Professor Ryan - Case Study

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No particular format must be 3 pages long and all material must be covered. 

 

Read the case study below titled Netflix, before completing the case study questions.  Be sure to describe specific examples from the case study to support your answers.  Submit your completed assignment as an attachment or copy and paste the text into the text box provided here. Your responses should be organized and should be written in complete sentences.

NETFLIX

Entrepreneur Reed Hastings got the idea for a web-based movie rental business called Netflix in 1997 after he was charged a huge late fee for renting Apollo 13 from his local video store. He thought, “There has to be a better way.” Later, he drove to his local gym where customers are charged with a flat fee, rather than based on the time spent in the gym. And so he created his own business using the gym’s business model— that is, renting unlimited movies on a flat-fee monthly basis, with no penalties for keeping movies beyond a certain time. At that time, renting movies by mail instead of at the video store “struck most people as somewhat ludicrous” (Cook and Taylor, 2006, p.1). 

But having a great idea is not enough. Hastings then gathered a group of friends, along with his wife, lawyer, and others, to thoroughly discuss his idea and to develop a full-fledged business plan that he could take to a bank or other funding source to launch the company. One by one, they went through the list of possible customer objections, systematically coming up with answers to each. They had to design a mailer package that was small, lightweight, and convenient. They mapped the processing logistics of each package. They started by acquiring intimate knowledge of the U. S. Postal Service operations. Next, they customized their software and operational technologies to automate their picking, packing, and shipping process and then linked those to their website. They also concocted the idea of offering 10 free movie rentals with the purchase of any new DVD player sold by the big-three manufacturers— Panasonic, Sony, and Toshiba. Combined, the big three had an 85 percent market share. Once new DVD player owners used the 10 free rentals, they were “ hooked” (Cook and Taylor, 2006). 

Once Hastings went to the funding sources, they in turn convened their loan committee to make sure that their decision to fund this new business was a sound one. The rest is history. In fact, Netflix is so successful that competitors like Blockbuster have added the same flat- fee, no-penalty type of service to their business model to supplement their local rental stores (Shell and Moussa, 2007). By 2006, Netflix was worth twice as much as Blockbuster, with over 4 million customers and a market value of over $1.5 billion (Cook and Taylor, 2006) Notice that a key part of Hastings’ business launch included gathering a group of interested and knowledgeable friends to think through the original idea. And the lending institution did the same thing to thoroughly explore their decision to loan him the money to start the business.

CASE STUDY QUESTIONS

  1. What does this case study tell you about the potential influence (positive or negative) that groups can have on individual behavior? Explain your response.
  2. If you were in a similar situation as Hastings, working with the same group, which of the group decision making processes discussed in the Decision Making Processes Module would you have utilized? Describe at least 2 reasons you would have used that process or processes.
  3. What kinds of self-discoveries (communication traits and characteristics) do you think did Hastings have to undertake before beginning his venture? Describe at least two examples.
    • 10 years ago
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