OIM Quiz 2: Netflix Strategy Insights

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Questions and Answers

What aspect of Netflix going public lured large, established firms into the market?

Netflix's model of flat-rate monthly subscriptions was found to be more profitable than a per-disc rental fee model.
By going public, Netflix was required to disclose its financial position. (correct)
By going public, Netflix was forced to reveal the Cinematch algorithm used to classify user ratings.
Netflix's plan to enter the online movie streaming market alerted rivals to the possibility of losing their market share.
The migration of Netflix services to cover the Blu-ray disc market opened up opportunities for rivals.

The long tail is a phenomenon whereby firms can make money by:

Leveraging customers to promote their products or services.
Selling the same product to virtually every customer the Internet can reach.
Selling the same product at different prices with only minor tweaks in their design.
Offering a selection of products or services vastly greater than conventional retailers. (correct)
Reselling multiple versions of a single product under different brand names.

Collaborative filtering is a classification of software that:

Monitors trends among customers to personalize an individual customer's experience. (correct)
Selectively sorts movies based on their censor ratings and delivers age-appropriate search results.
Provides Netflix users with parental controls and other options while streaming movies online.
Collates user ratings for a movie and creates a ranked list of movies most liked by users.
Is used to gather user ratings and calculate a gross average user rating for each movie.

How does the Cinematch recommendation system work?

Cinematch develops a map of user ratings and steers users toward titles preferred by people with similar tastes. (E) Signup and view all the answers

Churn rate refers to the:

Rate at which customers leave a product or service. (C) Signup and view all the answers

How is scale important to Netflix's streaming business?

A larger firm with more customers can spend more on content licenses. (A) Signup and view all the answers

Price elasticity refers to the:

Rate at which demand for a product or service fluctuates with price change. (C) Signup and view all the answers

Sony has ceded its market dominance to Apple because:

It failed to take advantage of opportunities presented by Moore's Law. (A) Signup and view all the answers

Which of the following is true of disruptive technologies?

Initially underperforming incumbents, over time their performance attributes improve to the point where they invade established markets. (C) Signup and view all the answers

Which of the following is a way to recognize potentially disruptive innovations?

Seeking the opinions of venture capitalists, research academics, and passionate internal engineering staff. (E) Signup and view all the answers

Which of the following is considered one of the three 'pillars' critical to Amazon's business success?

Large selection. (E) Signup and view all the answers

Why would Amazon allow products sold by others to appear on its site?

All of the above. (E) Signup and view all the answers

Which of the following is true of Amazon's warehousing process?

When stacking shelves in its warehouses, Amazon ensures that no two similar products sit next to each other. (C) Signup and view all the answers

Money owed for products and services purchased on credit to be paid at a later date is known as _____.

accounts payable Signup and view all the answers

The firm's period between paying suppliers for products and collecting funds from customers who purchase these products is referred to as the _____.

cash conversion cycle Signup and view all the answers

Firms that can't generate cash quickly enough are referred to as having _____.

liquidity problems Signup and view all the answers

The phrase inventory turns refers to:

The number of times inventory is sold or used during a specific period. (D) Signup and view all the answers

Which of the following is true of Amazon Web Services (AWS)?

It is just a single-digit percentage of Amazon's overall revenue. (B) Signup and view all the answers

Amazon Web Services (AWS):

Offers several advantages, including increased scalability, reliability, and security. (B) Signup and view all the answers

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Study Notes

Netflix Competition and Public Offering

Netflix's public offering attracted major competitors like Wal-Mart and Blockbuster.
The new entrance by Netflix revealed its intention to innovate, especially in online streaming, raising concerns over market share losses.

Long Tail Business Model

Long tail refers to monetizing by offering a vast selection of products beyond typical retail assortments.
This model allows companies to cater to niche markets, differing from conventional sales strategies.

Collaborative Filtering

Collaborative filtering customizes user movie suggestions by analyzing the preferences of similar users.
It enhances the personalization of the user experience on platforms like Netflix.

Cinematch Recommendation System

Cinematch creates a tailored experience by mapping user ratings and preferences, steering users towards similar titles.

Churn Rate

Churn rate measures customer retention, specifically indicating the percentage of customers leaving a service.

Importance of Scale at Netflix

A larger customer base enables Netflix to invest more in acquiring content licenses, offering competitive advantages.

Price Elasticity

Price elasticity assesses how demand for a product changes in response to price alterations, indicating consumer sensitivity.

Sony’s Market Shift to Apple

Sony lost its dominance in portable music to Apple due to failure to adapt and capitalize on technology trends.

Disruptive Technologies

Disruptive technologies initially perform less but eventually improve to compete with established firms in the market.

Recognizing Disruptive Innovations

Engaging with venture capitalists and forward-thinking internal teams can help identify potential disruptive innovations.

Amazon's Business Model Pillars

A vast selection of products is one of the three core elements that have driven Amazon's success.

Third-Party Sellers on Amazon

Allowing third-party sellers enhances product selection and creates network effects, benefiting Amazon strategically.

Amazon's Warehousing Strategy

Amazon optimizes its warehouse organization by ensuring that no similar items are stored together, facilitating efficient order fulfillment.

Accounts Payable

Accounts payable defines the total debts owed by a company for goods and services received on credit.

Cash Conversion Cycle

Cash conversion cycle describes the interval between paying for inventory and receiving payments from customers.

Liquidity Issues in Firms

Firms facing liquidity problems struggle to generate cash flow quickly enough to meet liabilities.

Inventory Turns

Inventory turns indicate the frequency at which inventory is sold or used within a determined timeframe, reflecting sales efficiency.

Amazon Web Services (AWS)

AWS contributes a minimal revenue percentage compared to Amazon's overall earnings, yet it provides extensive computing capabilities to both corporations and individual clients.

Advantages of AWS

AWS offers diverse benefits, such as enhanced scalability, reliability, and security for computing resources, influencing various industries’ operational methodologies.

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