Netflix: Dynamic Capabilities for Global Success

Abstract

With over 90 million members in more than 130 countries, Netflix has proven itself to be a leader in the global Internet TV industry. This case study documents the firm’s phenomenal rise from uncertain beginnings in DVD rentals to online streaming and original content. It highlights the role of dynamic capabilities in the company’s global success, showing how the firm’s strategy evolved over three key eras in its history. During the first era Netflix focused on the establishment of a scalable business model in the form of DVD rentals offered to mainstream segments at a competitive price. It developed novel resources and capabilities in its second era with reliable online streaming and ‘big data’ algorithms that customized a variety of content to customer preferences. However, it was only with the introduction of 'Netflix Originals', that the firm exercised dynamic capabilities. What were the dynamic capabilities underlying the firm’s growth? Are the strategic approaches that the firm used in the past sufficient to assure sustainable competitive advantage on a global scale?

Keywords: algorithms, business models, capabilities, DVD, dynamic capabilities, movies, vrio