Netflix Business Strategy Analysis

The assignment delves into the strategic decisions made by Netflix, tracing its journey from a DVD rental service to a dominant player in the global streaming market. It examines key aspects like their pivot to online streaming, original content production, recommendation algorithms, and global expansion. The analysis also considers the challenges and opportunities facing Netflix in an increasingly competitive landscape.

NetFlix

Table of Contents
Introduction......................................................................................................................................3
Broad overview of Industry.........................................................................................................3
Key industry performance measures...........................................................................................5
Structure, competition and factors required for success..............................................................6
The business model......................................................................................................................8
Marketing strategy of NetFlix.....................................................................................................9
The bottom line issue.................................................................................................................10
Financial implications of the marketing activities.....................................................................11
Conclusion.....................................................................................................................................11
References......................................................................................................................................13

INTRODUCTION
In the modern era, the competition among businesses operating in the service industry has
become so intense that it is no longer easy for companies to gain competitive advantage over
other market players. Furthermore, it is required by businesses to review their business policies
and practises at regular intervals and then carry out modifications in the same as per changes in
the market trends (Nandakumar and Murray, 2014). The present research report is based on
NetFlix, which is America based Entertainment Company and it was founded in the year 1997.
In context of service provided, it can be stated that NetFlix, offers wide range of services which
includes on demand videos and different types of streaming media. This study explains the
overview of industry in which NetFlix operates. Along with this, key competitors of selected
organization and its business model is also mentioned in the present study conducted.
Broad overview of Industry
The industry in which NetFlix is carrying out its business practices and operations is
entertainment industry as it is offering different types of fun and entertainment related services to
the people in market. It can be expressed that NetFlix is considered as one of the most renowned
and largest entertainment service provider. At present the selected business enterprise is carrying
out its practices and operations in more than 190 nations of the world. In terms of its members, it
can be expressed that presently it is operating with more than 86 million members and this
clearly indicates the fact that how potential the entertainment industry is (Netflix overview,
2016). The entertainment industry offers services such as online TV shows, various types of
movies and other related videos to the people in market. One of the most unique or creative
aspect of these services is that one can make use of the above mentioned services anytime they
want and every time they want (Mithas and Lucas, 2010). On the other side of this, the members
who are making use of such services are also available with the option of playing videos, pause
the same and again replay them as per their need and requirement. This means the convenience
of member of customers is well taken care of by the entire industry and this has contributed a lot
in overall growth and development.
In context of the competition in entertainment industry, it can be expressed that at present
the competition is highly intense as there are many small and big market players operating in the
industry. In markets such as United States, brands such as Amazon Prime have started giving

NetFlix very tough competition. Furthermore, at present the number of subscriber of Amazon
Prime is higher than that of NetFlix and this has resulted in affecting the sales and profits of
selected business enterprise. Companies are facing issues to sustain and achieve desired profits in
the industry even in situations where the industry has huge potential. In America, Amazon Prime
has around 63 million subscriber or members and the domestic member of NetFlix is only 47
million. This clearly indicates the fact that even in its home market; NetFlix is facing very tough
competition (Teece, 2010).
Recently, Amazon Prime has introduced new services with the name of prime instant
videos and this has resulted in enhancing the total number of users, members or subscribers. The
rationale behind increasing popularity of new services introduced is that it does not involves any
kind of perks and this has resulted in developing sense of satisfaction among people in the
market (Bell and Koren, 2007). Apart from this, the money which has been charged by NetFlix
for its services is also higher than that of Amazon Prime and this is another factor which has
created a very big difference between total numbers of subscribers of the above mentioned two
brands. It can be stated that the introduction of new services is acting as a competitive advantage
for brands like Amazon Prime (Rothaermel, 2015). Along with this, it has also supported in
increasing the overall revenue generated which will be beneficial for long run.
Hulu is another key market player which is carrying out its business practices in
entertainment industry and attracting customers to a great extent. The move which Hulu made is
that instead of providing free streaming services, it has started focusing upon the offering only
those subscription which are premium in nature. This has resulted in setting apart Hulu from the
other key players which are operating in the industry. In terms of online users or subscribers, it
can be asserted that the launch of service such as live TV streaming will results in increasing the
total number of members of Hulu and will make the entire market more intense. Over the last
few years, Hulu is able to achieve a growth rate which is higher than that of other players in the
market (Adhikari and et.al., 2012).The other players in the entertainment industry includes
businesses such as Showtime, HBO and CBS which are also providing almost same kind of live
and online video steaming services. These market players are able to sustain in the highly
competitive market place because the demand of such services are increasing with a very good
pace. This growing demand has emerged as a potential and very big opportunity for companies
in entertainment industry.

Key industry performance measures
One of the best and most effective way which can be used to measures the performance
of business operating in entertainment industry is of evaluating the total number of users or
subscribers (Hu, Koren and Volinsky, 2008). It can be stated that companies’ performance can
be easily judge with the fact that how many users or daily subscribers it is having. Higher
number of subscribers clearly indicates the fact that a company is performing very good in the
market. On the other side of this, it can be asserted that low number or few subscribers’
highlights that the company is not able to perform well in the entertainment industry and it is
facing several kinds of obstacles in terms of increasing sales and profits.
Apart from this, the revenue generated can be also considered as a major factor which
can be used for carrying out the evaluation of performance of companies which are operating in
the entertainment industry. NetFlix is able to deliver effective performance and get the desired
results in terms of both the parameters which are total number of subscribers and revenue
generated. This can be justified by the fact that at present it is having more than 86 million
subscribers which is an outstanding figure. Furthermore, the selected business is carrying out in-
depth market research to indentify the need and demand of customers (Direction, 2011). On the
basis of information collected, NetFlix is carrying out modifications in its existing services with
an objective to attain higher degree of customer or member satisfaction. Apart from this, it is also
trying to introduce new products and services in the market in frequent intervals with the purpose
of maintaining the interest of its customers and retain them for long term.
Geographical scope – In context of geographical scope, it can be stated that the industry has a
very huge scope in different geographical regions all across the world. At present online TV
channels and video streaming is a very popular concept in developed nations (Dongyan and
Fuzhi, 2013). The demand of such kind of service providers in developed countries is very high.
In future the same kind of services can be launched and delivered in developing and growing
market of the world. This will act as a very potential opportunity for organizations and will also
support in enhancing the total volume of sales and profits (Matrix, 2014). However, it can be
critically argued that offering products in new market such as India, china etc is not going to be a
very easy task for companies operating in the entertainment industry (Halal, 2015). These
businesses will be required to carry out aggressive marketing of their services in order to create
demand among people in the market.

Structure, competition and factors required for success
In simpler terms, organizational structure can be defined as the level of hierarchy which
defines reporting authority in a company. In order to carry out smooth flow business practices
and operations, firms are being required to focus on their structure and take corrective measures
for the improvements of the same. There are different types of organizational structure which
exists in the modern era and a company select’s suitable structure as per their need, requirement
and nature of business operations. NetFlix is one of the most renowned companies in terms of
providing online entertainment services (Ryan, 2013). At present the selected business enterprise
is carrying outs its operations with the help of flat organizational structure. It can be stated that in
such kind of organizational structure there is no or very few layers between the top management
and staff of the company. Further, it can be also expressed that majority of the companies in the
online entertainment industry are carrying out their business operations with the help of flat
organization structure only.
Being a service oriented company and operating in such a competitive market, it is
required by NetFlix to carry out innovations in its services and products at regular intervals (Hu,
Koren and Volinsky, 2008). The use of flat structure provides, NetFlix with a potential
opportunity to encourage views and suggestions of employees for carrying out innovations in the
online entertainment services offered. Apart from this, the use of flat structure has also resulted
in making the process of communication more effective within the selected business enterprise.
On the contrary of this, it can be argued that sometimes the use of above mentioned structure
results in creating obstacles in growth and success of NetFlix as the workers is not well aware
about their key roles and responsibilities.
As it has been already discussed, the competition among businesses in online
entertainment service provider is getting more and more intense along with the passage of time.
Even in developed markets such as UK, USA, the demand of such kind of services is increasing
with a very good pace (Grover and Kohli, 2013). This has resulted in entry of many big and
small players in the industry and has made the degree of competition highly intense. Nowadays,
businesses such as NetFlix are required to make regular modifications in their services and
introduce new services in order to create sense of satisfaction among its members or subscribers.

In the modern era, the broadband connections and video streaming has become very
important role in day to day lives of people all across the globe. Furthermore, the rationale
behind their growing popularity is that they have provided users or people in the market with an
option of downloading any video and watching the same as per convenience. NetFlix has seen
this as a potential opportunity and it came up with its own video streaming website in the year
2009 (Shuen, 2008). Here, the critical factor of success was the option that was provided to
people in the market to watch their favorite movies, videos and television shows as per their
convenience. There was a time when people used to miss their shows and movies due to some
work or other important task. Furthermore, there was no option available of watching the video
or show again once the task has been completed. NetFlix worked upon the above mentioned need
of people and it has emerged as one of the important factor which has contributed in making
NetFlix successful in the entertainment industry of the world (Stone, 2008). On the other side of
this, offering people with the content which they love is another major factor which can make a
company successful in the above mentioned industry.
At present people are more interested in watching their favorite reality shows and other
related videos as per their need and convenience. One of the most important things which has
made, NetFlix so successful in market is its strategy of focusing upon being a passionate brand
instead of becoming a diversified brand which can offer almost anything and everything. In
terms of major developments in the industry, it can be stated that over the past few years, there
has been wide range of developments took place in the online entertainment provider industry
(Read and Robertson, 2009). For example now people are just required to opt for monthly
subscription of services offered by brands such as NetFlix and they can watch videos and shows
anytime they want and any where they want. People can watch episode of their favorite channels
while travelling or when they are completely away from their home. Another development in
industry is of broadband from dial up connections. There was a time, when downloading of files
and videos was considered to be one of the most complicated and challenging task. However, it
can be argued that along with the passage of time, major developments took place in the industry
and now it is no longer difficult to watch a video anytime and as per convenience.
The business model
The business model which has been opted by NetFlix can be termed as a classical service
business model which is commonly adopted by the firms operating in the service industry. The

selected business enterprise which is NetFlix is carrying out its business practices in video on
demand industry (Thompson and et.al., 2013) It can be stated that in the above mentioned
industry the payers and user of services offered are the same and there is no difference between
the two. In order to offer online content which is related to entertainment, NetFlix is considered
as the first and foremost business which has adopted for such kind of business model. Here,
services related to video on demand is provided to people in the market and against these service
a sum is charged which is often called as subscription fee or amount. The key areas where
people in this industry compete are of price, content, picture quality etc. It can be expressed that
competitors such as Hulu are carrying out their operations and business practices with the help of
business model which is hybrid in terms of nature.
According to hybrid model, the operations and activities of businesses are entirely based
on advertising revenues. However, NetFlix is using one sided business model according to which
the use of service and payer are one and the same. Furthermore, it can be expressed that
providing customers or members with a string database of movies and thousands of episode act
as a value creation for the selected business enterprise. It also results in creating sense of
satisfaction among customers and retaining them for long time period. In terms of service
delivery, NetFlix purchases wide range of license content from different type of cable network
and broadcast network providers (Netflix business model, 2016). In addition to this, direct
channels are also being used where content is directly delivered from television and movies. One
of the main benefits which NetFlix has got of being the first entrant in the industry was of having
a collection of huge database of videos as well as of movies for its customers. In order to make
its services more effective and personalized a feedback system has been developed in which the
viewers or members gets an opportunity to provide reviews and feedback on the services used.
The information and data collected with the help of feedback system is further used for carrying
out modifications in existing services and acquire higher degree of satisfaction.
Marketing strategy of NetFlix
In the modern era, marketing o products and services has started to play a very important
role in overall growth and success of any business enterprise. The benefits derived from use of
different marketing tools and techniques have resulted in making marketing one of the most
crucial components of business practices. Marketing results in generating need among people in
the market and it also assist in attracting customers to buy products and services. Apart from this,

effective marketing also provides competitive advantage to a company over other business
operating in a particular industry. In order to carry out effective marketing of products and gain
the best possible outcomes, firms are firstly required to carry out appropriate segmentation of
market and define their target customers (Casadesus-Masanell and Ricart, 2010).
In simpler terms, segmentation can be defined as the process in which the entire market is
divided into different subset of potential customers. NetFlix has segmented its market on the
basis of demographic variable such as age, gender, income level etc. the market in which NetFlix
is carrying out its business practices and operations can be considered as highly dynamic as the
of technology keeps on changing at regular intervals. In order to sustain in such kind of market,
the selected business enterprise is required to make changes and upgrade its technology at
regular intervals (Adhikari, and et.al., 2015) . On the other side of this, its targeted customers are
the one who fall under the category of consumer paid streaming subscription. In terms of
marketing, it can be stated that NetFlix relies heavily on social media marketing and it is using
the same to attract customers and gain advantage over other market players. During the initial
stage, the selected business enterprise offers trial period of all new users in order to make them
understand what actually its services are and how they can be used. This strategy of marketing is
generally used by NetFlix with an objective to develop more loyal customers and retain them for
long run.
Along with this, advertisement through mobile phones and tablet messages is also very
important part of the company’s overall marketing strategy. The use of mobile phone
advertisement is not only cost effective but it also supports in attracting mass customers to but
the services which has been offered by NetFlix. However, it can critically argue that one of the
most important tools of marketing which is used by the selected business enterprise is the social
media marketing (Hu, Koren and Volinsky, 2008). It can be stated that 90% of the people living
in USA are active users of internet and therefore it is the most potential platform to reach mass
audience. The use of social media marketing also helps NetFlix in creating awareness among
customers regarding the different types of services which it is offering. Apart from this, the use
of social media marketing also results in lowering down the cost of operations because as
compared to other tools and techniques of marketing, it is very cost effective.

The company also finds a very potential platform to interact with customers, understand
their changing need and deliver service according to the same by making use of social media
marketing. On the other side of this, NetFlix also make some use of traditional form of marketing
where it uses television as a platform to market and promote the services. The result of one
survey conducted depicts the fact that as compared to internet, television is more effective in
terms of reaching customers in short span of time (Bell and Koren, 2007). On contrary of this, it
can be argued that the cost of operations or marketing increases when the company starts
marking use of television as a tool for marketing its key services offered. NetFlix is also
indulging in promoting itself of carrying out the sponsorship of different events which are
associated with movies in any of the country where it is operating. This can be justified with the
example of movie event such as Sundance which is organized in countries such as America and
was sponsored by NetFlix. It can be expressed that carrying out such kinds of marketing and
promotional activities at regular intervals supports in creating more and more awareness among
people in the market and directly contributes in increasing the customers’ base of the selected
business enterprise. The pricing strategy which has been used by NetFlix can be termed as
moderate one as the company seeks for obtaining more and more market share and becoming the
leading market player.
The bottom line issue
The issues of bottom line are linked with factors such as sales, profits, revenues and
growth of a company. At the time of carrying out their business practices, it is required to a
business enterprise to focus on all the above mentioned aspects and take corrective measures for
the satisfaction of the same. It can be stated that operating in market or industry which is highly
competitive is not an easy task for companies and this results in creating various obstacles in
growth and success of a business enterprise (Jenner, 2014). A company such as NetFlix is
required to devise effective action plan and strategies which can support in dealing and resolving
issues linked with bottom line. It can be also argued that a firm cannot sustain in long run if its
sales and revenue keeps on declining in the long run. In the year 2015, the selected business
enterprise has obtained revenue of $1.74 billion. It has been analyzed that the brand is not able to
achieve the aggressive growth which it has witnessed during the initial stage of its operations and
establishment. The present growth rate and revenues can be termed as steady one as they are not
up to the desired level. NetFlix needs to come up with strong marketing and effective strategies

in order to deal with its bottom line issues. Other than this, it can be stated that in the last quarter
of 2013, NetFlix has generated revenue of $1175 Million and in the third quarter of 2015 it has
obtained revenue of $1798 Million. Thus, it can be analyzed that the revenues are growing but
not up to the level which is desired by the selected business enterprise.
Financial implications of the marketing activities
The marketing activity which has been conducted by NetFlix is providing wide range of
benefits to the selected business enterprise. In context of financial implications, it can be stated
that the company is more focused on making use of marketing tools such as social media. This
has lower down the cost as the company is not required to invest large amount of human and
financial resources in carrying out marketing and promotion of its services through social media
channels (Nandakumar and Murray, 2014). Along with this, the sales and revenue are increasing
constantly from the last three years. This clearly highlights the fact that marketing activities
which has been used by NetFlix are able to create need among customers and it is also able to
increase the customer base of the selected business enterprise.
CONCLUSION
From the above carried out research report, it can be concluded that marketing of
products and services has become one of the most important aspects of businesses. It can be
inferred that NetFlix is USA based company which is providing services such as internet
television network and online video streaming to all its customers. Furthermore, the company is
considered as first mover in the industry and it is getting wide range of benefits because of the
same. From the above study, it can be concluded that over the last few years the competition
among this industry has become highly intense and businesses such as NetFlix are facing issues
related to low market share and in attracting customers. It can be inferred that the marketing
activities which are being used by NetFlix consists of tools such as social media, advertisement
on televisions and over internet. The main objective behind conducting all these activities is to
achieve higher profits and gain maximum market share in the industry. The business practices
carried out by the brand is mainly focused on enhancing the level of customer satisfaction and
loyalty.

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