Netflix production chain, horizontal and vertical conflict analysis

Netflix

The value chain at Netflix is as follows. The inbound logistics reflects the content for which Netflix is able to secure distribution rights. The more content, the better the value to the consumer. The operations are mostly behind the scenes, but this is what allows Netflix to manage the physical DVDs in its collection. More importantly these days, operations are what allow for high-quality streaming, without which that line of business would have gone nowhere. With respect to streaming, operations and outbound logistics are closely linked, the process happening nearly instantly. With the DVDs, the use of USPS and the policy of not having deadlines work together to provide a positive customer experience. Marketing and sales provides value for Netflix as well, because the company is able to reach its customers, and promote new content to them. A key element of marketing is the queue, something that has attracted Netflix users since the company started. Service is how Netflix resolves problems and interacts with customers. The relaxed attitude the company has with its DVDs is part of the service, but so is technical support and the ability of Netflix to resolve streaming issues quickly.

2. Horizontal conflict is when "multiple manufacturers sell through the same or different retailers" (Settle, 2012). Netflix's pricing policy generally does not facilitate horizontal conflict, because the content is not priced individually. Vertical conflict occurs when there is a conflict between levels in the distribution channel. This is the case with Netflix. Though the case does not elaborate, Netflix is having significant problems with content providers, for example Disney and Sony, and the result is that Netflix customers are losing access to films from some major content providers (Edwards & Grover, 2011). This conflict threatens to diminish the company's value to its customers, especially since customers have long had access to works from those providers. However, Netflix competes against new initiatives run by those studios, so there is little likelihood of this vertical conflict being resolved.

3. The distribution function adds significant value for Netflix customers. The DVD service saved customers from having to deal with renting DVDs, a process that consumers often found to be inconvenient, especially with return deadlines. The streaming function is even more convenient. Consumers can access content with the click of a button, and of course they can run the movies through their television sets with an HDMI cable, so that there is no "small screen" disadvantage to Netflix programming.

4. Netflix faces many threats. The vertical conflict with major content providers is one example, as this will reduce the amount of content that is available to the company's customers. There may be long wait times for content to become available streaming, and there may be problems with some content never becoming available. Netflix might face steep cost increases in order to maintain content. Content creators are becoming a major competitor for Netflix, creating this conflict. Most of the more robust startup competitors have studio backing, and there are new competitors emerging frequently to challenge Netflix.