Strategic Management Report on Netflix

This report provides a detailed analysis of Netflix's strategic management, including its current issues, geographical location, future challenges, financial analysis, ratios, efficiency ratio, liquidity ratio, and more. It also includes a segment analysis, competitor analysis, marketing, product, price, place, promotion, human resource management analysis, corporate governance, and operations.

Running head: STRATEGIC MANAGEMENT REPORT ON NETFIX
Strategic Management Report on Netflix
Name of the Student:
Name of the University:
Author Note:

STRATEGIC MANAGEMENT REPORT ON NETFLIX 1
Table of Contents
Introduction......................................................................................................................................1
Current Issues..............................................................................................................................1
Geographical location and SBU’s...............................................................................................1
Future Challenges........................................................................................................................1
Income........................................................................................Error! Bookmark not defined.
Ratios...............................................................................................................................................1
Profitability Ratio........................................................................................................................1
Return on Capital Employed...................................................................................................1
Net Profit Margin.....................................................................................................................1
Gross profit Margin.................................................................................................................1
Efficiency Ratio...........................................................................................................................1
Debtors.....................................................................................................................................1
Creditors..................................................................................................................................1
Liquidity Ratio.............................................................................................................................1
Current Ratio...........................................................................................................................1
Quick Ratio..............................................................................................................................1
Cash Analysis..............................................................................................................................1
Financial Ratio.............................................................................................................................1
Gearing Ratio...........................................................................................................................1

STRATEGIC MANAGEMENT REPORT ON NETFLIX 2
Interest Coverage Ratio...........................................................................................................1
Investors Ratio.............................................................................................................................1
EPS Ratio.................................................................................................................................1
Market Share................................................................................................................................1
Conclusion:....................................................................................Error! Bookmark not defined.
Key Performance Indicator..............................................................................................................1
Segment Analysis (Q1-Q3)..............................................................................................................1
Segmentation Analysis....................................................................................................................1
Global OTT and Pay Revenue.....................................................................................................1
Competitor Analysis........................................................................................................................1
A) General..............................................................................................................................1
Online TV & Movie Piracy Losses to Soar to $52 billion..............................................................1
B) Specific Competitors.........................................................................................................1
Marketing.....................................................................................................................................1
Product.........................................................................................................................................1
Price.............................................................................................................................................1
Place.............................................................................................................................................1
Promotion....................................................................................................................................1
People.........................................................................................Error! Bookmark not defined.
Human Resource Management Analysis.........................................................................................1

STRATEGIC MANAGEMENT REPORT ON NETFLIX 3
Corporate Governance.................................................................................................................1
Operations........................................................................................................................................1
References:......................................................................................................................................1
Appendix:........................................................................................................................................1
Appendix 1 Financial Statement..................................................................................................1
Appendix 2: Ratios......................................................................................................................1
Appendix 4: Market Share.......................................................................................................1
Appendix5: Organization Culture and Values.............................................................................1
Appendix 6: Employees...............................................................................................................1
Appendix 7: Market Analysis......................................................................................................1
Appendix:....................................................................................................................................1

STRATEGIC MANAGEMENT REPORT ON NETFLIX 4
Introduction
In the year 1997 at Scotts Valley, California, Marc Randolph along with Reed Hastings
founded Netflix. As Hastings faced problems and he felt frustrated for Paying $40 as late fees to
Blockbusters for Apollo 13. To completely wipe off the problem he founded a solution Netflix
for every customers. Netflix is known as the foremost internet subscription services in respect to
TV episodes and movies in over 40 nations across the world. It has 33 million subscribers.
Netflix belonging to entertainment is traded in NASDQ. (Ir.netflix.com, 2018)
Current Issues
- Netflix spent more currency to attract clients along with developing the market. In this
regard, it does not put much focus on consumer service. Due to sluggish facilities
consumers’ rate decreased.
- Video on Demand had influence the performance of Netflix. This had provide immediate
view support to the consumers in regard to watch latest movies. This had proved that
VOD is better than the DVD rental along with the traditional video stores.
Geographical location and SBU’s
SBU Geographical Location
Domestic Streaming USA
International Streaming Sweden, United kingdom, Italy
Domestic DVD USA, Canada, Japan

STRATEGIC MANAGEMENT REPORT ON NETFLIX 5
Future Challenges
 The nonexistence of advertising revenues for ads.
 Netflix focus in the subsequent years is absolutely the High Dynamic Range that is an
innovative average set for the superiority of the appearance. (Vena 2018).
Financial Analysis
Financial Highlights 2015-2018
In 2015, debts increased as it signed partnership agreement with Soft Bank to launch in Japan.
Operating profit margin in 2015 amounted to 4.51%
In 2017, Net Income increased to 33.40% compare to 2016.
$146.7 billion was the market capitalization till July 2018

STRATEGIC MANAGEMENT REPORT ON NETFLIX 6
2014 2015 2016 2017
$-
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
Revenue
Domestic Streaming International Streaming Domestic DVD
$-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
$1,600,000.00
$1,800,000.00
$2,000,000.00
Revenue 2018(Q1)(Q2)

STRATEGIC MANAGEMENT REPORT ON NETFLIX 7
Automotive Automotive Leasing Energy Generation and
Storage
Service and other
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
Revenues 2017 Q1 & Q2
2017(Q1) 2017(Q2)
Ratios
Refer appendix 1,2 and 3
Appendix 4- Nissan Motor Company’s Ratios1
Data used from Annual Reports and MorningStar.
Profitability Ratios 2012 2013 2014 2015 2016
2017(Q1
)
2017(Q2
)
Gross Profit % 16.56 17.61 18.76 19.63 19.6 13.18 13.78
Net profit % 3.63 3.56 3.71 4.02 4.3 5.66 5.46
ROCE % 7.12 6.19 7.18 7.03 9.11 - -
ROIC 4.58 4.33 4.29 4.5 5.43 - -
Liquidity Ratios 2012 2013 2014 2015 2016
2017(Q1
)
2017(Q2
)
Current Ratio 1.67 1.66 1.61 1.59 1.62 1.5 1.58
Quick Ratio 1.18 1.24 1.28 1.25 1.25 1.33 1.36
Efficiency Ratios 2012 2013 2014 2015 2016
debtor days 169 186 209 220 244
creditor days 62 60 61 57 59
Inventory turnover 7.77 7.48 7.59 7.51 7.58
Investor Ratios 2012 2013 2014 2015 2016
EPS 1.45 1.66 1.95 2.23 2.96
Net Dividend yield 0.48 0.53 0.57 0.76 0.81
Gearing Ratios 2012 2013 2014 2015 2016
Capital Gearing 50.59 50.91 50.63 51.55 54.54
1 Source: http://financials.morningstar.com/ratios/r.html?t=NSANY

STRATEGIC MANAGEMENT REPORT ON NETFLIX 8
Interest Coverage 0.82 0.83 0.79 0.79 0.95
1. Profitability Ratio
 Return on Capital Employed
2 0 1 3 - 1 2 2 0 1 4 - 1 2 2 0 1 5 - 1 2 2 0 1 6 - 1 2 2 0 1 7 - 1 2 A v e r a g e
0.00
0.50
1.00
1.50
2.00
2.50
ROCE
Figure 1
Netflix has expanded from the DVD rentals to streaming videos in 2008. The return has
shown an impressive increment every year as shown in the figure 1. The net income in year 2013
came up to $ 112 million and Capital employed $3259 million. This gave the return of 0.89%.
this increased to 1.14% in 2014 with further increase in the ROCE ratio as the subscriber rate
along with annual membership increased every year. This fetched increment in the net income.
 Net Profit Margin

STRATEGIC MANAGEMENT REPORT ON NETFLIX 9
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Net profit Margin
Figure 2
This ratio indicates the amount of cash collected as profits are transformed from
revenues. This ratio is calculated by dividing net profits with revenues. The lower side of the
ratio indicates lower profits. In the figure 2 the percentage of ratio shows fluctuating figures. In
the year 2015 and 2016 the company suffers loss as it could not meet the estimated figures. In
year 2017, it earned high profits by launching new series along with it the subscribers increment.
Recently, in first two quarter of 2018 net profit margin highly increased in compare to other
years.
 Gross profit Margin

STRATEGIC MANAGEMENT REPORT ON NETFLIX 10
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Gross Profit Margin
Figure 3
The above figure indicates that the profit margin of Netflix increased every year as
Netflix earned most of its revenue from the videos streaming and as the annual membership
subscription increased.
 ROIC
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.08
0.14
0.06
0.07
0.16
0.07
0.09
ROIC

STRATEGIC MANAGEMENT REPORT ON NETFLIX 11
The ROIC ratio indicates fluctuation return every year. In 2018, the quarterly return has
slightly increased. This indicates growth of company.
2. Efficiency Ratio
 Debtors
2013-12 2014-12 2015-12 2016-12 2017-12 Average
140
145
150
155
160
165
170
Debtors(days)
Figure 4
The debt collection days has been fluctuating in past 5 years. The average collection day
is 158 days that is medium than the receivables of the industry average.
 Creditors

STRATEGIC MANAGEMENT REPORT ON NETFLIX 12
2013-12 2014-12 2015-12 2016-12 2017-12 Average
0
5
10
15
20
25
13
20 20
19
17 18
Creditors( Days)
Fgure:5
The credit period has been fluctuating in the recent years. It was same for the two years in 2014
and 2015. The average days of creditor payment is 17 days which shows a positive repo of the
company.
 Inventory Ratio
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
0.50
1.00
1.50
2.00
2.50
Inventory Turnover

STRATEGIC MANAGEMENT REPORT ON NETFLIX 13
Inventory ratio signifies the efficiency of how company is managing its inventory as
compared to its cost of sales. The ratio shows that Netflix has improved in maintaining its
inventory in recent quarter of 2018.
1.3 Liquidity Ratio
 Current Ratio
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
Current Ratio
Figure 6
Through current ratio the ability of wiping off the short debts along with long term debts
can be measured. The figure 6 shows that the Netflix has current ratio above the indicator level
that is 1.0 that indicates that Netflix had a strong bound stability of the company in past 5 years.
 Quick Ratio

STRATEGIC MANAGEMENT REPORT ON NETFLIX 14
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Quick Ratio
Figure 7
The indicator of quick ratio tell us that if the ratio is above 1.0 that indicates the company
is flexible in liquidity. In the recent 5 years the trend of quick ratio is lower than 1.0. This means
Netflix is not flexible in its liquidity and it is based on inventory.
1.4 Cash Analysis
 Netflix still expects free cash outflows of up to $4bn in the year 2018.
 Trailing revenues have flew 78% higher in the last two years, while EBITDA profits took
a 162% jump increase.
 In up coming time company would invest in new shares so in the year it smashed 2
billion in cash. The CEO said that for few time Cash flow will have a negative trend.
1.5 Financial Ratio
 Gearing Ratio

STRATEGIC MANAGEMENT REPORT ON NETFLIX 15
2013-12 2014-12 2015-12 2016-12 2017-12
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.15
0.20
0.36 0.37
0.48
Capital Gearing Ratio
Figure 8
The ratio has been slightly increasing in the past 5 years as the company invests in the
property and other areas for launching new series.
 Interest Coverage Ratio
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Interest Coverage
Figure 9

STRATEGIC MANAGEMENT REPORT ON NETFLIX 16
Rise in the interest coverage ratio has been identified in 2013 and 2014, but in year 2015 and
2016 it has significantly decreased. If the ratio is lower than 2.5 it means that the company
carefully put its cash in borrowings as it simultaneously increases its debt and expenses on
interest. This ratio indicates the company`s financial health.
1.6 Investors Ratio
 EPS Ratio
2013-12 2014-12 2015-12 2016-12 2017-12
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
0.28
0.63
0.29
0.44
1.29
EPS
Figure: 10
Earnings per share is an equity production dimension, which is achieved by dividing
earnings accessible for common stockholders with number of shares of common stock those are
outstanding. Potential stockholders to evaluate a company’s earning power use this ratio.
Observing at Netflix’s EPS statistics in figure 10, the company proficient an amplified revenue
from 2013 to 2014 for consequently decreasing again in 2015 and again rising from 2016.
Please add the competitor analysis for me after finish the ratio. Like the Tesla example u can
refer it:

STRATEGIC MANAGEMENT REPORT ON NETFLIX 17
Competitor Analysis
Refer to appendix 6.
At year 2016, General Motor Company has highest EPS, ROCE and ROIC. The strengths of the
GM are strong position in U.S automotive market and rare product recalls2.
Ford Motor Company contained the highest current ratio and capital gearing in automotive
industry. The strengths of the Ford Company are extensive distributions channels across 11,971
dealerships and Ford’s sound financial performance allows the company to make investment
easier3.
 Market Share
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
Market Share
Figure:11
The revenue of Netflix showed the upward trend due to increase rate in the subscriber
streaming videos. The share price increases from $48.50 to $114.38 in the year 2015. As Netflix
is spending more in the advertising, the rate of subscribers is increasing. Recently by July 2018
the share price was at $337.4 As the GDP has a growth rate of 7.7% . (Delen, Kuzey and Uyar
2013).
2 Source: https://www.strategicmanagementinsight.com/swot-analyses/general-motors-swot-analysis.html
3 Source: https://www.strategicmanagementinsight.com/swot-analyses/ford-swot-analysis.html

STRATEGIC MANAGEMENT REPORT ON NETFLIX 18
At year 2016, General Motor Company has highest EPS, ROCE and ROIC. The strengths of the
GM are strong position in U.S automotive market and rare product recalls .
Ford Motor Company contained the highest current ratio and capital gearing in automotive
industry. The strengths of the Ford Company are extensive distributions channels across 11,971
dealerships and Ford’s sound financial performance allows the company to make investment
easier .If the KPI has the 2018 the amount and information please put in.
Key Performance Indicator
KPI(target) 2017(actual) KPI Met ?
Sales Growth 65.51% Yes
Operating Income Growth 27.71% Yes
ROIC 10.66% Yes
Segment Analysis (Q1-Q3)
Segmentation Analysis (Q1-Q3)
in Thousands $
Quarter 3 Quater2 Quater1
2017 2016 Variance 2017 2016 Variance 2017 2016 Variance
Revenue
Domestic Streaming
1937314 1547210 -390104 1893222 1505499 387723 1820019 1470042 349977
International Streaming
1973283 1327435 -645848 1921144 1165228 755916 1782086 1046199 735887
Domestic DVD
3910597 2874645 -1035952 92904 2670727 -2577823 98751 2516241 -2417490
Total Revenue
7821194 5749290 -2071904 3907270 5341454 -1434184 3700856 5032482 -1331626
Total Operating
Revenue
480668 208627 272041 462213 127807 334406 446578 256942 189636

STRATEGIC MANAGEMENT REPORT ON NETFLIX 19
 The performance of Netflix showed upward trend in all sectors.
 The revenue from streaming grew 36% in the year 2017 with addition of 24 million
members as compared to 2016.
 In the letter that is being provided to the shareholders every quarter, Netflix stated his
disappointment against its own estimation team. The team was compressed substantially
by Netflix.
 In the second quarter of 2018 streaming company running videos added 5.2 million value
under fresh subscribers. This did not meet the forecast made by their forecast team.
(&rarr 2018).

STRATEGIC MANAGEMENT REPORT ON NETFLIX 20
United States China Norway Other
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
Revenues by Geographical Segmentation
2014 2015 2016
54%
13%
8%
26%
Total revenues
United States China Norway Other
Automotive Automotive Leasing Energy Generation and
Storage
Service and other
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
Total Revenues
2013 2014 2015 2016

STRATEGIC MANAGEMENT REPORT ON NETFLIX 21
 Automotive : that is a big jump from 2015 to 2016 due to the deliveries of Model X and S4.
 Automotive leasing : began at April 2014, Tesla provides resale value guarantee to the customer5.
 Energy Generation and Storage : increase tremendously from 2015 to 2016 due to the
acquisition of SolarCity6.
 Service and other : development of vehicle powertrain components such
as battery packs and drive units.
Segmentation Analysis
 Global OTT and Pay Revenue
 In the year 2017 global OTT
revenues were $46.5 billion.
 In the same year estimation
regarding decline in revenues
were marked by Pay Tv up to
$2 billion in the year 2022.
 In 2017 revenues of OTT global was $46.5 million
4 Source: http://www.marketwired.com/press-release/tesla-delivers-17400-vehicles-in-q4-2015-total-2015-
deliveries-were-50580-nasdaq-tsla-2085132.htm
5 Source: https://forums.tesla.com/forum/forums/resale-value-guarantee-0
6 Source: https://www.bloomberg.com/news/articles/2016-11-17/tesla-seals-2-billion-solarcity-deal-set-to-test-
musk-s-vision

STRATEGIC MANAGEMENT REPORT ON NETFLIX 22
 In the research made by Digital TV estimated that SVOD revenues were 50% of total
revenue that is $23.2 billion.
 There is an estimation too regarding the increment of OTT revenues by $41.2 billion
in the year 2022.
 2013-12 2014-12 2015-12 2016-12 2017-12
0
100
200
300
400
500
600
Sales

STRATEGIC MANAGEMENT REPORT ON NETFLIX 23
Competitor Analysis
A) General
Online TV & Movie Piracy
Losses to Soar to $52 billion
 Online TV Piracy Forecast report
stated that the loss would be
double in the years of 2016-2022
by $51.6 billion.
 Revenue loss was due to episodes
at TV and movies.
 Piracy losses of Asia Pacific`s
would get double by 2022 as it has over taken North America. (Elaluf-Calderwood 2014).
B) Specific Competitors
In the year 1997, Netflix started with mail order of DVD providing on a rental basis charging no
late fees. In recent ten years it gained a prior percentage of market share. After introducing
streaming videos in 2008 it gained 37 percentage of market share. The competitors of Netflix
made an entry in the game section that proved to be at negligible losses regarding the market
share in the year 2012. (Moskowitz, 2018)
In the recent times, Netflix is streaming at highly competitive market. The forecast team
has been estimating that there is a tenfold from $1.3billion in the year 2007 to $12.5 billion in the
year 2017. It holds a lead place in terms of program membership. Closest competitor of Netflix is

STRATEGIC MANAGEMENT REPORT ON NETFLIX 24
Comcast in relation to subscribers. Indirect competitors of Netflix along with piracy is
representing more threat in regard of profits as the harm all the legitimate providers ignoring the
position of market.
Direct Competitors Indirect Competitors
Hulu The Pirate Bay
Coinstar You Tube
Amazon Studios/ Prime Dailymotion
Comcast Xfinity Bittorrent
Marketing
Product
DVD rental
It is based on monthly rental fee. This gives the subscriber the right of possession of
DVDs as per the range of each one subscription

STRATEGIC MANAGEMENT REPORT ON NETFLIX 25
.
Streaming
By paying some dollars the customer can get the access to Netflix catalogue. One can
watch as per own choice and availability.
TV shows
If anyone can understand Netflix better it is only Netflix users . as it understands the need
of customers. Maximum seasons are of 24 episodes and minimum 10-14 episodes. (Chao and
Zhao 2013).
Price
Netflix provides three streaming membership plans:-
Plan Streaming Description
Basic SD quality single screen at a time.
Standard HD quality two screen simultaneously. This is
mostly preferred one by the customer.
Premium HD and ultra HD quality on four screen

STRATEGIC MANAGEMENT REPORT ON NETFLIX 26
At the year end of 2017, the price strategy of the above plan changed in the US. The price
ranged from $7.99 to $13.99 every month. Outside US every month the price ranged from $4 to
$20. (Cain 2014).
Place
Product success is based on a bundle of small factors. The content of the product is the
big factor to survive in the industry as well as market. Netflix is mainly used on PC. As for the
series Netflix bids, it fluctuates per nation since workplaces administer copyright by nation,
therefore Netflix would have to reimburse the workspace for streaming rights per nation.
However, if one is registered Netflix user, then the account would work anywhere user are and
the list of the shows would alter mechanically.( Xu, Frankwick and Ramirez 2016).
Promotion
Promotion is the procedure of receiving our product data to customers by viewing how it
distinguishes from alike services. Promotion comprises any and each way it can reach our
spectators such as publicizing through TV, radio, social media, press, billboards. As a substitute
of disbursements publicizing currency on salaried media such as those illustrations Netflix
indicates to increase consciousness by state of affairs through social media sites such as
Instagram and Twitter. (Cain 2014).

STRATEGIC MANAGEMENT REPORT ON NETFLIX 27
Human Resource Management Analysis
Richard Barton, CEO Netflix, headquarter at LOS at Gatos
Recuritment Process
 Reed Hastings, is Chairman of the Board and CEO of Netflix and board member of
Facebook. He preserved 10.7 million shares of Netflix that included stock options that
came in totaling of 5.2 million shares. Percentage of total holding in shares is 2.5% that is
equivalent to the shares of Netflix.
 In the year 1998, Netflix launched first DVD online store along with 30 employees.
Online
Application
Offical Job sites
Recruiter
On- job
Evaluation
Telephone call evaluation
Meeting with Manager
Interviews
Face to face interview
Final Round with higher level of managers
Board Of Directors
A.George(Skip) Battle
Rodolphe Belmer
Mathias Dopfner
Timothy Haley
Jay Hoag
Leslie Kilgore
Ann Mather
Brad Smith

STRATEGIC MANAGEMENT REPORT ON NETFLIX 28
 Jay Hoag is appointed as principal independent director.
 Netflix’s Chief Communication Officer – Jonathan Friedland– left in June 2018
 In June 2018, Jonathan Friedland, the Chief Communication Officer left Netflix.
 In the AGM of 2018 it was stated that the role of Chairman and CEO is being combined.
As the person being the chairman is also the director so he is best to identify the priorities
of strategies and it would help the management and Board to develop and execute the
plan. (McCord 2014).
Key Values
Judgment
Communication
Courage
Curiosity
Passion
Selflessness
Innovation
Integrity
Inclusion
Impact
Refer Appendix 5

STRATEGIC MANAGEMENT REPORT ON NETFLIX 29
2014 2015 2016 2017
0
1000
2000
3000
4000
5000
6000
Number of Netflix Employees
Number of Netflix Employees Total Number of Netflix Employees Full-Time
Number of Netflix Employees Temporary
 Excellent benefit package is offered to the employees.
 As per the report prepared by the Glassdoor`s Netflix pays the second maximum median
base income. Software Engineer salary is 56% above the nationwide average.
 Employee`s benefits are
- Open working hours (at the California office)
- Mobile phone discounts
- Unlimited vacation days, within reason
-Free lunches
- . Employees use their discretion on actual leave taken.
- Health, vision and dental insurance

STRATEGIC MANAGEMENT REPORT ON NETFLIX 30
-Up to 12 months maternity and paternity leave. (Ir.netflix.com, 2018)
Refer Appendix 6
Corporate Governance
 Netflix applies two highly unique practices :
1. Members of board has to attend timely meetings with the senior level of management.
2. Communications with board is explained in a narrative way along with the supporting
evidences.
 The corporation is said to design the strategy to spend $4.2 billion on imaginative
programming by the year 2022, together with $1billion in 2018.
 Netflix's share values have gushed at slightest 10 percent in four of this year's first half,
but some four-week times have provided even high-pitched profits.
 Cost of marketing for acquiring subscribers has moved up to $60 to $100 per person at
present in comparison to 2013 to 2015 .
 As per Ampere Netflix has spent approx. $1.3 billion for advertising streaming products
in the year 2017.( McCord 2014).

STRATEGIC MANAGEMENT REPORT ON NETFLIX 31
 Business model of Netflix
 Product life cycle
 Add the Strength and weakness

STRATEGIC MANAGEMENT REPORT ON NETFLIX 32
Strenght
 Leader In Subscription Streaming
Services
 Large customer base
Opportnity
 Branching Into New Lands
 Expansion into China
 Growth of technology
Weakness
 Cost of original content
 Environmental cost
 Lack of rights to original content
Threat
 High compeition
 Digital piracy

STRATEGIC MANAGEMENT REPORT ON NETFLIX 33
Operations
Value Chain
- Primary Activities: inbound logistic
- Operations-- online network is also available
- Outbound logistic- sound supply chain.
- Marketing & Sales- large market place covered
- Service- have innovative policy for employees
- Support Activities: Firms Infrastructure
- HR Management
- Technology Development

STRATEGIC MANAGEMENT REPORT ON NETFLIX 34
- Procurement
Refer Appendix 5

STRATEGIC MANAGEMENT REPORT ON NETFLIX 35
References:
→, V. (2018). Netflix Business Strategy & Unit Economics Analysis. [online] Unicornomy.
Available at: https://unicornomy.com/netflix-business-strategy-netflix-unit-economics/
[Accessed 16 Nov. 2018].
Allen, G., Feils, D. and Disbrow, H., 2014. The rise and fall of Netflix: what happened and
where will it go from here?. Journal of the International Academy for Case Studies, 20(1), p.135.
Cain, P., 2014. Marketing-mix Modelling Big Data.
Chao, C.N. and Zhao, S., 2013. Emergence of movie stream challenges traditional DVD movie
rental—An empirical study with a user focus. International Journal of Business Administration,
4(3), p.22.
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A
decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Elaluf-Calderwood, S., 2014, May. Netflix as a player in the digital market. In Network
Economy Forum. London School of Economics and Political Science.
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STRATEGIC MANAGEMENT REPORT ON NETFLIX 36
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STRATEGIC MANAGEMENT REPORT ON NETFLIX 38
Appendix:
Appendix 1 Financial Statement
NETFLIX INC (NFLX) Statement of CASH
FLOW
USD in millions except per share data.
2013-
12
2014-
12
2015-
12
2016-
12
2017-
12
Cash Flows From Operating Activities
Cash used in operating activities -2938 -3496 -5632 -8364 -9075
Depreciation & amortization 2242 2782 3547 4925 6330
Net changes in working capital 794 730 1335 1965 959
Net cash provided by operating activities 98 16 -749 -1474 -1786
Cash Flows From Investing Activities
Net Investments in property, plant, and equipment -54 -70 -91 -108 -173
Purchases of investments -550 -427 -372 -187 -75
Sales/Maturities of investments 408 527 364 423 343
Other investing activities -60 -73 -80 -78 -60
Net cash used for investing activities -256 -43 -179 50 34
Cash Flows From Financing Activities
Other financing activities 476 542 1640 1092 3077
Net cash provided by (used for) financing activities 476 542 1640 1092 3077
Effect of exchange rate changes -3 -7 -16 -9 30
Net change in cash 315 509 696 -342 1355
Cash at beginning of period 290 605 1114 1809 1468
Cash at end of period 605 1114 1809 1468 2823
Free Cash Flow
Operating cash flow 98 16 -749 -1474 -1786
Capital expenditure -54 -70 -91 -108 -173
Free cash flow 44 -53 -841 -1582 -1959

STRATEGIC MANAGEMENT REPORT ON NETFLIX 39
2013-12 2014-12 2015-12 2016-12 2017-12 2018(Q1) 2018(Q2)
Assets
Current assets
Cash
Cash and cash equivalents 605 1114 1809 1468 2823 2594 3906
Short-term investments 595 495 501 266
Total cash and short-term investments 1200 1608 2311 1734 2823 2594 3906
Other current assets 1858 2332 3121 3987 4847 5224 5441
Total current assets 3059 3940 5432 5720 7670 7818 9347
Non-current assets
Net property, plant and equipment 134 150 173 250 319 680 690
Other long-term assets 2220 2966 4598 7616 11023 11993 12967
Total non-current assets 2354 3116 4771 7866 11343 12335 13317
Total assets 5413 7057 10203 13587 19013 25008 26974
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable 108 202 253 313 360 436 448
Other current liabilities 2046 2462 3276 4274 5107 4466 4541
Total current liabilities 2154 2663 3530 4587 5466 4902 4989
Non-current liabilities
Long-term debt 500 900 2371 3364 6499 6542 8342
Other long-term liabilities 1425 1636 2078 2956 3465 3584 3745
Total non-current liabilities 1925 2536 4450 6320 9964 10126 12087
Total liabilities 4079 5199 7979 10907 15431 15028 17076
Stockholders' equity
Common stock & additional paid-in capital 778 1043 1325 1600 1871 1995 2103
Retained earnings 552 819 942 1129 1731 2021 2406
Accumulated other comprehensive income and other equity 4 -4 -43 -49 -21 4 -12
Total stockholders' equity 1334 1858 2223 2680 3582 4021 4497
Total liabilities and stockholders' equity 5413 7057 10203 13587 19013 19049 21573
NETFLIX INC (NFLX) CashFlowFlag BALANCE SHEET
USD in millions except per share data.
NETFLIX INC (NFLX) Statement of CASH
FLOW
USD in millions except per share data.
2013-
12
2014-
12
2015-
12
2016-
12
2017-
12
Cash Flows From Operating Activities
Cash used in operating activities -2938 -3496 -5632 -8364 -9075
Depreciation & amortization 2242 2782 3547 4925 6330
Net changes in working capital 794 730 1335 1965 959
Net cash provided by operating activities 98 16 -749 -1474 -1786
Cash Flows From Investing Activities
Net Investments in property, plant, and equipment -54 -70 -91 -108 -173
Purchases of investments -550 -427 -372 -187 -75
Sales/Maturities of investments 408 527 364 423 343
Other investing activities -60 -73 -80 -78 -60
Net cash used for investing activities -256 -43 -179 50 34
Cash Flows From Financing Activities
Other financing activities 476 542 1640 1092 3077
Net cash provided by (used for) financing activities 476 542 1640 1092 3077

STRATEGIC MANAGEMENT REPORT ON NETFLIX 40
Effect of exchange rate changes -3 -7 -16 -9 30
Net change in cash 315 509 696 -342 1355
Cash at beginning of period 290 605 1114 1809 1468
Cash at end of period 605 1114 1809 1468 2823
Free Cash Flow
Operating cash flow 98 16 -749 -1474 -1786
Capital expenditure -54 -70 -91 -108 -173
Free cash flow 44 -53 -841 -1582 -1959

STRATEGIC MANAGEMENT REPORT ON NETFLIX 41
Appendix 2: Ratios
Formula Used:
1) Profitability
ratios
 ROCE = (Operating profit/ Capital Employed)
* 100%
Capital Employed= Total Asset- Total
Current Liabilities
 Net profit margin = (IBT)/Revenue) *100%
 Gross profit
Margin
= (Gross profit/ Revenue) *100%
2) Liquidity Ratios  Current Ratio = (Current Assets/ Current Liabilities)
 Quick Ratio = (Current Assets-other Asset)/ Current
Liabilities
3) Efficiency
Ratios
 Debtors (Days) = (Account receivable/ Revenue) * 365
days
 Creditors (Days) = (Account payable/ Cost of Revenue)
*365 days
4) Investor Ratios  EPS Ratio
(pence)
= (Net income)/ Weighted average
number of outstanding share
 Market Share = (Market Price per share/ EPS)
 ROIC Ratio = (Net income/ Shareholder’s Equity)
5) Gearing Ratios  Capital Gearing
Ratio
= Long term Debt/ Capital Employed
 Interest Coverage = EBIT/ Interest Payable
Appendix 3: Ratios

STRATEGIC MANAGEMENT REPORT ON NETFLIX 42
Particulars
2013-
12
2014-
12
2015-
12
2016-
12
2017-
12 Average
Ratios
Particulars
2013-
12
2014-
12
2015-
12
2016-
12
2017-
12
2018(Q1
)
2018(Q2
)
Profitability Ratio
ROCE 0.89 1.14 1.99 1.67 1.76 0.40 0.46
Net profit Margin 3.91 6.34 2.09 2.96 4.15 8.11 10.98
Gross Profit Margin 29.51 31.83 32.27 31.72 34.49 40.66 41.39
Investors Ratio
EPS 0.28 0.63 0.29 0.44 1.29 0.67 0.88
Market Share 208.57 77.46 394.41 29.09 148.81 597.01 625.00
ROIC 0.08 0.14 0.06 0.07 0.16 0.07 0.09
Gearing Ratios
Capital Gearing
Ratio 0.15 0.20 0.36 0.37 0.48
Interest Coverage 5.90 6.98 1.07 1.74 2.04 3.70 4.21
Particulars
2013-
12
2014-
12
2015-
12
2016-
12
2017-
12
2018(Q1
)
2018(Q2
)
Efficiency Ratio
Debtors(days) 155 155 168 165 151 515 508
Creditors( Days) 13 20 20 19 17 72 71
Liquid Ratios
Current Ratio 1.33 1.36 1.28 1.25 1.23 1.66 1.58
Quick Ratio 0.56 0.60 0.65 0.38 0.52 0.53 0.78

STRATEGIC MANAGEMENT REPORT ON NETFLIX 43
Appendix 4: Market Share

STRATEGIC MANAGEMENT REPORT ON NETFLIX 44
Appendix5: Organization Culture and Values

STRATEGIC MANAGEMENT REPORT ON NETFLIX 45

STRATEGIC MANAGEMENT REPORT ON NETFLIX 46

STRATEGIC MANAGEMENT REPORT ON NETFLIX 47
Appendix 6: Employees
Appendix 7: Market Analysis

STRATEGIC MANAGEMENT REPORT ON NETFLIX 48
Worlds Valuable Brand

STRATEGIC MANAGEMENT REPORT ON NETFLIX 49

STRATEGIC MANAGEMENT REPORT ON NETFLIX 50

STRATEGIC MANAGEMENT REPORT ON NETFLIX 51
Appendix: