Designing and Managing Industrial Product Service

Question: Discuss about the Designing and Managing Industrial Product Service . Answer: Introduction: Founded in the year of 1997 on August 29, one of the most popular and recognized multinational organizations entertainment organizations of America, Netflix emerged to be retail giant in the entertainment industry of the global market (Bruce 2014). Although the organization had a very humble beginning, with a handful number of workers, the streaming business largely expanded with the expansion of the market. By the year of 2013, the organization added film as well as television production that helped the organization benefit from the subscription of 93 million people worldwide (Jenner 2016). However, it should be noted that despite being an average start-up, Netflix managed to reach the pinnacle and one of the key drivers behind the growth of the organization is its effective strategies. Accordingly, the following task intends to analyze and evaluate the strategies undertaken by Netflix that has ultimately helped the company witness a massive jump in its stock price in the market. A Brief History of Netflix: Netflix was founded by Marc Randolp and Reed Hastings in California in the year of 1997 (Bruce 2014). Although the organization initially was meant to offer products or service via internet, keeping in mind the love of the Americans for TV content and movies, the plan was revised, and the organization started offering TV content to the audience in lieu of subscription fees. In the year of 1998, Netflix was a very ordinary organization which had merely 30 employees working under it, and the organization had at most 925 works available (Vickers et al. 2016). However, while during its inception, the market of the organization primarily consisted of the business of sending DVD by mail, by the year of 2007, the organization expanded its market further by introducing the business of streamline video. Further, by the year of 2013, Netflix managed to mark its international presence worldwide, providing a far more diverse service to the consumers including film, television production and onli ne production (McCord 2014). Each organization has been disrupting old, traditional ideas of conducting business, and evolving its service in a considerable way, that is ultimately helping the organization enjoy a growth in revenue. Netflix is also no exception here. The organization has rightly observed the irrelevance of the physical DVDs in the contemporary market, and hence the organization rightly applied the most advanced technology for replacing the physical DVDs by the streaming videos (Uribe and Hunt 2016). It is only the Netflix organization that has helped the consumers of television series and movies gain a convenience experience instead of the immersive experience. While the introduction of the online video service in 2007 has helped the company gain from technological disruption, the organization has managed to enjoy its competitive edge, by asking its video algorithm team to develop a number of quality levels or recipes meant for improving the consumer experience. The organization has not only succeeded in offering excellent quality picture and audio to the consumers, but also offers convenient experience to the consumers, who can stream their videos of Netflix directly to the television sets, via Chromecast for their own comforts (Madrigal 2014). Netflix offers the opportunity to its consumers to watch TV shows as well as movies, otherwise unavailable on a free social media platform. The target market of the organization primarily consists of viewers waiting to explore the innovative content of new television series and movies (Gustin 2014). The business of online streaming has helped Netflix offer the newest television shows and the most recently released movies in lieu of a set monthly fee. Initially, though the organization initially got the license of streaming newly released movies by forming partnership with the concerned studios, it realized soon that it could not convince the high class studios to lend their most popular television content to Netflix. Hence, the organization introduced a more innovative plan of producing its own movies and television series, so that it can attract consumer attention by its exclusively available production (Adhikari et al. 2015). Pricing Strategies: As far as the pricing strategy of the organization is concerned, it should be noted that Netflix operates in a highly competitive market and hence the pricing strategy chosen by the organization is largely determined by the nature of competition, the organization encounters. Since, recently Netflix has been encountering tough competition from organizations such as Sling TV and Hulu. Now, while price against which the online television service offered by Hulu is $35 per month, the subscription fee of Sling TV is priced at $ 15 per month (Helo et al. 2017). Keeping into consideration the moderate to premium pricing strategy of its arch rivals, the price strategy of Netflix is being deliberately kept low at $ 10 per month (Helo et al. 2017). In a conference, the management authority of Netflix has admitted that it has deliberately kept its service underpriced so as to ensure that the consumers have been anchored on Netflix and the company can enjoy competitive edge over others. As the d iagram below explains and illustrates, the service offered by Netflix is comparatively much cheaper in respect of the other rival giants of the market: Besides, the organization tries to ensure uniformity in the price rate among all the 60 countries it is currently operating in (Lyons 2016). It is worthwhile to mention here that back in the year of 2011, the consumers of Netflix witnessed a 60% hike in the subscription fees to be paid, and consequently the organization itself witnessed a shocking 75% drop in the total stock prices (Wu 2015). Soon the organization realized that the hike in the price proved to be nothing short of a financial loss for Netflix with a loss of 800,000 subscribers (Choudhary and Zhang 2015). Hence, the organization modified its existent pricing strategy and adopted the lower price point strategy. Besides, it should also be noted that the organization, in order to retain its top position has recently started offering a variety of new pricing options for the new consumers, and accordingly the consumers can choose their service in lieu of subscription fees ranging from $ 7.99 to $ 11.9 each month. The organiz ation offers new schemes of pricing plans- Basic Plan, Standard Plan and Premium Plan (Wu 2015). Netflixs Innovations: Despite having established in the year of 1997, Netflix has managed to soar pretty fast in terms of its profitability. More importantly, with a market value of approximately $11 billion, the organization is indeed illustrating a design principle that most of the organizations aspiring to achieve innovative disruption wish to adopt. Hastings, one of the founders of Netflix, during the early days of Netflix was well-aware that mailing DVDs would never let the organization earn substantial amount of revenue in the future. Hence, overlooking the immediate profit of the organization, he deemed it profitable to invest $10 million for researching into the area of streaming videos (Nan et al. 2016). It should be observed that Netflix as an organization not only adopted technical innovation, but also adopted effective innovation in the entire process of formulating the strategies. While the organization continued with its DVD mailing services till 2010, the organization kept on creating its o wn library of online media content to be offered to the viewers at lower price in the year of 2010 (Nan et al. 2016). Consumer resistance could have easily spoiled the entire strategy, had Netflix not offered an increasing size of Netflix library at a considerable low price. Hence, it is a self-evident fact that Netflix is indeed a remarkable example of disruptive innovation. Hastings, the Co-founder of Netflix managed to think beyond the immediate concern of the organization, Just like most of the start-up organizations, he could have remained content with the average profitability of its existent organization, instead he chose to re-invent to disrupt and replace the existent technology. It replaced the old and commonplace business model of DVD by mail, and instead it produced a model that intends to offer greater availability, affordability and accessibility to its consumers, especially to the underserved consumers of Blockbuster. Netflix proved that adapting is better, and with the introduction of the new business model of video streaming, the organization could much easily enjoy greater competitive advantage. However, it should be noted that while discussing and evaluating the business innovation of Netflix, much attention is also to be paid to the organizations recent innovative strategy. Presently, the organization has been focusing to create its ow n shows that can be broadcast exclusively on Netflix, and while so far they have been paying the cable networks, the new plan is letting Netflix charge price from the cable networks. This strategy is another remarkable instance of creative innovation, which will definitely help the organization stay at the very top of the market share. The realm of television is at once changing before the eyes of the viewers, as Netflix is offering innovation in each field, starting with the idea of video streaming, gaining access to videos on demand, to the lack of commercial intervention while viewing a favorite television show or movie. Will Netflix Remain the Dominating Power of Online Video Streaming? First of all, the major strategy that had helped in the growth and unquestionable success of Netflix is the innovative thought that the current business model of the organization is based on. The business model of video streaming was indeed nothing short of disruption that helped the consumers keep a series of online videos for as long as they wanted, in lieu of an affordable subscription rate (Bushnell et al. 2015). The innovative thought was indeed highly disruptive, and it helped to generate huge profit as the business model of video streaming offered a more convenient and a far more accessible way of watching television series and movies. Apart from the innovation strategy, the partnership strategy has also equally contributed to the organizational success of the company. The strategic partnership of Netflix with Apple is an example of the same. Netflix, as part of its partnership strategy with Apple, has allowed the consumers of the Apple set top box to gain access to Netflix directly. Further, these consumers of Apple set top box could also pay for the video service of Netflix via their I-tune accounts (Landi and Roberts 2013). This partnership strategy of Netflix not only helped the organization enhance its brand value by forming alliance with a highly prestigious company, but it also helped the company experience remarkable profit growth for gaining access to the large consumer base. The recurring income strategy of Netflix has also largely contributed to the growth of profitability of the company. Netflix usually follows a low price strategy, and intends to win the race slow and steady. The organization has always been well-aware of the potential competitors in the industry, and thus did not charge an incredibly high price for its unique service at the start. As the organization has been offering greater innovation in terms of the content to its consumers, it is increasing its subscription fees at a slow pace. Of late, Netflix has charged an extra $1 for its service, and consequently its sudden increase in price has not led to the loss of any client. In a research, 73% of the consumers were being reported to say that considering the high quality service, the consumers do not mind paying a little extra each month. The low price strategy thus has also been a major contributing factor in the organizational success of the company. The consumers have been regarded as the most important asset of Netflix, and hence the organization has seriously invested in the field of consumer value strategy. The management authority of Netflix has ensured that the company gets across the consumers as something beyond just a name in the movie rental service providing organization. The organization has continually researching over what the consumer wants to see. Hence, Netflix has recently incorporated some of the most popular English shows, such as Orange is the New Black and House of Cards to ensure that the consumers are able to get 100% entertainment from their end (Jenner 2015). Last but not the least mention should be made of the promotional strategy of Netflix on the social media platforms. While most of the brands intend to play safe on social media, and put up a more formal approach while communicating their message with the consumers, Netflix employs a more informal and friendly method of interacting with the consumers. Instead of informing the viewers about the quality of their service or their popularity in the market of video streaming, Netflix interacts with the viewers by asking them if they have checked the latest episode of Ridiculous 6 or not. Besides, the organization also promotes its service by getting personal with each viewer, helping them feel a part of the Netflix family. A viewer with the app of Netflix, will get a special Recommended for You section, that provides a variety of television shows and films based on the personal interest of the particular consumer. How is Netflix Currently Performing? The strong international growth of Netflix, along with its innovative price strategy has led to the unprecedented success of Netflix. The US based streaming giant, Netflix has been found to be one of the best and most admirable organizations in the stock price market. In the first quarter of the year of 2015, the company has witnessed an increase in share by 60%, and by the end of the year Netflix has been one of the very few organizations that has indeed fared admirably well in the share market. With the continual growth in revenue, Netflix has also been launching its service in different, new foreign markets, including Japan, Portugal, Spain and Italy. According to a recent report by Netflix, the organization has succeeded in adding as many as 5.59 million new subscribers in the year of 2015 itself, that clearly explains the growth of the organization in the recent years (Jenner 2015). However, with the increase in popularity of the organization in the international market, Netflix is aiming to take over the entire world by the end of 2016, for entertaining the consumers of each nation. Reports number suggest that while in the year of 2014, the organization had its members streaming 29 billion hours, in the year of 2015, the total number of viewers were being found to stream 425 billion hours (Jenner 2015). Consequent upon this fact, the company managed to have 17 million net additions in the year of 2015, that has in turn helped the company feature the most popular films, such as The Ridiculous Six and Beast of No Nation (Halal 2015). Taking into consideration the price returns of the rival giants of Netflix, such as Time Warner and Amazon, it can be easily said that Netflix is far ahead of all its competitors. The shares of Netflix are found to head towards $ 600 million price mark and hence the present time is being considered to be the most favorable time for the company if it wants to carry out further acquisitions or issue its stock (Halal 2015). The future prospects of Netflix seem to be indeed very high, and hence it would be good to reflect over what the future of Netflix seems to be like. Till the present time, people have been considering the steaming service of Netflix to be a platform meant for enabling the viewers watches movies and a few selected original shows. However, Netflix presently is considering the option of incorporating the genre of reality shows as well. For example, Netflix is soon to include some of the most popular reality shows of all time, such as The Ultimate Beastmaster and The Biggest Loser. According to the chief content manager of Netflix, Ted Sarandos, the exploration of this reality TV genre is believed to capture the attention of larger number of viewers in the foreign markets. Any kind of unscripted television show helps in satisfying the curiosity of the foreign viewers about the art of living, food habits or nature of the people living abroad, and hence these shows are expected to lead to the increase of revenue. The organization is all set to roll out 600 hours of original content for the viewers. Considering the incredible growth that Netflix has been experiencing since the year of 2015, it can be easily said that the streaming video of Netflix in itself will emerge to be the ultimate future, with the streaming boxes such as Roku or Apple TV finally replacing the cable boxes very soon (Halal 2015). Besides, more importantly, it is also expected that considering the huge growth of annual revenue of Netflix, the company will form alliance with some of the biggest production houses of Hollywood. Consequently, some of the most awaited Hollywood movies will be first released via Netflix, and Netflix is likely to charge a early bird fee from its subscribers. However, it is to be noted that considering the huge competition, the organization is encountering from rival giants such as Amazon Prime, the company is likely to invest (approximately $ 6 billion) in the year of 2017 for ensuring better content for the viewers in the years to come (Halal 2015). Conclusion: To conclude, it should be noted that Netflix is an organization that has a great potential in the market, and will continue to remain the number 1 destination for online video streaming programs. 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