Final answer:
Netflix's choice to create original content in 2012 was a strategic product development decision that addressed past misjudgments of consumer preferences and market trends. It leveraged the growing trend of streaming video preference, which led to a significant increase in subscribers.
Step-by-step explanation:
In 2012, when Netflix decided to create original content for its streaming service, it was making a strategic decision focused on differentiation and adaptation to changing market conditions. This move can be categorized as a product development strategy within the Ansoff Matrix - a framework used to understand and explore various growth strategies. By recognizing the trend where the preference for streaming video was overtaking physical DVD disks, Netflix could capitalize on the shift in consumer behavior, despite previous missteps where they had misjudged customer preferences and the impact of close substitutes.
This strategic decision aimed to increase their competitive advantage and address the issue of elasticity of demand that they previously faced. The substantial increase in the number of subscribers over time suggests that this strategy was effective in capturing the market's interest. Netflix's foray into original content not only helped differentiate their service but also set a precedent for streaming platforms as producers of exclusive content.