Netflix Strategy Analysis

This assignment requires a comprehensive analysis of Netflix's business strategies and their contribution to the company's success. Students need to examine key aspects such as Netflix's market positioning, content acquisition and production strategies, pricing models, technological advancements, and impact on the traditional entertainment industry. The analysis should draw upon provided resources and demonstrate a critical understanding of Netflix's competitive advantage and future prospects.

Running Head: STRATEGIC ANALYSIS 1
Strategic and Case Analysis: Netflix

STRATEGIC ANALYSIS 2
Table of Contents
1. Introduction..............................................................................................................................2
2. Institutional Background..........................................................................................................3
2.1 Brief History of Blockbuster..................................................................................................3
2.2 Brief History of Netflix..........................................................................................................3
3. How Netflix Beat Blockbuster.....................................................................................................4
3.1 Changing Technology............................................................................................................4
3.2 Retail Outlets versus operating Online..................................................................................5
3.3 Pricing Strategies...................................................................................................................5
3.4 Netflix Innovations................................................................................................................6
4. Netflix as a dominant provider of Online Video Streaming........................................................7
4.1 Netflix stumbles: The demise of Qwikster............................................................................7
4.2 Netflix rebuilds: The rise of original content.........................................................................8
4.3 The future of Netflix..............................................................................................................8
5. Conclusion.................................................................................................................................10
References......................................................................................................................................10

STRATEGIC ANALYSIS 3
1. Introduction
Strategic analysis of a company is one of the most important processes for enhancing its position
in industry. It assists the organization in understanding different strategic aspects and
implementing effective strategies to stay competitive over its competitors. There are various
tools and frameworks, like; SWOT analysis, PEST Analysis etc. which can be adopted for
strategic analysis. The major objective of this report is to include the strategic analysis for case
study organization, i.e. Netflix. Netflix is an American Organization, which provides television
and movies by streaming online media and delivery by mail. This report includes brief history
about both Netflix and Blockbuster as well. Moreover, there is the discussion that how Netflix
can beat Blockbuster through its advancements and effective strategies. At the end, the last part
of this report discusses about the dominance of Netflix in the area of online video streaming. By
analyzing this, it includes the future of Netflix organization in Online Video Streaming segment.
2. Institutional Background
2.1 Brief History of Blockbuster
Blockbuster, i.e. Blockbuster Entertainment Inc. is an entertainment service provider, which is
based in America and offers video games and home movie rental services via DVD mail
delivery, video rental shops, media streaming, cinema theatre and on-demand video. Throughout
the 90s, the organization has become globally known. In the year 2000, the company had given
an acquisition offer to Netflix, but Netflix had rejected that offer. Now, Netflix is operating is
business operations as the biggest competitor of Blockbuster. Since its establishment by David
Cook, the organization has hired 84,300 employees all over the world, which include
approximately 58,500 in US and about 25000 in other nations. Currently, it is operating 9094
stores worldwide (Blockbuster, 2017). There are various risks, which are faced by Blockbuster,
like; competition from Netflix, on demand video services, Redbox automated kiosks etc. These
are the major factors behind the eventual demise of Blockbuster. In the duration of 2000s, the
company started to lose its revenues and it claimed for bankruptcy prevention.

STRATEGIC ANALYSIS 4
2.2 Brief History of Netflix
Netflix is an American organization, which was established in the year 1997 by Marc Randolph
and Reed Hastings. It is an entertainment company that was founded in Scotts Valley, California.
It offers different services related to streaming video on demand and media (Netflix, 2017). It
provides the customers opportunities to stream the TV episodes and movie through internet. In
the beginning, the business model of Netflix involved DVD rental and sales. However, Hastings
abandoned sales of DVD after one year of its establishment, so that it could focus on rental DVD
by mail delivery. Since last few years, the organization is carrying out its business operations in
international markets by offering better services than its competitors. Currently, it is serving 190
countries and has 109.25 million subscribers all over the world, inclusive of 52.77 million in US
(Chopra, Chopra, Veeraiyan, and Veeraiyan, 2017). In addition to its wide range of movies and
TV episodes, the original series of Netflix is also there on internet for its diverse customers.
The mission statement of the company is to enhance the number of subscribers for video
streaming in local and global market. For this, organization is constantly improving customer
experience by diversifying its services. By the use of different strategies and focusing in this
mission, Netflix wants to become one of the best entertainment companies internationally. It
assists content developers all over the world to increase the customer base globally. The
organization is implementing various marketing and business strategies, so that it can generate
more revenues and profits than its competitors.
3. How Netflix Beat Blockbuster
From its founding, Blockbuster had ruled the rental movie business for the decades. In 2005, the
company was valued at over $8 billion. Meanwhile, Netflix started the use of postal service to
deliver DVDs. By using effective strategies and market tactics, the company has become leader
in the industry and soon, Blockbuster has filed for bankruptcy. The organization lost $518 billion
in the year 2010, $1 billion in debt and it had closed most of its stores. After this, Netflix attained
16 million users by operating a well-established business and online videos online (Chen, Zhou,
and Chiu, 2015). Netflix was able to beat Blockbuster due to its effective leadership, use of
enhancing technology and effective strategies. The reasons behind this fact are stated below;

STRATEGIC ANALYSIS 5
3.1 Changing Technology
In the beginning of its business operations, Netflix had provided its customers with DVDs on
demands (Napoli, 2011). With the increase and changes in the demands of customers, company
has adopted advanced and emerging technologies. The major reason behind its growth is that
executives at Netflix have understood that developing technology can change the delivery of
DVDs and rental movies. They have developed a technology strategy that was used under
different steps. The company has implemented a strategy of media and internet streaming, virtual
company and suitable customer service, so that it can deliver the services flawlessly and cheaply
(Cook, 2014).
By analyzing the market, management of Netflix has understood that each and every bit of
content is significant and exclusive. This is the major reason that it has changed its catalogues.
With the advancement in technology, the company is offering different versions of episodes and
videos, which are most appropriate for the customers (Keating, 2012). Another part of
company’s technology strategy was to ignore the liability of retail stores by running business
online. In this way, the organization has adopted advanced and modern technologies for
providing satisfactory services to its potential customers. It collects the data base from previously
and frequently watched shows and movies and then provides the personalized list to the viewers
(Datta, Knox, and Bronnenberg, 2017). Blockbuster was failed to adopt changing technologies,
thus Netflix was able to beat this organization.
3.2 Retail Outlets versus operating Online
Netflix believes in operating the business online, so it has ignored the burden of retail stores and
operated business online. With few offices and warehouses, it has become a virtual company
with no sales persons and no retails stores. The organization had a clear understanding that
running business physically, like Blockbuster may restrict the business areas and customers. So,
it has adopted an effective approach, i.e. open source approach (Enkins, Ford, and Green, 2013).
By the use of this approach, the company was able to deliver its movies on DVD players, TVs,
mobile phones and computers. Now, it offers DVD by mail and online streaming videos, which
make it different from other competitors in the industry. In addition to this, the shipping costs of
these DVDs are comparatively higher in the market, so customers prefer to watch streaming
videos. Netflix has enhanced the services modes, used by Blockbuster (Gibs, 2009). By offering

STRATEGIC ANALYSIS 6
online videos, the company was able to attract more customers in comparison to Blockbuster and
become a leader in entertainment industry. There are several factors, like; technology changes
and online business were effective for the growth and success of Netflix’s business over
Blockbuster.
3.3 Pricing Strategies
Netflix is offering its services, using two modes, i.e. online video streaming and DVD by mail.
However, the organization has faced various issues, but it has eliminated those issues by
providing unique and advanced services. In this industry, Netflix has dominant position in
entertainment industry and streaming video market because of its effective leadership and
emerging technology (Grant, 2016). In addition to this, pricing strategy of Netflix is also an
attractive feature of its services. It has attractive rates and plans for the customers and enticing
them towards its services. It operates its services on monthly subscription basis. It has three
popular plans, which are given below;
 $8.99 for one title at a time
 $13.99 for two titles at a time
 $16.99 for three titles at a time
All of these plans of the company provide unlimited DVDs every month and streaming also
(Jenkins, and Williamson, 2015). The company does not charge for late and due dates and this
approach differentiates it from other domestic movie rentals. It does not charge fees, if the
customer returns the DVDs. Blockbuster was implementing obsolete pricing strategy and
charging $5 for every movie. The major factor behind Blockbuster’s failure is that customers
hated the fees charged on late returns (Pelts, 2017). After analyzing its pricing strategy, Netflix
has improved its strategies accordingly.
3.4 Netflix Innovations
Technology innovations are the center of Netflix’s business and marketing strategy. The
company has adopted various innovative techniques and systems to enhance its business
operations and attracted a large number of customers towards its services. In the year 2017,
Netflix is in the list of most innovative companies in the world. Since, this organization had
started its business operations; it has implemented disruptive innovation (Newman, 2010). Under
this, the organization has considered four elements, i.e. think big, start small, fail quickly and

STRATEGIC ANALYSIS 7
scale fast. Netflix has implemented the innovations, which are winning the market of streaming
videos. To compete with Blockbuster, Netflix has revolved out a user interface upgrade and
replaced the fixed poster pictures with the preview videos. These videos play automatically,
when viewer scroll over DVD’s title card. It was the first organization that provided DVD
delivery through mail. Netflix has invested a large amount of funds on innovation and advanced
technology. In addition to this, the company has adopted open innovation also (Peteraf, Gamble,
and Thompson, 2014).
The organization has applied this approach to enhance its business approach and technology
resources. It not only delivers the television episodes and movies, but also gives detailed
information about the movie, like; member reviews, critic reviews, online trailers, synopses and
ratings from subscribers. It is committed with the community and public by offering
approximately $1 million to the people, who can utilize the movie ratings in enhancing the
service. These innovations at Netflix made it better to perform than its competitors, like;
Blockbuster (Sharma, 2016).
4. Netflix as a dominant provider of Online Video Streaming
Since its establishment in the year 1997, Netflix Organization has captured the entertainment and
streaming video market easily. The company is using effective strategies and in innovative
techniques for enhancing its business operations and processes. Blockbuster is one of the major
companies, which is operating business in the similar industry. In comparison to Netflix, this
organization is charging late fees from the customers. Netflix had declined its prices and plan
rates to compete with its biggest competitor, i.e. Blockbuster. Now, it is confronting bankruptcy
and Netflix covered the market and dominated the industry (Sicoli, 2014). There are various
competitors of Netflix, like; kiosk machine services, television stations, content developers and
cable service providers. However, this organization has implemented effective technology and
pricing strategies, which assisted the organization in dominating the market of online video
streaming. The major reason behind Netflix’s success is that it is Focusing only on its existing
business than diversifying in new business. It enables Netflix to dominate the entertainment and
video streaming industry.

STRATEGIC ANALYSIS 8
4.1 Netflix stumbles: The demise of Qwikster
In 2011, Netflix had introduced its intentions to restructure and rebrand its DVD Home Media
rental services as a separate subsidiary named as Qwikster. It was an independent subsidiary that
separated streaming and DVD rental services. This was the DVD by mail only facility, which
included video-games also. The organization had different websites for both Netflix and
Qwikster, because Hastings felt that it would allow them to give equal attention for enhancing
both the services (Indiviglio, 2011). However, Netflix introduced this new service effectively,
but it did not work in company’s favor. It did not work for various reasons, such as; change in
name, website split, increase in the prices etc. Qwikster forces the users of Netflix to access
DVD subscriptions and combined streaming to create separate accounts for managing them. The
organization was unable to combine both the websites in any manner, like; separate ratings, bills
and separate preferences for Qwikster and Netflix, despite owned by a same organization.
Netflix faced the demise of Qwikster, because new subscribers failed to identify that Netflix and
Qwikster are possessed by same organization. This is the major reason that caused its users to
select a different mailing service and Netflix lost its millions of customers. Thus, these are the
major reasons behind the demise of Netflix (Trendowski, and Sherman, 2014).
4.2 Netflix rebuilds: The rise of original content
In the year 2013, Netflix entered in the content development industry, starting with its first
series, i.e. House of Cards. After the demise of Qwikster, this new service supported Netflix to
rebuild. The organization has significantly expanded the production of television and film series
then, providing “Netflix Original” content via online library of television and films. As of 2016,
Netflix introduced around 126 original films and series, which is more than other cable channel
and network. Netflix is increasing its spending on original content, which is more than its
competitors, i.e. Amazon and Hulu. According to the data of 2015-2017, the importance of
original content was increased and it has gained momentum among people as a major reason to
pay for streaming video. Netflix acts as balancing service to pay the TV packages, because it
enables its customers to watch the ad-free content (Rigby, Brumby, Cox, and Gould, 2016).
In 2017, the company has spent $7 billion, which is more than 6$ billion last year. To attract
more subscribers, the company has focused on increasing its marketing and budget on content
production. Thus, the organization is now emphasized on development of new content and

STRATEGIC ANALYSIS 9
catalogue to capture a large customer base all over the world. At Netflix, there is no scope of
other types of content, i.e. music, sports, news and consumer generated data, but it always
develop better content in DVD and pay per view. The diversification of Netflix’s business in
content development supported the organization in rebuilding its business and brand image after
demise of Qwikster.
4.3 The future of Netflix
At looking at the past position of Netflix in entertainment industry, it can be stated that future of
this organization will be bright than other competitors. There are so many factors, which are
changing with the passage of time. These factors are such as; changes in the status and lifestyle,
convenience and affordability, changes in the interests and behaviors of customers and efficiency
and costs. Integration of these factors may lead an organization towards growth and success. On
the basis of above analysis, it can be stated about Netflix that it is on better position in
entertainment and video streaming market (Tryon, 2013). Netflix is implementing effective
strategies and technologies to become a top leader in the near future. The elements of the
company’s strategy are, like;
 Offering its subscribers with wide range of DVD titles
 Purchasing new and original content by creating and maintaining mutually profitable
relationships with the video providers
 Providing the users an option of watching streaming video and content or fast delivery of
DVD by mail.
 Making it easier for the customers to select the movies, which they like to enjoy
 Making expenses on marketing to entice the people and create extensive awareness about
the brand and services of Netflix
 Regularly transitioning the users to streaming the delivery than delivery by mail as the
popularity of content delivery through internet grew.
The above-mentioned elements are the major reasons behind the growth and success of Netflix
Organization over its competitors, like; Blockbuster. It is facing intense competition from its
competitors, like; Blockbuster as it is offering the products similar to Netflix. But Netflix is able
to entice the people because of its exclusive and innovative strategies (Walker, 2016). On the
other side, the business model of Netflix needs high speed internet to operate but it has the

STRATEGIC ANALYSIS 10
capacity to entice the people, as the expenses and costs of internet are declining. After
considering these factors, it can be said about the Netflix that this organization will experience a
significant growth and success in the timeframe of next 5 years. After this analysis, it can be
estimated that the organization will have approximately 80 million subscribers from outside US
and generate about $7 billion in terms of revenues and profits by the year 2020.
Their significant growth is a symbol that the organization is headed in the correct direction. It is
not only acquiring millions of viewers each year, but they are also retaining them. The major
reason behind its growth and success is its affordable and attractive prices. Hence, Netflix is able
to maintain its financial performance for the future growth (Wheelen, and Hunger, 2017).
In the future, the company needs to make some improvement and advancements, so that it can
meet its future objectives. Netflix should establish its own kiosk, where the people can have free
access, with their membership card. The organization should expand to have more premium and
popular channels, like; Showtime and HBO streaming online. By doing this, company will be
able to improve its business operations and processes in the future. Thus, the company is
continuously dominating entertainment and video streaming industry and growing its business
successfully.
5. Conclusion
Thus, it is hereby concluded that Netflix is a fast growing organization in entertainment and
video streaming industry. The company is offering its entertainment and video streaming
services effectively. Being a leader of DVD rentals, this organization has faced various
challenges due to increase in marketing and advertising expenses, competition, increased
expenses on new purchase, emergence of digital downloading etc.
To deal with these challenges, the company has implemented effective strategies and innovative
technologies, so that it can attract more customers towards its services. Continuous changes in
the technology moved the company to maximize its profits and market share. Adoption of
advanced technologies and implementation of effective pricing strategies helped Netflix to
dominate the industry. By introducing its original content development service, the company was
able to overcome the loss due to demise of Qwikster. The directors of the company have adopted
subscription based strategy and business model, which had projected Netflix into being the

STRATEGIC ANALYSIS 11
largest entertainment service provider in the world. In the future, the organization should expand
its business by partnering with well-known premium channels. By this partnership, it will be able
to enhance its brand image in America and other countries.

STRATEGIC ANALYSIS 12
References
Blockbuster, 2017, Home: Find a Kiosk or store, http://www.blockbuster.com.au/home.
Chen, L., Zhou, Y. and Chiu, D.M., 2015. Smart streaming for online video services. IEEE
transactions on multimedia, 17(4), pp.485-497.
Chopra, S., Chopra, S., Veeraiyan, M. and Veeraiyan, M., 2017. Movie Rental Business:
Blockbuster, Netflix, and Redbox. Kellogg School of Management Cases, pp.1-21.
Cook, C.A., 2014, Netflix: A Stepping Stone in the Evolution of Television, University of South
Florida St. Petersburg Journalism and Media Studies.
Datta, H., Knox, G. and Bronnenberg, B.J., 2017. Changing their tune: How consumers’
adoption of online streaming affects music consumption and discovery. Marketing Science.
Enkins, H., Ford, S., and Green, J., 2013, Spreadable media: Creating value and meaning in a
networked culture, New York: New York University Press
Gibs, J., 2009, The new screen for video. Television goes digital. New York: Springer Science +
Business Media.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Indiviglio, D. 2011, 5 Reasons Why Qwikster Is Now Deadster. Retrieved from
https://www.theatlantic.com/business/archive/2011/10/5-reasons-why-qwikster-is-now-
deadster/246465/.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Keating, G., 2012, Netflixed: the epic battle for America’s eyeballs. New York:
Portfolio/Penguin.

STRATEGIC ANALYSIS 13
Napoli, P.M., 2011, Audience evolution: New technologies and the transformation of media
audiences, New York: Columbia University Press
Netflix, 2017, See What’s Next, Retrieved from https://www.netflix.com/in/.
Newman, R. 2010, How Netflix (and Blockbuster) Killed Blockbuster.
https://money.usnews.com/money/blogs/flowchart/2010/09/23/how-netflix-and-blockbuster-
killed-blockbuster.
Pelts, S. 2017, Taking a Look at Netflix’s Pricing Strategy.
https://marketrealist.com/2017/07/taking-a-look-at-netflixs-pricing-strategy.
Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The
quest for competitive advantage. McGraw-Hill Education.
Rigby, J.M., Brumby, D.P., Cox, A.L. and Gould, S.J., 2016, September. Watching movies on
netflix: investigating the effect of screen size on viewer immersion. In Proceedings of the 18th
International Conference on Human-Computer Interaction with Mobile Devices and Services
Adjunct (pp. 714-721). ACM.
Sharma, R, 2016, The Netflix Effect: Impacts of the Streaming Model on Television Storytelling.
Wesleyan University.
Sicoli, C. 2014. How Netflix Beat Blockbuster And Became Huge. Retrieved from
https://www.therichest.com/business/how-netflix-beat-blockbuster-and-became-huge/.
Trendowski, J. and Sherman, P., 2014. Txtbookrental: netflix or Blockbuster?. Journal of the
International Academy for Case Studies, 20(3), p.17.
Tryon, C., 2013, On-demand culture: Digital delivery and the future of movies. New Brunswick,
N.J: Rutgers University Press.

STRATEGIC ANALYSIS 14
Walker, N., 2016, The rise of Netflix, accessed on 23 January 2018 from
http://www.businessreviewusa.com/leadership/5478/The-rise-of-Netflix.
Wheelen, T.L. and Hunger, J.D., 2017. Strategic management and business policy. Pearson
Education.

STRATEGIC ANALYSIS 15

STRATEGIC ANALYSIS 16