I.

Investigate the Company’s history-

The company “Netflix” was founded in August 1997 in Scotts Valley, California by
Marc Randolf and Reed Hastings. The creation of the company was an inspiration of
the co-founder, Reed Hastings, through an overcharged overdue of a certain video
that he had rented. They have charged their customers 6 USD per rental, but then
moved to a monthly subscription rate in 1999 and have dropped their single-rental
model, at the start of the company.

In May 2002, Netflix has been a success selling 5.5 million shares of common
stock at the IPO price of 15 USD per share to raise 82.5 million USD, in 2003 Netflix
has profited 6.5 USD, even when Netflix incurred substantial losses in its early years
of operations. The subscribers of Netflix have been increasing since the fourth
quarter of 2002 which Netflix has reached 1 million subscribers and has been
increasing since, and have reached over 27 million subscribers in July 2012.

In September 2010, Netflix began international operations by offering an

unlimited streaming plan without DVDs in Canada, in September 2011, Netflix
expanded its international operations to customers in the Caribbean, Mexico, and
Central and South America. On September 18, 2011, the co-founder and CEO of
Netflix Reed Hastings announced that the company’s is splitting its DVD delivery
service from its online streaming device, rebranding its DVD delivery service
Qwikster as a way to differentiate it from its online streaming service, and creating a
new website for it. In 2012, Netflix had distributed over 100,000 titles via more than
50 shipment centers, and have ensured to their customers that they would receive
their DVDs in just one to two business days. This is one of the main reasons that
made Netflix very popular and became one of the most successful dot-com ventures
during its existence since 1997. Netflix also employed almost 4100 employees which
2200 of those were part-time employees.

II. Identify Strenghts and Weaknesses-

In the case of Netflixs’ rebranding and price increase debacle it is clear that Netflix
have sought to introduce some critical changes to their organizational structure and
pricing plan. Pricing and organizational structures are very critical parts of the
company that when it is not properly conceptualized and organized may lead to
insolvency of the company or worst. In this case, the Netflix company would
eventually split their services into streaming provisions and DVD-by-mail service.
This means that most of them had to quit one of the services and maintain that other
one. As a matter of fact, splitting the company implied that the customers would be
forced to visist the two websites in order to find for a movie that they would like to
acquire.

Instead of reconsidering their plan of dividing the services of the company, the
company have pushed through with their primary plan with dividing the services of
the company, Netflix announced their plan to the public and implemented it
immediately. As expected, the introduction of Qwikster, could come with other
provisions that customers needed some time to learn. The company’s decision
resulted to abandonment of customers and have changed their subscriptions to the
Netflixs’ competitors. Furthermore, the splitting of services of the company resulted
to a new price plan that presented another challenge to its subscribers. In this case,
the provision of DVD and streaming services separately led to division of price
subscription, this also result to the event that the subscribers needed to pay double
the amount in order to access the two services since they were provided under
different protocols. Also, the customers were notified about one month prior to the
implementation thus leading to drastic change of budget besides the operational
difficulties. As a result, they did not have enough time to conceptualize and
understand the necessity of those changes as explained by the CEO. This implies
that the two changes were implemented drastically rendering them risky, destructive
and financially invalid.

Strengths-
- Since 1997, the brand “Netflix” is fast becoming a verb in today’s society,
almost everyone knows the name of the company and is associated generally with
positive feedbacks and reactions.
 - Of all the major streaming services, Netflix has the best delivery system; it
helps to keep customers loyal.
- Paying $7.99 for all-you-can watch streaming video is cheaper than one
night out at the movies, With internet-ready TV’s, the Netflix experience becomes
more in demand due to its conveniency and dependability when it comes to movie
entertainment.
- Platform: Of all the major streaming services, Netflix has the best delivery
system; this helps to keep customers loyal. Amazon's search engine for Prime Video
(videos available for free streaming as part of the Prime service that also includes
free two-day shipping on all Amazon orders) returns results including videos you
have to purchase, Hulu Plus is jumpy and the experience is weighed down by in-
show advertisements, and streaming on Time Warner's HBOGo is both jumpy and
plagued with little things like the title of the episode in your queue being unavailable.

Weaknesses-
- The raise of prices on the subscription of Netflix has been one of its
weaknesses due to the reason that it caused them a lot of subscribers and
transferred to their competitors. This increase was the effect of splitting the services
of the company into two (2).
- DVD subscriber base: In the second quarter, Netflix lost 475,000 DVD
subscribers; this left the subscriber base at 7.51 million. Netflix expects that DVD
subscriptions will continue to fall until they’re zero.
-Show ownership: Netflix outbid everyone for "House of Cards" and other
Netflix originals. Unlike Time Warner, however, the company doesn't own these
shows. Netflix has an exclusive window to stream the show, but after that, poof, the
hit might be gone. Time Warner derives residual income from sale of its shows'
DVDs and other ancillary benefits that Netflix does not.

III. Examine the External Environment -

Opportunities-
 - Netflix can offer a lower-priced option to entice and retain subscribers in
international market. Netflix has been testing a cheaper mobile-only plan in
India that costs only $3/month.
- With such a huge current subscriber base, Netflix can tap into many other
countries and expand its services and subscribers. They can start to target
the countries where it is currently not available. Recently, Netflix expanded its
operations and added a few more countries on its operation list. However, it is
still unavailable in China, Crimea, North Korea, and Syria.
- It can expand its content licensing by increasing the contracts with various
movie distributors. Additionally, Netflix should refresh its content library as it is
now producing its original content.
- It can also partner up with various telecom providers and offer bundle
packages in different countries. Alliances and partnerships can prove to be
beneficial for Netflix. In the past, Netflix partnered with Channel 4. It can form
more solid partnerships with local broadcasters.
- Producing region-specific content in their local languages is also another big
opportunity for Netflix. Niche marketing has been proven beneficial for Netflix

Threats-
- Recently, there are many uprising competitors that Netflix had been dealing
of, one of these companies are, Redbox Automated Retail, LLC, Vudu, Inc,
Hulu Plus, and their largest competitor which is the Blockbuster LLC.
- While Netflix expands internationally, there are certain government protocols
and standards that are needed to be met in order for their shows to be aired in
that certain country, with this strict government rules and regulations
regarding service providers like Netflix in many countries can be a big threat
for them. E.g The expansion of Netflix in China would be unlikely due to the
restriction on foreign content of the country.
 - Digital piracy is still at its peak as thousands of people around the world find
ways of downloading media content because of high monthly costs which they
cannot afford. It is another big threat that Netflix faces.
- The number of hacked Netflix user accounts increased drastically in Q1 and
Q2 of 2020 with the increase in daily users due to lockdown. If account
hacking persists into the future, frustrated Netflix users can mass migrate to
rival companies.

IV. Analyze your Findings

(Compare the strengths and weaknesses within the company to the
external threats and opportunities)
- The internal factors in this SWOT analysis of Netflix Inc. indicate that the
company is capable of growing in spite of its weaknesses. However, the
corporation’s weaknesses present barriers to global success, considering that
many firms, including content producers, have the capacity to imitate the
company’s movie streaming business model. Still, the Netflix’s brand and
other strengths and competitive advantages empower the business to keep
growing despite strategic challenges.
On the other hand, the external factors provide a glimpse of Netflix’s
business environment and how on-demand digital content distribution
companies, customers, and other variables influence each other. The global
industry’s dependence on online technologies makes these firms experience
the threat of cybercrime and related issues. This SWOT analysis describes an
industry environment where Netflix’s strategic management continually seeks
new solutions to bring the business to higher performance levels, despite
competition and other threats. The company’s strategic plans aim to exploit
growth opportunities in this industry, where entertainment producers and
movie streaming companies aggressively innovate to capture more market
share.

V. Identify Corporate-Level Strategy-

Mission Statement-
“We promise our customers stellar service, our suppliers a valuable partner,
our investors the prospects of sustained profitable growth, and our employees the
allure of huge impact.”
- The statement resounds what the company is best known for – providing
outstanding and unparalleled video entertainment services. It also shows how
the company balances the satisfaction of its customers with the financial
needs of its other stakeholders.

Vision Statement-
“Becoming the best global entertainment distribution service.”

- The vision statement is all about what the company wants to achieve. It
stresses the desire to set a quality bar in the provision of on-demand video
services. Specifically, this mission statement is a reflection of the leadership
position Netflix aspires to attain and secure in the sectors.

Goals/Core Value-

Netflix’s core values comprise “judgment, communication, curiosity, courage,

passion, selflessness, innovation, inclusion, integrity, and impact.” These values are
integral to the smooth running of Netflix’s operations as they ensure all players
remain focused on the major goals of the company.

In its processes, Netflix is critical in creating a working environment that not

only leads to the production of the most sought-after content but also one that has
attractive returns to the investors and the company. It stimulates this through values
such as inclusivity, innovation, passion for the content, curiosity to do take
constructive risks, and informed judgment. It also considers communication and the
nerve to do the impossible as must-have skills for taking the company to the top.
Together with the desire from every player to make a difference while doing the right
things, Netflix believes that the company can have the impact it aims for in the
sector.

Pros of Netflix
1.) Choices: It doesn’t take more than a few minutes of browsing the Netflix library
to realize how much content there is. As much as is available from the dynamically
adjusting personal account menus, utilizing the search feature is even more
indicative of how wide the selection of movies, shows, documentaries, and family
programming Netflix has at its disposal.

2.) Ease of use: The menus are very intuitive, simple to navigate, and smooth.
There is not much to question about the layout or how to manipulate any streaming
actions (play/stop/pause/rewind/fast forward), regardless of the device being used
for streaming.

3.) No commercials: No matter the membership tier, Netflix does not utilize
advertisements, collecting their revenue based solely on the subscription model from
members.

4.) Membership choices: There is a variety of Netflix membership tiers. Some allow
for just streaming to a certain number of devices, and some add the use of the
original Netflix model of mailing DVDs to homes. For streaming, there is a basic plan,
which allows for SD quality streaming, a basic HD plan, which allows for HD
streaming, and a premium plan which allows HD and Ultra HD streaming.

5.) Original Programming: The scope of original programming is vast, not only in
quality but also in quality. If one was to look into the amount of original release
Netflix churns out, the numbers are mind-blowing. The range of original content
spans from any hour-long genre of the show to vast amounts of children’s
programming, to documentaries, all the way to half-hour comedies, and everything in
between.
6.) Watching Offline: Unlike many other streaming providers, Netflix offers the
ability to download the content and be able to watch it offline. Whether its shows or
movies to keep kids entertained on long car rides or a long commute to work on
public transportation, it allows people to consume more of Netflix’s content on the go.
It is also a great way to be able to download something inside of a wifi zone and
watch it without blowing through limited data plans when not.

7.) Price: For the basic, basic HD and premium plans, Netflix goes for a low monthly
cost of $8, $10, and $12, respectively. The price does tend to creep up by a dollar
every couple of years, but this directly correlates to the volume of content Netflix puts
out monthly.

Cons of Netflix
1.) Geographically Limited. Netflix serves many different parts of the world, all with
their own rules and limitations for the streaming service. In the US, the selection of
content is vast. In other parts of the world, it is more limited. However, Netflix
features programming available in the US only on other services, which also sets a
limitation on what the US version of Netflix can stream.

2.) Delay on Content. Unlike a service like Hulu, for example, Netflix does not make
new episodes of television series available the day after they air on television.
Someone hoping to watch a season which will be available on Netflix will likely need
to wait till around 1 or 2 weeks before that following season of the show starts, for
Netflix to have that content finally. There is also a period between when the DVD or
pay stream of a movie begins, to the time Netflix makes it available. This time gap is
usually for several months.

3.) Infrequent Updates. Aside from cranking out massive amounts of original
content, the Netflix library does not get updated all that often. Amazon and Hulu get
new content on their streaming services more readily, even though they do not have
as much volume-wise to offer.

VI. Identify Business-Level Strategy

 (Identify and analyze each company’s competitive strategy, marketing
strategy, costs, and general focus)

Netflix’s competitive strategies were rooted mainly in content innovation and

revolved around perfecting their recommendation and personalization engine. As the
first mover in the category, Netflix has a sea of data about consumers’ preferences,
ratings, watch habits, watch lists, and taste regimes. For many consumers, Netflix
recommendations were probably their first encounter with a consumer-facing AI-
solution. Netflix’s customization through recommendation engine works well because
consumers are overwhelmed with the massive amount of content available to them
on a multitude of platforms and sources. They are tired and lethargic about going
through all the elaborate stages of assessing whether content is worth their time.
Many long-time Netflix users have trained their Netflix account by diligently rating the
content they view. And, based on this initial investment, they get good
recommendations about new content available on the platform. That level of
personalization and subsequent satisfaction make these consumers hesitant to
switch to another service. They do not want to invest that foundational effort again
and start from zero in a “new” platform that does not know them at all. This overtime
investment perpetuates the engagement, thus creating routinized behavior (or habit)
for the Netflix consumer. The shift to, and engagement with, alternative streaming
services is costly money, time, effort for these consumers. Serial engagements and
watch lists are some other tactics Netflix uses to thicken the cocoon, wrapping
around the existing consumers to facilitate that habit and escalate the commitment.
That cocooning strategy worked well for Netflix against platforms like Hulu; yet, it
might not suffice to compete against Disney.

In the customer’s point of view and analysis on the marketing strategy of netflix, with
the Online video platform becoming a trend among the youngsters especially college
going students and the early jobbers as it is easily available on the go and can be
streamed on mobiles and tablets anywhere anytime.

Customers of the company mainly include the ones who are tech-savvy consumers
and are in the age group of 15-40 years and those who prefer watching movies and
TV shows on the internet rather than on TV which has a lot of unwanted
advertisements between the broadcast.
The major source of promotion for the brand includes social media websites
including YouTube. Being a globally well-known brand gives them the edge of not
going to intense advertising hence the brand prefers pop-up ads, banners, hoardings
and other static ads on websites.

In the past, Netflix has turned into high ranked celebrities as well in their marketing
videos to boost sales and profits.

Free trial for a month has been one of their promotional strategy to lure or
rather acquaint customers by making them try the service on a trial basis.

The brand also promotes its original TV series through teasers and trailers on
YouTube and by strategically placing Hoardings on Public places to make people
aware about their upcoming productions.

VII. Analyze Implementation-

1. Internationalization and Localization Strategy-

The company is able to reach its online-based global target audience
through the use of servers strategically located in different regions of the world. It is
worth mentioning that Netflix uses the cloud-computing platform of Amazon Web
Services for a more cost-effective and globally available large-scale computing
capacity. Through cloud computing, the company is able to scale its operation, make
it services available across the globe, and mitigate the risks that come with network
outages and bandwidth traffic.

Take note that the company is headquartered in California. However, to maintain a

global presence and to better manage its global operation, the company has offices
and subsidiaries in countries such as the Netherlands, Germany, Luxembourg,
Brazil, India, Japan, South Korea, and Singapore.
Operating on a global scale means dealing with a diversified target audience with
diversified preferences. To deal with this issue, Netflix has also utilized a localization
strategy as part of its business strategy. The company has secured licenses to
distribute content not only from Hollywood producers but also from regional
producers. Hence, its streaming services also offer drama series from Korea, anime
from Japan, Sundance films, and other films and television shows from countries
such as United Kingdom, China, and India, among others,

The business strategy of Netflix

The Business Strategy of Netflix
Posted on November 5, 2020 by Rachelle Samson
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Netflix is an American public company involved primarily in providing Internet-based
and subscription-based streaming media, distribution of film and television contents
on the Internet, and video content production. The company is headquartered in Los
Gatos, California and it has several regional locations in Latin America, Europe,
South Asia, East Asia, and Southeast Asia, as well as subsidiary offices in the
United Kingdom and Singapore.

It is interesting to note that Netflix started as an online-enabled DVD rental-by-mail

business that used a monthly subscription model instead of a single-rental model
that was typical in most video rental stores. The company provided its customers
with unlimited rentals at a fixed rate with extended due dates. Hence, when it was
launched in 1998, the business model of Netflix was the first of its kind in the world.

The wide adaptation of the Internet in the mid-2000s and the substantial
improvements in bandwidth and Internet speeds compelled Netflix to explore the
idea of offering online video streaming services. Note that the idea was inspired by
the growing popularity of YouTube. Adding to this motivation is the fact that DVDs
and other stored media had become less popular due to the advancements in
technologies related to the Internet.

Netflix started to offer streaming content in February 2007 and began moving away
from its core DVD rental business. Today, the company has over 120 million paid
subscribers in over 190 countries. Of course, it is competing against other streaming
service providers such as YouTube and Amazon, the streaming services of TV
networks and Hollywood producers such as HBO and Fox Entertainment, and other
similar competitors such as HOOQ and iFlix, among others. Understanding the
success of Netflix and how it competes against other similar businesses requires an
understanding of the key elements of its business strategy.

THE KEY ELEMENTS IN THE BUSINESS STRATEGY OF NETFLIX

1. Internationalization and Localization Strategy
Remember that Netflix is available in more than 190 countries. The company is able
to reach its online-based global target audience through the use of servers
strategically located in different regions of the world. It is worth mentioning that
Netflix uses the cloud-computing platform of Amazon Web Services for a more cost-
effective and globally available large-scale computing capacity. Through cloud
computing, the company is able to scale its operation, make it services available
across the globe, and mitigate the risks that come with network outages and
bandwidth traffic.

Take note that the company is headquartered in California. However, to maintain a

global presence and to better manage its global operation, the company has offices
and subsidiaries in countries such as the Netherlands, Germany, Luxembourg,
Brazil, India, Japan, South Korea, and Singapore.

Operating on a global scale means dealing with a diversified target audience with
diversified preferences. To deal with this issue, Netflix has also utilized a localization
strategy as part of its business strategy. The company has secured licenses to
distribute content not only from Hollywood producers but also from regional
producers. Hence, its streaming services also offer drama series from Korea, anime
from Japan, Sundance films, and other films and television shows from countries
such as United Kingdom, China, and India, among others,

2. Diversification Strategy Through Content Production-

Netflix is primarily a provider of on-demand video streaming services. These
video contents include television series, films, animations, and documentaries
produced in the United States, as well as other countries such as the United
Kingdom, France, Germany, India, Japan, and Korea, among others. However, the
company has diversified its business to include numerous subsidiaries.

The company owns and operates three content production companies: The US-
based Netflix Studios, the Germany-based Netflix Services Germany GmbH, and the
Singapore-based Netflix Pte. Ltd. These subsidiaries are production studios that
produce and co-produce original television shows and films. Some of the films and
televisions that are exclusive under the company have earned critical praise and
positive audience reception. These include the series “Sense8” and “13 Reasons
Why,” and the films “First They Killed My Father” and “To All The Boys I’ve Loved
Before.”

3. Marketing Strategy and Marketing Activities-

A critical component of the business strategy of Netflix is its marketing strategy and
its specific marketing activities. It is interesting to note that that marketing strategy of
the company is relatively straightforward.

Because it is an online-enable or Internet-based business that follows the general

principles of electronic commerce, Netflix makes extensive use of different digital
marketing activities. For example, it maintains a social media presence using
Facebook, Twitter, and YouTube to maintain connections with social media users. In
addition, it also uses Internet advertising, particularly ad placements on social media,
publishing websites and blogs, search engines, and mobile apps to promote its
streaming services and contents.
Promotional strategies are also a critical part of the overall marketing strategy of
Netflix. The company offers a one-month trial period as a specific sales promotion
tactic to entice new customers to subscribe. It has also been partnering with
telecommunication service providers and general Internet service providers to offer
free or discounted subscriptions to new or existing customers while also tapping the
existing customer base of these providers and turning them into subscribers.

4. Technological Strategy and Capability Building-

The fact that Netflix is an online-enabled business that uses the general principles or
framework of electronic commerce means that is dependent on technologies related
to the Internet and digital communications.

Remember that to reach its global target audience and maintain regional markets,
the company has opted to use cloud computing or virtualization. Cloud computing
gives Netflix several advantages, including cost and operational efficiency from the
absence of the need to build and maintain physical network and server
infrastructures, global scalability, and a workaround against network and power
outages.

Netflix is also involved in software development. The company has developed and
released web and native apps for multiple computing platforms such as the web for
Microsof Windows and Apple macOS operating systems, as well as for Android and
iOS mobile operating systems. It regularly updates its apps to introduce new features
and improve user experience, thus enabling online users to access its services
regardless of the platform they use.

Also part of the business strategy of Netflix is its anti-piracy initiatives. The company
has been working with other producers and technology companies to fight piracy and
protect its rights to contents. It has specific programs to scan and report contents
that have been illegally distributed online. The apps have built-in digital rights
management systems aimed at curbing illegal copying and distribution.
To improve user experience, the company also uses machine learning to provide
subscribers with automated television or film recommendations based on their
profiles and historical preferences. The company also uses machine learning to
improve streaming quality, particularly through a complex algorithm and statistical
analysis to examine network throughput. Note that the company has a dedicated
department called Netflix Research aimed at capitalizing on the benefits of machine
learning for various business purposes.

VIII. Recommendation-

- Netflix’s model has been undeniably successful to date. However, fighting the
blockbuster battle over content acquisition and creation is becoming ever
more expensive, and it involves an increasing number of combatants
(including Amazon, Apple, Disney, and Google). All these companies already
have or will have digital download and streaming services. Furthermore, the
growth of Netflix’s subscriber base is slowing down. The company lost more
than 15% of its stock market valuation over the past month after its growth
numbers disappointed investors. In this context, it seems obvious that Netflix
can and should become a platform. Netflix’s big subscriber base (130 million
worldwide) and content-delivery infrastructure are potentially very attractive to
many third parties. In addition to video content providers, these third parties
include marketers and the developers of cloud gaming or other services. How
would Netflix become a platform? Simply by allowing these third parties to sell
their products or services within Netflix’s service but outside Netflix’s
subscription, on terms controlled by the third parties. Becoming a multisided
platform in this way would allow Netflix to tap a different dimension of growth:
selling more stuff to the same subscribers. And the beauty of the platform
model is that Netflix can grow without having to buy or produce the new stuff
itself. It just has to attract third parties to develop and sell the content, and
then it can take (as is common) a share of the revenue or a transaction fee.
Moreover, third parties could experiment with new forms of content, which
could be very valuable to Netflix’s content acquisition and production efforts.
In this way, Netflix would follow in Amazon’s footsteps. That company started
as a pure retailer of products it bought from sellers and sold in its own name,
before adding a marketplace where customers purchased directly from third-
party sellers. Netflix can aim to become a similarly powerful reseller-platform
hybrid, except it will have digital content rather than (for the most part)
physical products. The quality-control argument would run as follows.
Becoming a platform — allowing third parties to sell content whose quality is
not fully controlled by Netflix, and on terms not completely determined by
Netflix — runs the risk of letting low-quality content slip through the cracks
and alienating customers, who would then hold Netflix responsible. That is a
valid concern, but there are many ways in which Netflix can mitigate this risk
— as other companies have done when turning their products into platforms
(examples include Amazon, Intuit, and Salesforce). I am not arguing that
Netflix should move to an open platform model like YouTube’s, where
everyone and their cat can post video content. Rather, Netflix can turn its
service into a carefully curated platform, with relatively tight governance rules
that can be relaxed over time. The bottom line is that Netflix has little to lose
and a lot to gain by shifting from being an aggregator of content under one
subscription, to a hybrid aggregator platform on which various content
providers sell directly, and at prices of their choosing, to users. Becoming a
platform is usually about fear (of competitors) or greed (for new sources of
growth and revenues). For Netflix, it should be about both.