Last week, Netflix decided to split itself into two parts: a DVD by-mail service and a movie-streaming service. This strategy, according to Mr. Hastings, was mainly based on the company's fear that it might be too slow in the transition from physical media to digital media and and suffer the fate of the recently bankrupted Borders bookstore chain.
In July, Netflix changed its pricing structure so that its by-mail and online offerings were essentially sold separately, each starting at $8 a month. Previously customers paid less for the combination ($10) than the offerings cost separately. This has caused anger among many long-time Netfilx fans who felt betrayed. Meanwhile, Netfilx's stock price plummeted by 19% in two days.
According to the Generic Strategy Model we learned in class, one can assume Netflix's intention to narrow its business scope by separating its two main services. But why such a sudden drastic move which cost them millions of long term subscribers? My guess is that they are experiencing foreseeable financial difficulties at the current price level.
Thursday, September 22, 2011
Friday, September 16, 2011
Strategy journal 1
I read an article on WSJ yesterday titled "PepsiCo Shakes Up Management" and found this is very interesting and related to the concepts we have learned in Strategy class.
The article says that Albert Carey, the head of PepsiCo's more profitable snack unit will take the reins of PepsiCo Americas Beverage unit. Meanwhile, the two former co-executives of Americas Beverage unit, one resigned and the other got demoted. From the article, Pepsi-Cola slipped to No. 3 in U.S. volume behind Diet Coke and longtime leader Coke last year for the first time. And there are lots of criticism about PepsiCo's poor management on its beverage unit. Assigning Carey as the new executive of beverage unit shows PepsiCo's main business focus and its determination to regain market share. In addition, PepsiCo is going to launch its first Pepsi-Cola ad campaign in the U.S. in three years this June. It also invested $60 million to sponsor "The X Factor,'' a new music-talent competition airing on U.S. television this fall, and recently renewed its sponsorship deal with the National Football League. According to the value chain worksheet we discussed in class, PepsiCo is focusing on changing management and marketing strategy to claw back its market share and increase its profit margin.
The article says that Albert Carey, the head of PepsiCo's more profitable snack unit will take the reins of PepsiCo Americas Beverage unit. Meanwhile, the two former co-executives of Americas Beverage unit, one resigned and the other got demoted. From the article, Pepsi-Cola slipped to No. 3 in U.S. volume behind Diet Coke and longtime leader Coke last year for the first time. And there are lots of criticism about PepsiCo's poor management on its beverage unit. Assigning Carey as the new executive of beverage unit shows PepsiCo's main business focus and its determination to regain market share. In addition, PepsiCo is going to launch its first Pepsi-Cola ad campaign in the U.S. in three years this June. It also invested $60 million to sponsor "The X Factor,'' a new music-talent competition airing on U.S. television this fall, and recently renewed its sponsorship deal with the National Football League. According to the value chain worksheet we discussed in class, PepsiCo is focusing on changing management and marketing strategy to claw back its market share and increase its profit margin.
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