Question 2: Service Process Matrix

On the Service Process Matrix, where the x-axis measures the degree of interaction and customization, and the y-axis measures the degree of labor intensity, Netflix lies in the upper left quadrant, named "Service Factory". They are however, very close to the center of the matrix on the y-axis as their business has a low amount of interaction with the customer, and at the same time, a high degree of customization.

Netflixs' top three competitors are: Blockbuster, Amazon.com, and Bestbuy. Blockbuster and Bestbuy, both businesses that are inherently more labor intensive since they have actual store front locations, lie in the bottom left, "Mass Service", quadrant of the service matrix. Amazon is in the same quadrant as Netflix, "Service Factory", since both are online-only retailers whose businesses are run from warehouses throughout the country.

Blockbuster is facing a great disadvantage when compared to Netlix since they have a lot of capital tied up in physical stores, and this fact is evident when comparing the market capitalization of both companies (Netflix: $2.8B, Blockbuster: $97M).

Amazons' position is much better since they are a larger company that offers many products and services and are not dependent on DVDs to generate revenue. Since they are a much larger company, they also have a considerably higher amount of cash on hand to invest in new projects ($2.7B vs. $140M at Netflix). Also, both Amazon and Blockbuster offer online services that are similar to Netflix whereby a user can create a list of DVD's they want to watch and both have the ability to stream video to a compatible device.

Lastly, Bestbuy is a movie and technology retailer, and offers an alternative to Netflix for customers who would prefer to purchase a DVD rather than just renting it. Since Bestbuy is a retailer, they also sell Netflix-ready equipment to allow users to stream videos from Netflix (and Amazon) directly to their televisions.