Strategic Management: Netflix's Diversification Plan Analysis

This report analyzes Netflix's product and market, focusing on its diversification strategy. Netflix, a leading on-demand video streaming service with over 151 million subscribers across 190+ nations, faces challenges from competitors like Amazon, Apple, and Disney. The report suggests Netflix transition into a multisided platform, enabling third parties to sell products and services within its ecosystem. This diversification strategy, offering more content to subscribers without direct content creation, could emulate Amazon's model. The value addition includes increased economies of scope and potential for new content exploration by third parties. The report references diversification, risk, returns, and market research related to Netflix’s strategic choices.

Running head: BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT
BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT
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Product and market of Netflix:
Established in the year 1997, Netflix now has its existence in excess of 190 nations
with more than 151 million endorsers and is in this way the world's leading supplier of on-
demand video, streaming movies and TV series ("Number of Netflix subscribers 2019 |
Statista", 2019).
It is an Over-the-top (OTT) video service distributor which has membership based
streaming service as its essential business offering a pool of movies and TV programs most
of them are in-house produced.
Level of diversification:
As of now, Netflix is in the business of purchasing or making content, which it sells
consumer access to at costs and on terms it completely controls (a month to month
membership). That is not normal for a platform, for example, YouTube, which empowers
heap content suppliers to sell straightforwardly to clients at costs they control, with restricted
intercession by YouTube other than the requirement of some substance rules (Wiersema &
Beck, 2017).
Netflix's model has been irrefutably fruitful to date. Be that as it may, taking on the
blockbuster conflict over content safeguarding and formation is windup up always costly, and
it comprises an intensifying number of competitors (counting Amazon, Apple, Disney, and
Google). Every one of these organizations as of now has or will have advanced download and
spilling administrations. Besides, the development of Netflix's endorser base is backing off.
The organization lost over 15% of its financial exchange valuation over the previous month
after its development numbers frustrated speculators.
In this specific situation, it appears glaringly evident that Netflix can and ought to turn
into a multisided platform, utilizing opening the entryway to outsider methodology. The
significant explanation is that Netflix's enormous supporter base and substance conveyance

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framework are possibly appealing to numerous outsiders. Notwithstanding video content
suppliers, these outsiders incorporate advertisers and the designers of cloud gaming or
different administrations. How might Netflix become a platform? Just by enabling these
outsiders to sell their products or services inside Netflix's service offerings but outside
Netflix's membership, on terms constrained by the outsiders (Wu, 2019).
The reason behind adopting such diversification:
Turning into a multisided platform along these lines would permit Netflix to tap
another component of development: offering more stuff to similar supporters. What's more,
the magnificence of the platform model is that Netflix can develop without purchasing or
produce new things itself. It simply hosts to pull in third gatherings to create and sell the
substance, and after that, it can take (as is normal) a portion of the income or an exchange
charge (Buchner, Mohamed & Schwienbacher, 2017). Additionally, outsiders could explore
different avenues regarding new types of substance, which could be truly significant to
Netflix's substance securing and creative endeavours. Along these lines, Netflix would
emulate Amazon's example. That organization began as an unadulterated retailer of items it
purchased from merchants and sold in its own name, before including a commercial centre
where clients acquired straightforwardly from outsider dealers (Ramaswamy, Purkayastha &
Petitt, 2017). Netflix can plan to turn into a comparably amazing affiliate platform
crossbreed, with the exception of it will have computerized content as opposed to (generally)
physical items.
Value addition by such diversification strategy:
The bottom line is that Netflix has little to lose and a great deal to pick up by moving
from being an aggregator of content under one membership to hybrid aggregator platform on
which different content suppliers sell legitimately, and at costs based on their personal
preference, to clients. In this way, the economies of scope for selling its products or services

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will be increased. For example, the CNBC survey has shown that on an average 25%
subscriber of Netflix is interested in subscribing below service:
Source: (Sheetz, 2019)
This indicated that opening door to third parties not only helped them to sustain such a large
base of viewers but also help them to become large market power.

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References:
Buchner, A., Mohamed, A., & Schwienbacher, A. (2017). Diversification, risk, and returns in
venture capital. Journal of Business Venturing, 32(5), 519-535.
Number of Netflix subscribers 2019 | Statista. (2019). Retrieved 11 October 2019, from
https://www.statista.com/statistics/250934/quarterly-number-of-netflix-streaming-
subscribers-worldwide/
Ramaswamy, K., Purkayastha, S., & Petitt, B. S. (2017). How do institutional transitions
impact the efficacy of related and unrelated diversification strategies used by business
groups?. Journal of Business Research, 72, 1-13.
Sheetz, M. (2019). Most Netflix subscribers won't leave for Disney's or Apple's services,
survey finds. Retrieved 11 October 2019, from
https://www.cnbc.com/2019/10/02/most-netflix-subscribers-wont-leave-for-disney-or-
apple-survey-finds.html
Wiersema, M. F., & Beck, J. B. (2017). Corporate or Product Diversification. In Oxford
Research Encyclopedia of Business and Management.
Wu, Z. (2019). Price discovery, ownership structure and portfolio diversification by investor
categories.