Netflix: Strategic Management Analysis Report - Business Development

This report offers a strategic management analysis of Netflix, a global streaming service. It begins by outlining Netflix's mission and vision, followed by an examination of its external environment using PEST and Porter's Five Forces analyses, and a competitive profile matrix. The report then delves into Netflix's internal strengths and weaknesses, utilizing IFE and EFE matrices to assess its strategic position. Various strategies are explored through SWOT and Grand Strategy matrices, culminating in recommendations for future growth and implementation. The report provides a comprehensive overview of Netflix's strategic approach, emphasizing its competitive advantages and potential challenges within the dynamic streaming industry.

INDIVIDUAL
REPORT

EXECUTIVE SUMMARY
Strategic management can be defined as a process which includes the formulation and
implementation of goals where initiatives are taken by venture's top management. Apart from it,
report also emphasize on considering different resources by analysing the internal and external
environment. This present document has been prepared on Netflix which is a global venture who
provides streaming films and TV series. This present document will emphasize on mission and
vision of cited organization.
This document is evident of different models and matrix's which has been explained
effectively. Further, SWOT analysis of the venture has been done in order to see where firm
stands in the global market. Apart from this, this report is also evident of specifying the role of
different departments within the Netflix and with their efficient operations, firm directed towards
achievement of their goals and objectives.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
1. MISSION AND VISION OF NETFLIX.....................................................................................1
Mission...................................................................................................................................1
Vision.....................................................................................................................................2
2. ENVIRONMENTAL, INDUSTRY AND COMPETITOR ANALYSIS....................................2
PEST analysis.........................................................................................................................2
Porter’s Five Forces................................................................................................................3
Competitive Profile Matrix.....................................................................................................4
External Factor Evaluation (EFE) Matrix..............................................................................7
3. NETFLIX’S INTERNAL STRENGTHS AND WEAKNESSES...............................................8
4. DIFFERENT STRATEGIES AND THEIR ADVANTAGES AND DISADVANTAGES........9
SWOT matrix.........................................................................................................................9
Grand Strategy Matrix..........................................................................................................11
Quantitative Strategic Planning Matrix................................................................................12
5. RECOMMENDATIONS...........................................................................................................14
6. IMPLEMENTING THIS STRATEGY.....................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INDEX OF TABLES
Table 1: Competitive Profile Matrix of Netflix...............................................................................4
Table 2: External Factor Evaluation (EFE) Matrix for Netflix.......................................................8
Table 3: Internal Factor Evaluation (EFE) Matrix for Netflix........................................................9
Table 4: SWOT Matrix of Netflix.................................................................................................10
LIST OF FIGURES
Figure 1: Subscribers Ratio.............................................................................................................5
Figure 2: Digital Video Viewers......................................................................................................5
Figure 3: Content Acquisition Spending.........................................................................................6
Figure 4: Share of Pay TV services.................................................................................................7
Figure 5: Grand Strategy Matrix....................................................................................................12
Figure 6: Porter-Generic-Strategy model......................................................................................14

INTRODUCTION
Strategic management can be defined as a process which includes the formulation and
implementation of important goals where initiatives are taken by ventures top management on
behalf of owner, based on the consideration of resources by analysing the internal and external
environment. It plays a crucial role so that organization gets competitive advantage over the rival
firms who are working in the same industry (Teece, 2010).
This present document has been prepared on Netflix which is a global venture who
provides streaming films and TV series. Organization having their operations throughout the
world except in countries like China, North Korea, etc. Further, cited firm have 3,500 employees
who are giving there productive services throughout the globe. This present document will
emphasize on mission and vision of cited organization. It will also showcase environment,
industry and competitor analysis along with identifying a particular strategy which Netflix can
pursue in order to achieve positional advantage.
1. MISSION AND VISION OF NETFLIX
Mission
Netflix mission is to increase the streaming subscription business both domestically and
internationally. Cited firm also focusing on to improve the customer experience by expanding the
streaming content so that they become the loyal customer's for the venture. Apart from it,
organization revenue is increasing year by year and cited firm is focusing on the same and this is
the major reason of their immense goodwill throughout the globe (Montgomery, 2011).
Organization main aim is to increase their goodwill, revenue, productivity and turnover as
compared with their major competitors. Further, venture has concerned on some component for
their mission statements and these are:
 Products and services
 Market
 Technology
 Customers
 Growth and profitability
 Self- respect
 Employees
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Vision
Neflix vision is to become the worldwide leader in on-demand video entertainment
available for the multiple devices (The Mission Statement, Vision, Promise and Values of Netflix.
2016). Moreover, their vision for future has been discussed down under:
 Become the best global entertainment distribution service
 Developing market which will be approachable to film makers
 Licensing the entertainment content whole around the globe
 Increasing the customer base through their effective services worldwide
2. ENVIRONMENTAL, INDUSTRY AND COMPETITOR ANALYSIS
PEST analysis
PEST analysis for cited organization plays a crucial role as they have their effective
operations throughout the globe and venture has to consider each and every element of external
environment analysis before starting their operations in new place (Verbeke, 2013).
Political:
These factors can influence the organization performance upto great extent. It involves
government regulations who can control organization operations and impact their activities
(Welford, 2013). Some political aspects are discussed down under:
 Political stability
 Government policy
 Taxation level
 Trade barrier
 Market regulations Bureaucracy
Economic:
Economic factors have contributed a lot in the growth of cited firm. There are things
which include customer income, spending rates, inflation rates, interest rates, etc. Moreover,
consumer income is also one of the major factor in which organization operates as revenue is
sensitive for economic conditions and people may feel that online streaming is a luxury product
(MARKETING THEORIES – PESTEL ANALYSIS, 2015).
Social:
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From social point of view, demographic changes and lifestyle are the major element
which is influencing organization growth. Further, people compares the traditional media with
the digital media and this comparison is one of the challenging factor for the cited venture
(Hollensen, 2015). Apart from it, increasing access of electronic devices is impacting Netflix
access to each market as privacy of data is major concern However, it gives lot of benefit to
customers as they can watch any films anywhere.
Technological:
Technology is changing at a rapid pace and cited firm need to update their technology
constantly in order to give their competitors stiff competition who are dealing in the same
industry. Further, organization have to stay bold in the online streaming market as it is majorly
impacted with new development in the technology (Salem Khalifa, 2012).
Porter’s Five Forces
Competition rivalry
This threat is relatively high as there are many ventures who provide streaming and cited
firm need to adopt certain practices which will improve their revenue and productivity (Dong-
Hun, 2010). Moreover, Netflix has loosed 4% of the market share since the year 2012 as they are
getting stiff competition from Hulu and Amazon.
Threat of new entrance
This threat is high as there are numerous websites who offers the online streaming.
Further, there also not exist any legal barrier which stops competition from setting up the website
Threat of substitute
Threat of substitute for Netflix is low as they only have some minor threats. Further, any
venture who do not provide streaming and only provide films can be treated as substitute.
Bargaining power of buyers
Bargaining power of buyers is high as buyers having different alternatives and options
available with them. With this, they can easily switch the services and it will be major drawback
for the business venture (Winroth and Johansson, 2010). Customers used to be loyal for the
services what they are getting and are not loyal for the service provider.
Bargaining power of suppliers
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Although cited firm has few suppliers but then also the supplier power is high. The main
reason is the content which they are offering to customers. Supplier content plays a crucial role
and firm has to ensure that they provide quality of content to their customers. Those
organizations provide content to Netflix becomes their suppliers.
Competitive Profile Matrix
Competitive Profile Matrix (CPM) is a tool which compares organization with the
competitors and reveals strengths and weaknesses of business enterprise. This matrix helps
venture to understand the external environment and also the competition which persist within the
industry (Competitive Profile Matrix (CPM), 2016). It identifies Netflix key competitors and
compares them with industry's critical success factor. Further, by identifying the strength and
weakness, firm will try to overcome them.
Netflix Amazon Prime Hulu
Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertisement 0.15 4 0.60 3 0.45 2 0.30
Goodwill 0.20 4 0.80 2 0.40 2 0.40
Customer's Retention 0.10 3 0.30 3 0.30 3 0.30
Global expansion 0.30 3 0.90 4 1.20 2 0.60
Market share 0.15 4 0.60 3 0.45 2 0.30
Management 0.10 4 0.40 2 0.20 3 0.30
TOTAL 1.00 3.6 3 2.2
Table 1: Competitive Profile Matrix of Netflix
The above explained table shows strengths and weakness of Netflix when compared with
its two major competitors and they are Amazon Video and Hulu. Netflix has got the score of 3.6
as compared to Amazon Video and Hulu 3 and 2.2 respectively. This shows that cited
organization remains competitive force in the industry.
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Figure 1: Subscribers Ratio
(Source: Loesche, 2016)
Further, above figure signifies that Netflix enjoys a significant position in SVOD market. It has
around 43% subscribers which is far ahead from Amazon Prime i.e. 22% and Hulu merely 9%.
Figure 2: Digital Video Viewers
(Source: Sutcliffe, 2016)
Additionally, there is significant growth in the subscribers of Netflix from past 3 years as
compared to Amazon Prime and Hulu Plus. Above figure signifies the same.
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Figure 3: Content Acquisition Spending
(Source: Hagey and Ramachandran, 2015)
Additionally, above infographics signifies the spending of each company in content acquisition.
It has found from this that Hulu has adopted aggressive approach in this context in order to
enhance the number of subscribers.
Figure 4: Share of Pay TV services
(Source: Statista. 2016)
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However, fact cannot be denied that concept of SVOD is on growing phase but it is still far
behind from cable TV concept. Above figure signifies the same.
External Factor Evaluation (EFE) Matrix
External Factor Evaluation (EFE) matrix is a strategic-management tool which is used for
assessing current business status. Further, it is considered as an important tool in order to
visualize and prioritize opportunities and threats which business must be facing (Elbanna, 2010).
Moreover, external factors evaluated in EFE matrix consist of social, economic, political, legal,
and other external forces which can impact the organization performance. EFE matrix for Netflix
has been discussed down under:
Key External Factors Weight Rating Score
Opportunities
1. Streaming devices 0.16 3 0.48
2. Video games rental 0.08 3 0.24
3. Low cost of HD TV's 0.11 4 0.44
4. Declining cable TV's subscription 0.06 4 0.24
5. 3D TV's 0.09 2 0.18
Threats
6. New firm entering industry 0.13 2 0.26
7. ISP bandwidth caps 0.08 3 0.24
8. Declining DVD rentals 0.07 2 0.14
9. Barriers to market expansion 0.12 4 0.48
10. Growth of online commerce 0.10 4 0.40
TOTAL 1.00 3.1
Table 2: External Factor Evaluation (EFE) Matrix for Netflix
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From the above table it is evident that EFE matrix for Netflix comprises five external
opportunities and threats. Netflix having the total score of 3.1 which is more than the average
score of 2.5. Further, this shows that mentioned venture focusing on grasping the external
opportunities and dealing with the threats accordingly.
3. NETFLIX’S INTERNAL STRENGTHS AND WEAKNESSES
Internal Factor Evaluation (IFE) Matrix
Internal Factor Evaluation (IFE) matrix is considered as a strategic management tool
which is generally used for evaluating major strengths and weaknesses in functional areas of
business enterprise. Furthermore, IFE matrix is very similar to EFE matrix (Galpin, T. and
Whittington, 2012). The major difference between the IFE matrix and the EFE matrix is the
different factors which include in the model.
Moreover, IFE Matrix together with EFE matrix is strategy-formulation tool which can
be used to evaluate how mentioned organization is performing and what all there internal
strengths and weaknesses is. This model has been discussed down under for better
understanding:
Key Internal Factors Weight Rating Score
Strengths
1. Satisfaction of employees 0.17 4 0.68
2. Multi skilled employees 0.18 3 0.54
3. Strategic partnership 0.16 4 0.64
4. Strong team 0.15 3 0.45
5. Better customer service 0.14 4 0.56
Weaknesses
6. Tapping foreign markets 0.06 2 0.12
7. Problem in tracking cost 0.04 1 0.04
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