MOD001147: Dynamics of Strategy - Netflix Strategic Audit

This report presents a comprehensive strategic audit of Netflix, a leading company in the global video streaming market. The analysis begins with an introduction to the competitive media services landscape, highlighting the increasing market growth driven by factors like internet penetration and technological advancements. The report then delves into Netflix's internal analysis, including historical developments from its inception, strategic choices, VMOST framework (Vision, Mission, Objectives, Strategy, Tactics), product portfolio, BCG matrix, and market definition. Financial and value chain analyses, along with core competencies and the McKinsey 7-S framework, are also included. The external analysis covers customer and competitor analysis, industry life cycle, and a PESTEL analysis. A strategic fit analysis, incorporating SWOT, EVR congruence, ESP, and a balanced scorecard, assesses Netflix's position. The report further explores strategic direction, trend and sensitivity analyses, and risk management. It proposes strategic options, including incorporating educational shows and obtaining secondary listings in emerging markets. The report evaluates the suitability, acceptability, and feasibility of these options. The implementation and control sections discuss alignment of company structure, project management, and green strategy. The report concludes with a business plan and execution plan, offering insights into Netflix's strategic choices and market position.

Running head: MANAGEMENT
Strategic Fit of Netflix
Name of the student
Name of the university
Author Note:

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Abstract:
The global video streaming market is one of the most competitive segments in the entertainment
industry. The competition has become so intense that it has necessitated even the leader in the
market namely, Netflix restructure its market strategies. The analysis clearly points out several
aspects of Netflix which contribute to its strong market position. First of all, the company is
listed on NASDAQ which enables it raise capital from the American stock market. Secondly, the
company markets immense varieties of shows like films, documentaries and TV shows which
enables it to generate immense revenue. However, the report has also brought into the light
several weaknesses in terms of marketing of products in case of Netflix. First, its operations are
still very much centred on the US, its home country whereas its competitors like Hulu and
Amazon, also based in the US enjoy strong international presence. Secondly, Netflix charges far
higher rates compared to its competitors like Hulu. Thirdly, Amazon provides a more vast range
of products. These two factors limits the product differentiation of Netflix, thus rendering its
competitively weak. The company should form a business plan to strengthen its market position.
The emergent business plan would consist of two strategies namely, marketing more purposeful
shows to spread consumer education and obtaining secondary listing in emerging markets. These
emergent strategies would be supported by an approval of an amount of $5 billion

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Table of Contents
Abstract:...........................................................................................................................................1
SECTION 1 – Analysis and Discussion..........................................................................................9
Part 1. Introduction..........................................................................................................................9
Part 2. Internal Analysis:...............................................................................................................10
Part 2.1. Historical Analysis:.....................................................................................................10
Timeline:................................................................................................................................10
Strategic choices:...................................................................................................................12
VMOST.........................................................................................................................................15
Vision and Mission....................................................................................................................15
Strategy......................................................................................................................................16
Tactics........................................................................................................................................16
Product Portfolio:...........................................................................................................................17
Show Product Portfolio:............................................................................................................18
BCG Matrix...............................................................................................................................19
(Cash Cow, Star, Problem Child, Dog).....................................................................................19
Star:............................................................................................................................................19
Cash cows:.................................................................................................................................20
Question mark:...........................................................................................................................21
Dog:...........................................................................................................................................21

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Product Position:........................................................................................................................22
Introduce new products:........................................................................................................22
Education:..............................................................................................................................22
Market Definition and Location....................................................................................................23
Competitors (Rank)...................................................................................................................23
Current Competitive Position........................................................................................................24
Product Positioning....................................................................................................................24
Company's Aggressiveness Strategy.............................................................................................24
Current Competitive Strategy........................................................................................................25
Ansoff Matrix for Company [New Product Development; New Market Development;
Prescriptive Strategy etc.]..............................................................................................................26
Green Strategy [Ask yourself, is my company eco-friendly?]:.....................................................27
Summary of Historical Analysis:...................................................................................................27
FINANCIAL ANALYSIS.............................................................................................................28
Extract of Financial Data...............................................................................................................28
Accounting Ratios.........................................................................................................................28
Summary of Ratio Analysis:......................................................................................................30
Evaluation of COMPANY Financial Position using the CAMELS Framework......................30
Summary of Financial Analysis:...................................................................................................32
Value Chain Analysis....................................................................................................................32

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Porter’s Value Chain..................................................................................................................32
Summary of the value chain:.....................................................................................................33
Core Competencies........................................................................................................................34
McKinsey’s 7-S Framework:.........................................................................................................35
Customer Analysis and Market Segmentation –...........................................................................35
Distinguishable:.........................................................................................................................35
Relevant to purchasing:.............................................................................................................37
Sufficiently large:......................................................................................................................37
Reachable...................................................................................................................................37
Competitor Analysis:.................................................................................................................37
Cooperative Environment..............................................................................................................38
Competitive Industry Environment...........................................................................................38
Key Factors for Success – Lynch (2015, p83- 84)....................................................................39
Industry Life Cycle:.......................................................................................................................39
PESTEL Analysis:.........................................................................................................................39
Degree of Turbulence in the Environment:...................................................................................41
Summary of Opportunities and Threats:........................................................................................41
Strategic Fit Analysis.....................................................................................................................41
SWOT Analysis of Netflix:...........................................................................................................42
EVR Congruence [See table below. Goggle Model for further details]........................................43

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ESP:...............................................................................................................................................44
Balanced Scorecard:......................................................................................................................44
Summary of Strategic Fit:..........................................................................................................44
SECTION 2 – Strategic Direction.................................................................................................46
Trend and Sensitivity Analysis:.....................................................................................................46
Risk Management..........................................................................................................................48
Growth Strategic Options..............................................................................................................53
Strategic Direction:........................................................................................................................53
Incorporating more educational shows:.....................................................................................53
Obtain secondary listing in emerging markets:.........................................................................54
Suitability – Suitable to whom and what.......................................................................................57
Suitability to Resource Base (Lynch 2015, p132) Fig 4.8 – 7 elements.......................................57
Suitability to Culture......................................................................................................................57
Suitability to Purpose of the Company......................................................................................58
Suitability to Stakeholders.........................................................................................................58
Summary of Suitability..............................................................................................................59
Acceptability..................................................................................................................................59
Acceptability of Business Model...................................................................................................59
Acceptability to Ethics and Social Responsibility.........................................................................59
Acceptability to Knowledge Management....................................................................................59

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Acceptability to Technology..........................................................................................................59
Acceptability using Blue Ocean Strategy......................................................................................59
Summary of Acceptability Analysis..............................................................................................60
Feasibility......................................................................................................................................60
Internal Feasibility Checklist.....................................................................................................61
1. Capital Investment Required.....................................................................................................61
2. Projection of cumulative profits (based on strategic choices)...................................................61
3. Working Capital Requirements.................................................................................................61
4. Tax Liabilities and Dividend Payments.....................................................................................62
5. Number of current employees? Redundancy? Is the company over-staffed? –........................62
6. New technical skills; new plants, etc.........................................................................................63
7. New products and how they are to be developed......................................................................63
8. Amount and timing of market investment.................................................................................63
9. Possibility of acquisition, merger, joint venture, etc.................................................................63
10. Communication of ideas to all those involved........................................................................64
External Feasibility Checklist........................................................................................................64
Financial Feasibility Checklist:.....................................................................................................64
Financial Evaluation..................................................................................................................64
Summary of Feasibility:............................................................................................................66
Summary of Suitability, Acceptability and Feasibility:............................................................66

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Internal Development....................................................................................................................66
E-Commerce:.................................................................................................................................66
Implementation and Control..........................................................................................................66
Alignment of Company Structure..................................................................................................67
Elements of the Implementation Process.......................................................................................67
Project Management Approach.....................................................................................................67
Project Monitoring and Control.....................................................................................................67
Green Strategy...............................................................................................................................67
Managing Change..........................................................................................................................67
Managing Strategic Leadership.....................................................................................................68
Business Plan.................................................................................................................................68
Execution Plan for Chosen Strategic Option.................................................................................68
Conclusion:....................................................................................................................................68
References:....................................................................................................................................70

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Tables of charts and figures:
Figure 1. Timeline of Netflix 12
Figure 2. Product portfolio of Netflix............................................................................................18
Figure 3, BCG matrix of Netflix....................................................................................................19
Figure 4. Comparison between Netflix, Amazon and Hulu..........................................................24
Figure 5. VRIO of Netflix.............................................................................................................26
Figure 6. Ansoff matrix.................................................................................................................26
Figure 7. Garph showing share price on LSE................................................................................55
Figure 8. Graph showing share prices of Amazon, Netflix and Walt Disney...............................56

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SECTION 1 – Analysis and Discussion
Part 1. Introduction
The media services market is one of the most competitive segments of the global
entertainment market. The global video streaming market is estimated to achieve a growth of
18.8% (CGAR) to reach a value of $687.2 billion within 2024 (Globenewswire.com. 2019). The
growth in the market is driven by factors like increase in internet penetration in both developed
and emerging market and technological advancements taking in the ICT industry. The video
streaming market attracts consumers both from the developed and emerging, making it one of
most profitable segments in the entertainment industry. The market as a result experiences
presence of global giants like Amazon and Vodafone (Primevideo.com. 2020). This level of
competition is further intensifying in video streaming companies embracing innovations to offer
more innovative market mixes which are aligned with the changing expectations of the
customers to maintain their respective competitive advantages. Davcik and Sharma (2016)
mention that marketing strategies enable companies to gain competitive advantage in the market
and surpass their competitors’ positions. Lynch (2015) defines the term strategy from diverse
angles. Analysis of these definitions would bring into the light the essence of forming strategies
in business organisations like Netflix. The first definition of strategies defines the term as the
match between the internal competencies and external market factors. Strategies are the plans
which firms take according to their internal factors like financial strengths in response to the
market environment. Strategies can also be defined that the plans which companies adopt to
achieve their organisational goals like increase in revenue generation. The fact applies strongly
to the video streaming and media services industry with the increasing numbers of players. The
aim of the assignment of would be exploring the market strategies adopted by a company.

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Sergeev, Akhmetshina and Grabovyy (2019) mention that market strategies which business
organisations adopt are dependent on the macroeconomic conditions and market competition
levels. That is why it is extremely important for firms to conduct market analyses prior to
forming marketing strategies. The assignment, keeping the matter in light would take into
account different tools like PESTEL and Porter;s Five Forces models. Zhou, Mavondo and
Saunders (2019) point out that firms today view their different functions as systems which are
interrelated and interdependent, using the systems approach. For example, the outcome of
marketing activities is generation of revenue which in turn directly impacts the financial
operations of the company. That is why in the pursuit of exploring the marketing strategies, the
research would incorporate the financial aspects of the company chosen. The entire research
would commence under the stewardship of Netflix, the leading global media services and video
streaming company based in the United States of America (Netflix.com. 2020).
Part 2. Internal Analysis:
Estrin, Nielsen and Nielsen (2017) mention that the capability of multinational companies
to form and implement market strategies is directly impacted by their internal capabilities. The
multinational companies have certain capabilities which enable them to surpass their competitors
and emerge as market leaders. These capabilities include financial strengths, manpower,
technological strengths and innovative strengths. The following section would analyse the
analysis of the internal environmental conditions which apply to Netflix:
Part 2.1. Historical Analysis:
Timeline:
The following section would explore the timeline of Netflix right from inception as a
video renting company to a global media services giant it is today:

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Year Action
1997
Netflix was founded by Hastings and Randolph. The firm offered film rental services on
the internet platform
1998
Netflix launched its own website netflix.com. The firm shifted its focus to movie rentals
and sales in DVD format
2000
The company added subscription services to allow customer hire unlimited numbers of
DVD by paying a monthly subscription. The firm offered recommendation systems which
enabled customers to give rating. Thus, by 2000, the firm was already on its way to emerge
as one of the most consumer centric entertainment rental services.
2002 Netflix got listed on the NASDAQ.
2005 The customer base of Netflix reached 4.2 million.
2007
The streaming emerged. Netflix entered the video streaming industry. The company
allowed the company to choose the contents they wanted to watch. The company brought
about the disruptive innovative in the video streaming industry.
2009
1. The share price of Netflix reached $8 from $2.
2. Netflix started entering into partnerships with information and communication
technology companies to obtain smart TV platforms and gaming consoles.
2010
Netflix had to withdraw the Netflix Prize contest. The contest was floated to acquire talents
to improve the recommendation system.
2012 Netflix entered Europe.

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2013 Netflix launched its own programming like House of Cards and Orange is the New Black.
2016
Netflix expanded into other markets like Asia and became accessible from all over the
world. The company gained memberships from all over the world. The company got the
creators of streaming content license their products under its own brand name. Thus,
Netflix came to own these contents and could use them to serve its customers.
2019-
till date
Netflix is facing tremendous competition in both video and game streaming. Global
companies like Amazon and Apple have entered the market. Netflix has to struggle to
maintain its market position.
Figure 1. Timeline of Netflix
(Source: Butler 2019)
Strategic choices:
An analysis of the timeline of Netflix shows that the company took strategic choices
throughout its journey which ultimately contributed to the high market position the company
holds today. The first strategic move of Netflix which enabled it to strengthen its market position
was to launch its own website in 1998. This enabled the company to enable customers rent or
buy movies in DVD formats under its own brand name. This greatly prevented third party
companies like Google gain information about the products of the company since the company
no more used their platforms to sell movie DVDs. The company in 2013 launched its own
programming like House of Cards (Netflix.com. 2020). One can point out that these two moves
enabled Netflix strength its brand value. This is because, the company was no more dependent

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on brands owned by other companies to market products. This also reflected the increasing
financial strength of Netflix (Burmann et al. 2017)
The second strategic move of Netflix was enabling customers rent unlimited film DVDs
by paying subscription. The company in this year also launched a recommendation system which
enabled the consumers rate their experiences of renting DVDs. Chai et al. (2018) mention that
understanding the expectations of consumers and measuring customer satisfaction levels are
important parameters which all the companies, including companies operating on the virtual
platforms, should achieve. This is because marketing products as per customers’ expectations
creates customer satisfaction which in turn is responsible for customer retention. Customer
retention enables the companies to generate repeat business. This repeat business enables the
companies to generate the revenue which supports its business expansion and market penetration
strategies to acquire new customers. One can point out in the respect of these articles that,
Netflix recognised the value of customer satisfaction and customer retention to generate high
profits in the market very early in its lifecycle stage. This was evident from the introduction of
recommendation systems which enabled the company to acquire and measure customer
satisfaction levels its products achieved. This enabled the company to offer videos and games as
per customer recommendations, thus generating high revenue. One can point out in other words
that this strategic move of Netflix enabled it to generate the immense revenue required to support
its future business expansion strategies.
The third strategic decision which enabled Netflix to strengthen in market position was
getting listed on Nasdaq in 2002 (Nasdaq.com. 2020). Kapaya, Ngatuni and Katunzi (2018)
mentions that listing enables the firms to generate more capital from the market by floating
shares. In fact, investors generally prefer investing in shares of listed companies. Murniati (2016)

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strengthens the argument by mentioning that generation of higher amount of capital by issuing
shares in the share market enables the companies to support their operations by acquisition as
well as holding of fixed assets, which increases their efficiency levels. These facts can be applied
to Netflix greatly. The firm got listed on Nasdaq which enabled it to acquire capital from the
share market which attributed it the financial strength it required to strengthen its market
position. The vitality of this strategic move of Netflix way back in 2002 can also be ratified by
the fact that some of the main competitors of the company like Apple, Amazon and Disney are
listed companies (Forbes.com. 2020). Thus, this move of Netflix enabled it to get access to
market capital to strengthen its market operations which continues till date.
The fourth strategic move of Netflix was to enter the video streaming industry in 2007
which was then in its rudimentary stage. The global video streaming market is expected to attain
a size of US$ 687.2 billion in 2024 (Globenewswire.com. 2019). Thus, in this respect one can
point out that entering the video streaming industry, which was far less developed in 2007
compared to present years was truly one of the most future forward decisions of Netflix.
The fifth ground-breaking strategy which Netflix adopted was expanding into foreign
markets. The company entered Europe in 2012 and rest of the world by 2016 (Netflix.com.
2020). This enabled the company to acquire a global base of consumers which it still continues
to enjoy. This global expansion enables the company to generate the immense revenue which
support its global operations.
The current competitive strategy of Netflix consists of integration of global and local
strategies. The apex management of the company forms the global policies like terms of
payments and terms and conditions of availing video streaming services on the Netflix platform.
The content aired on the platform are adjusted as per the tastes and preferences of the consumers

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in the host markets. Netflix markets video streaming products of different genres in more over
190 countries in different languages. This once again ratifies that the company integrates global
strategies with local business conditions which enables it to enjoy immense customer base and
generate high revenue. The company though enjoys dominant positions in the video streaming
markets at present but it is forecasted to lose customers to strong competitors like Hulu and
Amazon (Feldman 2019).
VMOST
Vision and Mission
Statement What Company is doing? Achieved/ Not
Achieved
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.
The company is offering an array of
products like films, television shows
and television series in different
languages. Thus, the company is
keeping up to its mission statement.
However, in terms of ensuring
protection interests of employees,
the company is not keeping up to
mission statements. This is proven
by the fact the company is laying off
employees to restructure its
marketing strategy (Masters and
Interests of
customers-Achieved
Interests of
employees- Not
achieved

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Sandberg 2020).
The vision statement of
Netflix is ‘Becoming the
best global entertainment
distribution services.’
The company is one the top video
streaming companies in the world.
However, it is losing its market to its
international competitors like
Amazon Prime owing to dependence
on its home market namely, the US
to a great extent to generate
business.
Achieved but needs
to be retained.
Strategy
Observed Strategies Alignment to
Vision and Mission
Netflix has entered the markets like Asia and Europe. The company has
started producing shows like films and web series which are aligned to the
preferences of customers in these markets. The consumers can enjoy shows
both centred on their own culture like British as well as shows from the US.
Yes
Using free trial as an aggressive promotional strategy to convert prospective
consumers into existing consumers. The company is able to convert more
than 90% of its prospective customers who download trial versions of the
Netflix software into its existing consumers
Yes

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Tactics
Observed Tactics Alignment to Vision and
Mission
Marketing of regional shows like television soaps and films. Yes
The entire video streaming of Netflix is taken care of by
Amazon
No(this makes the business
interests of the company
increasingly dependent on
Amazon)
Product Portfolio:
The product line of Neflix can broadly be divided into business to consumer products and
business to business products. The business to consumers products which the company markets
consist of films, television series, television soaps, educational videos, documentaries and
contents created by Netflix under the brand name Netflix Originals (Netflix.com. 2020). The
business to business products which Netflix markets in the global market consist of film
production, film studios and platforms which the third party film makers can use to showcase
their products (Partnerhelp.netflixstudios.com. 2020). The consumers can access the product
portfolio of matrix by buying subscription slots.

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Netflix products
B2C B2B
Films
Documentaries
TV series
Education related contents
TV soaps
Film production
Providing platform
to third party
content makers
Show Product Portfolio:
Figure 2. Product portfolio of Netflix
(Source: Netflix.com. 2020)

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BCG Matrix
(Cash Cow, Star, Problem Child, Dog)
Market growth rate
Star
1. The international TV series,
Hollywood films, games, educational
shows etc.
2. The foreign films made outside the US
in countries like India are gaining
immense popularity.
Question mark
Content production
Cash cow
Documentaries
Dog
Regional TV soaps
Relative market share
Figure 3, BCG matrix of Netflix
(Source: Author)
Star:
The above Boston Group Matrix of Netflix is divided into four main divisions namely,
star, question, cash cow and dog. The star products refer to those products of the company which
have high market share and market growth rate. As far as Netflix is concerned, the international
TV series produced in the US, Hollywood films, games and educational series come under the
star category. This is because Hollywood is a global film industry and generates a revenue of $10
billion a year (Currentschoolnews.com. 2019). This means that by marketing more Hollywood

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films and TV series, the company would be able to generate immense revenue. The foreign films
from other countries like China, India and France which Netflix markets in the global market
also come under the star categories. This is because the present population of the US today
consists of considerable percentage of residents of foreign origin like Chinese and European
(Census.gov. 2020). This increasing population of residents of foreign origin has led to increase
of viewership of films made in other countries like China. The market share of the films from
other film industries is increasing. Thus, one can establish that the Hollywood films, films of
non-Hollywood industry, American TV series and educational series are the star products of the
company. One can also point out that considering that increasing market share of non-Hollywood
films in the global market, Netflix should invest more capital to strengthen this segment of its
product line. For example, the company can enter into leading film production houses in top film
markets like the UK and China to distribute their films exclusively on its platform.
Cash cows:
The cash cows are the products marketed by companies which have high market share
but experience low growth in the market. The documentaries which Netflix markets belong to
this category. One can point out that the demand for documentaries of different types like fiction
and non-fiction has risen (Kaufman 2018). However, there is a strong competition in the terms of
distribution of the documentaries. For example, there are channels like Discovery which telecast
documentaries of different topic like horror and wildlife (Discovery.com. 2020). Thus, one can
point out that though the company namely, Netflix enjoys a strong market share, it experiences
slower growth owing to strong competition from firms like Discovery and YouTube. This means
that the company has to strengthen its marketing strategies in order to expand its profit
generation from marketing of documentaries (Hristov and Ramkissoon 2016).

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Question mark:
The question mark on a BCG matrix refers to the products which experience low share in
the market concerned compared to the high growth rates. The product marketed by Netflix which
comes under this category is production of contents like film and TV series. The global box
office revenue generation is expected to surpass $50 billion in 2020 (Statista.com 2018). This
means that the film market is experiencing increase in productivity of films which means that the
market of film production is also increasing. The company should form strategies to strengthen
its position in the film production market like producing more films.
Dog:
Dog refers to the products which show weak performance both in case of market share
and growth rate (Mohajan 2017). As far as Netflix is concerned, one can point out that the
regional TV soaps which the company produces come under this category. This is because,
majority of the consumers watch regional television serials on platforms provided by local cable
operators. There are also regional video streaming platforms which market regional television
serials (Godwin 2019). Moreover, television serials are mostly available on the free platforms
like Youtube. Netflix is on the other hand a paid entertainment platform which means that it
generates less number of TV serial watching consumers compared to its competitors like
Youtube (Youtube.com. 2020). Thus, one can recommend that Netflix should divest in products
like television serials as the product generates less revenue for the company compared to the
other products like film streaming.

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Product Position:
The analysis of the product line of Netflix brings using the BCG matrix brings into the
light several facts which indicate that the company should make strategies to strengthen its
position in the global entertainment market. The following are the decisions which the
management of the company should to emerge as stronger than its competitors in all the
products:
Introduce new products:
Netflix should introduce new products like games and environmental awareness creation
series. These new products would enable the company to cater to new customer needs and
generate higher revenue. For example, the environment based shows would create consciousness
among the consumers about aspects like importance of using environment friendly products.
Thus, the company would create value to consumers raising their environmental awareness and
encouraging them to use products containing less chemicals, thus benefiting their health. This
creation of value for customers would enable Netflix attract more customers.
Education:
The company should invest in the educational products like child education and
environmental education. This would enable the company spread education among users
including children and adults.

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Market Definition and Location
Competitors (Rank)
Ran
k #
Company Market Share
%
Strength Weaknesses Strategic
options for
the Company
1 Netflix 55.3%
(Average)
Highest
market share
and global
presence.
Business is still
largely
dependent on
the US.
Increase
international
presence
2 Amazon Prime 52.9%
(Average)
Increasing
market share
and backing
by Amazon
The brand value
of Amazon
Prime is largely
dependent on
the market
positions of its
parent company
Amazon.
Divestment by
the latter would
weaken its
market position.
Strengthen its
brand value.
3 Hulu 41.5%
(Average)
Increasing
market share
Restricted Expand into
new markets

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and
ownership of
The Walt
Disney
Company.
More
affordable
compared to
Netflix and
Amazon
(Hulu.com.
2020)
within the US. like the UK
and
Figure 4. Comparison between Netflix, Amazon and Hulu
(Source: Feldman 2019)
Current Competitive Position.
Product Positioning
Company's Aggressiveness Strategy.
Company Behaviour Company Justification Strength/ Weakness
Market Leadership Netflix Owns around 5.%
market share
Highest market
share and global
presence.

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Market Follower Smaller video
streaming firms
They would seek to
enter the video
streaming market
which is still
advancing and
growing at a very
fast rate.
New innovative
video streaming
subscription
packages
Market Challenger Amazon Prime Owns around 52%
market share and
dominates foreign
markets
Increasing market
share and backing by
Amazon
Market Defender Amazon, Hulu and
Netflix
They would form
strategies to retain
their respective
market positions.
They are existing
players with
immense respective
consumer bases.
Current Competitive Strategy
Resource Capability Valuable Rare Costly to
Imitate
Organized
to exploit
Comparative
Implications
COMPANY Technology Yes No Yes yes Yes
Marketing Teams Yes No Yes yes Yes
Financial Performance Yes Yes Yes Yes Yes
Brand Reputation Yes Yes Yes Yes Yes

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Customer Service Yes Yes Yes Yes Yes
Highly Skilled Product
Development Staff
Yes Yes Yes Yes Yes
Figure 5. VRIO of Netflix
(Source: Lynch 2015)
Ansoff Matrix for Company [New Product Development; New Market Development;
Prescriptive Strategy etc.]
Figure 6. Ansoff matrix
(Source: Yin 2016)
As per the above shown Ansoff matrix, one can point out that Netflix should use market
penetration strategy and combination strategy. As far as the market penetration strategy is
concerned, Netflix should adopt penetrative pricing strategy to strengthen its position in its
existing markets like the United States of America. The company should lower its subscription
rates. A comparison between Hulu and Netflix shows that the subscription rates of the latter is

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far lower than the former (Hulu.com 2020). This means that Netflix should lower its subscription
rates in order to attract more customers in its existing markets.
Netflix should introduce new products at lower rates, thus using combination strategy.
The company should introduce new products into its host markets which would be aligned to the
market conditions of these host markets. The products should be made available to consumers at
lower rates. This would enable the company acquire new customer bases in its host markets. This
would strengthen its competitive strengths in the global market (Feldman 2019).
Green Strategy [Ask yourself, is my company eco-friendly?]:
Netflix supports environmental sustainability. The company operates using advanced
hardware and software using less energy. The company uses mail service to send shows like
films and TV soaps to consumers. This reduces the need to ship videos in form of DVDs (Lobato
2018). This in turn reduces transport of entertainment products and consequent environmental
pollution.
Summary of Historical Analysis:
The historical analysis of Netflix conducted above brings several salient aspects in the
light. First of all, Netflix is a new company which was founded in 1997. However, the
management of the company based in the United States of America based its business strategies
on the macroeconomic trends and the changing market conditions to a great extent. For example,
the company started its business of video renting using third party internet websites. However,
the management recognised the importance of brand equity to sustain in the market and launched
its own video platform to market videos. The second fact which comes to light upon conducting
an analysis of the historical facts pertaining to Netflix is that the company understood the

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emerging trends of the entertainment market like video streaming emerging as one of the most
profitable segment. The management entered the video streaming market even though it was in a
rudimentary stage. This move of the company ensured that it was able to gain a commanding
position in the market at a very early stage and still retains its position till date. As far as the
financial aspects of the company is concerned, one can point out that Netflix is financially strong
with its primary listing on the NASDAQ. The weakness of the company lies in its extremely
high subscription rates which repels customers to its competitors like Hulu. The company also
faces strong competition from international video streaming companies like Amazon Prime
which is owned by Amazon.
FINANCIAL ANALYSIS
Extract of Financial Data
Accounting Ratios
Strategic Financial Analysis – Element Company’s
Indicators Observations Measure Strength/
Weakness
(1-10)
Income
Acid Test 0.58 Poor 4 Poor asset
management
Current Ratio 1.49 Poor 4.00 Poor asset
management
Gross Profit Ratio NA
Net Profit Margin 8% Poor 4% Poor asset
management
Cost Ratios
Average Stock Turnover
Share Price to Earnings Ratio 69.0503597 Strong Strong revenue
generation
Dividend Pay-out Ratio 0% Poor 2

29MANAGEMENT
Debt/Equity (Gearing) 1.98 Strong 9 Strong revenue
generation
Debtor Turnover (other current assets in the
balance sheet would be assumed as debtors) 21.1022825 Strong 8 Strong revenue
generation

30MANAGEMENT
Summary of Ratio Analysis:
An analysis of the accounting ratios earned by Netflix for the year ended 2018 brought
into the light several facts about the financial operations of the company. First of all, the
appropriate rate of acid test ratio should be 1 which means the after deducting the stocks, the
current assets amount of the company should be equal to the current liabilities. However, in this
case, the acid test which Netflix earned in 2018 stood at 0.58. This means that the company had
insufficient amount of current assets after deduction of stocks to cover its current liabilities. The
current ratio which the company earned in the period was 1.49 instead of 2. Thus, here also it can
be established that the company had insufficient amount of current assets to cover its current
liabilities. One can point out on the basis of the analysis that the company should take steps to
reduce its liabilities.
Evaluation of COMPANY Financial Position using the CAMELS Framework.
Element COMPANY
position
Measure (1-10) Strength/Weakness
Capital Adequacy Strong 7 The share price of Netflix enjoy
high position in the share market.
The company is listed on
NASDAQ which enables it to
generate high capital from the
share market which ushers it with
capital adequacy.
Asset Suitability Weak 5 The assets of the company are not
suitable. This is evident from the

31MANAGEMENT
poor current ratio which the
company has earned.
Managerial Competence Strong 6 The management of Netflix is very
capable of making prudent
business decisions. This is evident
from the dominant position of the
company in the global video
streaming market in spite of the
strong competition from
companies like Amazon.
Earnings Strong 7 The company generates high
revenue.
Liquidity Weak 5 The liquidity of the company is
weak.
Sensitivity to Market
Risk
High 9 The company is highly sensitive to
the global market risks owing to
presence in more than ten markets.

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Summary of Financial Analysis:
The financial analysis shows that Netflix is financially extremely strong. The revenue
generation of the company increased to $ 15,794,341000 in 2018 compared to $ 11,692,713000
in 2017 (Netflix.com. 2020). This shows that the customer base of the company has increased.
However, one can point out that the current ratio of the company is less than 2, which is the ideal
current ratio. Thus, one can point out from this analysis that the company should aim to reduce
its current liabilities like sundry creditors by paying time credits.
Value Chain Analysis
Porter’s Value Chain
Element Impact on
COMPANY
Measure (1-10) Strength/ Weakness
Primary
Inbound
logistics
Strong 6.5 Very strong on contents
produced in the USA but
weak on contents
produced abroad.
Outbound
logistics
Strong 7 Totally dependent on
Amazon which owns its
strong competitor,
Amazon Prime
Operations Strong 8 Global presence
Marketing Strong 8 Global presence

33MANAGEMENT
and sales
Services Strong 8 Global presence
Secondary
activities
Procurement Strong 8 Global presence
Human
Resource
Management
Strong 8 Global presence
Technological
development
Strong 8 Global presence
Infrastructure Strong 8 Global presence
Summary of the value chain:
The value chain of Netflix based on the Porter’s Value Chain can be divided into two
broad categories namely, primary functions and the secondary or supporting functions. The
primary function of is divided into five main parts namely, inbound logistics, operations,
outbound logistics, marketing and sales and services. The inbound logistics which Netflix
employs the suppliers of contents like films, videos and documentaries which use its platform to
market their products.

34MANAGEMENT
Core Competencies
Core Competencies Explanation in terms of Netflix
Customer value Netflix provide an array of entertainment products like videos and
films in high definition. These products adds value to the
customers.
Competitors differentiation The customer differentiation level of Netflix is low. This is
because, its main competitors like Amazon Prime provide similar
products.
Extendable The product line of the company should be extended to incorporate
new products like sports.

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McKinsey’s 7-S Framework:

36MANAGEMENT
Element What the company does Measure
(1-10)
Strength/ Weakness
Hard Elements
Strategy Netflix forms the strategies
which are aligned to the
market.
8 Netflix in spite of being a global
company has started losing its
customers to competitors like
Amazon.
Structure Strong Netflix in spite of being a global
company has started losing its
customers to competitors like
Amazon.
Systems Strong Netflix in spite of being a global
company has started losing its
customers to competitors like
Amazon.
Soft Elements
Skills Netflix trains its employees Netflix in spite of being a global
company has started losing its
customers to competitors like
Amazon.
Staff Netflix trains its employees Netflix in spite of being a global
company has started losing its
customers to competitors like
Amazon.
Style The managers at Netflix
encourage the employees
Netflix in spite of being a global
company has started losing its

37MANAGEMENT
Element Particulars Impact on the
company
Measure
(1-10)
Opportunities / Threats
Customer
preferences
Customer preferences
keeps on changing
Strong 7 Netflix markets entertainment
products in alignment with the
customer preferences
Competitor
s
Competitors
necessitate the
company to bring
about innovations in
its products to sustain
in the market
Strong 8 The company conducts
innovation to introduce
innovative products
PESTEL
factors
Netflix has to adapt to
the PESTEL factors
Strong 9 Adaptation
Customer Analysis and Market Segmentation –
Distinguishable:
The high definition products marketed by Netflix are easily distinguishable from its
competitors.

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Relevant to purchasing:
The products of the company are expensive keeping in line with their superior quality in
terms of subject, technological aspects like definition and variety.
Sufficiently large:
The product line of Netflix is sufficiently large.
Reachable
The Netflix platform is accessible on smart phones and tablets.
Competitor Analysis:
 Main competitors of Netflix are Amazon Prime and Hulu.
 The main customer segments of Netflix are middle and upper class customers.
Cooperative Environment
Four Links Model

39MANAGEMENT
Competitive Industry Environment
Porter 5 forces elements Level in case of Netflix
Threats of new entry Low
Threats of substitutes High
Power of buyers Low
Bargaining power of suppliers High
Industry rivalry High
Element Company’s Links Measure
(1-10)
Opportunities / Threats
Firm
strategy
External 8 High
Demand
conditions
External 8 High
Factor
conditions
External 8 High
Supportin
g
industries
External 8 High

40MANAGEMENT
Key Factors for Success – Lynch (2015, p83- 84)
The three Cs are Customers, Competition and Corporation. The corporation namely,
Netflix markets products which are aligned to the needs of the customers and generates high
revenue. These two factors provides the company strong competitive advantage.
Industry Life Cycle:
Netflix is in growing stage of its life cycle.
PESTEL Analysis:
The PESTEL analysis shows that the US is extremely strong. The market conditions in
the country are favourable for the company to expand.

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Degree of Turbulence in the Environment:
Summary of Opportunities and Threats:
1. Opportunities: Product line expansion and innovation
2. Threats: Strong competitive threats.
Strategic Fit Analysis
Netflix is strategically fit for the market conditions of the US. However, the company is
not well aligned to the market conditions of its several markets which has led it weak before its
competitors like Amazon.
Element Degree of
turbulence in the
industry
Impact on the
company
Measure
(1-10)
Opportunities /
Threats
Political High High 9 Threats
Economic High High 8 Threats
Technological High High 7 Threats
Social High High 8 Threats
Environmenta
l
High High 9 Threats

42MANAGEMENT
SWOT Analysis of Netflix:
Strengths:
1. Listed on NASDAQ.
2. Global presence.
3. Strong market position.
Weaknesses
1. Insufficient current assets to cover current
liabilities.
2. The packages are expensive and customers
prefer video streaming platforms which are
free of costs
Opportunities:
1. Innovation in product line.
2. Providing products which are more aligned
to the local market conditions, thereby
competing with local firms.
Threats:
1. Threats of international competitors like
Amazon.
2. Emergence of video streaming companies
in the host markets as well.

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EVR Congruence [See table below. Goggle Model for further details].
Element Congruence of the company Measure
(1-10)
FIT & NOT FIT
Environment Strong 8 Largely fit
Value Strong 8 Largely fit
Resources Strong 7 Fit

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ESP:
Components ESP Outcome
Employees, technological
resources, financial resources
Environment Strong operations
Participative and divisional System Global operations
Made by home country and
host country governments
Policies Compliance
Balanced Scorecard:
S
u
m
m
ar
y
of
Strategic Fit:
As far as the degree of strategic fit of Netflix is concerned, the company is averagely fit.
This is because, its products are extremely expensive and hence not appropriate for lower middle
class customers. The platform which Netflix uses to offer its products is owned by Amazon.
Element Influence on
the
company
Measure
(1-10)
FIT & NOT FIT
Financial perspective Average 7 Average
Customers Strong 7 Average
Internal perspectives Strong 7 Average
Innovation and learning
perspective
Strong 7 Average

45MANAGEMENT
Hence, it is technologically strong and available in multiple countries for viewing. However, the
company is dependent on its own competitor namely, Amazon which renders it competitively
weak to a certain degree.

46MANAGEMENT
SECTION 2 – Strategic Direction
Trend and Sensitivity Analysis:

47MANAGEMENT
Element Particulars Sensitivity Issues Opportunity/ Threat
Political Changes in laws,
deteriorating political
relationships between
nations, terrorism
Changes in laws,
deteriorating political
relationships between
nations, terrorism
Threats
Economic Weakening of USD in
the foreign currency
market renders
Netflix’s operations
less profitable.
Economic downturn
Weakening of USD in
the foreign currency
market renders
Netflix’s operations
less profitable.
Economic downturn
Threats
Social Changing customer
preferences
Demand for contents
which are aligned to
the host market
conditions
Changing customer
preferences
Demand for contents
which are aligned to
the host market
conditions
Threats
Technologica
l
Data thefts Data thefts Threats
Legal Changing laws Changing laws Threats
Environment Radiation, Ewastes Radiation, Ewastes Threats

48MANAGEMENT
Risk Management
Risks of Netflix
Ris
k
no
Document
control
information
Risk
identifier
Risk
Category
Risk
Descriptio
n
Impact of the
risks
Risk
response
category
Owner of
risk
Precautionary
recommendatio
ns
Owner of
Risk
response
action
1 Profit and
Loss
statement,
balance
sheets
Falling
profits
because
customers
sense lakc
of security
in a hotle
compared
to other
companiess
Market risks 1. Market
risks can
originate
due to
introductio
n of new
products by
existing
competitor
companies
and/or
entry of
new
companies
firms with
similar
products.
2. Loss of
customer
loyalty
1. Fall in
revenue and
losing of
consumers.
(short term
impact)
2. Losing
investors, and
supply chains
due to falling
capacity to give
positive ROI.
(medium term)
3. Goodwill
risk and losing
of global
market position
(long term loss)
4. Reduced
productivity
due to
increasing
Strategic
decisions,
marketing
strategies
Finance
department,
Marketing
department,
Risk
manager,
Engineer
1. Formation of a
strong risk
management
strategy.
2.Use of modern
risk management
systems
3.Strengthening
marketing of
products,
introducing new
and innovative
products with
less competitors
Conducting
marketing
analysis
Marketing
department

49MANAGEMENT
accidents and
loss of
resources
2 Risk register
Employees,
customers
or any other
stakeholder
WHS risks
WHS risks
to
employees
and
customers
due to
collision
with
objects etc
Loss of
productivity,
actions from
Safe Work
High to
very high
Manageme
nt
Safety training of
employees
Management
and the
concerned
departmental
heads
3 Unjustified
loss of
capital,
Unjustified
loss of data,
Unexplainabl
e alter of
information
Employees,
customers
or any other
stakeholder
Cyber theft
risks
1.Cyber
attack
would
cause loss
of ICT data
and designs
which
would
attract huge
security
risks
towrads the
companies
companies.
2. Cyber-
attacks lead
to loss of
customer
1. Loss of
sensitive
business data.
2. Loss of
financial
resources.
3.
Unauthorised
access to the
business
strategy
information of
the company.
4. R1
High Apex
managemen
t and all the
department
al heads
1. Tightening of
security.
2. Allocating
new email ids
and passwords to
each employees.
3. Mandating
subordinates to
obtain approval
of superiors to
accede to
specific
information.
4. Making it
compulsory for
all employees to
exchange official
information
Apex
management
and all the
departmental
heads

50MANAGEMENT
and
financial
data of
extreme
business
significanc
e. Loss of
customer
data and
financial
resources
online lead
to R1
3. Data of
customers
are leaked
to external
parties
which
spark
security
issues
among
customers
exclusively on
the formally laid
path of
information
sharing.
5. Employees
holding assistant
managers and
beyond should
lock their
systems using a
four layer
password
security.
4 Cannot be
documented
Employees,
customers
or any other
stakeholder
Natural
disasters
Natural
disasters
lead to loss
of
resources,
inventory
Depends on the
seriousness and
intensity of the
calamities
Immediate Governmen
t, security
personnel
etc
Evacuation or
any other
necessary steps
Government,
security
personnel
etc

51MANAGEMENT
and assets
5
Government
and legal
websites
Apex
managemen
t
Change in
legislations
pertaining to
retail sector
in the USA
(home
country) and
hots
countries.
Change in
laws
require
companies
to comply
with the
new laws
pertaining
to safety
measures
1. Damage to
existing stock
2.
Unproductive
maintenance
costs
3. Requires
Netflix to adapt
the relevant
areas of
operations as
per the laws
like cyber laws
Immediate
Apex
managemen
t and all the
department
al heads
Compliance,
OHS strategies
Government
s
6 Risk register
Apex
managemen
t, security
officer and
any other
employee
Fire,
explosions
Loss of
materials,
loss of
equipment,
injury of
employees,
loss of
productivit
y, casualty
in case of
large scale
explosions
Netflix lose
productivity,
employees,
resources
Immediate
or within
the date of
enforceme
nt
specified
specified
Apex
managemen
t and all the
department
al heads
Risk
management
strategies
Apex
management
and finance
department
7 Financial
statements
Apex
managemen
t and top
Goodwill
risks
The
company
may loose
Netflix loses
productivity,
employees,
Immediate Apex
managemen
t and all the
Risk
management
strategies
Apex
management
and finance

52MANAGEMENT
managers
including
CFO, R&D
head, night
auditors
trust of
stakeholder
s like
customers
suppliers,
patents and
assets
department
al heads
department
8
Financial
statements
Apex
managemen
t and top
managers
including
CFO
Capital risks
Weakening
of capital
base of
companies
due to
lower
generation
of capital
Netflix loses
productivity,
employees,
suppliers,
patents and
assets
Immediate
Apex
managemen
t and all the
department
al heads
Strengthening
marketing of
products,
introducing new
and innovative
products with
less competitors
to boost revenue
generation and
strengthen
goodwill
Apex
management
and finance
department
9
Financial
statements
Apex
managemen
t and top
managers
including
CFO, R&D
head
Technologic
al risks
1. Modern
technology
leaves
previous
technology
versions
redundant.
Requires
Netflix to carry
on continuous
research on
product
technology,
operation,
ecommerce
technology etc
to enhance
customer
services
Immediate
Apex
managemen
t and all the
department
al heads
Requires
companies in the
USA to carry on
continuous
research on
product
technology,
operation,
ecommerce
technology etc
Technologic
al officer

53MANAGEMENT
Growth Strategic Options
Element Organic
Rating (1 – 10)
Joint Venture
Rating (1 – 10)
Alliance
Rating (1 – 10)
Protection of Investment 5 5 5
Earnings 5 5 5
Asset Suitability 5 5 5
Reduction in Cost / ROI 5 5 5
Liquidity 5 5 5
Sign of Growth 5 5 5
Strategic Direction:
The management of Netflix would be required to form certain emergent strategies which
would strategically direct the company towards strengthening its position in the global video
streaming market against its main competitors like Amazon Prime and Hulu. The following are
the recommended emergent strategies which could be placed before the management for
consideration in future business plans:
Incorporating more educational shows:
Netflix should expand its product line to incorporate shows which are more educational
and purposeful in larger context than merely profit generation. For example, the company should
air shows which would deal with sensitive environmental issues like destruction of rainforests
which are of great concern. The destruction of rainforests in the Amazon basin which is surging
at a very fast rate owing to spread of housing and industrial projects. This destruction may

54MANAGEMENT
generate profit in the short term but in the long run result in ‘large-scale, irreversible ecological
disaster’ (Panda.org. 2020). Netflix should spread environmental education using its global reach
by airing environment related documentaries. The company should also host shows which would
enable children derive education in different forms like stories, puzzles and simple assignments.
The company would as a result spread awareness among the stakeholders like consumers, firms
and government about the need to conserve environment. This would encourage the consumers
and governments put pressure on the commercial organisations to exploit natural resource more
sustainably like treating wastes before releasing them into water bodies. This unique types of
shows would enable Netflix differentiate itself from its competitors. The company would be able
to acquire the image of socially responsible video streaming company which would strengthen
its market goodwill. This would enable the company attract more consumers which would boost
its revenue generation.
Obtain secondary listing in emerging markets:
The company should obtain secondary listing on stock exchanges in emerging markets
like India and China to support the above strategy. One can point out that Netflix is already listed
on LSE secondary which enables it to raise capital from the stock market of the UK
(Londonstockexchange.com. 2020). As far as the share market position of Netflix in its home
country the USA is concerned, it faces stiff competition from its main competitors like Amazon
(owner of Amazon Prime) and Walt Disney (owner of Hulu) (Bloomberg.com. 2020). Thus, it is
clear that Netflix should acquire secondary listing in its host markets to counteract the
competition its faces in the share market. The company should obtain secondary listing in
emerging markets like India and China which would enable it to raise capital from their

55MANAGEMENT
respective share markets. This strategy would strengthen the capital position of Netflix against its
competitors to a great extent.
Figure 7. Garph showing share price on LSE
(Source: Londonstockexchange.com. 2020)

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Figure 8. Graph showing share prices of Amazon, Netflix and Walt Disney
(Source: Bloomberg.com. 2020)

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Suitability – Suitable to whom and what.
Element Comments/Observations Suitable/ Not Suitable
Incorporating more
purposeful shows
Strong Suitable
Obtaining more
secondary listing
Strong Suitable
Suitability to Resource Base (Lynch 2015, p132) Fig 4.8 – 7 elements
Element Comments/Observations Suitable/ Not Suitable
Sustainability Yes Suitable
Innovation Yes Suitable
Prior or acquired
resources
Yes Suitable
Durability NA Suitable
Imitability Yes Suitable
Truly competitive Yes Suitable
Suitability to Culture
Element Comments/Observations Suitable/ Not Suitable
Stories Netflix is aligned Suitable
Symbols Netflix is aligned Suitable

58MANAGEMENT
Power cultures Netflix is aligned Suitable
Organisational
structures
Netflix is aligned Suitable
Control systems Netflix is aligned Suitable
Routines and rituals Netflix is aligned Suitable
Suitability to Purpose of the Company
Element Comments/Observations Suitable/ Not Suitable
Time Yes Suitable
Leadership yes Suitable
Suitability to Stakeholders
Element Comments/Observations Suitable/ Not Suitable
Stakeholder power Netflix recognises stakeholder power Suitable
Purpose Netflix recognises stakeholders’
interests/purposes
Suitable

59MANAGEMENT
Summary of Suitability
Netflix is suitable in terms of market conditions.
Acceptability
The two proposed business plans of Netflix would acceptable among the stakeholder
groups like management and the investors. The management would consequently release a
funding of $5 billion to support the business plan.
Acceptability of Business Model
The business model of Netflix is acceptable. The management should approve an amount
of $5 billion towards implementation of the above two business plans recommended.
Acceptability to Ethics and Social Responsibility
Netflix follows strong ethics and CSR policies.
Acceptability to Knowledge Management
Netflix accepts knowledge management as a part of its internal operations.
Acceptability to Technology
Netflix accepts and embraces technological advancements.
Acceptability using Blue Ocean Strategy
Netflix accepts blue ocean strategy. It brings in open innovations to recognise new areas
of product development like new formats of contents which it can explore to create higher levels
of customer satisfaction.

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Summary of Acceptability Analysis
The strategies of Netflix are acceptable.
Feasibility

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Internal Feasibility Checklist
1. Capital Investment Required
a. Current Situation: As per the current situation, there is a growing trend in capital expenditure.
There is an intense competition in the market from its main competitors like Amazon, Hulu and
Disney. There is a growing need for making acquiring contents, broadcasting media, to support
continuous improvements in streaming service, international expansion and increased content
production activities.
b. Do they have the funds required for future projects/expansion? - As per the current situation,
Netflix Inc. does not have sufficient fund if it undergoes for increasing capital expenditures.
Therefore the company has to increase its debt for funding its future investment projects in order
to deal with the stiff market competition from Amazon, Hulu, and Disney.
2. Projection of cumulative profits (based on strategic choices)
The company can create original contents which provide a competitive advantage. If the
company utilizes this strength properly, then it can convert its advantage over profits. The main
source of revenue for Netflix Inc. is subscription fees. The company charges low subscription
fees for high-value contents. If the company makes a balance between the contents value and the
subscriptions fees, accordingly it can improve its profitability.
3. Working Capital Requirements
Working capital requirements of Netflix Inc. shows increasing trends due to increasing in
expenditure. As the company shows an increase in profit trend over the three years, it means
there is also an increase in cost for creating the revenue. The company is planning to undertake
future projects which will create additional requirements for funds and thereby create the extra

62MANAGEMENT
burden of interest payments. Hence, it can be said that the working capital requirements would
be high for meeting the operating expenses.
4. Tax Liabilities and Dividend Payments
a. Is the company paying its taxes? - The company has both domestic as well as international
business. Accordingly, the company has to abide by different taxations rules and laws prevailing
in that particular country. Hence the company paid taxes in foreign countries. However, it did not
pay any tax to the US Government owing to introduction of new tax rules in 2018.
b. Does the company pay dividends? - The company has shown an increase in earnings over the
last three years. But the company has never paid a dividend to its shareholders. This is because
major portions of the earnings are spent in business expansions and creating contents. Hence the
company does not pay a dividend. However, there is a significant growth in the stock price
irrespective of non-payments of dividend.
5. Number of current employees? Redundancy? Is the company over-staffed? –
The company is maintaining a decent shape of the employee's count. This is mainly
happening due to their sustainability plan of maintaining a healthy staff count so that the
workplace is not being overcrowded or they incur unnecessary expenses (Spang et al., 2019).
The balanced sheet states that approximately 7,100 full-time employees, of which approximately
6,900 supported are being stationed at the streaming segments. Thus, helping the company to
work smoothly and effectively. The company is not at all overstaffed.

63MANAGEMENT
6. New technical skills; new plants, etc.
The company is working on encoding videos by investing in world-class engineers for
technologies. This encoding will help to develop videos and make library title by title and
episode by episode. They are by improving the customer's satisfaction and reducing the data
consumptions while video streaming.
7. New products and how they are to be developed
The products that are being made are of high quality which is being liked by every
customer who prefers quality over price. The company enters multi-year commitments with
vendors. This helps them to bring cleanliness in their products and segregate them from their
rival companies. This is being mainly done through the help of purchasing the copyrights and
other patents of the movies and web-series.
8. Amount and timing of market investment
The company makes a sufficient amount of investments for a healthy and prosperous
future. The company has a sufficient amount of assets to meet up the debt that they would find
during the business process. The main stress is being laid on the short term investments which
the investors like to invest for a good return.
9. Possibility of acquisition, merger, joint venture, etc
The company namely, Netflix, is a huge USA based company. It is the market-
dominating players. They have the required capitals to be the dominating force in the market.
They have an agreement of merging with other companies easily due to their policy. This policy
states that a stockholder needs to provide written consent before taking up shares and cannot call
a special meeting for issuing of shares. In addition to this, they follow certain laws which state

64MANAGEMENT
that a stockholder cannot indulge in business which has more than 15% shareholding in the
company. Thus it is very much difficult to merge or acquire easily with Netflix (Lobato, 2019).
10. Communication of ideas to all those involved
The marketing is done through the help of strong advertisement over the various platforms.
This is only happening due to the fact of certain employees who have helped in self-production
processes. It has helped to create their unique contents for better results in terms of financial
prospects for a better future (Jenner, 2016).
External Feasibility Checklist
The management of Netflix should conduct an external feasibility test pertaining to the
two business plans revolving around exclusive shows like environmental awareness and
education shows. For example, the company can conduct a market feasibility on demand for
environment based shows among its consumer base. The company would also be able to
recognise new customer segments which would make the new business plan more profitable. For
example, the company may recognise customer base in which viewers want to watch
environment related documentaries in forms of web series. Thus, recognition of new customer
base would make the business plan more profitable.
Financial Feasibility Checklist:
Netflix should prepare a financial feasibility checklist. The checklist should stress on
financial requirements like fresh allocation of funds which would be required to implement the
business plan.
Financial Evaluation
Netflix

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Year 1 Year 1 Year 3
Particulars USD USD USD USD USD USD
Cash flows from
operating
activities
Cash received
from customers 240000000 290400000 290400000
less Interest paid 10000 12100 12100
Less: income tax
paid 1000000 1000000 1000000
Net cash flow
from operating
expenses 238990000 289387900 289387900
Cash flows from
investing
activities
Dividend
received 1000000 1000000 1000000
Net cash flows
investing
activities 1000000 1000000 1000000
Net increase in
cash and cash
equivalents 239990000 290387900 290387900
Add: Opening
balance 200000 200000 200000
Closing balance 240190000 290587900 290587900
Particulars USD
Per unit per unit Revenue 100
Units of products 200000
Variable costs 2200000
Fixed costs(A) 1300000
Variable costs per unit 11
Revenue per unit-VC per unit(B) 89
BEP(A/B)
14606.7
4
Note: The cash flow would and BEP above would only consider the two products
(environmental shows and educational shows) suggested in the business plan.

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Summary of Feasibility:
One can summarise from the feasibility tests that Netflix should launch the new products
as per the business plan namely, environmental shows and education based shows. This would
enable the company to generate more revenue.
Summary of Suitability, Acceptability and Feasibility:
It can be summarised that Netflix that the business plan would suit the business
requirements of Netflix. They should enable the company acquire more customers. The
management should accept the business plan.
Internal Development
The company should monitor the internal operational aspects in the light of the business
plan. For example, the management should consider the fact whether the present technology of
Netflix would be able to support environment based and education based shows.
E-Commerce:
Netflix is present on the ecommerce platform. The company should make education and
environment related shows on its ecommerce platform.
Implementation and Control
Netflix implements and controls its business operations strongly. The company should
control the telecast of its new shows to ensure superior customer experience. The contents for the
shows should be chosen very carefully so as to ensure high level of customer satisfaction.

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Alignment of Company Structure
The company structure of Netflix is well aligned. The company should however, make its
organisational structure flat to enable faster decision making on new business plans.
Elements of the Implementation Process
The implementation process of the business plans of Netflix is formed by the
management. The employees are trained to implement the strategies. The company should also
consider acquisition of staff members with experience of working with Animal Planet and
National Geographic Channel.
Project Management Approach
The projects of Netflix are formed by the management. The employees are trained to
implement the strategies.
Project Monitoring and Control
The projects of the company are monitored and controlled by the management. Any
discrepancy noticed should be dealt with immediately.
Green Strategy
The green strategy of the company is formed by the management. It deals with adopting
more environmentally sustainable strategies like becoming more energy efficient.
Managing Change
The change management strategies of Netflix are formed by the top management. The
employees participate in the implementation of the change management and embracement
proactively.

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Managing Strategic Leadership
The strategic leadership of Netflix is able and capable of taking accurate decisions in the
face of market challenges.
Business Plan
The business plan of Netflix should aim to strengthen its market position. The plan should
be based on ten elements. They are environment, resources, realistic purposes, entrepreneurial
business opportunities, target customers, distribution, pricing, quality and services, reputation
and marketing and alliance and joint ventures.
Execution Plan for Chosen Strategic Option
The above mentioned components of the business plans should be incorporated in the
business strategies of the company. The activities should be spread over a year and presented
before the management using a Gantt chart.
Conclusion:
The analysis conducted above brought into light several salient aspects of Netflix. First,
the company is listed on the NASDAQ and holds more than 50% of the customer base in the
video streaming market in its home country namely, the USA. This means that the capital
generation and revenue generation of the company are commendably strong. However, the
company has acquired excess liabilities, especially current liabilities which is evident from the
financial analysis. The current ratio of the company is way below the standard ratio of 2:1. The
company should plan its financial operations like investment in asset class more judiciously so as
to generate high ROI. Secondly, the company no doubt holds a dominant position in the market
yet it faces cut throat competition from video streaming giants like Amazon Prime. Moreover,

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the distribution of the entertainment products of Netflix is entirely based on Amazon platform.
Considering the fact, that Amazon Prime is its biggest competitor, Netflix should acquire its own
platform instead of using Amazon’s platform.

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