Worksheet 2

Time: 8 mins
 SWOT Analysis

Strengths
• Brand Reputation – Netflix has risen to become a household name within a short period.
In 2019, Netflix was ranked at #4 top regarded companies by Forbes.

• Global Presence – Netflix is serving over 190 countries across the world, having a global
customer base. There are over 200 million subscribers of Netflix, and it gives the company
a strong bargaining power with the studios for securing exclusive content.

• Flexibility - Netflix is flexible enough to fit various technologies immediately. It provides

streaming operations for different internet-connected devices like laptops, desktops, mobile
devices, iPads, and television.

• Focus on Innovation-  In 2019, the research and developed expenses of the company
reached $1.7 billion from $981 million in 2016. The company also makes good use of data
and analytics to save big on user retention and beat the competitive pressure.

Weaknesses
• Limited Copyrights – Netflix does not own most of its content, and this affects the
company negatively. The rights taken from other studios expire after few years, and that
content starts appearing on other sites.

• Increasing Debt – Netflix keeps adding to its long-term debt to fund new content. As of
April 2020, Netflix reported $14.17 billion in debt and plans to raise $1 billion more through
a debt offering. The increase in debt every year is a major weakness.

• Rigid Pricing – Customers demand customized pricing with more options. Unfortunately,
Netflix’s pricing model is rigid with only three tiers, Basic, Standard, and Premium. The lack
of different options has contributed to stagnation in the number of new subscriptions.

• Over-dependence on North America Market – Even though Netflix operates globally, it

relies heavily on the North American market. In the fiscal year 2019, Netflix reported $10.05
Billion revenue from North America, which represents about 50% of its total revenue
($20.15 Billion). This a major weakness because the North American Market is nearing
saturation.

• Raising Prices – Netflix has raised its subscription prices, while other new video streaming
services such as Disney+ ($6.99 per month) and Apple TV+($4.99 per month) have
introduced their services at much lower prices.
 SWOT Analysis
Opportunities
• Low – Price Mobile Streaming Option –Netflix has been testing a cheaper mobile-only
plan in India that costs only $3/month. It can expand this lower-priced option globally to
compete more effectively against cheaper alternatives like Disney+, Apple+, Peacock, and
so on.

• Exploit Ad-Based Model – Google, Amazon, Facebook, and many other service providers
make billions in revenue from adverts. Netflix can boost its revenue by adopting an
advertising-based business model.

• Alliances – 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.

• Local Content – Producing region-specific content in their local languages is also another
big opportunity for Netflix. Niche marketing has been proven beneficial for Netflix. For
example, it started an original TV series ‘Sacred Games’ in India, and Spanish series ‘La
Casa de Papel‘ (Money Heist), which are massive hits

Threats
• Competitive Pressure – Netflix is not the only one which provides digital streaming around
the world. Its competitor keeps increasing every year. Disney+, Apple TV+, HBO, Amazon,
Hulu, and YouTube are competing continuously with Netflix by giving repeated access to
new and original content to its subscribers.

• Government Regulations – Strict governmental rules and regulations regarding service

providers like Netflix in many countries can be a big threat for them. For example, Netflix
expansion to China will be unlikely because of its restriction on foreign content.

• Piracy – 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.

• Market Saturation – Netflix added 420,000 U.S. subscribers in Q4 of 2019 and lower than
its target of 600,000. In Canada, its target was 218,000 but it added only 125,000
subscribers. For the third quarter in a row, the North American subscriber growth has slowed
because the market is reaching saturation. Netflix will find it harder to add new subscribers
in the future due to market saturation.

• Account Hacking – 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.
 TOWS Analysis
Provide at least two strategies for each mini-maxi, maxi-maxi, maxi-mini and mini-
mini.