service compares these ratings to the database of ratings collected from our entire user base. For each subscriber, these comparisons are used to make predictions about specific titles the subscriber may enjoy. These predictions, along with other factors, are used to help merchandise titles to subscribers throughout the Web site. We believe that our recommendation service and our other merchandising practices allow us to create broad-based demand for our library and maximize utilization of our library.

 

 

 

Growing Scale.     We have achieved a level of scale in our business that provides many operational advantages. For example, we are able to cost effectively automate many of our shipping and receiving processes, helping to drive down costs while also providing a better, more consistent experience to our subscribers. Also, our growing scale, namely, our more than 10 million subscribers, provides what we believe to be a key strategic advantage as our business expands into the Internet delivery of content. We believe that this large installed base of subscribers positions us well to compete in the Internet delivery of content with companies that may have more recognizable names or more resources.

 

 

 

Convenience, Selection and Fast Delivery.     Subscribers can conveniently select titles by building and modifying a personalized queue of titles on our Web site. We create a unique experience for subscribers by serving pages on our Web site that are tailored to subscribers’ individual rental and ratings history. Based on each subscriber’s queue, we ship DVDs by first class mail. Subscribers return these DVDs to us in prepaid mailers. After receipt of returned DVDs, we mail our subscribers the next available DVD in their queue of selected titles. We have over 100,000 DVD titles to choose from, and our nationwide network of distribution centers allows us to offer fast delivery. In addition, we offer subscribers more than 12,000 streaming content choices that can be watched instantly without commercial interruption.

Growth Strategy

Our core strategy to grow a large subscription business consisting of DVD by mail and streaming content includes the following key elements:

 

 

 

Providing Compelling Value for Subscribers.     We provide subscribers access to our comprehensive library of over 100,000 DVD titles with no due dates, no late fees, no shipping fees and no pay-per-view fees for a fixed monthly price. We merchandise titles in easy-to-recognize lists including new releases, by genre and other targeted categories. We also offer more than 12,000 streaming content choices that can be watched instantly. Our convenient, easy-to-use Web site allows subscribers to quickly select current titles, reserve upcoming releases and build an individual queue for future viewing. Our recommendation service provides subscribers with recommendations of titles from our library. We quickly deliver DVDs to subscribers from our shipping centers located throughout the United States by U.S. mail, and we offer certain movies and TV episodes that can be watched instantly.

 

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Utilizing Technology to Enhance Subscriber Experience and Operate Efficiently.     We utilize proprietary and other technology to manage the processing and distribution of DVDs from our shipping centers and the delivery of streaming content over the Internet. Our software and equipment automate the process of tracking and routing DVDs to and from each of our shipping centers and allocate order responsibilities among them. We continuously monitor, test and seek to improve the efficiency of our distribution, processing and inventory management systems as our subscriber base and shipping volume grows. We operate a nationwide network of shipping centers and continue to develop and grow this network to meet the demands of our operations.

 

 

 

Building Mutually Beneficial Relationships with Entertainment Video Providers.     We have invested substantial resources in establishing strong ties with various entertainment video providers. We maintain an office in Beverly Hills, California that provides us access to the major studios. We obtain content through direct purchases, revenue sharing agreements or license agreements. We work with the content providers to determine which method of acquiring titles is the most beneficial for each party. Our growing subscriber base provides studios with an additional distribution outlet for popular movies and television series, as well as niche titles and

 

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