Netflix: A Business Strategy and Innovation Analysis Report

This report provides a comprehensive analysis of Netflix, examining its evolution from a DVD rental service to a global streaming leader. It delves into Netflix's business model, highlighting its subscription-based revenue and value propositions, including on-demand content and a user-friendly experience. The report explores Netflix's strategic context, including its marketing strategies, focus on customer satisfaction, and competitive landscape. It analyzes Netflix's innovative approach to content creation, international expansion, and technological advancements. The report also discusses the company's vision and mission, emphasizing its commitment to providing exceptional entertainment services and its impact on the entertainment industry. The report covers various aspects of Netflix's operations, including its history of innovation, marketing strategies, and ability to adapt to market changes, and also provides a detailed overview of the company's global market entry strategies and its ability to overcome challenges, ultimately contributing to its success.

Abstract
Since its establishment in 1997, Netflix has been on the rise. However, a careful
examination of the company’s strengths strategy reveals that it faced a few little and large
difficulties along the road, some of which had the ability to permanently distance the
company from the market. Nevertheless, it handled strategically with all these concerns,
with many of them being dealt with in a proactive and preventative manner, while others
were dealt with quickly, essentially faster than any of its competitors. This article
examines a few such challenges that the corporation has experienced since its inception
until recently, when it nearly conquered the entire world. The firm focused on its in-depth
knowledge of how markets react in an internet-based economy.

Keywords
Figure 1
Table of contents: 47 words
Table of figures: 21 words
Bibliography: 199 words
Total :2797 word

Table of Contents
Abstract.......................................................................................................................................................2
Keywords.....................................................................................................................................................3
.................................................................................................................................................................... 3
1. Introduction.........................................................................................................................................5
1.1 What is Netflix?.....................................................................................................................................5
1.2 History of Innovation and Creativity......................................................................................................5
2. Business Model....................................................................................................................................6
2.1 Vison Statement....................................................................................................................................8
2.2 Value Propositions.................................................................................................................................8
3. Strategic Context.................................................................................................................................9
3.1 Marketing Strategy..............................................................................................................................10
3.2 Focus on Customer Satisfaction...........................................................................................................11
3.3 Netflix Competitors and Threat...........................................................................................................12
4. Conclusion.........................................................................................................................................14
Table of Figures
Figure 1........................................................................................................................................................3
Figure 2........................................................................................................................................................6
Figure 3........................................................................................................................................................8
Figure 4........................................................................................................................................................9
Figure 5......................................................................................................................................................12
Figure 6......................................................................................................................................................13
Figure 7......................................................................................................................................................14
Figure 8......................................................................................................................................................15
Figure 9......................................................................................................................................................15
Figure 10....................................................................................................................................................16

1. Introduction
This report was written as a mid-level coursework to study Netflix's creative and
innovative leadership. To understand the scope of this organization's creativity and
innovation, we must first examine its history, followed by the technique and power of
Netflix's creative and innovative leadership.
1.1 What is Netflix?
Netflix, Inc. (NFLX) is the world's most popular online television network, with over
203.67 million members in nearly 200 countries watching 125 million hours of
documentaries, original series, and feature films each day. With one affordable monthly
membership, Netflix members may watch as many as they want, when they want, on any
internet connected device screen. Users may watch without being interrupted by
commercials and can play, pause, and restart their viewing at any time and from any
location. (Jack M. Wilson Professor, 2012)
1.2 History of Innovation and Creativity
Netflix, Inc.” was founded in 1997 by Reed Hastings and Marc Randolph in California.”
After being charged $40 for returning Apollo 13 late, Reed Hastings a math teacher who
came up with this idea for Netflix. Netflix started as a movie rental website that worked
on a normal pay-per-rental system. In early 2000, the company discontinued the original
model. Netflix has built its reputation based on its business model of flat-fee unlimited
rentals without due dates, late fees, shipping, and handling fees, or per title rental fees.
(Gloria, MAR 26, 2018)

The company started giving DVD rentals and sales service in 1998, after a year sale were
suspended, and a subscription plan was introduced in the company because of the
investor who invested $30 million, which helped the company to focus on innovation and
improve their services. In the year 2000, Netflix signed income sharing deals with
Warner Brothers and Columbia film studios. (40 Amazing Netflix Statistics and Facts,
n.d.)
Netflix used the post service to mail DVDs to their customers from 1999 until 2007.
The internet became a major phenomenon, with 70 percent of Americans already getting
access to it. Rather than resisting the internet revolution, which could pose a significant
danger to his company, Reed Hastings chose to establish a streaming service that allows
customers to view TV series and movies on their PCs instantly. (Raras, 2018)
In the year 2009 and 2010, Netflix continued its innovations by becoming available on
more platforms such as PlayStation, iPad, iPhone, Xbox, and other platforms. All of the
Netflix Innovation was honored in 2012, when the Netflix won its first Emmy
Engineering Award. The National Academy of Television Arts & Sciences grants this
honor on companies that produce major innovations in broadcasting technology. (Butler,
2019)
Figure 2 (40 Amazing Netflix Statistics and Facts, n.d.)

2. Business Model
Netflix's international expansion is important to the company's success. Netflix's unique
business approach has played a significant role. It was operating in over 190 countries in
2017 its international streaming revenues exceeded domestic streaming revenues for the
first time in the second quarter of 2018 this is an incredible achievement for a company
who was only in the US before 2010 and was in 50 countries by 2015. Netflix enters all
markets step by step there were three stages to Netflix's global market entry. Netflix
carefully selected its initial nearby markets. As a result, Netflix was able to develop in
areas where foreigner challenges appear to be less significant. (Brochet, Srinivasan, &
Norris, 2019)
The second phase Netflix extended its footprint to some 50 countries in order to operate
in a wider variety of markets the choice of these markets was on the basis of the degree of
attractiveness shared similarities affluent consumers and the availability of broadband
Internet this phase included growing into new markets with the use of investments, which
included technological investments in big data and analytics, which allowed Netflix to
learn more about internationalization and partner with local players. (Healy, 2018)
Third phase, Netflix focused on adding more languages including subtitles expanding its
support for a range of device and payment partnerships Netflix also give importance on
improving its mobile experience it includes signups, credentials and authentication also
focus on developing relationships with device makers, TV operators and Internet service
providers as well Netflix has responded to the new markets. (40 Amazing Netflix
Statistics and Facts, n.d.)
Netflix partnered with KDDI in Japan and Telefonica in Spain, it wants to reach a
massive following through content. Netflix saw that for a developing country specific
knowledge is essential for success in local markets this knowledge needs to be brought
deep unemotional, political, institutional, regulatory, technical, cultural and customers

were taken into consideration this enhanced Netflix credibility and helped it smooth
relationships with key stake holders. (PEREIRA, 2021)
The business model of Netflix is subscription based. Subscriptions are Netflix's main
source of revenue. The corporation makes money by charging customers to access
Netflix material and having DVDs delivered to them. Based on the streaming quality of
the content delivered, the company offers three different plans to the consumer. The first
is the Basic, where standard definition information can be transmitted. The second option
is the Standard, which allows for high-definition video to be transmitted. The last option
is a Premium subscription, which allows you to stream content in Ultra High-Definition
resolution. (Villarroel, Taylor, & Tucci, 2018)
Figure 3

Netflix has collaborations with Smart TV manufacturers, gaming businesses, television
networks, as well as Google and Amazon. Netflix's main activities are acquiring and
retaining employees, producing content, and obtaining licenses. Netflix also values
customer relationships; users can self-register, which is convenient for both the
corporation and the customer; Netflix also offers gift cards for which customers are
rewarded, and online live chat services are available for users with questions or
complaints. Furthermore, unlike many other companies in the entertainment industry,
Netflix has not remained constant, and its success is due to its ability to follow trends and
overcome obstacles. (Healy, 2018)
2.1 Vison Statement
Netflix’s vision statement is “Becoming the best global entertainment distribution
service.”
The company's vision statement explains what it aims to achieve. It highlights the desire
to raise the standards in the delivery of on-demand video services. This mission statement
reflects the leading position Netflix aspires to achieve and maintain in the industry.
(Taylor, 2021)
Figure 4

2.2 Value Propositions
Netflix strategies method and aims t0 give the greatest customer experience.
Here are some of Netflix’s favorite parts.
 Users can stream 24hours in 7 days, without commercial advertisements.
 Gives the shows and movies in high-definition quality.
 Unlimited access to Netflix original films and series that aren't accessible
anywhere else.
 A 30-day free trial is available to new users.
 Receive recommendations for new shows to watch.
 Avoid commercials and other adverts- Some individuals enjoy watching
commercials and other advertisements, while others avoid them.
 Netflix resolves the issue that most consumers have with movie theaters and
mainstream media. With four easy words – Watch Anywhere –cancel anytime.
 Netflix's sharing account’s function allows families, friends, or even
organizations to share an account with pre-configured filters and preferences.

 Users can personalize their Netflix accounts and preferences by creating user
profiles.
 The admin can alter, allow, or even prohibit users using the User profiles. (Lucy,
2018)
3. Strategic Context
Mission statement of Netflix “We promise our customers stellar service, our suppliers a
valuable partner, our investors the prospects of sustained profitable growth, and our
employees the allure of huge impact.” (Taylor, 2021)
The statement reflects the company's strategic position: providing nice and unmatched
video recreation services. It additionally demonstrates however the corporation strikes a
balance between client happiness and the money desires of its different stakeholders. in
keeping with Netflix, client satisfaction is significant to success. it's for this reason that
Netflix tries to form original content. this system has tried to achieve success for Netflix,
because it has helped the corporate increase its subscriber base and improve its spoken
name. the prices of making original programming area unit wide, and Netflix features a
sizable debt load that it's going to have to be compelled to take care of. However, the
company's increasing operational margins and audience size counsel that, relative to its
competitors and different problems, it's going to have less to stress concerning its debt.
the corporate can perform well within the long-term, supported its previous success.
(Brochet, Srinivasan, & Norris, 2019) Overall, Netflix has stunned investors and
shareholders with its performance. The focus of Netflix on original content is one in all
the pillars of Netflix's business growth strategy. the corporate has continuing to feature to
its library of original films and tv shows. It additionally intends to extend the amount of
them in 2020 and 2021. Its competitive fosse has fully grown abundant wider. excluding
that, original material is that the primary individual for net streaming services. Not solely

Netflix, however additionally its competitors, like Amazon Prime, area unit finance in
original content. Netflix, on the opposite hand, features a way larger library than the
others. (Jack M. Wilson Professor, 2012)
3.1 Marketing Strategy
Netflix has also made marketing investments to expand its brand. With high quality
content, the organization has been able to gain market share. The company has a strong
word of mouth because of its quality and innovative content. The company benefited
greatly from word of mouth and earned media in the United States and Canada, two of its
largest and early markets. Netflix began as an entertainment company but has evolved
into a lifestyle brand for youngsters and Younger Generations It represented itself as a
technology, entertainment, and lifestyle company. With time, the organization became
more adept at marketing. Its marketing strategy became more developed over time.
(Siddiqi, 2019)
The mission statement for Netflix really reflects the desire to grow both in the US and
internationally with a clear focus on end user experience and it also references the
Figure 5 (IQBAL, 2021)

company’s goal of extending their streaming services to even more Internet connected
devices.
Looking at the competition for Netflix at this point Hulu and Amazon prime are really
some of the big competitors it’s just Internet streaming remains the most streamed online.
Without a doubt, Netflix was a more customer-focused and growth-oriented firm than its
competitors. The best response came from learning about new cultures and marketing
approaches when growing worldwide. As the company's focus on understanding
consumer preferences expanded. The increasing use of data and analytics, as well as
increased personalization, has aided in increasing consumer satisfaction and brand equity.
Netflix spent $1.88 billion on advertising in annual year 2019. (Butler, 2019)
Figure 6

3.2 Focus on Customer Satisfaction
Netflix prioritizes customer satisfaction. Netflix co-CEO Reed Hastings recognized that
in the streaming sector, there are no shortcuts. It's all about member pleasure, and if one
Netflix show satisfies, the member is more inclined to return the next day to watch more.
A few factors influence user satisfaction. Two of them are continuous evolution and
increased personalization. It improves user satisfaction and retention. Aside from that, the
user experience is influenced by the quality of the content. Netflix has always placed a
premium on producing high-quality programming that appeals to a wide audience.
Netflix will continue to invest in original programming despite increased operating costs.
(Gloria, MAR 26, 2018)
User happiness is critical and has a direct impact on a company's bottom line. Its
profitability has continuously increased over the last five years and is expected to
accelerate in the future. This was proved by Netflix's performance in the third quarter of
2020, when its net income climbed by 20%. Netflix must cultivate user loyalty to prevent
users from switching to other online streaming providers. This will need a continuous
focus on customer happiness. (40 Amazing Netflix Statistics and Facts, n.d.)
Figure 7 (Brochet, Srinivasan, & Norris, 2019)

3.3 Netflix Competitors and Threat
Netflix from blockbuster than originally expected because Netflix in 2007 was facing a
very unusual situation and after this news came out the stock price of Netflix went down
by 5% and the market in general became extremely doubtful about Netflix progress so
strategically able to navigate through this situation that in the next 10 years Netflix went
on to become one of the best performing stocks in the world which gave out a return of
more than 10,000%. (Butler, 2019)
Figure 9
In the year 1997 very popular blockbuster failure saga started for those who don’t know
blockbuster back then was a movie rental service which had physical stores of DVDs
across the United States, back then you rent a movie on a Friday and then give it back on
a Monday. Blockbuster was a billion-dollar company in1997, with over 6000 locations in
the United States and $3.91 billion in revenue. Where one of the customers got fined an
Figure 8

overpriced amount of $40 in late fees and it annoyed him so much that he went on to start
a company of his own this man was none other than Reed Hastings and the company he
founded is what we know as Netflix today. Netflix developed a multimillion-dollar
corporation that had a revenue of $500 million by 2004. (Daniel G. Jennings, 2019)
When Blockbuster realized that DVD email service was a major market, they made a big
announcement and launched their own DVD in mail service as a direct competitor to
Netflix in 2004, and they started going as quickly as Netflix, adding 2.1 million
customers in the first year alone. Now On paper, Blockbuster was set to destroy Netflix
because they have such a large network of stores that 90% of the American population
was within reasonable distance of a Blockbuster location. (Jack M. Wilson Professor,
2012)
Figure 10
Blockbuster still failed because they did not use their store network to deliver DVDs and
on top of that within just that one year they cut down on late fees which costed them
about $200 million in revenue and sending out the DVD in mail service costed them on
another $200 million so they were practically$400 million in debt and this made it very
difficult for them to experiment with new methods and systems but even then their
market share kept growing rapidly and By 2007, they had begun to cut into Netflix's

earnings, and in that year alone, Netflix lost 55,000 customers as blockbusters continued
to increase gradually. This is the background in which, according to JP Morgan, "Netflix
is seeing higher competition from blockbusters than originally projected" and this is
where Netflix surprised the world by doing something incredible. The first one was
obviously blockbuster entering the DVD mail service because considering their huge
network of stores they could have delivered a much better service than Netflix with very
less efforts. (Archer, 2019)
There was also a competitor who was strangely eating into the profits of both Netflix and
a blockbuster and Walmart has been the unknown entity in this play. It turns out that
Walmart was eating into the earnings of both Blockbuster and Netflix by implementing a
pricing strategy known as the loss leader pricing model. It's a pricing strategy in which
you sell a low-cost product to entice customers to come to your store and eventually buy
a high-cost product. In this case, Walmart was giving away DVDs on rent at a cheap
price to entice customers to come to their store. Walmart was uninterested in profiting
from DVDs, which was Netflix and Blockbuster's core business. And this was how
Netflix moved into online streaming and turned to another category, investing heavily in
data analytics to construct a powerful personal recommendation. (Hansraj, 2014)
4. Conclusion
As we observed in this course work, Netflix is an extremely innovative firm that has
managed to preserve its entrepreneurial spirit throughout the years. Netflix's current
success is largely due to its ability to constantly adapt and seek out new opportunities.
One of Netflix's most valuable assets is its human resources and people management
expertise. Even though Netflix currently has problems, such as worldwide expansion, we
can say without a doubt that it is one of the most innovative companies in the world.

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