University of Guelph

MGMT*4000

Case Analysis I

Group 5

Students:

Daniel Kazak (1145392)

Karolina Wu Wu (1145380)

Meghan Henshaw (1144957)

Kenneth Sotiriou (1146402)

Martijn Radman Strong (1146705)

Date: June 23, 2024

1
TABLE OF CONTENTS

Industry Analysis…………………………..………………………………………………….pg. 3

Resource-based view………………………………………………………………………….pg. 5

VRIO Model………………………………………………….……………………………….pg. 8

Pyramid Model……………………………………………………………………………….pg. 11

2
1. INDUSTRY ANALYSIS

The home video entertainment industry is a fascinating sector that has seen a significant

transformation over the past few decades. This industry has evolved from the era of physical

media formats such as VHS and DVD to the current age of digital streaming platforms. This shift

has been driven by technological advancements and changes in consumer behavior, with a

growing preference for on-demand content that can be accessed across multiple devices.

In the context of Porter’s Five Forces model, one of the forces that shape this industry is

the threat of new entrants. This force examines the ease with which new competitors can enter

the market and challenge the existing players. In the home video entertainment industry, the

threat of new entrants is low. Potential new entrants in this market are typically independent

streaming platforms and tech startups. These entities might have innovative ideas and business

models, but they often lack the resources and expertise to compete effectively with established

industry players. They face significant challenges in securing the necessary funding, acquiring or

producing high-quality content, and developing or procuring the technology infrastructure

needed to deliver a seamless and reliable user experience. The high barriers to entry in this

industry serve to protect the market position and profit margins of established players. These

companies have already made substantial investments in content and technology, and they have

built strong relationships with customers through their brand and service offerings. As a result,

they are well-positioned to fend off potential new entrants and maintain their profitability. The

root causes of the low threat of new entrants in this industry are multifaceted. High startup costs

are a significant deterrent, as establishing a new streaming platform requires substantial upfront

investment. This includes not only the cost of technology development and infrastructure setup

but also the expenses associated with content acquisition or production. The latter is particularly

3
challenging given the soaring prices commanded by popular movies and TV shows and the

significant investment required to produce original content. Moreover, the need for advanced

technology and content is another root cause of the low threat of new entrants. Delivering high-

quality video content to consumers on-demand and across various devices requires sophisticated

technology. This includes content delivery networks to ensure fast and reliable streaming, data

analytics capabilities to understand user behavior and personalize content recommendations, and

cybersecurity measures to protect user data and intellectual property.

Now, let us delve into the real-world competitors within the home video entertainment

industry. Some of the leading video subscription services in the U.S. include Amazon Prime

Video, Hulu, Netflix, HBO Max, and Disney+ (Julia Stoll, 2023). These platforms have a

significant market share and have been instrumental in shaping the industry’s landscape. They

have vast libraries of content, robust technology infrastructure, and a large customer base,

making them formidable competitors for any new entrant. In China, the dominant long-form

video streaming platforms—iQIYI, Tencent Video, and Youku—are facing a growing challenge

from the massive popularity of short-form video content accessed on phones, which is pushing

traffic to video providers such as Douyin (owned by TikTok owner ByteDance) and Kuaishou

(PricewaterhouseCoopers, 2023). This indicates a shift in consumer behavior and the potential

for new market dynamics.

In conclusion, the threat of new entrants in the home video entertainment industry is low.

This conclusion is based on a thorough analysis of the industry dynamics, the challenges faced

by potential new entrants, and the competitive advantages of established players. The analysis is

grounded in the concepts from the course and aligns with the specified unit outcomes. It provides

a comprehensive understanding of the competitive landscape in the home video entertainment

4
industry and offers valuable insights for strategic decision-making. Table 1 illustrates an

overview table of the analysis.

Table 1. Summary Table of the Analysis

Force Main Players Analysis of Impact on Root Causes Force Level

Force Profit
Threat of new Netflix, Hulu, Potential Protection of High startup Low
entrants Amazon entrants face profit margins costs, need for
Prime, Crave high barriers for established advanced
including players technology
significant and content
capital
investment,
content creation,
and technology

2. RESOURCE-BASED VIEW

RESOURCES

A. Tangible Resources

i. Financial Resources: Over the years, Netflix has consistently increased its income,

indicating a strong financial position. As an example, Netflix's revenue in 2020 was

$24,996.1 million, demonstrating improved financial standing when compared to its

previous years in 2018 which was $15,794.3 Million. (Dryer, J. H., et al, 2022,

Exhibit 4). This substantial increase in revenue demonstrates the growing financial

resources of Netflix and its market growth.

ii. Physical Resources: Netflix's infrastructure consists of several technical assets and

distribution centres that are required for DVD-by-mail and streaming services. In

order to provide quick delivery and returns, Netflix established more than 30 highly

effective distribution centres and 50 more shipping terminals by 2010 (Dryer, J. H., et

5
 al, 2022, Exhibit 3). As proven, Netflix early on understood the market it had entered

and prepared its resources well to have a long-standing and successful company.

B. Intangible Resources

iii. Brand and Reputation: One important intangible asset is Netflix's brand, which is

associated with internet streaming. The company's early entrance into the streaming

sector and significant investment in original content serve to strengthen its brand

name. With shows such as "House of Cards" and "Orange is the New Black," among

other original content, Netflix has built a solid reputation for itself (Dryer, J. H., et al,

2022).

iv. Content Library: One important intangible asset of Netflix is its vast collection of

original and exclusive content. As evidence of the popularity of its original content,

Netflix was nominated for many Emmys in 2017 (Dryer, J. H., et al, 2022, sec 24). To

continue to put original shows out that are highly rated is an impressive feat for

Netflix and is one of the reasons why they are so dominant in the streaming sector.

v. Human Resources: Management Team - Reed Hastings, currently founder and

executive chairman of Netflix, has played a key role in guiding the business toward

innovation and expansion. The success of Netflix has been significantly impacted by

Hastings' strategic choices and vision (Dryer, J. H., et al, 2022, sec 17). He did not

like the current structure of the sector which Blockbuster had mainly dominated at the

time, having late fees and being inconvenient for people compared to the new

structure of Netflix.

a. Creative Talent: To further solidify its position in the industry, Netflix has

made significant investments to draw in top-tier creative talent in order to

6
 create original material of the highest calibre (Dryer, J. H., et al, 2022, sec 24).

The investment they have put into this has been evident and is one of the

reasons why they are positioned where they are.

CAPABILITIES

A. Operating Capabilities

i. Efficient Logistics and Distribution: Netflix created strong distribution and logistics

systems for its DVD-by-mail service, guaranteeing quick and effective delivery and

return procedures. This feature assisted in setting Netflix apart from more established

video rental businesses like Blockbuster (Dryer, J. H., et al, 2022, sec 19).

ii. Streaming Technology: One of Netflix's most important operational skills is its ability

to broadcast videos consistently to millions of consumers worldwide. An enhanced

user experience is continually assured by the company's ongoing investments in its

technological infrastructure (Dryer, J. H., et al, 2022, Exhibit 4). As shown in the

case, Exhibit 4 from 2005-2018 they had added to their investments each year until of

recent in 2020 they lowered their investment. This demonstrates that Netflix has now

reached their crucial point of investment where they are satisfied with its current

development in technology based on returns.

B. Dynamic Capabilities

i. Content Creation and Acquisition: Making smart acquisitions and launching original

material, Netflix has steadily increased the amount of content it offers. Because of its

dynamic capabilities, Netflix is able to stay one step ahead of its competition and

adjust to changing customer preferences (Invisibly, 2024). Netflix has been able to

pair with major production companies such as Paramount Pictures, MGM, and Lions

7
 Gate Entertainment which has positioned them to not only produce original content

but also get help from reputable companies to gain wider and more diverse viewers

(Dryer, J. H., et al, 2022, sec 23).

ii. Data Analytics: One of Netflix's most important dynamic capabilities is its use of data

analytics to inform content development choices and customize suggestions. Utilizing

user data improves customer retention and happiness (Invisibly, 2024).

PRIORITIES AND VALUES

Innovation and Customer Satisfaction

Netflix places a high priority on innovation in both its content offers and service delivery,

with the goal of achieving optimal customer satisfaction. Its transition from renting DVDs to

streaming them and its large investment in original content are clear indications of this (Dryer, J.

H., et al, 2022, sec 19). This was not only more cost-effective for customers but also gave more

convenience which is a reason Netflix was able to be so successful.

Efficiency and Cost Management

Netflix's business strategy eliminates the need for physical storefronts. Because of the

decrease in administrative expenses, Netflix is able to sustain profitability and provide

competitive pricing (Dryer, J. H., et al, 2022, sec 19). In addition, being one of the first

companies to do this, they have positioned themselves at the top of their market because of these

values which have swiftly become the new norm.

3. VRIO MODEL

This VRIO analysis evaluates three critical resources: original content production,

advanced algorithms and data analytics, brand reputation, and market position. By further

8
examining these resources we can understand how Netflix has sustained competitive advantages

in a rapidly changing home video entertainment market.

Original Content Production

Netflix’s investment in original content differentiates the platform from competitors by

providing exclusive, high-quality content that attracts and retains subscribers. Shows like “House

of Cards” and “Stranger Things” have driven significant subscriber growth and engagement.

This value is evident from the consistent investment in diverse and localized content, appealing

to global audiences. Netflix’s international appeal is also well-highlighted by its investment in

varied and localized content (Gibbons, 2019). However, the production of original content

requires substantial financial resources, talent, and infrastructure, which is something that not all

streaming services can afford. Netflix's extensive library sets it apart from other platforms that

lack the same volume and quality of exclusive offerings. Netflix’s original content accounts for a

significant portion of viewing time on its platform, which highlights its rarity (Gibbons, 2019).

As such, this resource is inimitable due to the high costs of production, established relationships

with top-tier talent, and sophisticated algorithms for predicting viewer preferences. Netflix’s

first-mover advantage in creating original streaming content has created a substantial content

library that’s nearly impossible for competitors to replicate (Lee, 2024). This leads to a

sustained competitive advantage, showcased by Netflix’s ability to consistently produce and

deliver compelling original content, which positions them strongly against competitors, ensuring

long-term subscriber growth and market leadership.

Advanced Algorithms and Data Analytics

Netflix’s advanced algorithms and data analytics capabilities significantly enhance user

experience and provide value to users by personalizing content recommendations. These

9
technologies enable Netflix to predict and suggest shows that cater to individual user

preferences, leading to higher engagement and retention rates. Additionally, Netflix’s

sophisticated data analytics system improves content recommendations and helps decide what

content to produce next (Invisibly, 2024). These capabilities are rare because they require

significant investment in technology and expertise. Netflix’s extensive data collection and

sophisticated algorithms offer a uniquely personalized user experience that is difficult for other

platforms to match. Few companies have the amount of data and analytic capabilities to match

Netflix's recommendation system.

Netflix is well-organized to exploit this resource through its integrated technological

ecosystem which supports continuous data collection and algorithm enhancement. The

company’s organizational structure fosters innovation and agility, allowing it to stay ahead in the

competitive landscape (Invisibly, 2024). This results in another example of Netflix’s competitive

advantage, as the ability to offer highly personalized content recommendations enhances user

satisfaction and loyalty, providing Netflix with a significant edge over its competitors.

Brand Reputation and Market Position

Netflix’s strong brand reputation and market position are highly valuable. The brand is

synonymous with high-quality streaming content and innovation, attracting a broad subscriber

base and fostering customer loyalty. Netflix consistently ranks as one of the most valuable media

brands globally (Mclaughlin, 2023). This resource is rare as few companies have achieved the

level of brand recognition and positive reputation that Netflix enjoys. The company’s

commitment to quality, innovation, and customer satisfaction sets it apart in a crowded market.

Netflix is often ranked as one of the most positively perceived brands in the entertainment

industry. This results in a brand reputation and market position that are inimitable as they are the

10
 result of years of consistent performance, strategic marketing, and positive customer experiences.

Competitors cannot easily replicate the trust and loyalty that Netflix has built with its audience

over time.

This resource can be exploited by Netflix through effective marketing strategies, strong

customer service, and continuous innovation. The company’s organizational culture emphasizes

excellence and customer focus, ensuring the brand remains relevant, which has once again led to

a sustained competitive advantage. Netflix’s strong brand and market position enables it to

attract new subscribers and retain existing ones, ensuring revenue growth and market dominance

(Mclaughlin, 2023).

4. PYRAMID MODEL

Table 2 presents the results of a simple pyramid analysis to compare the strengths of two

major streaming services: Netflix and Amazon Prime Video.

Table 2. Pyramid Model to Identify Strengths

Company
Questions Netflix Amazon Prime Video
What is the company good at? o Offers wide range of movies o Offers a large selection of movies
and series and TV Shows
o Personalized o Exclusive content
recommendations o High quality streaming options
o Smooth streaming experience o Family friendly
(Dryer J. H., et al, 2022).
What activities create value for o Content curation o Device compatibility
the customers? o User friendly-interface o Various streaming option plans
o Personalized o Personalized recommendations
recommendations o Additional benefits with other
o Original content production Amazon accounts – prime members
o Seamless streaming may get access to free shipping or
experience (Dryer J. H., et al, other digital content
2022). o Strong brand reputation (Dryer J. H.,
et al, 2022).
What resources and capabilities o Available in multiple countries o Global reach
drive those activities? o Localized content o User data and search engines
o Multiple language options o Marketing and advertising
available o Financial sustainability
o Regional content
o Strong brand image,

11
 o Global subscriber base (Dryer o Brand partnerships and digital
J. H., et al, 2022). content agreements (Dryer J. H., et
al, 2022).
How rare are these resources and o Content library and o Providing content exclusive to the
capabilities? recommendation algorithms Amazon brand and select streaming
are rare partners
o Global expansion – Amazon prime
video is available in over 200
countries (Video Central, 2024).
How difficult are they to imitate? o Recommendation algorithms o Exclusive content associated with
and original content the brand
production capabilities are o User data and algorithm allowing for
challenging to imitate due to the specification and content
years of investment and tailoring for global, local, and
expertise (Dryer J. H., et al, household status
2022). o Multiple financial outlets allow for
investments in content and
technological advancements (Dryer
J. H., et al, 2022).
In what ways is the company o Focus on content creation, o Strong financial positioning –
organized to capture value? user experience, and global strategic investments to be made for
expansion to capture and market expansion, technological
retain subscribers (Dryer J. H., advances, and content
et al, 2022).. o Continuous expansion of streaming
options and partnerships to appeal to
subscribers
What priorities support and o Investment in original content o Provides strong customer support
sustain those resources and – Netflix’s movies and series o Ability to acquire rights and licenses
capabilities? o Sustain global expansion to produce original content and other
digital channels such as – HBO
Max, Showtime, and Starz
o Integration between all Amazon
accounts
o Loyal consumers – Global reach

In conclusion, Netflix, and Amazon Prime Video each have unique strengths. Netflix

excels in personalized recommendations, original content production, and a seamless user

experience, driven by its extensive content library and advanced algorithms (Dryer J. H., et al,

2022). On the other hand, Amazon Prime Video offers a wide selection of exclusive content,

high-quality streaming, and benefits linked to other Amazon services, supported by its global

reach and strong financial backing. Both leverage their distinct capabilities to maintain

competitive advantages in the streaming market.

12
References

Dyer, J. H., Godfrey, P. C., Jensen, R. J., & Bryce, D. J. (2022). Strategic management:

Concepts and cases (4th ed.). Wiley.

Gibbons, S. (2019, May 21). What the rise of Netflix’s original content can teach leaders about

diversity. Forbes. https://www.forbes.com/sites/serenitygibbons/2019/05/21/what-the-

rise-of-netflixs-original-content-can-teach-leaders-about-diversity/

Invisibly. (2024, June 7). Behind the scenes of the Netflix recommendation algorithm.

https://www.invisibly.com/learn-blog/netflix-recommendation-algorithm/

Julia Stoll. (2023, December 18). Home video market in the United States - statistics & facts.

Statista. https://www.statista.com/topics/1860/home-video/#topicOverview

Lee, W. (2024, March 6). How netflix survived the Streaming Wars to stay the subscription video

king. Los Angeles Times. https://www.latimes.com/entertainment-

arts/business/story/2024-03-06/how-netflix-held-onto-its-crown-as-king-of-streaming

Looper, C. de. (2023, December 22). Everything you need to know about prime video. About

Amazon. https://www.aboutamazon.com/news/entertainment/what-you-need-to-know-

about-prime-video

Mclaughlin, J. (2023, August 12). Netflix marketing strategy: Streaming Success. Brand

Credential. https://www.brandcredential.com/post/netflix-marketing-strategy-streaming-

success

13
PricewaterhouseCoopers. (n.d.). Perspectives and insights: Global Entertainment and Media

Outlook 2023–2027. PwC.

https://www.pwc.com/gx/en/industries/tmt/media/outlook/insights-and-perspectives.html

Watch on Amazon.com. Amazon.com Sign up for Prime Video. (n.d.).

https://www.primevideo.com/offers/nonprimehomepage/ref=dvm_pds_amz_ca_dc_s_g_m

kw_sNvk1W5yJ-

Video central support - amazon.com. Video Central Amazon. (2024).

https://videocentral.amazon.com/home/help

14