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Employee Memo

Question Description

Each week, you’ll be participating in a threaded discussion relative to chapter topics. They involve the whole class and deal with questions that come up in your chapter readings. You are required to post twice weekly in each unit discussion. In many cases, I will have multiple topics within each chapter discussion. You are not required to post on each topic to receive credit; you are required to respond and/or comment to one or more of the topics twice. Remember, it is a discussion so you should be responding to each other unless, of course, you begin the discussion on a specific topic. Short responses such as “I agree with John” will not count; nor will short one or two sentence responses. Also, if your response/comment is not original in thinking, you will not receive full credit. In other words, be sure to read other comments before you make your own or you could duplicate someone else’s response therefore reducing the point value for your thread. Those who wait until late Sunday may have a more difficult time with this.

Topic 1: Provide an example (either a personal example in your own place of work or by doing some research online) of a recent communication from a company to its own employees and discuss what you believe the objective of the communication was and do you feel the company communicated in a manner that achieved that objective? Why or why not? What was the response in general to the communication?

Topic 2: In chapter 2, we look at the objective of a particular communication and its effect on the organization’s constituencies. In 2011, Netflix was publicly embarrassed by an email sent out to its customers (primary constituency) addressing a price increase. The email was poorly received and the feedback was quick and harsh. Shortly after, a second email was sent out by the CEO of Netflix addressing the poor communication on the part of Netflix. Below is the scenario along with the apology email. Analyze the apology email and discuss what you think was communicated well and what could have been communicated better. Use the information learned in chapter 2 to support your reasoning.

Here is what happened: Netflix had a DVD-by-mail and online streaming combo plan for $10 per month. The company decided to increase the price of the plan by 60 percent to $16. It offered customers a choice between paying $8 a month for the DVD service alone or $8 per month for the streaming service. Customers that wanted both had to pay the new price of $16. That move was very unpopular, causing a huge uproar among their customers and investors.

Dear (Customer Name),

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

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