Enriquez, Reymie B.

09 Task Performance

NETFLIX INC.
According to an article published in CNN Business website, Netflix, Inc. is an
Internet subscription service company, which provides subscription service streaming
movies and television episodes over the Internet and sending DVDs by mail. It operates
through the following segments: Domestic Streaming, International Streaming, and
Domestic DVD. The Domestic Streaming segment derives revenues from monthly
membership fees for services consisting solely of streaming content to its members in
the United States. The International Streaming segment includes fees from members
outside the United States. The Domestic DVD segment covers revenues from services
consisting solely of DVD-by-mail. The company was founded by Marc Randolph and
Wilmot Reed Hastings Jr., on August 29, 1997, and is headquartered in Los Gatos, CA

Follow the suggested outline below in completing the written output

I. Company Background
A. Current Performance
The company secures a Beta (Market Risk) of 0.3283, which conveys possible
diversification benefits within a given portfolio. Let's try to break down what Netflix's beta
means in this case. As returns on the market increase, Netflix returns are expected to
increase less than the market. However, during the bear market, the loss on holding
Netflix will be expected to be smaller as well. Even though it is essential to pay attention
to Netflix price patterns, it is always good to be careful when utilizing equity historical
price patterns. The philosophy towards estimating any stock's future performance is to
check both, its past performance charts as well as the business as a whole, including all
available technical indicators. Netflix exposes twenty-eight different technical indicators,
which can help to evaluate its performance. Netflix has an expected return of -0.0778%.
Please be advised to verify Netflix total risk alpha, downside variance, as well as the
relationship between the Downside Variance and daily balance of power to decide if
Netflix stock performance from the past will be repeated at some point in the near
future.

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 B. Strategic Posture
Netflix’s mission statement is “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.” Netflix’s vision statement is “Becoming
the best global entertainment distribution service.” The vision statement is all about
what the company wants to achieve. Netflix's generic strategy focuses on maximizing
the competitive advantages of high operational efficiencies and cost effectiveness of
information technologies. The company's intensive growth strategies require
aggressive marketing to expand multinational streaming operations.

II. External Environment

A. Porter’s 5 Forces
 Threats of New Entrants – Major organisations such as Apple, Disney, HBO and
Britbox (BBC and ITV) are either launching or have recently launched their new
streaming services.But Netflix has been able to adapt with the changing of
technology and trends in the media industry by shifting its focus from instore
DVD rentals to online streaming and dispatching the rented DVDs through post,
increasing the ease if gaining access of the customers.
 Competitive Rivalry – Netflix is facing severe competition from traditional
broadcasters, rival companies providing videos on demand and retailers selling
DVDs (Netflix, Inc., 2018).
 Threat on Subtitute Products – Netflix faces threats form subtitute service which
are offering the same products to DVD rental and online streaming.
 Bargaining Power of Suppliers – The high degree of influence on pricing is due to
the few numbers of entities producing media and entertainment based contents.
 Bargaining Power of Buyers – The media and entertainment industry dynamics
allow the customer to have a high level of bargaining power over the service
providers.

III. Internal Environment

The resources and capabilities of a company are its driversof competitive
advantage. Nearly all that a business owns can be classified as a resource or
capability. By understanding the resources and capabilities of different enterprises,
one can understand why overall performance differs from one firm to another. To
achieve a competitive advantage, the resource or capability that a company owns
needs to be valuable, rare, inimitable, and organized.The VRIO framework helps
managers when they are analyzing their company’s resources and capabilities.
VRIO is an acronym for Valuable, Rare, Inimitable, and Organized. These are
the four bricks of VRIO. They represent the four properties that core competencies

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 must have to give rise to sustainable competitive advantage. When the core
competency arising from a combination of resources and capabilities satisfies the
four requirements, the competitive advantage thus generated will be sustainable. If it
meets fewer standards, the competitive advantage will be temporary.

IV. Corporate Level Strategies

Netflix Inc.’s business model aligns with the company’s generic strategy for
competitive advantage (Porter’s model), and intensive growth strategies (Ansoff
Matrix). This alignment is seen as a factor in the company’s strategic position as a
leading competitor in the on-demand digital content streaming industry. Netflix’s case
is somehow comparable to that of Spotify’s business model, generic strategy, and
intensive growth strategies, although there are differences in terms of product
characteristics, competitive advantages, and how the business operates in providing
streaming services. The platform business model defines both of these online
companies’ operations. However, instead of focusing on music, Netflix Inc. focuses
on movies and series, and the production of original content. Moreover, the
company’s business model also involves a flat-rate subscription revenue model, in
the absence of advertising within the streaming platform. Furthermore, Netflix’s
intensive growth strategies and generic strategy for competitive advantage require
management initiatives that extent beyond streaming operations.

V. Analysis of Strategic Factors

Netflix Inc.’s growth and success are attributable to business strengths and
competitive advantages that enable global expansion and market dominance.
The net competitive advantages are among the net outcomes of the company’s
SWOT factors . In this SWOT analysis of Netflix Inc., the business continues to
grow and exploit opportunities, despite the adverse effects of the company’s
weaknesses and the threats in the market. This condition compels the online
enterprise to develop innovative solutions to strengthen its multinational
operations against competitors, especially Amazon, Walmart, Apple, Disney, and
Google, as well as HBO and other content producers and related networks.
These competitors hinder business development and the achievement of
strategic goals in Netflix’s corporate vision and mission statements. Addressing
the business factors examined in this SWOT analysis can ensure the on-demand
media streaming company’s continuous improvement.

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 STRENGTHS WEAKNESSES
 Zero Ads  Increasing Operational Costs
 Binge Watching  Increasing Debt
 Huge Customer Base  Lack of Green Initiatives
 Pricing  Over-Dependence on North
 Brand Name America Market
OPPORTUNITIES THREATHS
 Refresh Content Library  Competitive Pressure
 Alliances  Government Regulations
 Expand Global Customer Base  Piracy
 Low – Price Mobile Streaming  Account Hacking
Option  Government Pressure due to
 Niche Marketing Capacity Issues

VI. Strategic Alternatives and Recommended Strategy

A. Alternative strategies for Netflixinclude but are not limited to the stability,
expansion, and retrenchment.The company wouldneed to utilize the best
strategy possible to keep them afloat in the movie industry considering
their projected NPV as of 2015 is, $128,350 which will decrease to around
$90,250 by the year2017.Nonetheless, Netflix has proven itself in an
industry that once stood untapped, and withthe company’s efforts to shit
focuses on video streaming and VOD; they have a promising futureahead.
B. Netflix's generic strategy focuses on maximizing the competitive
advantages of high operational efficiencies and cost effectiveness of
information technologies. The company's intensive growth strategies
require aggressive marketing to expand multinational streaming
operations.

VII. Management Lesson Learned

Netflix raised the bar on the notion of company culture when CEO Reed
Hastings released the company’s groundbreaking culture ‘manifesto’ back in 2009.
The manifesto emphasizes the importance of strong company culture and outlines
Netflix’s own core values.Described by Facebook COO Sheryl Sandberg as the
most important document to ever come out of Silicon Valley, the slide deck outlined
how the business shaped its now-famous corporate culture through hiring strong
talent and giving employees the freedom to make their own decisions when it comes
to vacation time, expenses, and parental leave. The original document has since
been viewed over 16 million times and was recently updated in 2017.

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