Peter Drucker’s five deadly sins in 2016

(Peter Drucker) In 1993 Peter Drucker published a column titled The Five Deadly Business Sins, a copy for download is available here. Here, I want to shortly summarize them and see how they relate to what is going on in our current business world. 1. Premium pricing and high profit margins Drucker criticizes that companies falsely assume that high profit margins equal maximum profits. The profit equation of course suggests otherwise: Total profit equals profit margin multiplied by amount of goods or services sold. Additionally he argues that premium pricing always creates a market for lower-end competitors. He gave two example for this sin: Xerox and GM. Xerox, over-engineered its copier and, therefore, raised its prices into the premium segment creating high profit margins for Xerox. However, as consumers only needed a basic version, Xerox lost significant market share to Canon who entered the market which such a basic copier. Further, Drucker argues that the U.S. automobile industry (including GM) lost market share due to its fixation on „big cars“ as opposed to Volkswagen and Japanese competitors with their small, fuel-efficient cars. U.S. competitors followed their competitors, but not soon enough, due to the low per car profit margins. This

Strategic implications for Netflix’s future

Source I am currently read Frank Rothaermel’s Strategic Management: Conceptsand also doing the “Chaptercases” (case studies at the end of each chapter) and posting them here on my blog. Chapter seven’s “Chaptercase” happens to be about Netflix, which is a nice coincidence as Netflix recently published its earnings for Q3 2016; its last quarter’s user growth exceed its expectations in the U.S. as well as in international markets. The streaming service currently has about 86,75 million users in total (see statistic below for details). Source: and personal calculations So, here are the questions from the case study: Netflix growth in the United States seems to be maturing. What other services can Netflix offer that might further demand in the United States? International expansion appears to be a major growth opportunity for Netflix. Elaborate on the challenges Netflix faces going beyond the U.S. market. What can Netflix do to address some of the challenges encountered when going internationally? Netflix growth in the United States seems to be maturing. What other services can Netflix offer that might further demand in the United States? Original content: The company has given that answer in the letter to shareholders. Netflix has been creating on content for four years now and user growth