From the internal and external analysis, it is quite evident that 2 major issues that Netflix faces over expenditure on the content that will add financial debt and increasing the price of subscription of the plan will lose the customers. The second major issue is that competing in a competitive environment where popular key players are coming up with their own streaming services and merging with other companies. To overcome these issues Netflix can integrate their content with shopping ads, this will create revenue for them. They can experiment with the AVOD model that could help them in increasing revenue per user this will be a preferable model especially for developing countries such as India where they have a better appetite for advertisement. For overcoming the competitors, they can constantly upgrade themselves according to the taste and preference of the customer.

Introduction

Netflix is considered to be one of the most popular streaming services. The company was started in 1998, which started as mailing the discs of video games, movies, and popular shows through the means of postal mail. The company from the beginning is considered to be a brilliant startup, which has disrupted the market through its technological changes as they keep on enhancing themselves over the years. The journey of Netflix has been incredible from disks to the website which is full of movies. Today, they are one of the leading digital premium platforms known for their streaming services that have helped the company in capturing a large market share and revenue. Netflix platforms allow their users to a stream number of movies, documentaries, and TV Shows, with the help of websites and apps. The company streaming service has helped them in becoming the 7^th largest internet company in terms of revenue across the globe.

Findings
1. Findings from internal analysis

Findings from external analysis

From the industry analysis, it is quite evident that the company needs to make sure that its content and services are upgrading according to the taste & preference of the users. There are a lot of substitutes in the market ready to catch the eyes of the users, therefore to be one step ahead of them, they need to focus on the content and bringing innovation to their service. From the industry analysis and competitive landscape, it is evident that even the social media have come up with streaming services and other providers such as Hulu and QUIBI are using new ways to lure the users, as QUIBI content is under 10 minutes so those who don’t have time or prefer short media can subscribe their services, this will not severely impact the digital strategy (Appendices: 5.5- threat of Rivals). Constant innovation and development in this marketplace have not only increased the competition in the market but also the expectation of the customer. Users are constantly looking for a service that provides valuable service with low investment. The gaining of copyright to stream the media by Hulu and the major investment done by the established players such as Amazon (prime) and Disney (plus) can be a great threat to the company. Besides that, these powerful companies such as WarnerMedia-Discovery and ViacomCBS are merging for providing exclusive content and one more is that AT&T’s have decided to merge with Warner media, discovery, and Amazon. This will again impact the digital strategy of Netflix and it will be challenging for them to stay ahead of their competitors (Appendices: 5.5- the threat of Rivals).

Conclusion & Recommendation

From the above analysis, it would be right to say that the company is performing well in the market and are ahead from their competitors. However, looking towards the long-term goals the Netflix must work on some of the areas so that they could successfully retain their current position in the market. The two most significant issues that Netflix is facing are that they are spending a lot of money in generating their original content which is exceeding their revenue and secondly, meeting the customer expectations in the competitive and dynamic. As the company has adopted low-pricing and binge-watching for driving the growth has added a financial burden. Netflix has to keep on spending billions to increase its original content to attract new subscribers. This has impacted their balance sheet as well as share price. Besides that, Netflix subscriptions are a fraction of the cost of traditional pay which is a TV service, where the average per user is considered to be below. This is considered to be great when it comes to the growth of the company however at the same it implies that the company has to constantly have to increase their budget so that they can fulfilling the watching promise they have made to their valuable and loyal customer. This is added to the $16bn long term-debt and the $19bn obligations (Collins, 2021). This could be an alarming situation for the company especially from the investors, customers, and share value point of view. Additionally, in such a situation the company has tried to increase the price of their plans to cover the cost of producing the original content which has adversely impacted their sales in the US. This is an issue that will not only make a hurdle in the financial positioning and but will also make them lose their valuable customers.

References

Collins, J., 2021. Netflix’s Business Model Does Not Work. [online] Forbes. Available at: <https://www.forbes.com/sites/jimcollins/2020/01/22/netflixs-business-model-does-not-work/?sh=3d7f480722cc> [Accessed 16 August 2021].

Netflix, 2021. Introduction to Netflix Quality Control (QC). [online] Netflix | Partner Help Center. Available at: <https://partnerhelp.netflixstudios.com/hc/en-us/articles/115000353211-Introduction-to-Netflix-Quality-Control-QC-> [Accessed 16 August 2021].

Statista, 2021. Netflix: employee count | Statista. [online] Statista. Available at: <https://www.statista.com/statistics/587671/netflix-employees/> [Accessed 16 August 2021].

Stock Analysis on Net, 2021. Netflix Inc. (NASDAQ: NFLX) | Balance Sheet: Assets. [online] Stock Analysis on Net. Available at: <https://www.stock-analysis-on.net/NASDAQ/Company/Netflix-Inc/Financial-Statement/Assets> [Accessed 16 August 2021].

Appendices

Components of a Business System

5.1 Inputs - Resource Base (Stock Asset)

5.1.1 Tangible

Non-current Assets -$ 29,518,779 & Current asset- $ 9,761,580 (Stock Analysis on Net, 2021)

(https://www.stock-analysis-on.net/NASDAQ/Company/Netflix-Inc/Financial-Statement/Assets)

(Statista, 2021)

5.1.2 Intangible

5.1.2.1 Relational resources

The company has more than 35+ partners across the globe, they have partnered with various genres to add to the diversity of their media.

5.1.2.2 Core competencies

Strong brand equity.
Flexible and strong infrastructure.

5.2 Throughput - Activity System (Value Chain Analysis) (p89)

5.2.1 Primary Activities

5.2.1.1 Inbound Logistics

Netflix relies on its developers for their content and includes licensing from the developers to stream the content. some of the developers that provide content are Lions Gates, Paramount Pictures, Time Warner, and Dream Works (Wit and Meyer, 2010).

5.2.1.2 Outbound Logistics

Netflix provides 24/7 hours customer services

5.2.1.3 Operations

Netflix uses two basic systems they are cloud architecture and another one is the delivery of the content. Netflix tends to connect the device with its delivery network.
The delivery network of the company is not operated by Netflix it is outsourced.

5.2.1.4 Marketing & Sales

5.2.1.5 Service

Netflix provides freedom for their users/subscribers to watch their content on any device at any time that helps them in attracting the vast customer base and also works a competitive edge for them.

5.2.2 Secondary Activities

5.2.2.1 Firm infrastructure

The company has a strong infrastructure that allows them to spend low on operating expenditure at the same time help them in increasing the subscription base.

5.2.2.2 Procurement

5.2.2.3 Technology Development

Netflix has a strong infrastructure and advanced technology that allows the users to watch their media at the highest quality.
The company keeps on using the advanced technology and continuously upgrade their software and hardware’s so that the customer can have a seamless experience.

5.2.2.4 Human Resource Management

5.3 Output-Product offerings (Value proposition)

5.3.1 Segmented market

5.3.1.1 Segments

Netflix operates as a single business segment.

5.3.2 Positioning within the business

5.3.2.1 Price

Netflix provides its services in three plans that are they have a basic plan for $8.99 (non-HD), a standard plan for $13.99 (high-definition), and a premium plan for $17.99 (HD, 4K, and Ultra HD) (Business Insider, 2021).
The offering of the services by Netflix cannot be termed as ‘cheapest’ however in terms of the quality, facilities, and exclusive content provided, it would be right to say that they offering their services at value for the price (Roettgers et al., 2021).

5.3.2.2 Features

Flexibility to change the notification settings and suggestions.
‘User profile’ have the leverage to personalize their accounts and the ‘admin user’ can also restrict the certain user.

5.3.2.3 Bundling

They also have alliances with the telecom networks.

5.3.2.4 Quality

The content provided by Netflix is of the highest quality and they tend to ensure that they provide high-quality service to their users.

5.3.2.5 Availability

Netflix streaming services are available in 190 countries, their library shows the TV/movies according to the country-specific locations that vary from time to time. However, due to the local restrictions, Netflix is not available in China, North Korea, Crimea, and Syria (Netflix, 2021).
It is available 24/7 HD quality content that can be accessed anywhere anytime.

5.3.2.6 Image

5.3.2.7 Relations

Netflix also reaches its customers through social media platforms such as Facebook, Linked In, and Instagram.
Netflix gift cards are also one of the ways the company uses to engage with the customers where they provide special promotional discounts and other gifts cards.

5.4 Sustaining competitive advantage

5.4.1 competitive dependability

5.4.2 Environmental consonance

Drivers of industry development analysis

5.5 Porter’s five force model

5.5.1 The threat of new Entrants: medium

The entrants in this industry are not also from the domestic market only as international companies are also entering the market (Wit and Meyer, 2010).
New companies are entering into this market with new innovative and attractive models such as QUIBI where they have content that is under 10 minutes, which makes them appealing for the customer who does not have much time for the media. In the fast-moving life, this is one of the most convenient models for the working class and commuters (Wit and Meyer, 2010).

5.5.2 Bargaining power of suppliers: low

5.5.3 Bargaining Power of Buyers: high

There is a low switching cost which allows the users to cancel the subscriptions and seek other media providers (Wit and Meyer, 2010).
Due to the high pressure from the consumer, Netflix has to make sure that the quality they are providing to the customer is up to their expectation and preference. Besides that, the company can’t charge higher prices against the quality they are offering due to the competitive environment.

5.5.4 Threat of Substitute Products: Medium

Social media have also started the new streaming service.

5.5.5 Competitive Rivalry: high

The industry in which Netflix is considered to be highly competitive. Netflix does not allow for any subscribers to watch all of their shows and surf, this limits their customer base as well as the availability of shows. This opens the opportunity for the competitors. some of the major well competitors and are a threat to Netflix are highlighted below:

Free services with an advertisement, helps them in expanding their customer base, also have premium services for uninterrupted services.
Convenient facilities such as adding the media in the library which can be seen through any device, easy to purchase or rent the media.

This key player is considered to be a stiff competition as they have acquired the rights to display the content.

5.6 PEST Analysis

5.6.1 Political/ regulator drivers

Every country has different rules and regulations; hence they have control over the content which can be streamed on platforms.

5.6.2 Economic drivers

5.6.3 Socio-cultural Drivers

Change in taste and preferences can make them switch to other means of entertainment such as TV, radio, or reading a book. This can be considered a threat to the company.
People might stop using their services due to health issues and concerns (obesity, poor eyesight) (Wit and Meyer, 2010).

Contents

Executive Summary