Application of Business Model Canvas: A Case Study of Netflix

This report provides a comprehensive analysis of Netflix's business model canvas (BMC). It begins with an introduction to the BMC as a strategic tool, followed by an overview of Netflix and its global operations. The main body of the report details the nine elements of the BMC as applied to Netflix, including value propositions (unlimited entertainment, no ads), customer segments, key activities (content production, licensing), key resources (human resources, website), channels, customer relationships, key partners (IP owners, Amazon), cost structure (technology, marketing), and revenue streams (subscription fees). A graphical representation of the BMC is also included. Furthermore, a SWOT analysis is conducted, highlighting Netflix's strengths (customer-focused, adaptable), weaknesses (checklist-focused BMC), opportunities (service innovation), and threats (competitor impact, incorrect BMC application). The report concludes that the BMC is a valuable tool for Netflix, but its limitations must be considered. References to academic sources are provided.

Business Model
Canvas
Application Task

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
BMC elements.............................................................................................................................1
Graphical representation of BMC...............................................................................................3
SWOT analysis...........................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
The business model canvas is a potential tool that helps in understanding a business in a
straight forward and simpler manner(Joyce and Paquin, 2016). Netflix is an American media and
production company founded in the year 1997 by Reed Hastings and Marc Randolph in
California, United States. The company's core operations involve providing subscription based
online entertainment to its viewers include in house production shows as well. As of 2019,
Netflix operates in more than 190 countries with over 148 million subscribers globally. Thus, it
is important to understand the current business model canvas of the company that has contributed
towards its incessant growth over a period. The current study will highlight the elements of BMC
model, its importance, SWOT analysis and its role in making Netflix successful(BMC model,
2019).
MAIN BODY
BMC elements
The business model canvas was discovered by Alexander Osterwalder, a Swiss business theorist
and is an important approach that helps an organization to focus on the most strategically
important elements of its product or services. The BMC is an important tool used by all the
organizations as it provides great transparency, focus and flexibility to their business which
further helps in achievement of goals and objectives effectively and efficiently. The BMC
includes nine models namely called product's value propositions, customer segments, key
activities, key resources, channels, customer relationships, key partners, cost structure and
revenue streams(Rayna and Striukova, 2016).
The Business model canvas of Netflix is as follows
 Product's value propositions: It includes the value being delivered by an organization
to its customers. Value proposition involves the innovative services provided to the
customers that proves to be beneficial for them in the long run. Netflix's value
proposition is concerned with unlimited entertainment, no advertisements, convenient
watching and economic pricing. These are some unique services provided by Netflix
that attracts customers and has helped the company in achieving competitive edge over
the course of time(Manninen, K. and et.al., 2018).
 Customer segments: It is imperative for every company to identify the target
customers, their needs and wants and future expectations so that the organization can
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develop a product or service accordingly. Moreover, it is also essential to maintain good
relationship with customers as it would help in increasing sales and maximizing the
profitability of the organization.
 Key activities: Key activities are concerned with the most important activities that a
business needs to perform in order to grow their business and maximize the overall
profitability. Content production & creation, licensing & acquisition, technology
development & up gradation and its marketing are some core activities that Netflix has
to perform on daily basis so that it can provide the customers with unique services
continuously.
 Key resources: Key resources are concerned with the assets that help a business model
work effectively and efficiently. The major resources that contribute towards the success
and growth of Netflix includes its human resource, application/website, studios, cast &
crew and algorithms(Voigt, Buliga and Michl, 2017).
 Channels: Channels are mainly concerned with the pathway followed by an
organization to sell its products and services. Netflix itself acts as a channel to provide
entertainment services to its customers digitally through its application or website
facility.
 Customer relationships: Netflix maintains relationship with its customers through
various social media platforms, website and by forecasting customer demands and
developing the service accordingly(Pfeifer and Conroy, 2017).
 Key partners: The key partners involve the suppliers that provide raw materials to the
organization so that it can use them to provide finished goods to the customers. It is
important to maintain good relationship with the key partners as it would help in
optimizing operations and also reduce the risk of business model. Also, it helps the
company in allocating good quality material at right price and at right time. Since,
Netflix operates digitally its key partners involve IP address owners, Amazon web
services, film makers, production houses and investors. These are the competent
partners that contribute towards the success of the organization,
 Cost structure: Cost structure is basically concerned with all the expenses that will be
incurred by an organization while operating its business model. The structure of an
organization can either be cost driven or value driven. Netflix focuses on value driven
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structure which means that its major objective is to provide exceptional services to its
users that enhance their film watching experience and increase their brand loyalty
towards Netflix. The major cost structure of Netflix is concerned with technology up
gradation and development, administration cost, marketing and cost of revenue(Voigt,
Buliga and Michl, 2017).
 Revenue streams: It is the most important element in the entire Business Model Canvas
as it is concerned with the source of revenue and profitability for the organization. It can
either be through sales, licensing, advertisement, lease or renting but in case of Netflix
the only source of revenue are its subscription fees as it does not endorse advertisements
on its application/website.
Graphical representation of BMC
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Graphical representation of BMC of Netflix company
SWOT analysis
SWOT analysis is concerned with identifying the strengths and weakness of an
organization, grabbing the opportunities and countering the potential threats(Gabrielli, 2017).
The SWOT analysis of BMC model of Netflix is as follows
Strengths
 The adoption of BMC model has helped Netflix to fulfil customer needs and wants
adequately which has further helped the company in achieving competitive advantage.
Also, it has helped the company in modifying its operations timely as per the change in
environment and market demand.
 The Netflix has a complete knowledge about what the company is delivering to its
customers whether they are satisfied or not and what are the problems faced by its
customers. Furthermore, it helps the company in improving their overall services and thus
it has helped in establishing the brand image of their organization.
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Weakness:
 The major weakness of Business model canvas is that most of the times it is used just in
the form of a check list and does not have a practical use. Also, Netflix fails to update it
regularly which defeats the actual purpose of making it.
 The business model canvas is time-consuming and a costly affair therefore inadequate
implementation can affect the overall performance of the Netflix.
Opportunities:
 The business model canvas can help Netflix in innovating and improving its services
which can help the company in attracting new customer base thus achieving competitive
advantage over the new entrants.
 The BMC model will also help Netflix in finding adequate suppliers and resources
through which the company can reduce its cost and maximize its
profitability(Raisinghani, 2019).
Threats:
 The BMC model often neglects the effect of business plan on the competitors and the
liquidity of the company which can become a potential threat for the company in the near
future(Turner, 2018).
 Another potential threat associated with the BMC model is that if Netflix applies the
BMC model in an incorrect manner or without analysing the current trends then it can
provide misleading information and have an adverse effect on their business operations.
The BMC model has proved to beneficial for the Netflix company in the long run as it has helped
the organization in identifying the customer needs and wants through market research, the key
activities that attract customers towards Netflix, major suppliers who provide adequate resources
at right price, the value offered by the service to its users and the major sources though which the
revenue flows. Thus, it has helped Netflix in providing better quality services to its users through
incessant innovation and technological development(França And et.al., 2017).
Although, there are certain cons associated with the use of BMC like it does not take into
account competitor analysis, liquidity, socio-culture factors and regulatory framework which in
reality play a huge role in affecting the performance of the business. Moreover, it is just a tool
for service development and it is imperative for every company to visit it regularly or else it will
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become useless. The business model canvas has it own set of advantages and disadvantages that
affect the performance of an organization in the long run.
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CONCLUSION
From the above study, it can be concluded that BMC is a potential tool for achievement of goals
and objectives of an organization effectively and efficiently as it has various elements
that cover major aspects of a business like value propositions, key resources, key
activities, customer segments, customer relationships, channels, cost structure and
revenue streams. These elements help Netflix in managing their operations in
appropriate manner. Also, the report included a SWOT analysis of the BMC model
where it was identified that the model has certain weakness and threats as well and it is
important to analyse all the aspect before implementing Business model canvas into the
business and its daily operations.
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REFERENCES
Books and Journals
França, C.L. And et.al., 2017. An approach to business model innovation and design for strategic
sustainable development. Journal of Cleaner Production. 140. pp.155-166.
Gabrielli, G., 2017. Netflix inc. valuation (Doctoral dissertation).
Joyce, A. and Paquin, R.L., 2016. The triple layered business model canvas: A tool to design
more sustainable business models. Journal of Cleaner Production. 135. pp.1474-1486.
Manninen, K. and et.al., 2018. Do circular economy business models capture intended
environmental value propositions?. Journal of Cleaner Production. 171. pp.413-422.
Pfeifer, P.E. and Conroy, R.M., 2017. Valuation of Netflix, Inc. 1. Darden Business Publishing
Cases.
Raisinghani, M., 2019. Risks and Opportunities in the Next Frontier of the Digital Business
Ecosystem: A Strategic Perspective.
Rayna, T. and Striukova, L., 2016. 360° Business Model Innovation: Toward an Integrated View
of Business Model Innovation: An integrated, value-based view of a business model can
provide insight into potential areas for business model innovation. Research-Technology
Management. 59(3). pp.21-28.
Turner, G., 2018. Netflix and the reconfiguration of the Australian television market. Media
Industries Journal, 5(2).
Voigt, K.I., Buliga, O. and Michl, K., 2017. Entertainment on Demand: The Case of Netflix. In
Business Model Pioneers (pp. 127-141). Springer, Cham.
ONLINE
BMC model. 2019. [ONLINE]. Available. Through<https://canvanizer.com/new/business-model-
canvas>
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