Strategic Partnerships

How is the company that revolutionized the way we rent movies rein­venting itself? By making the movie-watching experience even more hassle-free. Netflix is utilizing superior customer service, emerging technologies, strategic partnerships, and an ever-growing subscriber base to transform the traditional video-rental model into a 21st­century on-demand concept.

No More Waiting

For only $8.99 a month, Netflix’s 12 million customers can instantly watch any of its 17,000 movies and TV episodes streamed to their TVs and computers and can also receive any of its 100,000 titles delivered quickly to their homes. Netflix members can exchange DVDs as often as they want using a postage-paid return envelope. There are never any due dates or late fees. Everything is hassle-free and picture perfect! Netflix was founded in 1997 and has truly revolutionized the way we rent movies. It launched its online subscription service in 1999 and has now become the world’s largest online movie rental service.

The company has more than 55 million discs and, on average, ships 1.9 million DVDs to customers each day. On February 25, 2007, Netflix announced its billionth DVD delivery. Two years later, on April 2, 2009, the company announced that it had mailed its two billionth DVD. The com­pany recently announced the availability of a free Netflix app for the iPhone and iPad allowing users to instantly watch TV episodes and movies. The company is experiencing amazing growth in subscribers and revenues. For fiscal year 2009, rev­enues exceeded $1.6 billion with net income rising above $123.5 million.

Keys to Success

What accounts for Netflix’s success? Co-founder and CEO Reed Hastings believes the key to the sustained growth of the Los Gatos, California-based company is no secret at all— it thrives and stays ahead of competitors because of its renowned customer service. Beating out such heavyweight competition as Amazon, Apple, and Target, Netflix was crowned Number 1 in online retail customer satisfaction by independent surveys from Nielsen Online as well as in nine consecutive sur­veys by ForeSee/FGI Research.

Netflix’s continued focus on providing customers with what they want allows the company to differentiate itself from the competition. More than 97% of Netflix’s subscribers live within one day of delivery from the company’s 58 distribution centers or 50 shipping points. For example, Netflix has seven shipping centers in Florida, six in California, and six in the state of New York. Netflix even provides customers with movie recommendations based on the customer’s own re­views, renting habits, and location. A Netflix subscriber can check to see what movies and television programs are popu­lar in their town. Another key success factor for Netflix has been the quick adoption of emerging technology and the formation of strate­gic partnerships. According to Hastings, “Netflix’s differenti­ated service, which combines DVDs delivered quickly by mail and movies streamed instantly over the Internet, is a key ele­ment driving our growth.”

In order to accomplish this, Netflix has partnered with con­sumer electronics companies to bring to market a range of de­vices that can instantly stream movies and TV episodes from Netflix directly to members’ TVs. These devices currently in­clude Blu-ray disc players and new Internet TVs from LG Electronics; Blu-ray disc players from Samsung; the Roku dig­ital video player (a palm-sized box to set on top of a TV); Microsoft’s Xbox 360 game console; TiVo digital video recorders; and, soon, Internet TVs from Sony and VIZIO. Netflix is even shipping instant streaming discs for the Wii enabling viewers to catch their favorite TV episodes and movies on their Wii consoles.

Putting People First

But has Netflix’s ability to attract and retain a dynamic, high-performance workforce also been an important factor that has propelled the company to such success? Yes, in order to succeed in this business, Hastings is betting as much on people as he is on technology and his business vision. The company does not act like other large employers when it comes to its human resources management and cul­ture. Instead, Netflix has created a very interesting organiza­tional culture based on freedom and responsibility, innovation, and self-discipline. Patty McCord, Netflix’s chief talent officer, understands that deftly managing the talent mix at Netflix is paramount to the success of the company.

Netflix is committed to hiring and retaining the best talent in the industry. One of their recruitment and retention practices is to pay top salaries. Netflix believes that one outstanding employee does more and costs less than two adequate performers. Thus they pay at the top of the market and strive to hire only outstanding employees. Interestingly, pay isn’t linked with performance in the sense of annual “merit” reviews. Annual compensation reviews are market-based as well. Salaries are pegged to job markets to ensure that Netflix’s pay packages are always the best around.

Freedom with Accountability

If you are identified as a top performer, you get top salary and are given the freedom to put your talents to work making Netflix’s strategy successful. But if you’re something less than a top performer, say just “average,” there isn’t room at the company. “At most companies,” says Hastings, “average per­formers get an average raise. At Netflix they get a generous severance package.” The Netfix focus on large salaries is coupled with the free­dom to spend it as employees think it is best. Employees choose how much of their compensation is paid in cash and how much in stock or stock options.

Flexibility Rules a Productive Work Environment

Netflix not only hires carefully, it offers a unique and highly productive work environment rich in features that appeal to today’s high-tech and high-talent workers. They believe in freedom and responsibility, not rules. Since 2004 Netflix has not had a vacation policy. Instead, the company encourages employees to take time off when they need to. Similarly, they do not have a 9-to-5 work schedule but measure people by how much, how quickly, and how well they get their work done, not by how many evenings or weekends they are in their cube. 16 Netflix has a lot riding on its human resource strategy. Will it continue to pay off?

Case Analysis Questions

1. What are the limitations and risks of Netflix’s human resource management practices?

2. What performance appraisal methods would be most consistent with the organizational culture surrounding Netflix’s HRM practices?

Generating a Plan of Action for Robin Hood

SWOT & TOWS Matrix: The SWOT model provides a comprehensive view of the firm in relation to its environment. Taking this further, you will learn to build a plan of action using the TOWS Matrix for Robin Hood.

BEFORE READING THE ROBIN HOOD MINI-CASE BELOW, PLEASE READ THIS DOC FOR THE THEORY BEHIND SWOT & TOWS MATRIX SWOT and TOWS Matrix.pdf

ROBIN HOOD MINI-CASE

It was in the spring of the second year of his insurrection against the High Sheriff of Nottingham that Robin Hood took a walk in Sherwood Forest. As he walked, he pondered the progress of the campaign, the disposition of his forces, the Sheriff’s recent moves, and the options that confronted him. The revolt against the Sheriff had begun as a personal crusade. It erupted out of Robin’s conflict with the Sheriff and his administration. However, alone Robin Hood could do little. He therefore sought allies, men with grievances and a deep sense of justice. Later he welcomed all who came, asking few questions and demanding only a willingness to serve. Strength, he believed, lay in numbers. He spent the first year forging the group into a disciplined band, united in enmity against the Sheriff and willing to live outside the law. The band’s organization was simple.

Robin ruled supreme, making all important decisions. He delegated specific tasks to his lieutenants. Will Scarlett was in charge of intelligence and scouting. His main job was to shadow the Sheriff and his men, always alert to their next move. He also collected information on the travel plans of rich merchants and tax collectors. Little John kept discipline among the men, and saw to it that their archery was at the high peak that their profession demanded. Scarlock took care of the finances, converting loot to cash, paying shares of the take, and finding suitable hiding places for the surplus. Finally, Much, the Miller’s son, had the difficult task of provisioning the ever increasing band of Merry Men.

The increasing size of the band was a source of satisfaction for Robin, but also a source of concern. The fame of his Merry Men was spreading, and new recruits poured in from every corner of England. As the band grew larger, their small bivouac became a major encampment. Between raids the men milled about, talking and playing games. Vigilance declined, and discipline was becoming harder to enforce. “Why,” Robin reflected, “I don’t know half the men I run into these days.” The growing band was also beginning to exceed the food capacity of the forest. Game was becoming scarce, and supplies had to be obtained from outlying villages. The cost of buying food was beginning to drain the band’s financial reserves at the very moment when revenues were in decline. Travelers, especially those with the most to lose, were now giving the forest a wide berth. This was costly and inconvenient to them, but it was preferable to having all their goods confiscated. Robin believed that the time had come for the Merry Men to change their policy of outright confiscation of goods to one of a fixed transit tax. His lieutenants strongly resisted this idea. They were proud of the Merry Men’s famous motto “Rob from the rich and give to the poor.” “The farmers and the townspeople,” they argued, “are our most important allies. How can we tax them, and still hope for their help in our fight against the Sheriff?”

Robin wondered how long the Merry Men could keep to the ways and methods of their early days. The Sheriff was growing stronger and becoming better organized. He now had the money and the men and was beginning to harass the band, probing for its weaknesses. The tide of events was beginning to turn against the Merry Men. Robin felt that the campaign must be decisively concluded before the Sheriff had a chance to deliver a mortal blow. “But how,” he wondered, “could this be done?” Robin had often entertained the possibility of killing the Sheriff, but the chances for this seemed increasingly remote. Besides, killing the Sheriff might satisfy his personal thirst for revenge, but it would not improve the situation. Robin had hoped that the perpetual state of unrest, and the Sheriff’s failure to collect taxes, would lead to his removal from office. Instead, the Sheriff used his political connections to obtain reinforcement. He had powerful friends at court and was well regarded by the regent, Prince John.

Prince John was vicious and volatile. He was consumed by his unpopularity among the people, who wanted the imprisoned King Richard back. He also lived in constant fear of the barons, who had first given him the regency, but were now beginning to dispute his claim to the throne. Several of these barons had set out to collect the ransom that would release King Richard the Lionheart from his jail in Austria. Robin was invited to join the conspiracy in return for future amnesty. It was a dangerous proposition. Provincial banditry was one thing, court intrigue another. Prince John had spies everywhere, and he was known for his vindictiveness. If the conspirators’ plan failed, the pursuit would be relentless, and retributions swift. The sound of the supper horn startled Robin from his thoughts. There was the smell of roasting venison in the air. Nothing was resolved or settled. Robin headed for camp promising himself that he would give these problems his utmost attention after tomorrow’s raid.

After reading the SWOT and TOWS Matrix.pdf and the Robin Hood Mini-Case above, please click on this doc link Robin Hood TOWS Matrix.docx and complete the exercise according to the instructions provided in the word document and submit it.