Business Strategy Analysis: Netflix Company Report 2019

This report provides a comprehensive analysis of Netflix's business strategy in 2019. It begins with an overview of the key challenges the company faced, including heightened competition, subscriber growth concerns, and increasing content costs. The analysis incorporates both Internal Factor Evaluation (IFE) and External Factor Evaluation (EFE) matrices to assess Netflix's internal strengths and weaknesses and its response to external opportunities and threats. The IFE matrix highlights Netflix's internal strengths, while the EFE matrix evaluates the effectiveness of its strategies. The report then offers strategic recommendations to address the identified challenges, such as expanding into new markets, reducing costs, and adapting content strategies to different cultural contexts. The analysis also considers challenges related to pricing and infrastructure, offering suggestions for mitigation.

Business Strategy
Netflix

Situational Analysis of Netflix Company
IFE Matrix
Strengths
Weight Rating Weighted
score
1 Revenue increased by 30.24% from 2017 to 2018 0.06 4 0.29
2 Over 90% of the surveyed subscribers would
recommend Netflix services to others
0.06 4 0.24
3 Library of choices grew by about 30% in 2018 0.04 4 0.16
4 At the moment Netflix has over 100,000 DVDs in
circulation
0.04 4 0.16
5 Netflix has expanded in other markets such as
Latin America, Canada, and Mexico
0.07 4 0.28
6 As of fall of 2018, Netflix was the leading live
streaming movie company
0.07 3 0.21
7 Current customer satisfaction is at 85% 0.04 4 0.16
8 Unrestricted access to internet movies and mail in
DVDs for as low as $7.99
0.08 4 0.32
9 Net revenue increased from $11.693B in 2017 to
$15.794B in 2018
0.05 4 0.20
10 Apple Co. uses Netflix to stream films to iPad,
iPhone, and its Apple TV
0.04 3 0.12

Weaknesses
Weight Rating Weighted
score
1 Depending on the US mail system for delivering
of DVDs in the US markets
0.05 1 0.6
2 Solely depends on Amazon for most of its cloud
computing services
0.04 1 0.04
3 Just 2 of the senior officers are women 0.02 1 0.02
4 Netflix has no specific publicly available mission
or vision statement
0.02 1 0.02
5 Netflix deal with Sony and Disney expired in
2011
0.04 1 0.04
6 In 2010 it did appear in the Top Ten list of the
video content dealers
0.06 1 0.06
7 It charges $79 for unrestricted streaming
without DVDs
0.08 1 0.08
8 Unrestricted access to internet movies and mail
in DVDs for as low as $7.99
0.03 2 0.06
9 Netflix gathers data from its consumers and
some companies have received criticisms for
this practice.
0.03 1 0.03
10 It is the object of patent breach regarding client-
server communications
Totals
0.08
1.00
1 0.08
2.88

EFE matrix
Opportunities
Weight Rating Weighted
score
1 147M of people in the US watch online videos 0.08 3 0.24
2 Distribution of digital media is growing at about
30% yearly rate.
0.06 3 0.18
3 Global markets accounts for about 50% of
expenditure on US filmed entertainment
0.05 2 0.10
4 US TV market accounts for less than 15% of the
global TV households
0.05 2 0.10
5 China’s box-office yearly growth rate contributes
to grow over 10% per annum
0.07 4 0.28
6 Competitors such as Disney do not have stable
business models
0.07 3 0.21
7 Consumers spend about $20B on home video
purchases on yearly basis
0.05 3 0.15
8 More people are now fully acquainted with
English
0.03 4 0.32
9 Weakening value of USD is making it more
attractive in the global market
0.03 2 0.06
10 High price of outing at the movie theater 0.04 4 0.16

Threats
Weight Rating Weighted
score
1 Overall global economy is poor hence low
personal spending
0.02 1 0.6
2 YouTube possess more than 75% of the
multimedia web market share
0.10 2 0.20
3 Increase in demand of competitors’ products 0.08 3 0.24
4 Some competitors provide similar products to
those of Netflix for free
0.10 2 0.20
5 DVRs are in over 40% of US homes 0.03 2 0.06
6 No barriers to entry in the industry and startups
can be established at low costs
0.05 3 0.15
7 By law, Netflix is not allowed to release DVDs
until 28 days are over after release in retail
0.03 2 0.09
8 Increase in USA postal charges might decrease
profitability
0.03 3 0.09
9 Breach of Company’s proprietary assets such as
patents may lower its brand value.
0.03 1 0.03
10 Netflix is the object of grievances concerning
collusion with Wal-Mart.
Totals
0.08
1.00
1 0.08
3.54

Identification of the key problems
face by the Netflix company
Main problems Netflix Company is facing in 2019 include: (Gaus, 2019)
• Heightening competition levels from other live streaming companies such as
WarnerMedia, Disney, and Apple Company.
• Challenge when maintaining its current subscriber growth
• Increasing content costs which comes as a risk to the company’s investors. The
possibility for the increasing content costs was recently shown by the $100 million
that the company paid off to renew its licensing of 'Friends' at the end of this financial
year -- up from the $30 million it had paid off previously

Continuation
• The content challenge: Netflix global expansion is impelling it to create additional
content which resonates with all its markets (Chauhan, 2019).
• The pricing challenge: Global growth is forcing Netflix to come up with different
précising structures
• The infrastructure challenge: in developing markets, there is slow internet and some
lack coverage at all.
 Though Netflix has no control over some of these challenges, they normally hurt its
operations substantially
Chauhan, H., 2019. What Are Netflix's Biggest Challenges Abroad? Retrieved from:
https://www.fool.com/investing/2019/01/23/what-are-netflixs-biggest-challenges-abroad.aspx

Recommendations
• In order to deal with the challenge of maintaining new subscriber growth, Netflix
Company can employ more staff members and exceptionally qualified personnel to aid
in alleviating this corporate problem.
• In order to deal with the ever-increasing competition, Netflix can expand its ventures
in more diverse countries with untapped markets. In so doing, it will not experience
the competition impact.
• In order to avoid excessive costs, Netflix can aim at reducing its expenditures while at
the same time augmenting their sales. Increase in sales coupled with a decrease in
expenses will lessen the impact of increasing costs.

Continuation
• In order to avoid the content challenge, Netflix can venture in regions with related
or akin cultural views. They may tend to require similar contents from the company.
• In order to avoid the pricing challenge, Netflix can deduce a common pricing
mechanism for market segments with various similarities and expectations.
• Netflix should just avoid taking their services to regions with poor internet coverage
especially in developing countries. Venturing in this places will affect its overall
returns as an organization.

References
• Chauhan, H., 2019. What Are Netflix's Biggest Challenges Abroad? Retrieved from:
https://www.fool.com/investing/2019/01/23/what-are-netflixs-biggest-challenges-abroad.aspx
• Gaus, A. 2019. Netflix's 3 Biggest Challenges in 2019. TheStreet. Retrieved from: https://
www.thestreet.com/technology/challenges-facing-netflix-nflx-in-2019-14810758

Appendixes
IFE Matrix in this presentation is used to evaluate the internal position of Netflix Inc.
and strategic intent. Strengths, weaknesses (derived from Netflix’s SWOT analysis) are
utilized as the key internal factors. Every key factor is assigned a weight ranging from
0.00 (low significance) to 1.00 (high significance). The number shows how significant
the factor is if Netflix intends to succeed in the sector. The sum of all weights (is
expected in this matrix) has equaled 1.00. Separate key factors has not been given to
much emphasize (allocating a weight of not more than 0.30) since Netflix’s success in
the industry is hardly dictated by one or a handful of factors. In this case, the most
important key factors are Unrestricted access to internet movies and mail in DVDs for
as low as $7.99, Netflix has expanded in other markets such as Latin America, Canada,
and Mexico, and As of fall of 2018, Netflix was the leading live streaming movie
company each with 0.08, 0.07, and 0.07 points respectively.
 Weights in both EFE Matrix and IFE Matrix mean the same. However, meaning of
ratings is different in every matrix.

The ratings in EFE matrix are used to show how effectively Netflix’s present strategy
responds to the threats and opportunities. These ratings range from 1-4 where 1 implies a
poor response, 2 means an average response, 3 means an above average response, and 4
implies a superior response. In this case we can see that Netflix’s response to the
opportunities is on average while its response to threats is very poor since a majority of
the allocations fall below 4.
In IFE matrix, ratings show how weak or strong every key factor is in Netflix Company. The
numbers range from 1-4 where 1 means a major weakness, 2- shows there is a minor
weakness, 3- implies minor strength, and 4- implies a major strength.
Weighted scores in both EFE and IFE matrices are determined by multiplying weight by
rating. All key factors have received scores. Total weighted scores is just calculated by
adding all weighted scores. Total weighted score in IFE matrix was 2.88 proving that
Netflix is strong against its competitors. For EFE, it was amounting to 3.54 showing that
the corporation’s strategic plans are properly tailored to accomplish the opportunities and
defend against threats.