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NETFLIX

MGMT 5005 – Supply Chain Risk Management

Submitted to
Prof. Amy Vuong

Submitted by
Ramandeep Singh, Harpreet Kaur, Natarajan Sundaresh, Kanwaljit Singh
November 21, 2014

.............................................................................................................................................................................................................................. 4 Weakness: ........................................................................................................................................................................................................................................................................................................................................................................... 7 IMPLEMENTATION .......................................... 7 REFERENCES ............................................................................................................................................ 6 ALTERNATIVES/OPINIONS ................................ 5 PEST ANALYSIS .................................................................................................................................................................... 7 MONITOR & CONTROL: THE BALANCED SCORECARD ........................................................................................NETFLIX Contents EXECUTIVE SUMMARY....... 2 ISSUE IDENTIFICATION ................................................................... 5 Opportunities: .................................................................................................................................................................................................................... 6 RECOMMENDATIONS ............... 3 SWOT ANALYSIS .............................................. 3 ENVIORNMENTAL AND ROOT CAUSE ANALYSIS ............................................................................................. 9 St Lawrence Page 1 ............................... 5 Threats: ................................................................................................................. 4 Strengths: .....................................................................................................................................................................................

The number of rivalries are increasing. Inc. we have to set a long term goal to acquire 5 million subscribers in the U. To accomplish that. and in less than six years their subscriber base has more than doubled to more than 10 million subscribers. Their intent is to leverage their online DVD rental leadership to grow both subscribers and net income.NETFLIX EXECUTIVE SUMMARY “Netflix. “Netflix growth strategy entails making the best product and the best consumer experience even better. or 5 percent of the U.” Netflix’s vision is “to change the way people access and view the movies they love.” Netflix exhibits dominant economic characteristics in the online movie rental business. St Lawrence Page 2 . TV households over the next four to seven years (Thompson C-41).. on a large scale. Walt Disney Movies and Movielink’s Downloadable Movies. with more than 10 million subscribers (Netflix Media Center. They enjoy strong market size and growth rate when compared to rivalry competition. 2009). and the market remains dominated by only a few sizeable rivalries like Blockbuster Video. thereby using a balanced scorecard approach relating to financial performance and those related to strategic performance. Netflix is determined to offer new and innovative technology to sustain their competitive advantage.S.” This vision is well devised and crafted setting short term and long term performance targets. Lead the expansion of internet delivery content by offering subscribers both mail delivery and a continuously improving internet delivery option (Netflix Overview. Current analysis shows less than 4 million subscribers in 2004.S. is the world's largest online movie rental service. Wal-Mart. 2009).

GOOGLE. They should focus on increasing their focus in different markets like India instead of only focusing on U. Movie Gallery and Redbox (Source: Netflix Annual Reports 2010) Video package providers with pay-per-view and VOD content including cable providers. Amazon. such as Apple’s iTunes. direct broadcast satellite providers. ENVIORNMENTAL AND ROOT CAUSE ANALYSIS DVD rental outlets and kiosk services.  FINANCIAL RISK – High debt and increasing working capital cost.  SUPPLIER STRENGTH. Wal-Mart and Amazon. However this competitive advantage may go if the distribution to these multiple formats happens simultaneously. (Source: Netflix Annual Reports 2010) Popularity of alternative entertainment mediums which can be distributed using a similar business model like Netflix (Example – Gaming CD and DVDs) Currently the time for distribution in DVD format is shorter than release to other mediums (VOD. premium TV etc) after a theatrical release of a movie. Hulu.  COMPETITORS – HBO. so the cost is increasing for Netflix. such as Time Warner and Comcast.Ever expanding market size and threat to be left out in a market.com (Source: Netflix Annual Reports 2010) Internet movie and TV content providers. AMAZONE. such as DIRECTV and Echostar. such as Blockbuster Online (Source: Netflix Annual Reports 2010) Entertainment video retail stores.com and Google’s YouTube.com. This gives a competitive advantage to the DVD market. such as Blockbuster.NETFLIX ISSUE IDENTIFICATION  MARKET RISK .Cost of content is increasing as they need to buy in from different supplier and producers as they have copyright. and telecommunication providers such as AT&T and Verizon (Source: Netflix Annual Reports 2010) Online DVD subscription rental web sites. HULU etc. St Lawrence Page 3 . such as Best Buy.S  BARGANING POWER – customers have higher bargaining power due to available different option.

The DVD format would probably give way to Internet movie and TV content providers and Netflix would be left stranded with its warehouse and sophisticated mail handling systems. Original Content: Award winning original content for series House of Cards and Hemlock Grove and other critically acclaimed titles.NETFLIX The proprietary technology and information systems are also based on a certain historic scale of operations which has increased substantially and this could lead to systemic disruptions and negatively impact operations. SWOT ANALYSIS Strengths:            Brand Recognition: The Netflix brand is very well known and has become a verb among many internet users. Accessibility: The Netflix App has enabled their subscribers the ability to stream media on nearly all internet enabled devices. Cost of Content: The cost of mass licensing packages and the in-house original content production has the company undertaking a large amount of debt. there is an opening for internet tv and Netflix’s exclusive inhouse content poises the company for that demand. St Lawrence Page 4 . However the one thing which will continue to survive is CINEMATCH and its database of billions of movie ratings which will give a competitive edge to Netflix when it decides to switch over to other formats of movie distribution. International Expansion: The ability to create original content will enhance international growth. Original In-House Programming: With many house-hold entertainment devices connected to the internet. Original Content: Award winning original content for series House of Cards and Hemlock Grove and other critically acclaimed titles. Raising Subscription Prices: Netflix has a difficult time raising subscription prices. DVD Subscribers: DVD and Blu-ray subscribers have dramatically declined in 2013. Accessibility: The Netflix App has enabled their subscribers the ability to stream media on nearly all internet enabled devices. The last attempt to raise monthly subscription prices left currently subscribers upset and Netflix stock tumbling. Brand Recognition: The Netflix brand is very well known and has become a verb among many internet users.

YouTube): Both. Netflix may have to assume more debt or cut content. Original In-House Programming: With many house-hold entertainment devices connected to the internet. With net neutrality laws struck down. Raising Subscription Prices: Netflix has a difficult time raising subscription prices. Content Price: The price of licensing and renewing those license agreements remain to be the largest threat to the company’s ability to operate at a profit. With net neutrality laws struck down. Weakness:    Cost of Content: The cost of mass licensing packages and the in-house original content production has the company undertaking a large amount of debt. YouTube): Both. ISPs: Netflix accounts for about 30% of daily internet traffic. Content Price: The price of licensing and renewing those license agreements remain to be the largest threat to the company’s ability to operate at a profit. Opportunities:    International Expansion: The ability to create original content will enhance international growth. Amazon Prime and YouTube has announced their own original content productions and aim to be a direct competitor to Netflix. St Lawrence Page 5 . Word-of-Mouth Campaigns: Marketing expenses have steadily decreased due to word-of-mouth campaigns based on original content. Threats:    ISPs: Netflix accounts for about 30% of daily internet traffic. Competition (Amazon Prime. there is an opening for internet tv and Netflix’s exclusive inhouse content poises the company for that demand. DVD Subscribers: DVD and Blu-ray subscribers have dramatically declined in 2013. Amazon Prime and YouTube has announced their own original content productions and aim to be a direct competitor to Netflix. Competition (Amazon Prime. Netflix may have to assume more debt or cut content. The last attempt to raise monthly subscription prices left currently subscribers upset and Netflix stock tumbling.NETFLIX     Word-of-Mouth Campaigns: Marketing expenses have steadily decreased due to word-of-mouth campaigns based on original content.

NETFLIX PEST ANALYSIS ALTERNATIVES/OPINIONS  Focus on original content publishing like ‘Orange is the new Black’ – increased revenues and lower costs  Pursue market penetration by excellent service and low prices  Capitalize on their award winning ‘Customer preference’ software – differentiation factors  Create more partnership to create perfect hardware  Invest in innovation St Lawrence Page 6 .

few of which are listed below: 1. MONITOR & CONTROL: THE BALANCED SCORECARD This method of analysis will allow firms to evaluate strategies from four perspectives: Financial performance. customer knowledge. The following table is Netflix’s Balanced Scorecard: St Lawrence Page 7 . Continuous and consistent representation of the company 3. Investing in R&D to improve efficiencies 6. Strong human resource team 2. Focus on Marketing through social media 5. internal business processes. movies and content would be a major game changer for Netflix • Increased revenues at lower costs • Capture the loyalty of customers through copyrighted content • Price rises should be done with caution – recent hike led to loss of 6 M customers • Netflix should start broadcasting ULTRA HD Contents IMPLEMENTATION This strategy can be implemented by following many key factors. Improve the MIS (Management information system) to achieve supply chain efficiencies. and learning and Growth.NETFLIX RECOMMENDATIONS • Production of in house serials. Develop more distribution centres to accommodate the growing economies of scale 4.

Number of Increase customer 2018 customers base to 100 M in 3 Aggressive years expansion Managers/Employees 1.NETFLIX Area of Objectives Measure or Target Time Primary Expectation Responsibility Customers 1. Lowering the Cost of software Marginal Cost 2018 decreased by 4% Outsource more types of content. Financial sustainability Net Profit increased to 6% (currently 3%) 2019  TQM practice  Optimize global expansion St Lawrence Page 8 . Eco friendly company E waste to reduce by 40 2016 % ISO 14001 standard Financial 1. implementation Business Ethics/Natural Environment 1. Employee welfare Employee Turnover 4 years decreased by 20% Enhance communication. Operations/Processes 1.

com/299989/netflix-now-accounts-for-35-of-bandwidth-usage-in-the-us-andcanada/ St Lawrence Page 9 . Netflix.com • http://www.com/hbo-challenges-netflix-streaming-announcement-questionsloom-about-price-quality-cable-tvs-1705777 • http://qz.ibtimes.NETFLIX REFERENCES • www.