Advanced Business Models: Netflix's Challenges, Strategy & Ethics

This case study provides an in-depth analysis of Netflix's business model, focusing on the challenges posed by increasing competition and the strategic responses the company can adopt. Cost control is identified as a key strategy for maintaining profitability, involving a review of both fixed and variable costs. The analysis also highlights ethical issues, particularly data caps imposed by ISPs, which could increase expenses and impact Netflix's strategic objectives. The study concludes that while cost control is vital for competitiveness, addressing ethical concerns related to data usage is crucial for long-term sustainability. Desklib provides access to similar case studies and solved assignments for students.

Running head: ADVANCED BUSINESS MODELS
Advanced Business Models
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1ADVANCED BUSINESS MODELS
Executive Summary:
This report would provide a closer insight on Netflix, which provides internet
streaming of television shows and movies. The analysis would focus on identifying the main
problem inherent in the organization and a strategy to address the problem. Netflix is facing
increased competition from its competitors for which cost control is suggested as the most
feasible strategy. This is because it would help in maintaining profitability by reviewing both
fixed cost and variable cost. Finally, the data cap is identified as the ethical issue, which
would increase the expense burden on Netflix.

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Table of Contents
Introduction:...............................................................................................................................3
1. Main problem in Netflix:.......................................................................................................3
2. Recommended strategy for the problem:...............................................................................3
3. Effectiveness of the strategy in solving the problem:............................................................4
4. Ethical issues and impact on strategy:...................................................................................4
Conclusion:................................................................................................................................4
References:.................................................................................................................................6

3ADVANCED BUSINESS MODELS
Introduction:
This report would provide a closer insight on Netflix, which provides internet
streaming of television shows and movies. The analysis would focus on identifying the main
problem inherent in the organization and a strategy to address the problem. In addition, this
report would shed light on assessing the effectiveness of the proposed strategy along with the
ethical issues identified from the provided case and their impact on the overall strategy.
1. Main problem in Netflix:
From the provided case, it has been identified that Netflix is encountering experienced
competition from the other organizations. The main competitors of Netflix include Redbox,
HBO Now, Hulu, Amazon, Sling TV and Youtube Reed. In particular, Amazon Prime has
continued to raise the choice of its online streaming selection, since it entered into more
partnerships with the movie studios.
2. Recommended strategy for the problem:
In order to maintain competitive supremacy, it needs to formulate effective cost
control for its streaming services. At present, the system of the organization constitutes of
greater fluctuations in price due to the contracts and content licensing coupled with the
technical infrastructure needed in maintaining the content. Despite of increased evidences
from the companies that generally gets involved in more than one business model in a
situation, strategy research has overlooked effect of diversification practice. (Aversa &
Haefliger, 2017). For cost control, it needs to enter into partnerships with additional cable
networks and studios along with writing up a contract, which depicts the share of revenue in
the agreement. With the help of this strategy, the networks and studios would be able to
provide greater content without gouging the profits of Netflix.

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3. Effectiveness of the strategy in solving the problem:
As laid out by Carvalho & Jonker, (2015), the major part of a strategic model is to
develop a value proposition concept and the way in which it includes social and ecological
values. Cost control is a significant factor for growing and maintaining profitability. For
example, it is assumed that Netflix intends to make a profit of $10,000 as net profit on
$100,000 in sales for a particular month. In order to accomplish the goal, the management
needs to review fixed costs as well as variable costs along with attempting to minimize the
expenses. Inventory could be termed as variable cost, which could be minimized by finding
other suppliers to provide more competitive prices. The business model is major aspect of
maintaining an aspect of corporate sustainability that has shifted its focus to a company’s
sustainability management research (Schaltegger, Hansen & Lüdeke-Freund, 2016).
Additional time might be needed to minimize fixed costs like lease payment, since they are
fixed in a contract. Thus, fulfilling target net profit is significant for Netflix, as the investors
buy the common stock of the issuer depending on the expectations related to earnings growth.
4. Ethical issues and impact on strategy:
As identified from the case study, the ISPs of Netflix have started to impose data caps
on the users. If the users go beyond their data caps, excess data usage leads to excess fees.
Another ethical issue confronting the organization is that it fails to count traffic from the
preferred providers of data in relation to the data caps of the customers. This would have
direct impact on the recommended strategy, since it focuses on minimization of expenses.
Moreover, a contingency model belonging to open business model is focused on linking open
innovation strategies associated with business model aspects and transactions governance
(Saebi & Foss, 2015). In order to deal with the data cap issue, it needs to incur additional
expenses, which would become even with the expenses minimized.

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Conclusion:
From the above discussion, it has been found out that Netflix is facing increased
competition from its competitors for which cost control is suggested as the most feasible
strategy. This is because it would help in maintaining profitability by reviewing both fixed
cost and variable cost. Finally, the data cap is identified as the ethical issue, which would
increase the expense burden on Netflix.

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References:
Aversa, P., & Haefliger, S. (2017). Business Model Portfolio Diversification. working paper,
Cass Business School, London.
Carvalho, J. M., & Jonker, J. (2015). Creating a Balanced Value Proposition: Exploring the
Advanced Business Creation Model. Journal of Applied Management and
Entrepreneurship, 20(2), 49.
Saebi, T., & Foss, N. J. (2015). Business models for open innovation: Matching
heterogeneous open innovation strategies with business model dimensions. European
Management Journal, 33(3), 201-213.
Schaltegger, S., Hansen, E. G., & Lüdeke-Freund, F. (2016). Business models for
sustainability: Origins, present research, and future avenues.