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.