Question

Netflix versus Volkswagen

Netflix was first founded in August of 1997 by two serial entrepreneurs Marc Randolph and Reed Hastings. The company started out in Scotts Valley, California and has grown to become the world's leading internet entertainment platform. When it first opened, Netflix was purely a website-based movie rental service. Later, they start producing their own movies, series, and drama. So, it was growth form movie renting to movie production.

Volkswagen AG, known internationally as the Volkswagen Group, is a German multinational automotive manufacturing company which manufactures a large variety of automobiles. Volkswagen stepped up its efforts to become the world's number-one carmaker in July 2012 by buying up the Porsche – the luxury sports car manufacturer. Porche was thus integrated into Volkswagen, joining the likes of Audi, SEAT, Bugatti, Bentley and Skoda (which are VW subsidiaries). Thus, Volkswagen's acquisition of Porche is a form of growth strategy.

Both companies followed the concentration strategies. Analyze and describe how are they different or similar in their concentration strategy? (10 Marks).

Answer 1

In the given case both companies have followed some type of concentration strategies. Both have focussed increasing their market shares by concentrating on one line of product and gain market share or even become the market leader in that space.

Let us examine their strategies one by one.

In the case of Netflix the market grew from movie rentals company to movie production company. They started their business as a movie rental company where one can go online and order their favorite movies to be delivered to their homes. Slowly they improved on this and started offering on demand movie streaming services. When the streaming services picked pace they started producing original series and movies. As we can they have adopted the Product Development Strategy, they introduced the on demand movie streaming and film production for online release to the people. Once they tapped their home market in the US they moved global and started offering their services in other countries as well, this here shows that they adopted Market Development strategy as well as they offered their existing products to new emerging markets.

In the case of Volkswagen(VW) group the automaker acquired another company Porsche to increase its product portfolio. Here the concentration strategy is different from that of Netflix. The company here has adopted the strategy of Horizontal integration via acquisition. Horizontal integration is such when the company acquires a competitor working at the same level in the production cycle. Porsche was a competitor in the luxury car space and VW acquired it.