Strategic Financial Management for Netflix: Analysis and Recommendations

Running head: STRATEGIC FINANCIAL MANAGEMENT
NETFLIX
STRATEGIC FINANCIAL
MANAGEMENT

STRATEGIC FINANCIAL MANAGEMENT 1
Table of Contents
Introduction................................................................................................................................2
PESTLE Analysis...................................................................................................................2
Strategic Business Unit of Netflix..........................................................................................3
Porter Five Force Analysis.....................................................................................................4
Markets and Critical Success Factors.....................................................................................5
Industry Predictions............................................................................................................5
Strategic Business Unit Predictions....................................................................................6
Critical Success Factors......................................................................................................7
Opportunities and Threats......................................................................................................7
Opportunities for Netflix....................................................................................................7
Threats for Netflix..............................................................................................................8
Strategic Position of Strategic Business Unit of Netflix 200.................................................9
Bowman’s Strategic Clock.................................................................................................9
Ansoff Matrix...................................................................................................................10
Parental Role of the Top Management.............................................................................10
Success/failure of the current strategies...............................................................................11
Identification of possible future strategies...........................................................................11
Strategy for Netflix’s SBU...............................................................................................11
Strategy for Netflix...........................................................................................................12
Acceptability and Feasibility of Recommended Strategies..................................................13
Acceptability Analysis......................................................................................................13
Feasibility Analysis...........................................................................................................14
Selection of winning strategy...............................................................................................14
Issues in implementing strategy........................................................................................14
Risk assessment and risk management.................................................................................15
Identification of Hazards..................................................................................................15
Deciding who will be harmed...........................................................................................15
Evaluating the risk and planning precautions...................................................................15
Recording the findings and implementing........................................................................15
Reviewing the assessment................................................................................................16
Conclusion................................................................................................................................16
References................................................................................................................................17

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STRATEGIC FINANCIAL MANAGEMENT 3
Introduction
The aim of this report is to discuss about a strategic business unit of Netflix and the strategies
it has adopted for its success. The report is providing the detailed market and industry
analysis of Netflix Company and its Domestic Streaming business unit in order to identify the
forces that are impacting their performance in the market. Besides this, it is also presenting
the critical success factors of the business unit of the company. Further, the report is also
presenting discussion related to the strategic position of business unit of Netflix and in the
end some recommendations are provided that can help company in the future to improve its
performance and deal with the forces that are negatively impacting it.
PESTLE Analysis
The political force that immediately effect the usage of Netflix is the claim filed to the
Federal Communications Commission by the AT&T. This petition is focusing on restricting
the use of online streaming platforms like Netflix. If the Commission of Communication
settles to this petition then there is possibility that the Congress can implement a law that will
augment the internet usage price and consequently will decrease the online streaming
platform’s usage, namely Netflix1. In consideration to the economic force, the rate of
currency exchange along with the laws of taxes of diverse nations and stages, for instance,
Chicago has forced to impose the tax on the service providers of digital media service, which
enforces Netflix to augment its price for diverse subscription plans. In the markets of United
States and United Kingdom, the Netflix’s success is majorly owed to the alteration in the
usage pattern of media by the people2. Both the nations reflect a huge flow towards the
platforms of online streaming, majorly includes Netflix, in place of traditional media
1 K., Bode,
How the new AT&T could bully its way to streaming domination, [website],
2018, https://www.theverge.com/2018/12/18/18146186/att-time-warner-streaming-video-
net-neutrality (accessed 20 December 2019).
2 B., Morgan,
What Is The Netflix Effect? [website], 2019,
https://www.forbes.com/sites/blakemorgan/2019/02/19/what-is-the-netflix-effect/
#f52302656409 (accessed 20 December 2019).

STRATEGIC FINANCIAL MANAGEMENT 4
services. The customers of 4K television have increased in number mainly in the United
Nations and across the world. In order to ensure that the users of Netflix can get their content
in 4K quality, the organization has placed a mechanism that will offer required quality3.
Netflix experienced a class action lawsuit about PR confusion. This misperception was due to
the fact that the organization desired to increase the subscription price, however, they did not
explain the way it will influence the present customers. All the technology companies are
projected to take steps from their own for decreasing their carbon footprint. The data centers
amount that are placed by the Netflix for use is high and therefore their need of the hour is to
confirm that they lead to less harm to the environment. Different environmental groups have
placed their petition against Netflix such that it can use renewable energy for operating its
data centers, particularly in North America.
In the conclusion, it can be said that Netflix is being majorly impacted by the political as well
as environmental force as the laws being implemented have negatively impacted the
performance of this company. Besides this social force and technological change in the
market is also impacting the company in positive terms.
Strategic Business Unit of Netflix
The segment of Domestic streaming has been selected as the strategic business unit of Netflix
for this section which earns revenue from monthly fees of membership for the services
entailing only of streaming content to the members of the company in the United States4.
Porter Five Force Analysis
Competition among existing players – The competition among existing players in the
domestic streaming market is high. Netflix has attained the leading position in the market and
3 M., Snider,
4K TV: Should you get one this year? Here's how to decide, [website], 2017,
https://www.usatoday.com/story/tech/news/2017/11/21/4-k-tv-should-you-get-one-year-
heres-how-decide/871959001/ (accessed 20 December 2019).
4 G.K., Mandal., F., Diroma., and R., Jain, ‘Netflix: An In-Depth Study of their Proactive &
Adaptive Strategies to Drive Growth and Deal with Issues of Net-Neutrality & Digital
Equity’,
International Journal of Management & Social Sciences, vol. 8, no. 2, pp. 152-
161.

STRATEGIC FINANCIAL MANAGEMENT 5
the two near competitors of the company are Hulu and Amazon5. With the fast growth of this
market, number of businesses are putting efforts to increase their market share, knowing that
this space is the future of television viewing.
Threat of new entrant – The impact of this force in the streaming industry is high, due to
technological advances, established content providers is increasing the ease for the players to
enter.
Threat of Substitute Products – The threat of this force in the domestic streaming market of
Netflix is moderate. This is because the substitute of online streaming is television whose
trend is nowadays diminishing in the market. However, presently there are number of players
trying to cover the market to give indirect competition to Netflix.
Suppliers Bargaining Power – The impact of the suppliers is high for the domestic
streaming segment of the company. Netflix procures different types of TV shows and movies
that are accessible to stream on the website of the company6. In order to keep the customers
of Netflix happy and make the website relevant, company have to maintain good relations
with its suppliers.
Customers Bargaining Power - The impact of the customers bargaining power is also high
for the company as customers holds the power in making a business successful or failure.
With the increasing competition for the viewing content, customers can pick and choose any
service they prefer.
In the conclusion, it could be said that domestic online streaming market is attractive for the
existing players as customers are preferring these services however, the increasing
competition is also raising threat for them for which they need to think about the substitute.
5 M.L., Wayne, ‘Netflix, Amazon, and branded television content in subscription video on-
demand portals’,
Media Culture & Society, vol. 40, no. 5, 2018, pp. 725-741.
6 Z.M., Sadq., ‘Analysising Netflix‟s Strategy’,
International Journal of Science and
Research, vol. 4, no. 3, 2015, pp. 2271-2273.