Globalization Drivers and Market Entry Strategies of Netflix in India and UK

This report analyzes the growth strategies of Netflix influenced by globalization drivers and compares the market entry strategies of Netflix in India and the UK. It also examines the economic growth in India, the opportunity for Netflix to expand in China, and suggests a sustainable approach for Netflix to penetrate the Chinese market.

Student’s Last Name 1
Critical Issues in Business Management
By (Name)
Course
Professor
University
Date

Student’s Last Name 2
Introduction
Initially, Netflix was a publicly-traded organization that was involved in offering
subscription video streaming as well as online digital disc, including Blu-ray Disc rental
services. All these were offered at a constant fee of US$ 7.99 monthly. By January 2016, the
organization had a revenue estimate of 74 million subscribers globally. The subscribers ranged
from those in the United States, - its domestic market- to customers in other parts of the world
such as South Korea and Poland. By 2015, the firm had approximately 3,500 full-time staff and
recorded revenues of approximately $6.78 billion. The company’s 2016 plans were to expand the
firm by targeting a global market. Netflix’s status as a power to reckon with in the internet
streaming industry was conceived from relatively humble beginnings. The company was
established to provide a solution to the common, but irritating issues of overdue fees related to
movie rentals. The company was founded in 1997 by Marc Randolph, - an entrepreneur- and
CEO Hastings. The report’s main objective is to provide an analysis of how the company’s
growth strategies were influenced by the drivers of globalization and offer a comparison of the
market entry strategies of Netflix in India and the UK. Besides, the report will also examine the
company’s opportunities to expand in another Asian market and the sustainable approach that it
can adapt when expanding into the Asian market.
Drivers of Globalization
The media, as well as other books on globalization, classify the drivers of globalization
into five groups which include technological, political, market, cost, and competitive drivers.

Student’s Last Name 3
Technological Drivers
Modern globalization has been shaped by technology. One such technology is the video
streaming technology that is used in delivering videos over the internet, and which is used by
Netflix. Using this technology, the company has been in a position to deliver audio as well as
video through the internet to its different subscribers globally through their PDAs, computers,
smartphones, along with other video streaming devices (Kim, 2016, pp.162). Netflix’s growth
strategy has been influenced by technological drivers, particularly those linked to the video
streaming technology. For instance, the employment of efficient and high-speed broadband
networks has influenced the growth of the organization (Brennan, 2019). Also, more efficient
video and audio compression methods have been developed. Besides, in recent times, there has
been an increase in audio and video quality and a variety of services. These, accompanied by
other technologies, have influenced the growth strategy of Netflix.
Market Drivers
There has been saturation in the domestic market, making opportunities for growth
unlimited. As a result, expanding globally is one of many methods that companies are choosing
in overcoming the situation. Besides, the existence of common customer needs as well as the
opportunity of using global marketing channels along with the ability to transfer marketing to a
certain level is also an incentive to select internationalization (Hagiu, 2019). Netflix’s market,
the US is almost coming to saturation, hence the company has sought to expand to other markets
such as India, thus affecting its growth strategy.

Student’s Last Name 4
Cost Drivers
The cost, as well as efficiency, does vary within states and international organizations can
advantage of this fact. Cost drivers to globalization such as the availability of opportunities for
building international scale economies along with high costs associated with developing a
product have influenced the growth strategy of Netflix.
Competitive Drivers
Due to the global market, there has been an increase in inter-firm competition, forcing
companies such as Netflix to go international. For instance, the company faces stiff competition
from firms such as Amazon and Baidu, forcing it to globalize its operations (Walker, et al., 2017,
pp.16). The competitive driver is supported by strong interdependence among states, the FDI
actions as well as two-way trades.
Political Drivers
Deregulated markets along with liberalized trading rules result in reduced tariffs. Besides,
a foreign direct investment that is generally accepted in all countries globally helps shape
globalization. Direct investment and liberalized trading rules have facilitated the growth of
Netflix’s growth strategy because it has been able to offer services in more than 190 countries
since 2016 (Khanna, 2017, pp.89). This, as a result, has supported its growth strategy.
Customers Demand
The demand for online content has increasingly increased over the last decade across the
globe, and India is no exception. Depending on the nature of the consumers in populous
economies such as India and China, the level of consuming online content does vary. According

Student’s Last Name 5
to Credit Suisse Research Institute’s Emerging Consumer survey 2019, Despite low GDP per
capita in India, due to the country’s huge population, the spending rates are expected to rise
(Disruption Banking, 2019). According to this report, just like China, India has an accelerated
luxury spending and emergence of ultra-rich people. Besides, the holders of wealth in the
country, - the young- is an added consideration because it increases discretionary spending.
(Disruption Banking, 2019)
Besides, according to PWC Global Entertainment & Media Outlook 2019-2023, there is
an increase in the rate of personal as well as personalized media interaction. This is due to the
fact that the modern consumer is highly veracious, eager, as well as highly selective in seizing
the chance of enjoying media experiences that are specifically tailored to meet their preferences,
schedules, as well as contexts. The consumers of the media are making use of several devices
that are organized and curated, aimed at discovering unique media. As a result, firms such as
Netflix are tailoring their products to meet these preferences by use of data as well as usage
patterns. The shift in consumption patterns has forced such companies to devise new methods to
engage with the customers. According to the report, Mobile Video Internet is becoming essential.
It is expected that the Global E&M market will reach US2.6 trillion by 2023. In India for
%0
5%
10 %
%15
20 %
25 %
30 %
35 %
40 %
45 %
Bank
account
Financial
products*
Cash Property Gold &
jewelry
Bank
account
Financial
products*
Cash Property Gold &
jewelry

Student’s Last Name 6
instance, Internet Advertising is set to gain the most. The country has a high data consumption
rate compare to countries such as Nigeria, Indonesia, China, and the US.
Economic Growth in India
According to the International Monetary Fund, India’s economic growth is targeted to
rebound to at least 7% during the next financial year. This has been facilitated by corporate
income tax cuts as well as monetary policy stimulus. The country’s nominal GDP growth
rate for the year 2019-20 is estimated at 12% while the 2018-19 estimate was 11.5% (Itu.int,
2019). India has a strong economic growth, retaining the third position as the world’s largest
startup base with at least 4,750 technology startups as reported by NASSCOM. By 2020, the

Student’s Last Name 7
country’s labor force is expected to be around 160 to 170 million. According to data obtained
from the RBI, the country’s foreign exchange reserve was $393.29 billion in December 2018.
Recent economic developments in the country include investments in different sectors
(Pwc.com, 2019). For instance, in 2017, the M&A activity increased by 53.3%, reaching
$77.6 billion. Besides, the Private Equity equaled US 24.4 billion. This economic growth in
India makes it an essential market for companies across the world. India is increasingly
adopting the use of internet. The country has continuously evolved from a fragmented service
provision state to a state that is characterized by enhanced industry consolidation as well as
national providers. According to India Country Monitor: HIS Market Executive summary -
08/19, the Mumbai Convergence Hub that was established in 2014 has become the biggest
Internet Exchange Point in South Asia (Ibef.org, 2019). India’s government is also
supporting ICT in the country, making it the leading country in ICT outsourcing services.
Market Entry Strategies in India and UK
Netflix and Amazon entered the Indian market same time in 2016 but in the past two
years, Netflix has been doubling Indian content. However, an organization such as Walt Disney
that is owned by Hotsrat entered the Indian market a year before Netflix and Amazon dd. Pricing
might be considered one of the best strategy that sets the three companies apart. However, the
Indian content is the big deal. The pricing strategy of Netflix in India starts from as low as Rs
500 for a single screen and Rs 800 for four screens (Evans, McDonald, Bae, Ray and Santos,
2016, pp.419). The pricing strategy employed by Netflix in India and other international markets
is associated with lower prices of approximately US$ 6 and US$9 monthly which is different
from the cost in the United States. The pricing strategy is linked to the fact that as it entered
India, the company was concerned with appealing households with different income levels.

Student’s Last Name 8
Statistics reveal that the use of the internet in India has doubled in the last four years while the
use of smartphones has grown five times (Ott, Eisenhardt and Bingham, 2017, pp.317). This has
been facilitated by the presence of cheaper devices and data as well as increased local language
content.
The strategy used by Netflix when entering India took into consideration price as well as
Indian content. The company has expanded its content offering in India to include Indian
content. Nonetheless, the company aimed to tap into the cheap data offering as well as
smartphone penetration by providing a mobile tier offering to reduce entry barrier price (Gomez-
Uribe and Hunt, 2016, pp.13). Taking into consideration the fact that the typical TV package in
India is below $5, Netflix’s market strategy involved lowering the price offer to improve
accessibility as well as complement the company’s current tier structure. As a result, this meant
rolling out cheaper plans, including offering Indian content.
Unlike in India, the price point for the launch of Netflix in the United Kingdom was
£5.99. The internet-delivered streaming service was offered on many devices such as the main
games consoles, iPhone, Android tablets, LG Blu-ray players, iPad, as well as Samsung Smart
TVs. The company’s entry strategy in the UK faced competition from companies such as
Amazon’s Love Film, Virgin Media, and Sky (Rataul, Tisch and Zámborský, 2018, n.d.). The
entry strategy adopted by Netflix included entering into content deals as well as deals with films
along with TV content from its partners that comprised of Channel 4, ITV, Miramax Momentum
Partners, Sony Pictures Entertainment, BBC Worldwide, Lionsgate, 20th Century Fox, MGM, as
well as Disney UK. Also, Netflix partnered with Facebook in launching a social app, similar to
the one it uses in the US that makes it possible for the users to connect their Netflix account to
their social network, enabling them to share what they watch in their timeline.

Student’s Last Name 9
Opportunity to Expand in China
Southeast Asia has an audience of approximately 400 million. This makes China a hot
market for organizations such as Netflix that offer video streaming. This alone, irrespective of
other factors present Netflix with an opportunity for Netflix to expand its operations in China.
China is considered one of the largest market regions in South East Asia. The reason why China
is a suitable market for Netflix is that it is in its digital age. In China, there has been increased
adoption of mobile internet, cloud technology, Internet of Things, and big data as well as
advanced analytics (Nocera, 2019). Due to the country’s adoption of the above-mentioned
technologies, there is a firm foundation for investing in the market. Indonesia’s mobile data is
cheap, costing approximately 50% of what other neighboring ASIAN nations pay. Besides,
mobile penetration in the country is approximately 54%, which translates to around 130 to 140
million individuals. By 2025, the country’s internet economy is estimated to grow to around
US$100 billion as revealed by a study conducted by Temasek, - Google and Singapore investors.
The study also notes that by that time, there will be an increase in the number of consumers
using smartphones to go online (Sim, 2016, pp.192). China is a country that is home to
approximately 1.45 billion people as indicated by the United Nation’s data. The population is an
equivalent of 18.59% of the global population, ranking number one as the most populated
country. This, in addition to the strong economy of the country as well as technological
advancements, the country is a market opportunity that Netflix can tap. Internet is relatively
available in the country with a large population, if not all, using smartphones.
Sustainable Approach

Student’s Last Name 10
The best approach that Netflix can use to penetrate China’s market is by licensing its
content to the country’s biggest streaming service, including other streamlining companies in
case the deal is non-exclusive. Licensing its content in China provides the company with the
mean to amortize the cost of its content. Besides, this can be effective in influencing other
licensing opportunities in China for toys as well as apparel because the organization will start to
begins most of its production in-house, thus gaining more control over intellectual property
(Wayne, 2018, pp.733). Since the company does not own any other business to use generate
revenue from China, pursuing the licensing strategy would prove the best option for Netflix
(Jenner, 2016, pp.265). The marginal cost associated with licensing its content is practically
nothing. The Chinese market is very competitive with internet firms recognizing the benefits
associated with video streaming a few years ago. The market is made up of players such as
Tencent Video, Youku Tudou, as well as Baidu’s iQiyi. The organizations produce original
programs to lick in paid subscribers representing an enormous shift from the ad-based strategy
that was previously used.
The increased competition in China has led to increased demand for improved perks as
well as reduced prices. Tencent Video, for instance, has been given access to approximately 600
NBA games and it costs the customer around $4.50 monthly. Nonetheless, iQiyi that quadrupled
its subscriber base to approximately 20 million offers its customers tickets to attend special
events to meet the best stars (Aguiar and Waldfogel, 2018, pp.426). Netflix can advantage of this
high competition and the demand for better perks and reduced prices by producing high-quality
as well as original Chinese programs that are tailor-made for the Chinese just as it did in India,
South Korea along with its other main markets. Besides, the company should as well as boost its
spending along with ensuring that it lowers its prices (Bosankic, 2019). However, despite that

Student’s Last Name 11
China is a viable market for Netflix, the strategy and the approach that Netflix uses should be a
patient strategy to make sure that the company’s operating margin does not decline. Netflix
should not just charge straight into the Chinese market without putting in place a solid and
localized expansion approach because it would likely result in losses. Through the licensing
strategy, the organization is capable of gaining insights into China’s viewing habits (Layton,
2015, pp.124). As a result, this would give the firm an edge when it fully decides to expand into
the country. Increasing the company’s exposure in the country is the best strategy that Netflix as
of now if it is to expand to the country.
Reasons why Netflix is not Successful in China
Netflix is unable to enter China due to varying reasons. For instance, China owns really
strong streaming sites. These streaming sites are well-established and well-funded as well as
managed by China’s biggest tech giants such as Alibaba that owns Youku and Baidu Spin-off
Qiyi. China’s streaming sites are mostly free and they are ad-supported. The second reason is
that prices are extremely low in China. However, most of the content is restricted to the “VIP”
users who are required to make monthly payments. Such is Alibaba that launched TBO that is
available to the company’s set-top box. Consumers in China are increasingly avoiding piracy as
well as ad-supported streaming. As a result, organizations are becoming more concerned in
making their price tags as little as possible. For example, Youku and TBO as well as Alibaba
charge the customers slightly above five bucks each month or $59 annually. This is way below
the $10 charged by Netflix in the United States or the $8 in India. Besides, there are increased
restrictions and censorship in China (Millward, 2019). The nation’s media environment is both
challenging and hostile to foreign organizations.

Student’s Last Name 12
Conclusion
The growth strategy model used by Netflix is undeniably successful. However, there are
certain lessons that the company should learn to expand and become successful in other Asian
markets and beyond. The first lesson is that it should continue to develop original, local content.
For instance, Netflix is a popular firm in the US due to its original content. Viewing preferences
are different among states. If the company is to expand to other Asian countries and across the
globe, it has to ensure that it possesses a broad content library that caters to its diverse audiences’
preferences. Besides, the content should be compatible with low internet bandwidths. Reduced
internet penetration, as well as the current low bandwidth connections in Asian countries such as
India and other countries, is a challenge that faces Netflix, thus limiting the company’s target
customers. The company should thus make sure that its content is compatible with the slow
internet available in such nations.

Student’s Last Name 13
Bibliography
Aguiar, L. and Waldfogel, J., 2018. Netflix: global hegemon or facilitator of frictionless digital
trade?. Journal of Cultural Economics, 42(3), pp.419-445.
Bosankic, L. (2019). Strategic implications for Netflix’s future. [online] Medium. Available at:
https://medium.com/@leo_pold_b/strategic-implications-for-netflixs-future-7cd9f3d96140
[Accessed 12 Oct. 2019].
Brennan, L. (2019). How Netflix Expanded to 190 Countries in 7 Years. [online] Harvard
Business Review. Available at: https://hbr.org/2018/10/how-netflix-expanded-to-190-countries-
in-7-years [Accessed 12 Oct. 2019].
Disruption Banking. (2019). Credit Suisse’s Emerging Consumer Survey 2019
⋆ Disruption
Banking. [online] Available at: http://disruptionbanking.com/credit-suisses-emerging-consumer-
survey-2019/ [Accessed 18 Nov. 2019].
Evans, E., McDonald, P., Bae, J., Ray, S. and Santos, E., 2016. Universal ideals in local realities:
Online viewing in South Korea, Brazil and India. Convergence, 22(4), pp.408-425.
Gomez-Uribe, C.A. and Hunt, N., 2016. The netflix recommender system: Algorithms, business
value, and innovation. ACM Transactions on Management Information Systems (TMIS), 6(4),
p.13.
Hagiu, A. (2019). The Best Way for Netflix to Keep Growing. [online] Harvard Business Review.
Available at: https://hbr.org/2018/08/the-best-way-for-netflix-to-keep-growing [Accessed 12
Oct. 2019].

Student’s Last Name 14
Ibef.org. (2019). Indian Economy: Overview, Market Size, Growth, Development,
Statistics...IBEF. [online] Available at: https://www.ibef.org/economy/indian-economy-overview
[Accessed 18 Nov. 2019].
Itu.int. (2019). [online] Available at:
https://www.itu.int/en/ITU-D/Statistics/Documents/publications/misr2018/MISR-2018-Vol-2-
E.pdf [Accessed 18 Nov. 2019].
Jenner, M., 2016. Is this TVIV? On Netflix, TVIII and binge-watching. New media &
society, 18(2), pp.257-273.
Khanna, V., 2017. A STUDY ON FACTORS AFFECTING SUBSCRIPTION RATES OF
NETFLIX IN INDIA: AN EMPIRICAL APPROACH. Delhi Business Review, 18(1), pp.83-100.
Kim, D.M., 2016. Media GroupsManagement Strategies: Business Areas, Platform Strategies,
Content Distribution Strategies and Business Strategies. Journal of Digital Convergence, 14(2),
pp.157-167.
Layton, R., 2015. Netflix comes to the Nordics: Lessons in OTT video. Journal of NBICT, 1,
pp.109-138.
Millward, S. (2019). Tech in Asia - Connecting Asia's startup ecosystem. [online]
Techinasia.com. Available at: https://www.techinasia.com/netflix-china-nope [Accessed 18 Nov.
2019].
Nocera, J. (2019). Can Netflix Survive in the New World It Created?. [online] Nytimes.com.
Available at: https://www.nytimes.com/2016/06/19/magazine/can-netflix-survive-in-the-new-
world-it-created.html [Accessed 12 Oct. 2019].

Student’s Last Name 15
Ott, T.E., Eisenhardt, K.M. and Bingham, C.B., 2017. Strategy formation in entrepreneurial
settings: Past insights and future directions. Strategic Entrepreneurship Journal, 11(3), pp.306-
325.
Pwc.com. (2019). [online] Available at:
https://www.pwc.com/gx/en/entertainment-media/outlook-2019/entertainment-and-media-
outlook-perspectives-2019-2023.pdf [Accessed 18 Nov. 2019].
Rataul, P., Tisch, D.G. and Zámborský, P., 2018. Netflix: Dynamic capabilities for global
success. SAGE Publications: SAGE Business Cases Originals.
Sim, G., 2016. Individual Disruptors and Economic Gamechangers: Netflix, New Media, and
Neoliberalism. The Netflix Effect: Technology and Entertainment in the 21st Century, pp.185-
201.
Walker, R., Jeffery, M., So, L., Sriram, S., Nathanson, J., Ferreira, J., Feldmeier, J. and Merkley,
G., 2017. Netflix leading with data: The emergence of data-driven video. Kellogg School of
Management Cases, pp.1-19.
Wayne, M.L., 2018. Netflix, Amazon, and branded television content in subscription video on-
demand portals. Media, Culture & Society, 40(5), pp.725-741.