Classroom Companion: Business

 
Chapter 8 · Value Creation Models and Competitive Strategy

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8
The public 
is made up of more than just users and buyers. Society has numerous 
written and unwritten rules that may influence the market of a company. Some of 
these rules are ethical; for example, a company may sell products which are made by 
suppliers who employ child workers, cause pollution, or prohibit workers to form 
labor organizations. This company may meet strong hostility in the market. Recently, 
strong public opposition forced shops to stop selling clothes with certain types of fur.
 Case Study 8.1 Netflix
.
Table 
8.2
shows a simple analysis of the film and video streaming services of 
Netflix using Porter’s five forces model plus the three versions of the sixth force.
. Table 8.1 Complementors. (Authors’ compilation)
Complementors and 
complementary products
Type (unilateral or bilateral)
Intel (hardware) and 
Microsoft (software)
Bilateral: both companies depend on each other to provide a 
complete service
DVD players and DVDs
Bilateral
Printers and ink cartridges
Bilateral
Apps and smartphones
Unilateral: smartphones offer services that do not involve the 
use of apps
Skype and ISPs
Unilateral: Skype depends on ISPs for Internet access, while ISPs 
do not depend on Skype to offer Internet access
. Table 8.2 Competitive forces and threats. (Authors’ compilation)
Type
Threat
Competi-
tion
Cinemas, broadcast corporations, Disney +, Amazon Prime, Redbox, 
Hulu Plus, and several other providers of equivalent services
New 
entrants
Any new provider of streaming services may capture market shares 
from Netflix
Bargaining 
power of 
users
Because of competition, the bargaining power of uses is mainly on 
price
Bargaining 
power of 
suppliers
Distributors of films may withdraw their contract with Netflix as The 
Walt Disney Company is doing in favor of its own streaming service 
Disney +. Film studios may also negotiate higher prices and special 
conditions for delivery of content. They can also ban Netflix from 
buying their content
(continued)