International Business & Strategy Report

This report assesses the feasibility of Netflix expanding its business into Malaysia. It begins by justifying Malaysia as a target market through a PESTLE analysis, highlighting the country's economic stability, growing internet usage, and movie-loving population. Key strategic issues are then identified, including competition from existing streaming services and the need for high-quality content. A SWOT analysis follows, detailing Netflix's strengths (free trial, diverse content, accessibility) and weaknesses (declining DVD rentals, profitability concerns). Finally, the report explores various market entry modes—licensing, partnership, and joint venture—recommending licensing as the most suitable approach for Netflix in Malaysia, suggesting a collaboration with Star Media Group. The conclusion emphasizes the importance of thorough market research and customer understanding for successful international business expansion.

INTERNATIONAL BUSINESS
& STRATEGY

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................2
2. Rational for Malaysia...................................................................................................................2
3. Key strategic issues faced by Netflix in the expansion of business at Malaysia.........................6
Strength and Weakness...........................................................................................................8
4. Various modes of entry available for the firm...........................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
Appendices ....................................................................................................................................15
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ILLUSTRATION INDEX
Illustration 1: Malaysia corruption rank..........................................................................................4
Illustration 2: GDP rate of Malaysia................................................................................................5
Illustration 3: Population of Malaysia..............................................................................................6
Illustration 4: Ethnicity of Malaysia................................................................................................6
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INTRODUCTION
International business expansion is all about a planned phase by which company starts its
business activities in several countries. It is not only about making investment in nations that are
outside the home country of company but also about maintaining actual business presence in
those nations (Killing, 2012). Due to this aspect, the present report has made an attempt to
expand the business presence of Netflix from United States to Malaysia. Further, the report will
also give a justification about the chosen target market by analysing the strategic issues faced by
firm at the time of conducting business expansion. After that, focus will be given on analysing
the strengths and weaknesses of Netflix so as to assess that whether it is going to support or
challenge the business expansion (Netflix, 2014). Report will further try to focus on evaluating
different types of entry modes that are available for the company such as Netflix.
2. RATIONALE FOR MALAYSIA
In order to select the best country for business expansion, cited firm should aim to
understand the economic stability. With this respect, economic condition of Malaysia is very
favourable. In addition to this, Netflix provides streaming of movies and TV series. According to
this, use of internet is also increasing drastically which will be very helpful for Netflix. This will
enable to attract more and more customers. In addition to this, Malaysian people are fond of
movies. Thus, there is a great scope for Netflix if they make their business expansion.
In order to understand the country’s stability, PESTLE analysis can be used as it covers
all the important areas which help in determining the stability of country. PESTLE analysis done
for Malaysia is as follows:
Political factor: This has a great impact over the business. It is essential to have balance
between free market and system of control (Wild, Wild and Han, 2014). In addition to this,
ruling party, Barisan National Party has power for over 25 years.
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Illustration 1: Malaysia corruption rank
(Source: Malaysia corruption rank, 2014)
Further, there is no corruption in the country and from the above given diagram, it can be
stated that the rate of corruption is falling down (Malaysia corruption rank, 2014). Malaysia
stands at 50th rank around the world for least corrupted countries. When ruling party changes,
then policies are also changed. But in Malaysia, there is stable government and there is no
corruption so cited firm such as Netflix will be able to expand its business effectively here.
Illustration 2: GDP rate of Malaysia
Source: Malaysia GDP, 2014)
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Economic factor: In the past 10 years, average rate of increase in economic growth is 7%
per year (Malaysia GDP, 2014). From the below given diagram, it can be stated that the country
is going on very well as the GDP rate is increasing at a fast pace. This has increased the income
of customers and as a result, buying power of them has also been increased. Further, Malaysia is
an idle place for international trade. Seeing the present economic condition, it can be critically
evaluated that economic factor is favourable for Netflix to make the business expansion. When
compared with the GDP of South Africa and Turkey, GDP of Malaysia is constant as well as it is
rising.
Illustration 3: Population of Malaysia
(Source: Malaysian population, 2014)
Social factors: On 1957, the total population of Malaysia was 6.3 Million and now, it is
29.72 million as per the data of 2014 which can be seen in diagram as given below and this will
be very much favourable for Netflix as they have growing potential customers (Malaysian
population, 2014). All people in the country are potential customers as there are no age barriers
and services provided by cited firm can be used by all age groups (Cavusgil, Knight and Rose,
2014). Further, rate of internet users is increasing rapidly and people in Malaysia are fond of
movies.
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Illustration 4: Ethnicity of Malaysia
(Source: Malaysian population, 2014)
Moreover, there are three main age groups which are Malay (50%), Chinese 22%),
Indians (7%) and remaining population is 0.70 in 2010. According to the pie chart, it can be
forecasted that the population will go high till 2040 (Malaysian population, 2014). Thus, services
which are provided by the cited firm will be able to attract all different groups as Netflix serves
all types of movies with different languages which are preferred by the people of different
countries. According to the geographical areas, South Africa is the largest and so as Turkey. In
spite of this, geographical area is less and still the population is high.
Technological factor: There has been seen a huge increase in the use of smart phones
and this has enabled people to use internet. There are many businesses and organizations which
have been introduced in Malaysia (Dunning, 2012). This has helped the country to make use of
new technology and provide better services.
Legal factors: Since 25 years, Barisan Nasional party has been ruling in Malaysia. In this
period, lots of changes have been made in the law. Legislation related to business expansion is
favourable as government of the country supports organization which wants to make business
expansion here.
Environmental factors: There has huge development in Malaysia and this has enabled
the country to grow (Doh, McGuire and Ozaki, 2015). Thus, this factor is also favourable for
Netflix.
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From the above conducted research, it can be stated that Malaysia is one of the best
markets in which business expansion will be more favourable as compared to other countries.
3. KEY STRATEGIC ISSUES FACED BY NETFLIX IN THE EXPANSION
OF BUSINESS AT MALAYSIA
According to Boykin, Schutze and Cameron, 2014, through determining opportunities
and threats, organization will be able to make improvements in the areas with the help of which
it will also be able to grow its business” (Boykin, Schutze and Cameron, 2014). However, as per
Aketarawong, Isasawin and Thanaphum, 2014, firm has to spend highly on identifying these
factors so that they can make changes accordingly (Aketarawong, Isasawin and Thanaphum,
2014). Opportunities are provided to the firm with appropriate ways through which they can
grow their business. On the other hand, threats are the barriers which put adverse impacts on the
path through which they desire to achieve their goals and objectives. Following are the
opportunities which prevail in the market of Netflix:
In this modern world, use of internet is increasing drastically and it is a type of
opportunity which Netfilx has in Malaysia (Bohari, Cheng and Fuad, 2013). Services provided
by cited firm will be highly benefited as internet users are increasing rapidly. People prefer to
make use of their mobile phones in order to entertain themselves and this is done by listening
songs, watching movies, T.V. series, etc. (Hee, Wee and Tan, 2015) With this respect, Netflix is
one of the best streaming companies which provides better services as compared to any other
similar organization. According to a survey, it was found that rate of internet users have raised
up to 23% which is approximately 18 million.
There is almost 5 cellular communication service provider at Malaysia and with the help
of these services, Netflix can be operated effectively. In this context, customers will be able to
make use of services provided by cited firm from all the networks which are available at
Malaysia (Gümüş and Ergün, 2015). In other countries, there are communication networks by
which people cannot make use of services provided by Netflix. Further, there is a stable market
in Malaysia and changes which take place are not frequent and this will enable to the
organization to expand their business effectively. In addition to this, growth of GDP is 7% per
year and this means that market in Malaysia provides better opportunity to conduct business
efficiently so that customers can make use of services in an effective manner (Mastoi, Azura and
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Ibrahim, 2014). Further, because of improvement in GDP, average income of people is also high
so they are able to spend highly on the services provided by different organizations.
Netflix provides movies of mostly all the region and language. In this context, there are
about 29.72 million people in Malaysia. More specifically about 60% people are Malay, 30% are
Chinese and 10% are Indians. With this respect, the organization provides all the three types of
movies from these different cultures (Shabanova, Ismagilova and Akhmadeev, 2015). As a
result, firm will be able to make effective business as all the people in Malaysia will be able to
enjoy the services provided by Netflix.
The use of technology is increasing rapidly. People of Malaysia are makeup of the latest
technology which is made available to them (Hin, Bohari and Pu, 2013). In this context, Netflix
will be highly benefited as they will be able make their services easily available to target
audience.
According to Krosch, Schutze and Clarke, 2013, threats are the barriers which
organization faces while operating their business operations (Krosch, Schutze and Clarke, 2013).
However, as per Ghazali, Zain and Yaakop, 2014, firm has to make of different strategies with
the help of which organization could understand the areas in which they need improvement
(Ghazali, Zain and Yaakop, 2014). In this context, following are the threats which cited
organization faces at Malaysia:
Wild, Wild and Han, 2014 stated that “organizations around the world aim at determining
the areas in which they can earn maximum profit” (Wild, Wild and Han, 2014). In this context,
according to Cavusgil, Knight and Rose, 2014 “firm aim at understand their customers’ needs
and requirements and accordingly they make use of different strategies which enable them to
gain maxim profit” (Cavusgil, Knight and Rose, 2014). Organization makes use of different
strategies with the help of which they focus on attaining competitive advantages. There are firms
which provide their customers with similar services and the company which make change in
their services according to their customer’s requirement can only attain or compete in the
business environment effectively. In accordance with the case, Netflix has many competitors like
HBO GO, Amazon Prime and Vudu (Doh, McGuire and Ozaki, 2015). In addition to this, there
are local social sites which prove similar services to customers. In this context, firm is facing
barriers from these organizations.
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The content provided by cited firm is not licences. They are spending highly on proving
their customers with original content. But the threat arises when customers fail to watch their
desired context at low quality and this has huge negative impact over the firm (Forsgren and
Johanson, 2014). Customers preferred to get services at high quality and it is possible only when
Netflix make necessary steps with the help of which they will be able to provide their service
users with satisfying services.
Strength and Weakness
According to Boykin, Schutze and Cameron, 2014, “for an organization, strengths are the
areas through which firm get highly benefited” (Boykin, Schutze and Cameron, 2014). However,
Aketarawong, Isasawin and Thanaphum, 2014 stated that “all the areas can be developed or
improved when they make of strategies which will enable the firm to overcome their issues”
(Aketarawong, Isasawin and Thanaphum, 2014). With this respect, following are the strengths of
Newflix:
 First month is absolutely free: This is one of the best services which are been provided
by Netflix. Among all its competitors, they provide their customers to make use of the
services provided by them for free and this done for one month (Bohari, Cheng and
Fuad, 2013). In this context, it enables the user to try which all types of services are
provided by Netflix. In order to make use of other services provided by other
organization, customers have to play subscription only then they can make use of the
services.
 More shows: In the world, frequently new shows are developed and people are found to
watch movies or series. In this context, Netflix continuously update their services so that
more and more customers could be attracted (Hee, Wee and Tan, 2015). Service users
prefer to watch that content which are new and which they would have been waiting for
long to watch. With this respect, it is the strength that cited firm do not make their
customers wait long for the latest movies or T.V. shows. This is very helpful in
attracting service users and in satisfying them.
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 Through internet: As it was stated above, the use of internet is increasing and this enable
them to make their services reach customers effectively (Gümüş and Ergün, 2015). As
long as internet connection is there craving of Netflix can be satisfied. People with
Smart TV can use of the services provided by cited firm with the help of internet. The
buffering is quick and fast and enables the viewer to enjoy their services effectively and
efficiently.
 No fast internet, still it works: The internet connection does not need to have high speed.
The minimum speed to buffer the services is just 0.5 megabits per second (Mastoi,
Azura and Ibrahim, 2014). Certainly faster connection will improve the quality of the
video and people prefer to watch videos in high quality. However, even with minimum
speed customers will able to enjoy the services provided by Netflix.
 Not just English: Around the world there be only very few countries which do make
movies or TV series. With this respect, in Netflix there are almost more than 17 forms of
languages which are been provided by cited firm (Shabanova, Ismagilova and
Akhmadeev, 2015). In this context, it enables the customers around the world to get
attracted to the services which are provided by them. Further, it helps the customers to
enjoy the movies in their own preferred language.
 Member starts with RM33: The subscription starts from one month that is RM33.
According to yearly basis, subscription pay is RM400 (Hin, Bohari and Pu, 2013). In
addition to this, the pay will be deducted according to the number of times the services
has been used.
Weaknesses can be determined the areas in which improvements are required. Following
are the weaknesses of Netflix:
 Company provides DVD by mail rental operations and these services have fallen down.
There has been huge decrease in these services (Krosch, Schutze and Clarke, 2013). In
other words, it can be stated that the membership of DVD subscription has fallen.
In all the business expansion done by Netflix is not profitable. The revenue which the
organization gets for business expansion is not profitable. This has led to high losses and the
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growth of the firm has also affected negatively. However, it is very important for Netflix to make
necessary research so that they get to know the areas in which they can make improvement and
improve their condition (Ghazali, Zain and Yaakop, 2014). In addition to this, organization
should be very careful in selecting the most suitable market in which they could expand their
business, in this context, they should conduct market research with the help of which they will be
able make gain profit.
4. VARIOUS MODES OF ENTRY AVAILABLE FOR THE FIRM
There are many ways with the help of which organization can expand their business.
Business expansion will be affective only when firm make research so that they could select the
best market (Boykin, Schutze and Cameron, 2014). When the market is selected, then they
should choose the best way through which enters the selected market. Currently Netflix is been
used at Malaysia with the help of Hola Unblocker (Netflix is available in Malaysia, 2015). This
is a type of software which people of Malaysia are using in order to make use of the services
provided by Netflix. In order to develop cited firms infrastructure following are the different
types of ways through which Netflix can enter into Malaysia:
Licensing: This is types of method in which organization provides right to other firm to
sell their services (Aketarawong, Isasawin and Thanaphum, 2014). In this context, Netflix has to
find out any organization which focuses on multi media. With this respect, Star Media Group in
company to which cited firm can provide licensing and star Media Group will be able to provide
the services of Netflix. Slowly, people will get to know about company through Star Media
Group (Bohari, Cheng and Fuad 2013). Meanwhile, cited firm can establish their business in
Malaysia.
Partnership: It is form of market entry strategy in which organization will work together
to achieve their goals and objectives. These are very helpful for the firm to enter into the market
as the other organization will put on the same efforts which it use to put for its services (Hee,
Wee and Tan, 2015). All the methods will be adopted by concerning all the member of both the
companies. Issues arise when different opinions come from parties. In such situations it becomes
very difficult to make a combined situation (Gümüş and Ergün, 2015). However, through this
method firm will be able to this to make its business expand their effectively.
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