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Competitive Strategy of Netflix Assignment

   

Added on  2020-03-04

7 Pages1536 Words896 Views
Competitive Strategy

NetflixNetflix was created by Reed Hastings in 1997. The principle was humble: Hastings trustedthat he could influence the high-performance ethos and data-drivenness personified by techbusinesses to prosper in the DVD-rental-by mail industry. For quite some time, Netflix haddominated the DVD rental market when compared to its competitors. With the onset of themillennia where online streaming and content became king, Netflix was quick to respond asper the decision of Hastings. He separated the DVD rental (Qwikster-later on) and the onlinestreaming content business. The target was to simply capture the market to become the bestglobal entertainment distribution business.And so, it became. Today when compared to its competitors Netflix has 36% capture onmarket compared to HBO and Hulu. When Hastings separated the streaming service andrebranded the DVD rental business with increased monthly subscriptions, there was a furore– it led to the loss of subscribers. It debilitated the brand appreciated by subscribers chieflyfor its effective client favourite database expertise and fee arrangement. Amazon posed achallenge by offering customers to view content instantly for a small price. More suchcompetition was beginning to show up and Netflix had to maintain its competitive advantage.Also, the rising content cost presented itself as an opportunity from which HBO andShowtime were gaining. Netflix needed its own exclusive matter. That would allow it tobring back lost value to Netflix and allow long-term growth. In 2017, Netflix has over 40million subscribers across the globe and over 1 billion hours of TV shows and movies everymonth (Grant, 2016). Porter’s five forces model analysis shows us that1.Risk of new entrants – high (Apple, Amazon, Hulu, YouTube)2.Menace of substitutes – high (Apple TV, Hulu)3.Negotiating power of customers – high (lots of choices)4.Negotiating power of suppliers – high (content king) (Walker et al., 2017. pp 1-19)

5.Strength of rivalry – high (low entry barriers and presence of big players)6.Complementors – high (Microsoft, Roku, Vizio etc.)The simple SWOT analysis reveals that –Strengths – data, experience, amount of shows plus moviesWeakness – costs fixed, debt high, inflexible systemsOpportunities – Europe, NEM, all original contentThreats – dynamic technology, price rises, highly competitive market (Rao, C.B., 2017.)An eminent issue as evident from the analysis is that for Netflix, threats of all five forceswere high and Netflix was stuck between powers. Netflix strategy was to penetrate marketsby building strategies around excellent services and competitive prices. Focus largely onbuilding their own content to maintain the competitive advantage. That’s the reason when wethink of Netflix – Orange is new black, House of Cards etc. come to our minds but if wethink of Amazon or HBO, we draw a blank. They went with the stream only content whileprofiting off the DVD rental for the next 5 years. It also thrived by steadying its highconvenience dispersal approach as well as creating more conglomerates to create impeccablehardware stage for its software. Netflix has associated itself with various other companies foreven more growth to have a stronger hold on market. They even recently stated that theywould like to see themselves in all gaming consoles, Blu-Ray players and internet TVs(McGrath, R.G.,2013).

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