Netflix Competitive Advantage: A Strategic Management Analysis

Strategic Management 1
STRATEGIC MANAGEMENT
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Strategic Management 2
Question Two: Netflix Competitive Advantage
Netflix enjoys a competitive advantage over its peers in video on demand.
Competitive advantage has been defined as the set of attribute that allow a business to
maintain advantage over its competitors (Casadesus-Masanell and Ricart, 2010). The
company has been a pioneer of creating new markets through its innovative ideas and
processes. From its inception the company has been at the forefront in creating new markets
through the way it has remodified its distribution channels (Fernández-Manzano, Neira, and
Clares-Gavilán, 2016). The company was responsible for the decline of Blockbuster.com
despite it having a dominant market share in the late 1990’s. The growth and dominance of
Netflix can be attributed to several factors which has made the company dominant in the
video on demand market (Gomez-Uribe and Hunt, 2016). The paper will seek to explore the
several ways in which the company has been able to remain relevant in an ever changing
market.
The company perceives itself as a technology company more than a media
distribution company this has enabled it to invent and develop new technologies geared
towards consumer satisfaction (Barney, 1991). Combining cutting edge technology with
quality content has been a step ahead of the rest of its competitors in the video on demand
market. With over 100 million subscribers the company acknowledges the need for customer
satisfaction as they interact with its services (Bell, Koren and Volinsky, 2008). The company
therefore considers consumer satisfactions as a key element in ensuring that is products are
easily accessible and navigable. The company has optimized its streaming service for a
variety of devices that the consumers owns. All the platforms are optimized to be accessible
regardless of the bandwidth the consumers are surfing on (Fernández-Manzano, Neira, and
Clares-Gavilán, 2016).
The algorithm of their search engines takes note of the customers’ history and offers
recommendation guided by their past behavior. The company has optimized all its platform to
improve on the users’ experience (Osterwalder and Pigneur, 2010). Users continue to prefer
Netflix over other companies due to its ease in navigability and great interaction. The
company offers ad free services meaning that the consumers are not interrupted by any
advertisement from the company. This portrays the company as strictly geared towards
improving the experience of the viewers.
In 2013, Netflix changed its strategy towards content by developing its own content.
The company began poaching high quality director actors and top-shelf writers from movie
production companies. Its goal was to grow original content which it would not need to pay
license for (Gomez-Uribe and Hunt, 2016). The project has paid off with the production of
high quality original content that has been nominated for several global films awards. This
approach has portrayed Netflix as high quality entertainment company able to offer exclusive
content to keep consumer coming back (Matrix, 2014).
Michael Porter described competitive advantage as a result of two general factors
mainly price advantage as a result economies of scale. He further noted that differentiation
through provision of greatest value and user experience at the similar price of their
competitors (Porter, 1989). The sheer size of Netflix and its market share is a great
competitive advantage against its competitors (Adhikari et al., 2012). The company has been
in existence for over 20 years making it a challenge for new entrants to break its dominance.
The company has accumulated over 100 million customers who are happy with the diversity
of films television services and movies offered by the company (Mithas and Lucas, 2010).