Driving Forces. What are the two most relevant driving forces from Table 3.2 for a firm with which you are familiar? Have these driving forces made the industry in which the firm operates more, or less, attractive? Explain your rationale.
Netflix is a company which has grown exponentially and is still showing a strong tendency of expanding. It started as a startup in 1997 and by 2007 it had delivered one billion DVD movies. The two major driving forces behind Netflix expansion are the emerging new internet capabilities and applications, and the changes in cost and efficiency.
Netflix started off with a novel approach to DVD movie rentals by letting customers rent for cheap as compared to its competitors like Blockbuster and more importantly it allowed its customers to keep the movie for as long as they wanted without any late fee penalties. It became an instant factor in its success. In today’s busy world the ease of keeping a rental movie without having to worry about late fee charged to the clients was a service that no other competitors of Netflix had thought of. This business recognized it and reaped tremendous financial rewards in the long term.
In the last few years Netflix again left its competitors far behind and even drove its major competition out of the market by simply recognizing and incorporating the Internet technology to its business. The streaming videos and the growing number of internet users was a factor which would influence almost all businesses if it has not already done so. Netflix allowed its subscribers to watch instant movies without having to pay any extra amount. This was a major boost to their business expansion and even took clients from cable where people had to pay extra to watch a new movie. The use of emerging internet technologies during this economic down turn gave Netflix an extra edge over its competition as its subscribers are paying for internet already and at a very low cost they can watch movies instantly without having to leave the comfort of their home.
Opportunity for Expansion. Should a business always expand if given the chance to do so? Think of a company that recently added one or more new businesses to the organization. Does the addition seem to be in line with the original mission, vision, and core competencies?
The three facts which the management needs to analyze are the current business situation, its future direction and the strategy to get there. The first most important factor is the realistic assessment of the present situation. Any shortcoming in analyzing the present will compromise all future strategies. It will take into account a business’ current performance, its strengths and weaknesses as well as the standing in the market vis-à-vis its competitors. The next factor which would allow managers to decide is the future direction. Without a clear goal for the future no solid strategy can be developed.
The expansion driven without any careful consideration of internal and external environmental factors leads to least beneficial results if not downright disastrous outcomes. So the decision to expand is not to be based on whether it has to be always done or not but rather it needs to be based on rational and analytical research of internal and external environment of the business as well as the market position of competitors.
Whole Foods is a business which started with a clear mission statement and always stuck to its original mission, vision and core competencies. On Whole Foods website it is clearly stated that their mission is to sell high quality natural and organic products and caring for the environment. It has stayed true to its core vision when it acquired Wild Oats Market. Though a complaint was lodged against this by stating that it would eliminate competition for Whole Foods and allow them to raise prices and reduce quality. But it has not happened and Whole Foods expanded their business without compromising its core values and vision.
Crafting and Executing Strategy, Quest for Competitive Advantage by Arthur A Thompson Jr.,A.J. Strickland III and John Gamble.