Netflix has been on a bumpy road due to managerial decisions that led some customers very unhappy. Around a year ago, Netflix decided to split up into two companies that separated it’s DVD rentals and instant online viewing of movies and television shows. The rebranding, along with pricing changes and some pretty bad PR, had many customers drop their Netflix subscription. There was definitely a need for change, so the company would not go under and could return to profits. This is where the importance of forecasting comes into play.
Netflix made some changes and recently released their third quarter earnings to the public. After the second quarter, Netflix returned to profitability and again in the third quarter. There was one issue that CEO Reed Hastings addressed in his third quarter investor call. He stated that the growth was “within the range of guidance from a year ago, although not from Q1.” He made it clear that it was a forecasting error instead of a stunt in overall growth. Netflix had to lower its own forecast by two million subscribers, even though it grew by five million subscribers this year.
I feel that two million is a big number to miss by an incorrect forecast. Why do you think that they missed this by this big of a number? Do you think Hastings is just trying to make light of the situation by saying that the forecast error has not really affected them? Is he doing this to just reassure his company is moving forward and continuing to grow? Will the forecast error affect the company in the future?
Hastings is optimistic about the future of Netflix due to strong growth abroad with recent expansions to Europe and South America. Also, Netflix is trying to compete with Amazon, Hulu, and HBO by the high value of exclusive content deals that Netflix has already and is still acquiring. Hastings has made it clear that “the outlook (for the company) has not changed” even after the disaster of splitting up the company.
Operations and productivity are essential when discussing about a business’s goods and services. Operations and productivity are the actual creation of a product, and it could make or break the company. If a business does not produce quality products and a certain number of goods, then the business could fail. This is why understanding what an operations manager does is important to finding how a business succeeds.
I found an interesting article from CNN relating to operations management and production. It deals with Tesla automobiles plan to produce a large amount of electric cars by the end of the year. Tesla is a luxury electric vehicle company that began as an independent company in 2003. This past week, for the first time in the history of the company, they produced 100 electric vehicles. This is huge for the company because in the past, they averaged on producing 10 vehicles per week. CEO Elon Musk has recently stated that by 2013 Tesla will boost production to “at least 20,000 units”. To meet that goal, Tesla will have to produce 400 vehicles per week. With these facts, the real question is “How can a very young automaker, one so meticulous in its efforts to make the perfect car, actually boost production levels at such a fast rate in the next few months and still maintain its high standards?”
The operation managers should really look at number two and three of the critical decisions, which are “managing quality” and “process and design capacity design”. It is obvious that they changed crucial components of their production because of the high amount of cars they recently produced. Granted, these cars have not been sold, so it is hard to determine its quality. According to the article, “going from producing 10 cars a week to over 400 in two quarters is quite monumental for any car company, never mind an automaker that is as young as Tesla.” It just does not seem realistic for this company to maintain its high quality by producing so many cars, so quickly.
After the class activity about producing paper origami’s, it was known that speed and quality need to be compromised. The faster the production of origami’s were being forced, the quality was greatly lessened. The same could be said for a lot of other good’s including Tesla luxury electric cars. It will be interesting to see how many electric vehicles will be produced by 2013 and if Tesla will be able to meet their goal with keeping their high quality standard.
What are your thoughts about Tesla’s historical push to produce a high rate of cars? Do you think the quality will be maintained? Will the company meet its goal? Is it good for a company to set such high goals?