1) Faced with the increased costs of delivering DVDs by mail and streaming online content, clearly Netflix had to take some action. Describe the decision-making process you would have advised Netflix management to follow.

2. What values are reflected in the Netflix decisions presented in the case?

3. Think back to the chapter discussion about the con- cept of escalation of commitment. Was Netflix's

continuation with its pricing action (which resulted in a large loss of customers) reflective of escalation

of commitment, or was it a rational plan? Explain.

Answer:

1.   Netflix management should follow the rational-decision-making process which comprises of seven steps, the company needs to, have full company meeting to have a brainstorming, revise their strategy and have alternative solutions, evaluate the solutions and come up with a new plan through evaluation of the alternatives and selecting the best, set the long term and short term goals, should use the focus group, implement the strategy and finally follow up evaluation the decision made.

2.   The values reflected in the Netflix decision happiness, sense of accomplishment, and responsibility as the top management were responsible for the decision-making process, honesty, ambitions, and capability as they are capable of making decisions to solve problems. It is also assumed they value net profit over consumer satisfaction.

3.   There was no Escalation of commitment since it means increased commitment to a decision despite negative information.it was a rational plan which means making consistent values-maximizing choices within specified constraints because when Netflix was faced with the issue where the stock price plummeted from its peak to approximately $69 per share the decisions to solve the challenge were made through shareholders vote. They identified the problem and decision strategy, selected the best decision, implemented the decisions, and evaluated the decision, though a consumer firestorm occurred, making them change their decisions.