Answers | Porter's Five Forces Framework

Answer 1
1. Porter’s Five Forces Framework
1.1. Threat of Substitutes- Moderate to High
Netflix is the global leader in the internet streaming due to which it is difficult to
substitute it(C-153).
Competitors also provide pay-per-view and VOD rentals are very common option for
individuals and households. That is why; these can substitute the services of Netflix (C-
153).
1.2. Bargaining power of buyers- High
Variety of applications and devices provides the similar services of Netflix that
customers can easily use to access both broadcast and streamed entertainment
programs (C-152).
Consumers have many options to view entertainment videos as there are many types
of providers (C-152).
1.3. Bargaining power of suppliers- High
Netflix appeal for its enhancing streaming content in original movies and TV series
those are produced in the house. These are the suppliers and they have high
bargaining power as they have many other options but the company does not have.
Purchasing DVD for a fixed fee per disc are collecting by distributors, studios those are
also the suppliers of the company that also have high brand value.
1.4. Threat of new entrants- Moderate to Low
It is easy to enter the internet market due to which after Netflix, many of the other
studios enter the market in the year 2018 such as Amazon Prime Video, and Hulu to
attract the consumers (C-158).
Government of different country put restriction on the entrance of foreign companies to
protect local providers such as China. China refuses Netflix to enter the market to
protect the local internet streaming providers.
1.5. Threat of competitors-High
There are many companies enter the market after Netflix to provide the internet
streaming such as Amazon Prime Video, Hulu, HBO NOW, Starz and many others (C-
152-153).
Competitors providing unlimited internet streaming plans to becomes the most
economical and suitable choice for household and individuals those are interested to
watch three of more titles per month (C-153).

Competitors also provide VOD rentals which are commonly used by household and
individuals (C-153).
1.6. Analysis
It is observed that the threat of new entrants (10-moderate favorable) is negative,
Industry rivalry (18- high threat) negative for company, Negotiation power of buyers (15-
high) positive and negative, Bargaining power of suppliers (12-high) negative and threat
of substitute (10-moderate) negative.
1.7. Limitation
It is observed that the industry of video streaming is expanding rapidly. There are two
ways in which the company provides the services and these are licenses and by making
their own videos. The companies get the license from the different TV Series channels
or studios for the fixed period of time according to the contract (C-154). Apart from this,
limited and slow internet services are also the limitation factor of the industry as the
whole industry is totally relies on the internet services (C-149).
It is observed that the industry provides the video streaming services to consumers by
taking the content on license. The industry has to make their own TV series so that the
companies can contain their content for long duration. In this strategy, it can also save
the investment money that the companies invest in taking licenses from the studios and
the other media channels (C-154). It is also observed that the industry provides the
services to consumers on the subscription basis due to which the consumers demand
shift to the other website. It is suggested that the industry has to provide the
subscription with the high speed of internet data so the people can watch the videos
without any challenges.
Answer 2
2. 1. Business strategy
Netflix’s implements the strategy in the year 2018 in to grow the business on the other
level and these strategies are:
Domestic and International growth: Operating the business in domestic and
international level helps the grab the high market share in terms of geographical areas.
It focuses on subscribers in order to enhance the domestic and international streaming
(C-157). The company earned $1.27 billion in the year 2017 as its subscriber has been
increases.
Expansion: Expansion is the strategies that helps the company to earn the high
revenue and grabs the high market share. Netflix expand the number of titles that
members can download for offline viewing (C-158).
Interface: It also enhances it continuously interface due to which it achieve the high
success (C-158).

Marketing and Advertising: Marketing and advertising strategy of Netflix helps to grow
the business at the international level. It has been found that the marketing and
advertising strategy of the company helps the company to expand the business (C-158).
Acquisition: Acquisition is the strategy from which the Netflix can spread its business
in different fields in order to provide the variety of services to consumers. Netflix had
spent its precious time and energy to contract with the video providers to expand the
business and attain success to new releases. It acquired many of its releases movies
DVDs from studios (C-158). Nowadays, its new content acquisition is to producing its
own original movies and TV series. Netflix acquire various TV series, movies and kids to
expand the business in these fields. It helps to grasp the market share in the market
(C-159).
Technology and Innovation strategy: In the time of internet, many internet streaming
providers is innovating the videos and various applications for the entertainment of
users. Netflix and many other companies develop the software for entertaining the
users. Companies attract the consumers by providing the new services with the
advance technology. Netflix developed proprietary software technology that allowed
members to easily scan a movie’s length, and the other functions which is appropriate
for numerous types of audiences (C-159).
2.2. Vision, Mission strategies of the organization
Vision and Mission- Not given in case study
Strategic Objective- People are getting addicted for internet using and the percentage of
users of internet has been increases across the world. It is expected that 179 million will
uses these application to watch video for entertainment (C-153). The strategic objective
of Netflix is to rapidly grow its subscribers with the motive to expand the business at the
international level by increasing the subscribers (C-158).
Business and Functional strategies- Netflix offers more programs to consumers on its
media channel in local languages order to attract the more or more consumers(C-160).
It also focuses on improving the download speeds to make their services more
convenient for consumers. These are the main strategies of the company that helps it to
grasp the market share (C-160). Providing more series and entertainment videos in
local languages helps it to expand the business at the international level with the
domestic market (C-160).
Answer 3
3. Nature and Sources of Competitive advantage
There are many key sources from which the company gains the competitive advantage
in the market and these are given below:
3.1. Online Video entertainment: Netflix introduces the online entertaining services
that attract the consumers towards its services. Earlier, television and studios is the
main entertainment channel but after Netflix consumers preferences has been changed
towards entertainment.

3.2. Variety of services: The other companies also enter the market but variety of
services of Netflix attracts its consumers that help it to attain the success such as titles,
variety of series as it has the partnership with many studios and TV Channels. It also
provides the facility to consumer to scan the entire movies in terms of length (C-159).
3.3. Marketing and Advertising: Netflix used multiple techniques to attract the users
but especially online advertising, and ads on national television and regional. The
company invests $1.27 (10.9% of revenue) in 2017 (C-159).
3.4. Analysis
It has been analyzed that Netflix offers the fast services as compare to the competitors
due to which it attains the success in business. It invests in marketing and advertising
that helps to gain the competitive advantage as it attracts the consumers.
The services provides by Netflix is not different but it provides the services fast as
compare to its competitors to gain the competitive advantage (C-157).
The company offers the services fast as compare to its competitors which states it
perform well as compare its competitors. It also high brand value in the market as
compare to its competitor (C-158).
Answer 4
4.1. Telecommunication sector: Telecommunication sector provides the data in voice,
audio, or video across the globe. Netflix provides the video streaming services across
the globe. It has been seen that the shareholders of Netflix are pleased with Netflix’s
skyrocketing stock price. In the last 8 years, the company had successful transformed
its business model from one subscriber paid a monthly fee to collect an unlimited
number of DVDs each month. It always ready to pay the good return to its shareholders
to build the good relations with them. If Netflix diversify into telecommunication industry
then it creates the high value for its shareholders. As per the experience of the
company, it is observed that the company earns the revenue and spread it business
with high loyalty. Its transformation is good for its shareholders as it has the position to
pay the good return to shareholders. And the transformation of Netflix into the
telecommunication industry means to earn the high revenue and pays the good return
to shareholders.
4.2. Appropriate measures that Netflix applied to make up its mind. The market factors
forces the Netflix to take the decision appropriately for growth and these are discussed
below:
Fast Changing Market- In the year 2018, the demand of consumers have been
increases towards the high-speed internet connections. The consumers install several
of devices and download apps that use to access entertainment programs. Netflix is
also one of the applications of these internet entertainment services. Market growth of
these services has been increases due to changing the preferences of consumers.

Market Size- According to the case study, half of the population of the world using the
internet. In 2018, 7.6 billion people use the internet and 700 million of people have
access to broadband high speed internet services (C-152). The millions of people
rapidly increases from million to billion. Netflix has long term market opportunity for
attracting more subscribers towards its services.
Marketing- It is one of the parts of contribution of economy. Netflix also invest in
marketing and advertising to aware the people towards its services. It is observed that
marketing and advertising in all of the countries and geographic regions the company
had recently entered to broaden awareness of the Netflix brand and service and thereby
support the company's strategic objective (C-159).
The drivers that also forces the company to take the decisions:
Globalization- Globalization is the main driver that forces the Netflix to take the
decision to spread the business. It is observed that 85% of percentages of internet
users in United States watch online video (C-154). Netflix reached to 75% of the gains
in subscriber growth in the year 2018(C-158). The company earned $1.27 billion in the
year 2017 as its subscriber has been increases. Rapidly enhancing users interface (C-
158).
Social changes- In the time of internet, socialization is the key driver. Social media
sites and internet are the best drivers for the entertainment industry as the lifestyle and
choice of consumers has been changed (C-159).The percentage of Internet users has
been increases by 2018 such as 85% in United States (C-153). Increasing internet
users helps to changes the lifestyle of the people as they get attracted towards online
video entertainment.
Answer 5
5. 1. Resource Based View
Inbound Logistics- Internet Streaming is the primary activity of the company (C-159).
In 2018, it is the world leading internet television.
Marketing and sales- It uses multiple techniques to attract subscribers especially it
invests in advertising. It spent the cost $1.27 million in marketing and advertising in
2017 (C-150). The main motive of Netflix is to invest in marketing and advertising to
aware the people towards its services. It is observed that marketing and advertising in
all of the countries and geographic regions the company had recently entered to
broaden awareness of the Netflix brand and service and thereby support the company's
strategic objective (C-159).
Technological Development and sales- Netflix develop the software to provide the
services such as scanning the movie in terms of length, time and the others help to
increases the sales. It invests 1.052 million in technology and development (C-150).

Research and development- Research and development are the process from which
the company can expand the business. The company develops the new networks as it
invests 1.052 million in 2017 (C-150).
5.2. Analysis
It is observed that Netflix invests in research and development department as it
provides the services to consumers as per their needs and desires. The company also
focuses on its resources and capabilities in order to enhance its capabilities or abilities
to improve the quality of business services. Netflix is entertaining business that is why; it
has to mainly focus on the demand of consumers so that it can satisfy its consumers.
But at the same time, it has to focus on it’s resources and capabilities so that it can
improve its services and provides the quality of services to consumers (C-152).
Apart from it, it is observed that the company invests in marketing and advertising in
order to aware the consumer towards its services so that the more or more consumers
attracted towards it (C-158).
Netflix also focuses on its competitive strategies in order to attain the competitive
advantage in the market. It provides the advance technology services to consumers as
compare to its competitors (C-159).
Netflix implements the globalization approach to attain the high success in business.
According to this approach, Netflix wants to expand the business at the international
level (C-149).