EPGDM TERM 3

Global Dimensions to International Business – GDIB

SET A

1. Full form of GDP and what is the difference between GDP per Capita

GDP - stands for gross domestic product.

Definition: GDP is the final value of the goods and services produced within the
geographic boundaries of a country during a specified period of time, normally a year.
GDP growth rate is an important indicator of the economic performance of a country.

Difference between GDP & Per capita

GDP, which stands for Gross Domestic Product, is a measure describing the value of
a countryÃ-s economy. Despite plenty of criticisms from respected authorities in
economy GDP is still the most popular method to indicate a country’s economic state.
GDP takes into account all of the goods produced and services made available in a
country over a specific period of time. Often, GDP is obtained quarterly and annually.
GDP is a number that will ultimately indicate the overall economic health of the country.
Though still widely accepted, it is not without significant flaws. Many bodies have
already proposed and some had already implemented alternate formulas or measures
to gauge economic well-being.
GDP per capita is a measure that results from GDP divided by the size of the nation’s
overall population. So in essence, it is theoretically the amount of money that each
individual gets in that particular country. The GDP per capita provides a much better
determination of living standards as compared to GDP alone.
National income is naturally proportional to its population so it is only fitting that with
the increase of the number of people, there is also an increase in GDP. However, it
does not entirely mean that with high GDP, a high standard of living also results.
A country with high GDP but with an overwhelmingly large population will result in a
low GDP per capita; thus indicating a not so favorable standard of living since each
citizen would only get a very small amount when wealth is being evenly distributed. A
high GDP per capita, on the other hand, simply means that a nation has a more efficient
economy.

Summary:

1. GDP is a measure of a nationÃ-s economic health while GDP per capita takes into
account the reflection of such economic health into an individual citizenÃ-s
perspective.

2. GDP measures the nationÃ-s wealth while GDP per capita roughly determines the
standard of living in a particular country.

3. GDP normally increase as the population increase while GDP per capita may
decrease when population increases.

2. Name two countries under Theocratic Laws.

Sudan

In Sudan, the theocratic rule of the Sudanese Government, and the establishment of
a legal system based on Islamic laws, are primarily used as tools by the country’s
leaders to manipulate and conform the Muslim population of the country, which forms
about 97% of the total population. Even though the constitution of the country mentions
the sharia-derived laws, it also leaves space for a more liberal attitude towards people
of other beliefs than Islam. This allows the Government punish anyone when deemed
necessary as per the dictates of the sharia law, while at the same time protecting itself
from allegations of religious intolerance.

Saudi Arabia

Saudi Arabia, an Islamic theocratic monarchy, has one of the most tightly controlled
governments in the world. The country is also home to two of Islam’s most holy sites,
the cities of Mecca and Medina. Since 1932, the land has been ruled exclusively by
the House of Saud. The Holy Quran and the Sunni School of Islam serve as the
country’s constitution. Although law does not directly forbid other religions to be
practiced in the country, the practice of religions other than Islam is abhorred by the
Saudis' Islamic-dominant society. Anyone in the country caught in an attempt to insult
Islam or promoting any other faith there is subjected to strict punishment, which may
go as far as death.

3. Name at least two of the three kinds of economies

An economic system is a means by which governments organize and distribute
available resources, services, and goods across a geographic region or country.
Economic systems regulate factors of production, including capital, labor, physical
resources, and entrepreneurs. An economic system encompasses many institutions,
agencies, entities, patterns, as well as decision-making procedures.
The economies can be classified into 3 different categories such as
Traditional
Command
Market
1. Traditional economic system
The traditional economic system is based on goods, services, and work, all of which
follow certain established trends. It relies a lot on people, and there is very little division
of labor or specialization. In essence, the traditional economy is very basic and most
ancient of all four types.

Some parts of the world still run a traditional economic system. Particularly, rural
settings in second- and third-world nations, where economic activities are
predominantly farming or other traditional income-generating activities.

There are very little resources to share in communities with traditional economic
systems. The reason is the resources don’t occur naturally or access is restricted by
other influential systems. Thus, the traditional system lacks the potential to generate a
surplus, as is the case with other systems. Nevertheless, because of its primitive
nature, the traditional economic system is highly sustainable. In addition, due to its
small output, there is very little wastage compared to the other three systems.

2. Command economic system

In the command economic system, there is a dominant and centralized authority, which
is usually the government, which controls a significant portion of the economic
structure. Also known as the planned economic system, the command economic
system is common in communist societies since production decisions are a preserve
of the government.
If an economy enjoys access to many resources, the chances are that it will lean
towards a command economic structure. In such a case, the government comes in
and exercises control over the resources. Ideally, centralized control covers valuable
resources such as gold or oil. The people regulate other less important sectors of the
economy such as agriculture.

In theory, the command system works really well as long as the central authority
exercises control with the general population’s best interest in mind. However,
command economies face many challenges, and they are slightly rigid compared to
other systems. That is, they react slowly to change because power is centralized.

SET B
Complete and Detailed Business Model Canvas analysis for any one of the following
Business Opportunities

Netflix business model canvas analysis

Netflix, Inc is an American media-services provider and production company
headquartered in Los Gatos, California, founded in 1997 by Reed Hastings and Marc
Randolph in Scotts Valley, California. The company's primary business is its
subscription-based streaming service which offers online streaming of a library of films
and television programs, including those produced in-house. As of April 2019, Netflix
had over 148 million paid subscriptions worldwide, including 60 million in the United
States, and over 154 million subscriptions total including free trials. It is available
worldwide except in mainland China (due to local restrictions), Syria, North Korea, and
Crimea (due to US sanctions). The company also has offices in the Netherlands, Brazil,
India, Japan, and South Korea. Netflix is a member of the Motion Picture Association
(MPA)
1) Key partners

a. Content/IP owners (studios / distributors): shows and movies that Netflix

acquires or licenses from 3rd parties
b. Internet Service Providers (ISPs): are essential to the delivery of the content in
“real-time” to the end customer (and simultaneously to millions worldwide in
case of new launches) via Netflix Open Connect standard. But there are
tectonic shifts happening (in the US market) that may pose a threat to Netflix
(note, the described Comcast and 21st Century Fox merger didn’t happen,
rather Disney who are not an ISP bought major Fox assets. The described
threats, however, are still simmering)
c. Amazon Web Services (AWS): Almost all of Netflix IT is hosted on AWS (from
a functionality perspective but not from a content perspective). They also use
Amazon’s Content Delivery Networks (CDNs)
d. Filmmaker “guilds” and individuals: Directors, actors, writers and their
guilds/unions are some of the most powerful players in the (US) film industry.
This also pertains to powerful individuals, remember Steven Spielberg’s
opinion to see streaming content as eligible for Oscars
e. Cinemas, Theatres: E.g. the ban on Netflix films at the Cannes film festival was
a consequence of French cinema owner’s protest against Netflix practice not
 to show their content on theatre screens (but Netflix has recently made an
interesting move in acquiring one of the title winners of Cannes)
f. Prizes and film festivals: Strong promoters and influences in the industry can
help get the word out, e.g. Film Academy (Oscars), Cannes Film Festival, etc.
Netflix titles ran at the Academy Awards and won some prices anyway
g. Influencers: Magazines, TV shows and others covering the film industry can
give free promotion (or criticism)
h. IP holders: such as Marvel and others who can license their IP to Netflix for
their own content creation. Netflix is entering into this space themselves with
the acquisition of Millarworld
i. Regulators: Policies of the Federal Communications Commission (FCC), esp
on the topic of net neutrality can have a crucial influence on Netflix (and the
entire industries) trajectory, including swaying M&A (dis)approvals / anti-trust
dealings of the FTC (here is one opinion piece – note the emphasis on opinion)
j. Investors: As you have seen in my our article on Netflix’s free cash flow, a lot
of the content is funded by external money, in particular bond issuance to
investors. Despite its huge user base Netflix still needs the faith (and funds) of
investors.

2) Key Activities

k. Technology & development: with all recent focus on content (rightly so) one
should not forget that at its heart Netflix was and is a technology company.
Their Open Connect standard that defines the interfaces and protocols, its pre-
positioning of content locally outside of peak traffic, etc is crucial and made the
Netflix experience along with myriads of other technological innovations that
they have come up with
l. Content licensing and acquisition: Licensing and acquisition of content have
been the main ways to add content in the first years after Netflix started
streaming
m. Content creation: Then from 2013 onwards, Netflix started creating their own
content. It requires a whole set of new activities to be added to the business.
Content licensing, acquisition and creation consume the largest amount of cash
 in the business (equally content amortisation is the largest cost element on the
income statement)
n. Marketing: advertising via paid channels, esp promotion of their new
show/movies
o. Influencing: via various channels, such as social media, TV, film festivals,
magazines, etc
p. Analytics: Most technological improvements are being analytically tested for
their impact. Analytics permeates the whole company and is the key to
customer segmentation. Customer preferences are being divided into 2,000
taste clusters rather than the traditional macro segments based on their viewing
behaviours.

3) Key Resources/Assets

q. The Netflix brand: while Netflix primarily promotes their new shows, they still
build a brand through this type of promotion. They rank within the global top
100 brands (here 66)
r. The app / website: the key resource to deliver the experience and content
s. Content library – licensed content: licensed content still plays a big role, esp
those evergreen series that are already well-known. A number of other
streaming content providers, however, have announced they will stop their
licensing to Netflix. By some estimates, this may affect 20% of Netflix’s total
content library this is one of the reasons why Netflix is pouring so much money
into acquisition and creation of content
t. Content library – Netflix-owned content: (created or acquired) can have a
more extended life cycle in that they can re-run after being fully amortised (i.e.
generate revenues at no costs – any firm’s dream). They can also be licensed
out to other content distributors and generate revenues that way
u. Algorithms: constant analysis of data based on algorithms and improvement
of the business, app, features, etc
v. Recommendations: falls under algorithms but is such an integral part of
Netflix’s success that I call it out separately
 w. Data: Captured data, such as behavioural data, preferences used e.g. for
micro-segmentation into 2,000 taste communities and used for future
investment decisions into content among other
x. Technology staff: technology is what made Netflix a streaming provider (they
started as a DVD-mailing company) and you can see they are valuing their tech
staff by their stock compensation schemes that go into this
y. Actors, writers, filmmakers: Netflix often uses indie and newcomers across
these activities and gives them more creative freedom. With many other
streaming providers ramping up their content creation it will be interesting to
observe the supply/demand shift in this area
z. Prices: winning revered film prices is one of the best ways to promote their
movies and platform, esp because this is exclusive content that people can
only watch when they have access
aa. Studios: Netflix has started acquiring their own studios and hiring staff in
support of content creation.

4) Value proposition

bb. Content library: a huge content library

cc. No ads: no ad interruption just when it gets interesting
dd. On-demand consumption: Unlike TV, one does not have to wait for a week
for the next episode. Users can watch anytime
ee. Ability to binge watch: They can also binge watch. All episodes of one season
of a series become available at the same time. This is a great stimulus for
customer advocacy and word-of-mouth
ff. Simple pricing: Using a flat fee (3 plans to choose from) with unlimited access,
no tiers, no premium content at additional charges, no pay-on-demand, etc
gg. Convenience and mobility: ability to watch on any device
hh. High-quality connection: the Netflix ISP speed index has become a
benchmark for measuring connection speed. Netflix uses pre-positioning of
content during non-peak hours, CDNs and other ways to get their content to
geographically close to their consumers
ii. Freemium: Free month to trial – in this period everything can be accessed (no
premium content, features, etc that are excluded)
 jj. Personalisation: through a recommendation system that takes into account
what each individual has watched and liked before (rather than a static “if you
liked this, you may like that”)
kk. Localisation: Increasing amount of localisation through translation (subtitles)
not taking into account the fact it needs to ensure the meaning is translated
(not just the words). Creation of international content (not just pumping out US
shows)

5) Customer relationships

We are looking at this from the perspective of underlying needs that Netflix satisfies
and the way that they do so

ll. Self-service through App: basically all interactions are managed through the
app and website, including help system
mm. User support: via live chat, call or call through the app
nn. Social media: Facebook and other for trailers and interactions
oo. Ability to watch anything on demand and all episodes available at once gives a
sense of self-control and trust
pp. The recommendation system: is a useful companion giving tips what to watch
next saving time and frustration
qq. The whole theme, voice and style: entertaining, relaxed, light-touch, friendly

6) Channels

Firstly, Netflix is the channel itself for content distribution.

rr. Desktop, tablet, mobile OS (any digital device with screen & internet)
ss. App stores: for the Netflix app
tt. Help and support channels via their app, web pages, phone
uu. Other:
 1. Social media for customer relations / promotion of upcoming
shows/movies
2. Media outlets to spread the word (magazines
3. Film festivals for promotion.

7) Customer segments

vv. Micro segmentation into 2,000 taste clusters determined by viewing history
ww. Various micro segments as part of A/B testing of new features / platform
improvements
xx. User segmentation based on usage parameters:

1. Technology used, e.g. screen size

2. Viewing behaviours, e.g. home, on-the-go, weekend/weekday
patterns, binge watcher, etc
3. First show/movie watched after subscribing
4. Browsing behaviours
5. etc

yy. Macro segments used for ad targeting (non-users), e.g.:

1. Geographical promotions
2. Geo-demographic
3. Age
4. Other
8) Cost structure

1. Technology and development

2. Marketing
3. General & admin
4. Costs of revenue:

■ Content amortisation (biggest cost in the business)

■ Payment processing fees
■ Customer service
■ Streaming delivery costs (e.g. open connect costs, payroll)

■ Operations costs (incl cloud computing).

9) Revenue streams
More than 99% of revenues come from subscription fees at this stage, all other revenues are
insignificant. There are opportunities for other types of future revenues (incl tiers, premium
content, licensing out, etc).

1. Subscription fees:

■ International streaming
■ US streaming
■ US DVD
■ 3 different plans

2. In future:

■ Licensing revenues for Netflix-owned content

Netflix total revenue in relation to other financial metrics