Unsuccessful Strategy of Netflix Company

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Unsuccessful Strategy of Netflix Company

Most strategies developed by corporates and businesses fail. Studies have proven that 90% of the strategies do not conceptualize to the expectations. A case study of Netflix Company shows that most business strategies fail. Below are reasons why Netflix strategy failed.

The Strategy

In 2011, Netflix announced a new pricing strategy for the business model. The package DVD-by-mail, and the streaming service to be split up in two brands (Qwickster and Netflix). The result was an increase in price by more than 60%. Due to the strategy, the company suffered a loss of almost one million customers within three months and a drop in stock price by $200.

How Management Failed

The strategy had a lot of flaws as careful considerations were taken into account. The management and the Board of Directors are greatly to blame for the fail of the strategy. Although the CEO made the pricing strategy, the board is accountable for the company strategy, decisions made and the performance of the company (Hill & Jones2007). The board failed to be responsible for their job that consequently led to the decline of the company.

Strategy’s Flaws?

The strategy had a lot of flaws that made it doomed to fail. Among them are wrong pricing strategies for stage of adoption. The company hiked prices when it only had 7% of the market share. Instead, the company should have come up with ways of increasing market share but they optimized the revenue (Keating 2012).

Lack of Empathy and Poor Communication

After the launch of the new strategy, the company never came out to defend its decision (Ireland, Hoskisson & Hitt, 2012). This caused outrage. The company should have communicated the value the new prices will bring but they never did. Instead, the company focused much on their interests (Ireland,Hoskisson &Hitt, 2012). Quality of the company’s content diminished mostly with the failed attempt to continue the contract with Starz entertainment that was the main source of their content.

Failure to Understand Customers

Netflix never understood what their customers wanted. The fact was that a large number was ready to pay the $10 per month even though they never used the service (Keating 2012). When price was hiked, customers became aware that they never even used the service. The company could have retained a lot of customers if they provided a DVD/streaming package with limited content a month.

Strategy Lacked Funds

The strategy did not require any funds to implement, but instead was to generate more revenue. It failed not because of lack funds but because it had a lot of flaws. There also were wrangles within the company where some employees were reported saying that they were unhappy with the leadership of Hastings, the then CEO of Netflix.

Recovering of the Business

Although the business is trying a comeback, it is facing a lot of challenges. Experts are worried that it may be headed to bankruptcy. The management has developed new strategies that include supplying content via website. Losses incurred are huge, ranging from low-priced stock to reduced customers. This is the cost Netflix had to pay for poor strategy.

Business Strategy should not Continue

Netflix abandoned the strategy in 2013 after experiencing great losses. A lot of customers had withdrawn and the stock had depreciated. The strategy would have been outdated due to the widespread of tablets and smartphones. New strategies have been developed to revive Netflix. The company is now resourcing content for their subscribers.

References

Hill, C. W. L., & Jones, G. R. (2007-). Strategic management: An integrated approach. Boston, Mass: Houghton Mifflin.

Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2012). Understanding business strategy: Concepts plus. Mason, OH: South-Western Cengage Learning.

Keating, G. (2012). Netflixed: The epic battle for America’s eyeballs.