Netflix Strategic Analysis: External Environment and Business Level

This report provides a comprehensive strategic analysis of Netflix, a prominent online streaming service. It begins with a background study, followed by an in-depth examination of Netflix's external environment, considering social, political, economic, and technological factors. The analysis then applies Porter's Five Forces framework to assess the competitive landscape, evaluating threats of new entrants, supplier and buyer power, threats of substitutes, and rivalry among existing firms. Furthermore, the report delves into Netflix's business-level strategies, including cost leadership, differentiation, and focused low-cost approaches. Finally, the report explores Netflix's strategic intent, particularly its content strategy, to maintain market share and attract viewers. The analysis incorporates relevant academic references and adheres to the specified word count and referencing guidelines.

Running head: Netflix
Netflix

Netflix
Table of Contents
Background of the study..................................................................................................................1
Netflix’s External Environment.......................................................................................................1
Social factor.................................................................................................................................1
Political factor..............................................................................................................................1
Economic factor...........................................................................................................................1
Technological factor....................................................................................................................2
Netflix – A Five Forces Analysis....................................................................................................2
Threats of new entrants................................................................................................................2
Bargaining power of suppliers.....................................................................................................2
Bargaining power of buyers.........................................................................................................2
Threats of substitute products......................................................................................................3
Rivalry among the existing firms.................................................................................................3
Netflix – Business Level Analysis...................................................................................................3
Cost leadership.............................................................................................................................3
Differentiation..............................................................................................................................3
Focused low cost..........................................................................................................................3
Netflix Strategic Intent....................................................................................................................3
Conclusion.......................................................................................................................................4
References........................................................................................................................................4
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Netflix
Background of the study
Netflix is one of the popular companies that provide different Netflix films and Television
programs online. It is a media service provider company that is situated in Los Gatos and was
established in 1997. In this paper, the research will be done on the Netflix Company and there
will be different factors that will be elaborated such as External environment, five force analysis
and also strategic intent. It is necessary to have in-depth analysis of these factors as it helps to
give proper understanding of the marketing environment of the company. So, the overall
discussion relates with market situation of the company and the factors that affect the Netflix
company operations.
Netflix’s External Environment
The external environment of the company emphasizes on the outside factors that influence the
overall activities of the company. The business should maintain the activities so that positive
results can be accomplished. The external factor of the company can be highlighted through
different aspects such as social, political and economic and technological factors.
Social factor
The main aim of the company is to provide the services that satisfy the needs of the customers.
According to the demand and preference of the customers the services are offered to the
customers. The Eco consumerism culture has pushed online, digital services which have helped
in satisfying the needs of the customers. In 2015, 65% of 16-24 years old, 58% of 25-34 year old,
48% of 35-44 year old have used the services of the company. The service has inherent wide
appeal that satisfies the needs of the customers (Euchner, 2016).
Political factor
The company has to comply with governmental regulations at the time of conducting the
activities of the company. There are agreements related to suppliers in which the DVD’s are
rented for 28 days in the market. It is analyzed that there are various political parties that involve
the congress and it has also impacted the business model of the company (Pfeifer, Conroy and
Pfeifer, 2017).
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Economic factor
It has been examined that there are subscription fees that tend to scare of the buyers with the low
income and also it emphasizes on solving the issues. The North American is in a recession but it
has not affected the overall sales of the company. The company has more than 100 Million
customers and there is large customer base. The recession has affected the spending of the
customers and also it has made the services of the company attractive (Ellis, 2015).
Technological factor
There are new services that are considered by the company. The services of the company are
unique and it helps in satisfying the needs of the customers. Digital medium is the platform that
is considered by the company to promote the overall services of the company in the competitive
market. Therefore, by analyzing the factors it can be stated that external environment of the
company is dynamic.
Netflix – A Five Forces Analysis
Threats of new entrants
The economies of the scale are difficult to attain in online streaming sector. It has been seen that
there is huge cost required at the time of entering into the market. For the new entrants, the
production cost is high which affect the overall functions of the company. The access to the
distribution networks is easy at the time of new entrants. So, it can be said that threats of new
entrants is low in this sector (Sorescu, 2017).
Bargaining power of suppliers
It is low as the suppliers have their own content that helps in managing the activities of the
company. The services of the company offer the fairly standardized and also it is less
differentiated that have low switching cost. From this, it is easy for the buyers like Netflix to
switch the suppliers. In relation to this the bargaining power of the supplies is low.
Bargaining power of buyers
The company can emphasize on innovation and differentiation to induce the customers. Product
differentiation and service quality is also one of the factors for the buyers in this sector. Netflix
focuses on building the large customer base as the bargaining power of the buyers is weak. It can
be done by emphasizing on the marketing efforts that aim at building the brand loyalty. Netflix
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can attain the advantage of its economies of scale to create the cost advantage and customers can
be attracted towards if the services are provided at low cost (Voigt, Buliga and Michl, 2017).
Threats of substitute products
The company emphasizes on offering greater quality services to the customers. The threat of
substitution is high as there are many companies who are offering the services in the market but
good quality can be offered by the Netflix. So, to compete with the other competitors it is
important for the company to emphasize on satisfying the needs of the customers.
Rivalry among the existing firms
The company emphasizes on differentiating the products so that actions of the competitors can
be less effective at the time of offering the unique products. Netflix can manage the research to
understand the overall supply demand situation within the industry. There are many rivalries of
the company but it can be managed if good quality services are offered to the competitors. So, it
can be stated that rivalry among the existing firms should be managed effectively. The
competitors of the company are Hulu and Amazon (Aversa, Haefliger and Reza, 2017).
Netflix – Business Level Analysis
Cost leadership
Netflix offer the service at the low cost with the higher quality and this is one of the reasons that
company is the cost leader in the competitive market. Quality services are provided to the
customers to maintain the large customer base.
Differentiation
To offer the differentiated services, the company focuses on introducing the low subscription
price and there is wide selection of the movies provided to the customers. It has helped in
maintaining the competitive advantage (Hanson eta al., 2016).
Focused low cost
The company offers the low subscription cost that helps in maintaining the services. This is one
of the focused low costs that have helped in boosting the satisfaction of customers. The unique
content is also offered to the customers that have helped in maintaining large market share.
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Netflix Strategic Intent
Content strategy is one of the strategic intent of the company. The company offers unique
services to the customers that also help in maintaining the large market share in the competitive
market. The new content is provided to the employees that assist in retaining and attracting the
viewers of the services. Quality services are also offered to the customers through that it could be
easy to boost the demand of the services in the competitive market (Weill and Woerner, 2015).
Conclusion
It can be concluded that Netflix is one of the popular company in the online streaming sector.
The company offer quality services to the customers which have helped in maintaining the large
market share in the competitive market. Low subscription is also one of the factors that have
helped in attracting the large market share and also it has boosted the satisfaction level of the
customers.
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References
Aversa, P., Haefliger, S. and Reza, D.G., 2017. Building a winning business model portfolio.
MIT Sloan Management Review, 58(4), pp.49-54.
Ellis, K., 2015. Netflix closed captions offer an accessible model for the streaming video
industry, but what about audio description?. Communication, Politics & Culture, 47(3), p.3.
Euchner, J., 2016. Business Model Innovation. Research Technology Management, 59(3), pp.10-
11.
Hanson, D., Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic management:
Competitiveness and globalisation. Cengage AU.
Pfeifer, P.E., Conroy, R.M. and Pfeifer, P.E., 2017. Valuation of Netflix, Inc. Darden Business
Publishing Cases, pp.1-13.
Sorescu, A., 2017. Data‐driven business model innovation. Journal of Product Innovation
Management, 34(5), pp.691-696.
Voigt, K.I., Buliga, O. and Michl, K., 2017. Entertainment on Demand: The Case of Netflix. In
Business Model Pioneers (pp. 127-141). Springer, Cham.
Weill, P. and Woerner, S.L., 2015. Optimizing your digital business model. IEEE Engineering
Management Review, 1(43), pp.123-131.
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