ADM 4311 Lecture Notes - Lecture 1: Horizontal Integration, Renting, Recommender System
26 Aug 2015
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Document Summary
Our case analysis shows that the five forces facing netflix and blockbuster around 1999 pushed the two companies in two directions. Blockbuster increased it size, location, and market share, while netflix exploited the changing environment of video rental industry to its advantage. Netflix constantly adjusted its strategy to better fit the market; meeting and shaping the market demand are the pattern of their strategies. Blockbuster was the market leader in home video market around 1999. Its rivals were numerous, but mostly were small individual retail outlets, fragmented in nature. Entry barriers were low, as capital needed for start-ups is not prohibitive, and buyer switching costs were low. The substitutes would be movie theaters and online rentals; low switching costs made the risk of substitution high. Buyers" bargaining power was low, as customers were not concentrated and they purchased in small quantities.
