Netflix Analysis

This document provides a detailed analysis of Netflix, including PESTLE analysis, Porter's five forces, strategic position, success and failure strategies. It covers various aspects such as political, economic, social, technological, environmental, and legal factors affecting Netflix. The document also discusses the opportunities and threats faced by the company, as well as its current strategies and their success or failure.

Running Head: NETFLIX ANALYSIS 1
NETFLIX ANALYSIS

Running Head: NETFLIX ANALYSIS
Table of Contents
Pestle Analysis............................................................................................................................................3
Porter’s five forces......................................................................................................................................5
Threat of New Entrants............................................................................................................................5
Bargaining power of buyers.....................................................................................................................6
Bargaining power of Suppliers................................................................................................................6
Threats of Substitute Products or Services...............................................................................................7
Rivalry among the Existing Competitors.................................................................................................7
Opportunities...........................................................................................................................................8
Threats.....................................................................................................................................................9
Strategic Position of the Organization.........................................................................................................9
Success/failure of Netflix’s current strategies............................................................................................11
Success Strategy....................................................................................................................................11
Failure strategy......................................................................................................................................12
Future Strategies for Netflix......................................................................................................................13
SBU.......................................................................................................................................................13
Corporate:..............................................................................................................................................13
Feasibility of the strategies........................................................................................................................14
Winning strategy and Key issues in implementation.................................................................................15
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17

Running Head: NETFLIX ANALYSIS
Pestle Analysis
Basis Analysis
Political In US markets, the number of audiences bounces away from
traditional television in order to have the experience of on-
demand streaming services like Netflix. Since the pace with
which Netflix grew tends to be amazing yet the US telecom giants
AT&T complained to the Federal communications for keeping a
strict supervision on the usage of the net. The most threatening
issue over here if the rule is passed through the congress the price
of the net would rise and the business model of Netflix will suffer
a huge loss1.
Economical The most important feature of the Netflix is they have currently
100 million subscribers and the customers who are enjoying the
services globally. The crucial factor over here is the prices of the
competitive nature against the conventional television services. In
the era of the global recession where the purchasing power of the
customer is low the Netflix is the real solution.
The key issue that affects the performance of the Netflix is also
because of the exchange rates. The company aims at dividing the
prices around US$10 fee, where as in many markets this can be as
1 Aversa, Paolo, and Stefan Haefliger. Business model portfolio diversification. working paper,
Cass Business School, London, 2017

Running Head: NETFLIX ANALYSIS
high as $19 due the changes in the currency levels or the changes
in the rate of VAT.
Social The traditional large screens have been set aback and the portable
screens are much in trend. Hence the customers are enjoying the
video content more on their smartphones or tablets rather than
TV. In the year 2015, according to a survey the US viewers
watched 24 minutes on an average on smartphones2.
Cord cutting has again become one of the most giant act for
facilitating with the services to the consumer to get away with the
conventional media or the streaming services. This in turn made
the customers grab for the non-cable options and to view the same
content was an influential move from Netflix side.
Technological Within the labs of the Netflix strong efforts are in making for the
patented technology as the technological shift to 4k screen is
creating a barrier for the streaming services. For the smooth
compression of the signals the company is aiming at 4K signal, if
the technology gets implemented the huge advantage will be on
the part of the Netflix. It is necessary be driven by technology
2 Babones, Salvatore. "Netflix & Amazon battle for a piece of India’s 500M smartphone
audience, but which strategy will pay off?." (2018).

Running Head: NETFLIX ANALYSIS
according to time.
Environmental The environment is facing a huge pressure from the streaming
services like Netflix when they try to access the data. In order to
lower down the impact of the carbon foot print on the
environment the firms are engaging with the Greenpeace to make
sure the environment is healthy as stable worth upwards of
$12trillion by the year 2026.
Legal In the year 2016 the Netflix had to face the misstep over a
consumer lawsuit. The subscription prices were announced
irrespective of the impact on the consumers. The company
received widespread criticism for the misleading the customers3.
Porter’s five forces
Porter five forces is one of the most useful tools in developing the holistic strategy in order to
analyze the present completion and the position of Netflix with respect to all the factors
3 Davenport, Thomas, and Jeanne Harris. Competing on Analytics: Updated, with a New
Introduction: The New Science of Winning. Harvard Business Press, 2017.

Running Head: NETFLIX ANALYSIS
determined below. the porter’s five forces tool also helps the company understand the various
factors that creates a heavy impact on the performance.
Threat of New Entrants
 New entrants possess the novelty factor
 Refining of the brand is necessary to cater the large customer base.
 To improve the international streaming shall be majorly focused on
 Competitors like YouTube Red are appealing customers on the basis of the demographics
 The streaming video industry is apparent with the combination of the music, content and
social media4.
 To improve the company must target 60-90 million homes in U.S
Bargaining power of buyers
 Cost of switching from Netflix to any other mode is easy.
 As such there is no presence of the annual contract and the registration costs are
affordable and minimal.
 Customers can switch to Hulu, HBO Now, Amazon PRIME and Showtime Anywhere.
 Easy to switch from one streaming service to another 5
 This is the strongest force that could drive the buyer’s preferences.
4 http://theconversation.com/the-unique-strategy-netflix-deployed-to-reach-90-million-
worldwide-subscribers-74885
5 Euchner, Jim. "Business Model Innovation." Research-Technology Management 59.3 (2016):
10-11.

Running Head: NETFLIX ANALYSIS
 Netflix needs to make sure the customers are grounded with them for a year.
Bargaining power of Suppliers
 Suppliers when dominant can decrease the margins for the Netflix.
 In CATV systems the company buys the raw materials from various suppliers.
 Due to high supplier bargaining power the overall profit reduces6.
 Extremely powerful suppliers can negotiate to extract higher prices.
Threats of Substitute Products or Services
 The situation gets worse when the Netflix has to compete against the free content
 Netflix faces the risk of pirating
 Cost to the company is high when the other streaming apps like PBS, Crackle, Snagfilms
offer the content at the low price7.
 In US people are less interested in live streaming.
 Traditional service cable continues to be popular.
Rivalry among the Existing Competitors
 Direct competitors create fierce competition
6 Fernández Gómez, Erika, and Juan Martín Quevedo. "Connecting with audiences in new
markets: Netflix´ s Twitter strategy in Spain." Journal of media business studies 15.2 (2018):
127-146.
7 Gomez-Uribe, Carlos A., and Neil Hunt. "The netflix recommender system: Algorithms,
business value, and innovation." ACM Transactions on Management Information Systems
(TMIS) 6.4 (2016): 13.

Running Head: NETFLIX ANALYSIS
 Major networks like CBS and Fox have their own streaming video services
 Hulu and Network video streaming services cater with next day view of the current hits
which is missing in case of the Netflix8.
 There is minimal definition of the product differentiation between the video streamers.
 Netflix is priced at the premium levels.
 The cost of Amazon Prime is $99 per year featuring HD videos, whereas that of Netflix is
$96 for standard videos9.
 The attractiveness and the market size in U.S remain intact.
Opportunities
 There is a huge opportunity for the expansion in China.
 Company must search for a joint venture that could capitalize within the range of 500m
in China currently streaming media content.
 In order to meet the new European laws and other partnerships in Europe shall be focused
on.
 Netflix can collaborate with BBC and Canal Plus to gain the excessive wealth
 Grow customers in the local market as well10.
8https://www.square2marketing.com/blog/why-blockbuster-failed-and-netflix-popularity-
skyrocketed-a-key-lesson-for-business-owners
9 https://www.forbes.com/sites/greatspeculations/2017/04/20/a-closer-look-at-netflixs-content-
strategy/#1239e1e51fc5
10https://www.strategy-business.com/blog/Lessons-from-the-Strategy-Crisis-at-Netflix?
gko=1f1e1

Running Head: NETFLIX ANALYSIS
 Due to the growth of VR and 4K UHD content, Netflix allowed good content.
Threats
 Increased Competition as the Facebook is the new entrant in this arena by launching the
original content.
 Other competitors are Amazon, Hulu, Youtube that are competing for grabbing the
customers to launch on the platforms.
 In case of the Netflix the competition continues to be exclusive11.
 The digital piracy for more than 30 content providers, piracy lead to the 5.4billion
downloads of media content in the year 2016. The Netflix model and the funding of the
content in future to threaten the whole of the Netflix business12.
 Digital piracy – For more than 30 content providers (including Netflix), piracy has led to
5.4bn downloads of media content in 2016 alone. This threatens the whole of Netflix's
business model and ability to fund content in the future13.
Strategic Position of the Organization
In terms of the above analysis the position of the Netflix is sound and in terms of the financial
statements as well the Netflix results were quite encouraging from the point of view of the
11 https://strategictechinvestor.com/2019/01/why-netflix-will-win-the-streaming-wars/
12https://www.square2marketing.com/blog/why-blockbuster-failed-and-netflix-popularity-
skyrocketed-a-key-lesson-for-business-owners
13 https://www.square2marketing.com/blog/why-blockbuster-failed-and-netflix-popularity-
skyrocketed-a-key-lesson-for-business-owners

Running Head: NETFLIX ANALYSIS
investors and the stakeholders. The company rigorously focused on the strong run with
significant growth in its international subscribers14.
The sales of the domestic area are bit slow and as competition the streams I different segments,
the company was able to create additional 1.5 million domestic subscribers in the first quarter
period. The position of the Netflix can be understood in a better manner by the image below15.
14 https://www.businesslive.co.za/bd/opinion/2018-07-17-netflix-has-failed-its-faithful/
15 https://creately.com/diagram/example/h3novg9m/New?pg=7&cat=block-diagram

Running Head: NETFLIX ANALYSIS
From this diagram it can be stated that the Netflix is the strong brand identity and the company is
having the high impact on the industry and therefore it can be concluded that the Netflix has the
more opportunities and it can grow if the cost is price competitive before the competitors like
Hulu and Amazon reach to that position16. The above image also explains the positioning of the
competitors such as Hulu and Amazon.
Success/failure of Netflix’s current strategies
Success Strategy
Though Netflix is on roll and the world’s largest online entertainment distribution business have
accelerated the growth of the revenue from US$1.3 billion in the year 2017 to $6.8 billion and
the stock price jumped by 130% and this had been possible when the company expanded in the
China, Crimea, North Korea, Syria so in a way the company got the opportunities to infuse in
more cities and the attract he large customer base17. The success was gained basically by
covering the regional areas as well, from where the content was already being generated by.
The filling of the gap is one of the biggest strategic decisions by keeping the videos and the
contents as long as they like to watch. The gaps need to fill in order to be ahead of the
16 https://www.cnbc.com/2017/05/23/netflix-greg-peters-chief-product-officer.html
17 Fernández Gómez, Erika, and Juan Martín Quevedo. "Connecting with audiences in new
markets: Netflix´ s Twitter strategy in Spain." Journal of media business studies 15.2 (2018):
127-146.

Running Head: NETFLIX ANALYSIS
competitors like Amazon and Hulu in all sense as they are devising the new strategies to capture
the market. The strategic partnerships such as that of with Apple is the smooth strategy for
acquiring the subscribers of the Apple as well. On the other hand for Apple the customers were
given the convenient way to live stream18.
Failure strategy
The chances of the failure of the strategy of the Netflix could be due to the high end competition
from the side of the other Apps delivering the same content in India like Amazon and in US
Hulu. As per the cost chart the Netflix is bit costly as compared to the Amazon Prime
membership and therefore the customer might switch towards the other Apps19.
Further apart from this the video streaming; the other strategy that could be the failure for the
Netflix and this could be the change in the content value. The digital content on the Amazon and
Hulu is much active in terms of the original content. The number of shows is more and that to in
high definition screen20. This can be a threat to the company as the original content is being
18 Rayna, Thierry, and Ludmila Striukova. "360° Business Model Innovation: Toward an
Integrated View of Business Model Innovation: An integrated, value-based view of a business
model can provide insight into potential areas for business model innovation." Research-
Technology Management 59.3 (2016): 21-28.
19 Sales, Tiago Prince, et al. "An ontological analysis of value propositions." 2017 IEEE 21st
International Enterprise Distributed Object Computing Conference (EDOC). IEEE, 2017.
20 Kwon, Minkyu, Jihwan Lee, and Yoo S. Hong. "Product-Service System Business Modelling
Methodology Using Morphological Analysis." Sustainability 11.5 (2019): 1376.

Running Head: NETFLIX ANALYSIS
publishes at the lower rates and the customers will focus mainly on the quality and the
investment factor they are making to watch that particular quality.
Future Strategies for Netflix
There are several strategies that Netflix can implement so that the Netflix can still remain in the
business at the current position.
SBU
Strategy: For live streaming the Netflix can cater more countries so that the larger customer
base gets larger. Further Netflix can provide the high definition facility to the customers at the
same range or at least the cost effective prices. Apart from this the strategy the Netflix can touch
the regional content as well to cater the Indian Customers21.
Corporate:
Strategy: The Netflix shall focus on the D2H concept in order to be more completive as a whole.
They can introduce their own channel and this can create more opportunities for the overall
development. The profit margin will increase by 20%. Moreover the Netflix can also introduce
the concept of the dongle so that they can get the facility of the internet. If the Netflix provides
both the things as complimentary to each other the company will set a new trend in the market22.
21 Mensikova, Anastasija, and Chris A. Mattmann. "Ensemble sentiment analysis to identify
human trafficking in web data." (2018).
22 Sorescu, Alina. "Data‐driven business model innovation." Journal of Product Innovation
Management 34.5 (2017): 691-696.

Running Head: NETFLIX ANALYSIS
Since the Netflix dominated the streaming industry in the year 2018, it can showcase itself at the
bigger platform in the year 2019. The steady pipeline of the great shows is what the Netflix shall
cater to keep the brand name alive and flouting23.
Feasibility of the strategies
The strategies described above, whether they are feasible or not are one of the most crucial issues
as all the future strategies must align within the vision and mission of the Netflix.
One of the strategy as discussed above is the introduction of the new channels of itself. As such
then company will not face any kind of problem as Netflix is already the biggest entertainment
industry and they have the ability to cater the facility of the channel. The can also be decided on
the basis of the trail methods where a niche population can be chosen who can afford the same.
The only problem that the company would face will be in training the employees. At times the
network speed will also decide the streaming of the channels. Therefore the feasibility of this
strategy is 80%. The rest of the 20% can be eliminated if the problems are eliminated24.
The next strategy was to introduce the dongle, this would be a feasible as most of the content is
the through the digital media. For this purpose either the company needs to make a joint venture
23 Parlow, Anton, and Sabrina Wagner. "Netflix and the Demand for Cinema Tickets-An
Analysis for 19 European Countries." (2018).
24 Wenzel, Peter, Irene Mahle, and Jens U. Pätzmann. "Streaming Services & Service Design: An
Analysis of Netflix and Amazon Video Based on the Gap Model by Parasuraman, Berry &
Zeithaml." Markenbrand 5.5/2016 (2016): 20-31.

Running Head: NETFLIX ANALYSIS
with the network companies providing the high speed internet with the high class bandwidth or
have a network pipeline of its own. The current position of the Netflix will definitely is not going
to suit the purchasing of the pipeline, hence the joint venture is the only option and this would
increase the feasibility of the company25.
Winning strategy and Key issues in implementation
The winning strategy for the Netflix is that it shall have a joint venture with the BBC or create
the channel of its own.
Though this would be a costly method, yet it is the one time investment and the strategy26. The
company will win against the competitors. Whether a new ad-supported streaming service is
provided by the Netflix or it will work in the long run as a question that cannot be answered on
an instant basis27. But this much is clear; the media is making it sound like the streaming media
war is entering into a phase that is much brutal rather than beautiful. The implementation would
face certain issues like;
 Less training and the ability to understand the new streaming concept
 The mobility is less
 The lack of proper channelizing of the resources
 The customers are unhappy and switching towards the new streaming application.
25 Weinstein, Art. Superior customer value: Strategies for winning and retaining customers. CRC
Press, 2016.
26 https://www.cnbc.com/2017/05/23/netflix-greg-peters-chief-product-officer.html
27 https://strategictechinvestor.com/2019/01/why-netflix-will-win-the-streaming-wars/

Running Head: NETFLIX ANALYSIS
Conclusion
From the above analysis it can be concluded that the position of the Netflix with respect to the
competitors is sound however the company needs to make certain amendments in its strategies.
The Netflix is already is a big brad and it needs to focus on the strategies of the competition so
that the company can eliminate any chances that are stopping them from being a leader. The
proactive strategy as adopted by the Netflix will definitely help them reach out to the best
customers around the world. To become a leader the Netflix must focus on low cost and the
retention of the customers before they move towards the new streaming options though attractive
schemes and packages. Netflix is the strong brand identity and the company is having the high
impact on the industry and therefore it can be concluded that the Netflix has the more
opportunities to grow and survive in the competitive scenarios.

Running Head: NETFLIX ANALYSIS
References
1. Aversa, Paolo, and Stefan Haefliger. Business model portfolio diversification. working
paper, Cass Business School, London, 2017.
2. Babones, Salvatore. "Netflix & Amazon battle for a piece of India’s 500M smartphone
audience, but which strategy will pay off?." (2018).
3. Davenport, Thomas, and Jeanne Harris. Competing on Analytics: Updated, with a New
Introduction: The New Science of Winning. Harvard Business Press, 2017.
4. Euchner, Jim. "Business Model Innovation." Research-Technology Management 59.3
(2016): 10-11.
5. Fernández Gómez, Erika, and Juan Martín Quevedo. "Connecting with audiences in new
markets: Netflix´ s Twitter strategy in Spain." Journal of media business studies 15.2
(2018): 127-146.
6. Gomez-Uribe, Carlos A., and Neil Hunt. "The netflix recommender system: Algorithms,
business value, and innovation." ACM Transactions on Management Information Systems
(TMIS) 6.4 (2016): 13.
7. http://theconversation.com/the-unique-strategy-netflix-deployed-to-reach-90-million-
worldwide-subscribers-74885
8. https://creately.com/diagram/example/h3novg9m/New?pg=7&cat=block-diagram
9. https://strategictechinvestor.com/2019/01/why-netflix-will-win-the-streaming-wars/
10. https://www.adweek.com/tv-video/7-things-we-learned-about-netflixs-2019-plans/
11. https://www.businesslive.co.za/bd/opinion/2018-07-17-netflix-has-failed-its-faithful/
12. https://www.cnbc.com/2017/05/23/netflix-greg-peters-chief-product-officer.html
13. https://www.fool.com/investing/2018/07/21/what-is-netflix-incs-competitive-advantage.aspx

Running Head: NETFLIX ANALYSIS
14. https://www.forbes.com/sites/greatspeculations/2017/04/20/a-closer-look-at-netflixs-content-
strategy/#1239e1e51fc5
15. https://www.square2marketing.com/blog/why-blockbuster-failed-and-netflix-popularity-
skyrocketed-a-key-lesson-for-business-owners
16. https://www.strategy-business.com/blog/Lessons-from-the-Strategy-Crisis-at-Netflix?
gko=1f1e1
17. Kwon, Minkyu, Jihwan Lee, and Yoo S. Hong. "Product-Service System Business
Modelling Methodology Using Morphological Analysis." Sustainability 11.5 (2019):
1376.
18. Lehtinen, Nina. "Strategic Marketing Analysis: Case: DNA Plc." (2017).
19. Mensikova, Anastasija, and Chris A. Mattmann. "Ensemble sentiment analysis to identify
human trafficking in web data." (2018).
20. Parlow, Anton, and Sabrina Wagner. "Netflix and the Demand for Cinema Tickets-An
Analysis for 19 European Countries." (2018).
21. Rayna, Thierry, and Ludmila Striukova. "360° Business Model Innovation: Toward an
Integrated View of Business Model Innovation: An integrated, value-based view of a
business model can provide insight into potential areas for business model
innovation." Research-Technology Management 59.3 (2016): 21-28.
22. Sales, Tiago Prince, et al. "An ontological analysis of value propositions." 2017 IEEE
21st International Enterprise Distributed Object Computing Conference (EDOC). IEEE,
2017.
23. Sorescu, Alina. "Data‐driven business model innovation." Journal of Product Innovation
Management 34.5 (2017): 691-696.

Running Head: NETFLIX ANALYSIS
24. Ulwick, Anthony, and Perrin Hamilton. The Jobs-to-be-Done growth strategy matrix.
Technical report, Strategyn, 2016.
25. Voigt, Kai-Ingo, Oana Buliga, and Kathrin Michl. "Entertainment on Demand: The Case
of Netflix." Business Model Pioneers. Springer, Cham, 2017. 127-141.
26. Weinstein, Art. Superior customer value: Strategies for winning and retaining customers.
CRC Press, 2016.
27. Wenzel, Peter, Irene Mahle, and Jens U. Pätzmann. "Streaming Services & Service
Design: An Analysis of Netflix and Amazon Video Based on the Gap Model by
Parasuraman, Berry & Zeithaml." Markenbrand 5.5/2016 (2016): 20-31.