Bow Valley College: Netflix - Management Analysis & Recommendations

This report provides a comprehensive analysis of Netflix, the leading online movie rental portal, examining its management strategies, organizational structure, and environmental constraints. It includes a SWOT analysis, identifying Netflix's strengths, weaknesses, opportunities, and threats, as well as a PESTLE analysis, evaluating the political, economic, socio-cultural, technological, environmental, and legal factors impacting the company. The report also identifies key stakeholders and discusses Netflix's flat organizational structure, employee motivation techniques, and provides recommendations for improving its differentiation strategy, brand value, and control mechanisms. The analysis draws on various sources and research to provide a detailed overview of Netflix's business operations and strategic challenges.

Running Head: NETFLIX 0
Introduction to Management
Student Details
3/28/2019

Netflix 1
Contents
Summary....................................................................................................................................2
S.W.O.T-Strategies....................................................................................................................3
Strengths.................................................................................................................................3
Weaknesses............................................................................................................................3
Threats....................................................................................................................................3
Opportunities..........................................................................................................................4
Environmental Constraints.........................................................................................................4
PESTLE Analysis...................................................................................................................4
Political..............................................................................................................................4
Economic............................................................................................................................4
Socio-Cultural....................................................................................................................5
Technological.....................................................................................................................5
Environmental....................................................................................................................5
Legal...................................................................................................................................5
Stakeholders...............................................................................................................................6
Organizational Structure and Design.........................................................................................6
Motivating Employees...............................................................................................................7
Recommendations......................................................................................................................8
Controls and Recommendation..................................................................................................8
References................................................................................................................................10

Netflix 2
Summary
Netflix is the biggest online movie rental portal having annual revenue of more than
6.78 billion U.S dollars by providing services to around 70 million customers in U.S and just
26 million users situated outside of U.S. It is a streaming service allowing customers to
search and watch their favourite movies, TV shows, documentaries, and vast number of
devices connected to internet. Netflix always provide its customers to discover something
new and excited as new content is uploaded every month and users can experience never
ending enjoyment on Netflix even without the interruption of a single advertisement. It is a
US based organization headquartered in Los Gatos, California, United States (Agile Alliance,
2019). Netflix was founded by Reed Hastlings and Marc Randolph in 1997. The core
audience of Netflix are teenagers, young adults, and middle age people who seek for the
quality content. In one of the researches conducted in 2017 shown that 81% of Netflix
audience is between the age of 18 and 35. Netflix content is not similar everywhere and
changes according to the culture and needs of that particular region. Netflix provides
preference to the needs of the customers and soon will make the customers to personalize
their own content and order contents on demand at reasonable prices. Mission and vision of
Netflix is of becoming the best entertainment distribution service all around the globe by
providing best experience and quality services to its customers (Unicornomy, 2017). Netflix
is working very hard in this direction and returning money of users in form of quality content.

Netflix 3
S.W.O.T-Strategies
Strengths
1. Netflix has designed its technology according to the needs of its customers and make
alternations in its services with changing needs of people.
2. Netflix has its brand value and known all around the world which offers services of
watching TV shows, movies, DVD’s, and original content found only on Netflix.
3. Netflix offers a variety of entertainment options which is also at very low price to its
customers. It is much more convenient with better value (Clear Company, 2019).
4. Content provided by Netflix is original which is not available on other streaming
channels. Providing original content has made Netflix number one among other
streaming providers.
Weaknesses
1. Netflix started its business by providing DVD-by-mail rental operation, but it has
been lost around 475,000 DVD subscribers.
2. Netflix is restricted by regulations placed on them of providing access to TV shows
and movies according to the requirements of studio. Netflix is also limited to accept
the rates and schedules set by U.S portal service which cause profit loss to Netflix.
Threats
1. There is constant development in technology for online entertainment services which
can grow other streaming businesses in a better way resulting in becoming a serious
competition for Netflix.
2. There are multiple entertainment providers, providing services at comparatively low
rates.
3. Also, Netflix can be a platform for online piracy (Clear Company, 2019).

Netflix 4
Opportunities
1. Growth in population is increasing constantly offering opportunities for growth.
2. Online entertainment market is developing and increasing number of viewers is
turning towards online videos for entertainment (Netflix Investors, 2019).
3. Due to its brand value, Netflix has huge opportunity of growing its business
internationally.
Environmental Constraints
PESTLE Analysis
Political
1. Due to increasing number of users in online streaming services resulted in increase in
internet usage which caused US telecom giants AT&T to go to Federal
Communications Commission for putting strict regulations on its usage. If the
regulations will be passed, then internet prices will be hiked and can threaten business
of Netflix (Quora, 2019).
2. EU ruling is looking to class the streaming services into the traditional television
distributors’ category. Also, company will be taxed the same 26% levy as traditional
media causing company to pass this cost onto customers.
Economic
1. As per the data of 2016, services of Netflix are accessed by over 100 million
subscribers globally. Key factor behind it is their competitive pricing compared to
traditional television services.

Netflix 5
2. Netflix’s expansion is affected by exchange rates. Aim of company is keeping its
pricing around $10 but due to exchange rates and VAT its pricing is $19 in certain
markets (Business Teacher, 2019).
Socio-Cultural
1. Younger viewers in UK are moving towards online streaming for entertainment as
compared to traditional television.
2. According to the social trends, users now prefer watching video content on their
smartphones rather than traditional larger screens.
3. US cable companies experienced loss of 2.4% due to switching of viewers from
traditional cable media towards online streaming services.
Technological
1. The 4K television market has watched a ten year growth of 43% to be worth of $71.9
billion. To efficiently support 4K streaming, Netflix have put money into R&D.
2. New software naming Hermes developed by Netflix, automatically grades a
translation of a Netflix show. This innovation will support Netflix in serving its
programming to 190 nations at faster and higher quality translation efforts (Business
Teacher, 2019).
Environmental
1. Streaming services are putting pressure on environment as it requires access to data
servers.
Legal
1. Netflix had to face consumer lawsuit due to costly PR misstep in 2016.

Netflix 6
2. Netflix introduced blocking workarounds in 2016 to meet the demands of film studios
and televisions over copyright access to content (Business Teacher, 2019). This
affected a small segment of users.
Stakeholders
Key stakeholders of Netflix are Owner, customers, employees, shareholders, suppliers, and
distributors. Below is the importance of each stakeholder:
1. Owner: Stakeholders of a business are defined by the degree of their involvement and
owner is the only one who is mostly involved in their business.
2. Customers: Revenue of Netflix is completely dependent on its customers. Therefore,
Netflix should make efforts to fully engage these customers and to satisfy their needs.
3. Employees: Employees are the most important asset of an organization as they are the
one who perform and manage all work of it.
4. Shareholders: Shareholders are the owners of an organization. They are responsible for
effectively operations and decisions related to the company (Kokemuller, 2019).
5. Suppliers: Content producers pose high power level but low interest level. Suppliers
tend to favour pay TV business which results in more value generation for Netflix.
6. Distributors: Netflix is popular due to its original content and therefore, individual film
or show distributors play important role in its success as it is the key source of original
content (Renee, 2019).
Organizational Structure and Design
Netflix is popular for its flat organizational circle structure. Netflix employees are
provided with more freedom and responsibility compared to other companies which is proved
by indefinite holiday days and humane expense account policy. Netflix does not follow the

Netflix 7
top-down decision making process and does not ask for approval from management for
everything (Unicornomy, 2017). Company appreciates the hard and excellent work and high
performance of employees. Netflix believe in freedom of working decisions in order to
perform well. Even after being rigid on certain policies, work environment at Netflix is
intense putting a lot of pressure on employees. Each employee is expected to perform
exceptionally high level. Mangers perform a keeper test periodically. There is no place for “B
level” employees in the organization (Wikipedia, 2019). Thus, even after having flexible
organizational structure at Netflix, employees have to face a trade-off between freedom and
stability. All the work units at Netflix have similar tasks and skills such as marketing,
finance, human resources, and production. Functional experts at Netflix are capable enough
to solving technical problems.
Source: (Fox Mis, 2018)
Motivating Employees
According to the former talent officer of Netflix “appealing challenges and talent density”
are the core factors for employee motivation. Below are the three ways of maintaining
motivation of employees:

Netflix 8
1. Netflix truly believes in valuing the value. They look for skills, hard work, and
behaviours at the time of hiring or promotion (Orgchart, 2019).
2. Netflix provides freedom and responsibility to the employees. It does not force its
employees to spend more hours at the office rather it look for hard work of
employees, thus providing flexible work environment (Parr, 2019).
Recommendations
Netflix is recommended to shift its hybrid strategy to differentiation strategy. This
new strategy would help the Netflix in involving higher investments for the production of
original content, best price policy, and provisional disruption of international expansion. This
will reduce the rates for new subscriptions and improve the loyalty of current customers
which ultimately maximize the profit and benefit over rivals.
Netflix should also work on creating its brand value by promotion and advertisement.
It has been realised from the research report that Netflix does not bother about its image
creation and expansion its brand image. Therefore, Netflix should work on creating a more
personal brand and value for the customers.
Controls and Recommendation
Differentiation strategy allows Netflix to build its brand identity. By providing ad free
original content to its user, Netflix has differentiated itself from its competitors. Netflix has
aim of creating original content, international expansion, and best price policy through
including differentiation strategy. Therefore, feedback control is used by Netflix in order to
ensure that the goals set for inclusion of differentiation strategy are met. This requires
monitoring of increase in number of subscribers, its profit on a monthly basis.

Netflix 9
References
Agile Alliance. (2019). Netflix Organizational Structure: Freedom, Responsibility, Impact,
and Agility. Retrieved from https://www.agilealliance.org/resources/sessions/netflix-
organizational-structure-freedom-responsibility-impact-and-agility/
Business Teacher. (2019). Netflix PESTEL Analysis. Retrieved from
https://businessteacher.org.uk/pestel/netflix.php
Clear Company. (2019). Communicating Your Organization’s Mission and Vision. Retrieved
from https://bestpractices.clearcompany.com/company-mission/index.html
Fox Mis. (2018). Netflix and Chill…Organizational Structure. Retrieved from
http://community.mis.temple.edu/mis4596sec003s18/2018/02/19/netflix-chill-
organizational-structure/
Kokemuller, N. (2019). How Shareholders Affect a Business. Retrieved from
https://smallbusiness.chron.com/shareholders-affect-business-65880.html
Netflix Investors. (2019). Company Profile. Retrieved from
https://www.netflixinvestor.com/ir-overview/profile/default.aspx
Orgchart. (2019). Motivating Your Workforce ( . . . the Netflix Model). Retrieved from
https://www.orgchartpro.com/motiviating-your-workforce-netflix-model/
Parr, A. (2019). 7 Aspects of Netflix's Company Culture That You'll Want to Copy. Retrieved
from http://www.selectinternational.com/blog/7-aspects-of-netflixs-company-culture-
that-youll-want-to-copy
Quora. (2019). What are the basic demographics of Netflix subscribers in the United States?
Retrieved from https://www.quora.com/What-are-the-basic-demographics-of-Netflix-

Netflix 10
subscribers-in-the-United-States
Renee, M. (2019). How to Become a Distributor to Netflix. Retrieved from
https://smallbusiness.chron.com/become-distributor-netflix-18197.html
Unicornomy. (2017). Netflix Business Strategy & Netflix Unit Economics. Retrieved from
https://unicornomy.com/netflix-business-strategy-netflix-unit-economics/
Wikipedia. (2019). Netflix. Retrieved from https://en.wikipedia.org/wiki/Netflix