Strategic Management and Practice: Netflix Case Study Analysis Report

This report provides a comprehensive analysis of Netflix's strategic management, examining its application of key theoretical concepts. The report begins with an overview of strategic management, defining its role in achieving competitive advantage. It then delves into Netflix's institutional background, highlighting its evolution from a DVD rental service to a global streaming giant. The core of the report explores strategic intent, environmental scanning (including PEST analysis), and strategy formulation. It applies Porter's Five Forces and SWOT analysis to assess Netflix's competitive position and the external factors influencing its business. The report evaluates Netflix's strategic intent, examining opportunities for growth and the impact of changing customer behaviors. It also assesses the company's responses to political, economic, social, and technological factors, and the competitive landscape. Finally, the report offers recommendations for Netflix, based on the analysis of its strategic management practices.

Running Head: Management Theory and Practice 1
Strategic Management

Management Theory and Practice 2
Contents
Overview..........................................................................................................................................3
Institutional background..............................................................................................................3
Theoretical concept of strategic management.................................................................................4
Strategic management..................................................................................................................4
Strategic management concepts...................................................................................................4
Application an d Evaluation of the concept.....................................................................................6
Strategic Intent.............................................................................................................................6
Environmental scan......................................................................................................................6
PEST analysis...........................................................................................................................6
Porter’s five forces...................................................................................................................7
SWOT analysis.........................................................................................................................9
Strategy formulation..................................................................................................................10
Reflection.......................................................................................................................................11
Recommendations......................................................................................................................11
References......................................................................................................................................13

Management Theory and Practice 3
Overview
The current time in the world is an age of strong competition where the effective
strategies are important to achieve growth and success in the business operations. To compete at
the global level, there is the need to adopt innovative strategies by the companies to carry out
open management so that all the restrictions and barriers can be removed. The technology,
marketing manufacturing, human resources and design departments of the company are getting
more competitive resources than ever before. This report focuses on the on the role of the
strategic management in the business operations of a company. For the discussion, the company
Netflix has taken. In present time, the company is very famous in the market for its innovative
strategies. The company Netflix has set up a successful example in the market in terms of
innovative strategies. The strategy of the company is mainly focused on the continuous efforts
towards internationalization. The aim of this report is to identify the theoretical concepts of the
strategic management and evaluate the impact of the theoretical concepts of the strategic
management on the business operations of the chosen company (Sherman, 2012).
Institutional background
The company Netflix was established in 1997 by Reed Hasting in California. In the
starting of business, the company only provided online movies on rental basis but after launching
the subscription services. The company also started to provide the facility of purchased rental
movies to its consumers through the US postal services. In the upcoming years, the company
improved its database and in current time, it is now offering the services of many DVDs with the
different title. Now, the company has large customers base with 4.4 million customers. Along
with this, the company did partnership with many internet connected devices. With this
partnership, the customers using the services of Netflix are also able to avail the services of
company on the iPhone, iPad, laptops and other internet connected devices. The company y is
operating in many countries i.e. USA, UK, Ireland, Canada, Carrabin and Latin America along
with 23 million members in these countries. The strategy of Netflix is to enhance the
subscription of the video streaming at the global level. To achieve this goal, the company is
focused on providing good customers experience by expanding the video streaming services
among the consumers (Ozer, 2011).

Management Theory and Practice 4
Theoretical concept of strategic management
Strategic management
For identifying the theoretical concept of the strategic management, it is important to
understand the strategic management first. Strategic management is about identifying and
describing about the effective strategies that can be carried by managers within the organization
to achieve high level of performance and competitive advantage in the market. The strategic
management within an organization can be described as the collection of many actions and
decisions by which managers can improve the organizations’ performance in the operating
market. Manager in the organization should have proper knowledge of the competitive
environment to take right decision. So, strategic management is the continuous and on-going
process that analyzes and controls the overall business operations in the market in which the
organization is involved. Along with this, strategic management is helpful in evaluating the
competitors and the set objectives and strategies to meet all the requirements of the customers.
Strategic management concepts
In the highly competitive environment of business, the forecast-based planning methods
or budget-oriented planning methods are not appropriate for the organizations to survive. The
company must engaged in the strategic management concepts for defining and understanding the
external and internal business environment to adopt effective strategy for the business. The
concepts of strategic management are helpful in making adjustments to keep the business on
track. The three basic strategic management concepts for the business are strategic intent,
environmental scanning, and strategy formulation.
Strategic intent-
This concept of the strategic management is focused on the various corporate challenges
and opportunities along with the long term objectives within the organization. The strategic
intent provides significant direction to the company along with the sense of direction which can
be communicated with the employees. Basically, it focuses on the upcoming opportunities for
the business. Strategic intent provides a clear picture of the actions to grasp the opportunities in
the market. It is helpful for the company to indentifying and focusing on the opportunities for the
better business performance. So, it is basically impacting the organizations’ resources and core
competencies to achieve the set goals in the competitive business environment (Hitt et al, 2009).

Management Theory and Practice 5
Environmental scan-
In the environmental scan concept in the strategic management is very crucial concept to
analyze the internal and external business situations for the various business activities. The
environmental scan of an organization includes following factors:
 Analysis of the organization (Internal environment)
 Analysis of industry (micro environment)
 Analysis of external macro environment (PEST analysis)
Further, the internal environment analysis includes the strengths and weaknesses of the
organization along with the opportunities and threats for the business operations. This can be
done by the SWOT analysis of the organization. Along with this, the industry analysis can be
done by using Porter’s five forces framework. This framework is helpful in evaluating the
suppliers, entry barriers, customers, and industry rivalry and substitute products.
Strategy formulation-
The strategy formulation concept is focused on developing of long-term plans for the
efficient management of the business opportunities and threats with the analysis of firms’
strengths and weaknesses. The strategy formulation for an organization includes corporate
mission, set objectives and developing strategy for the business operations.
Corporate mission:
Mission of the organization is basically an aim or the reason for the existence of the
organization. It reveals what the organization is providing to the community by the products and
services.
Objectives:
Objectives are the crucial part of the business as those are the end results of planned
activities. Objectives provide the timeline to accomplish them if possible. By achieving the
business objectives, the organization can be able to fulfill the corporate mission (Schilling,
2010).
Strategies:

Management Theory and Practice 6
This is basically a complex plan to achieve the desired position of the organization in the
operating market. So, effective strategies are required to give the posture to the organization in a
future period of time (Bainbridge, 2011).
Application an d Evaluation of the concept
Strategic Intent
There are many changing factors that creates competitive business environment for the
companies. The factors include changing lifestyle of the customers, cost and efficiency changes,
convenience, and various options available for the customers. These factors create opportunities
for the company to grow in the market. Although Netflix has good position in the market but
there are some opportunities to grow in the market. The company is able to attract customers
because of unique and innovative strategies (Lotz, 2017). Although the company is facing strong
competition in the market but with the innovative business model, company has ability to
improve its customer base. On the basis of these factors, it is observed that within next 3 to 5
years, Netflix will get more success. The company will get opportunity to improve the customer
base by 75 million non-US subscribers along with $7billion in revenue in upcoming years
(Heisler, 2016).
Environmental scan
PEST analysis
Like other companies, it is important to analyze the environmental factors impacting
Netflix’s business operations. For this manner, PEST analysis can be done for the company that
includes political, economic, social and technological elements. Changes in any elements in this
area can significantly impact on the business as this represents the large segments to which the
company is offering services.
Political factors-
The company Netflix can be affected by changing regulations and laws related to the
copyrights of some content such as television and movie shows that the company is presenting to
the customers. The changed law related to copyright might impact the ability of the company to

Management Theory and Practice 7
provide the content to the consumers. Along with this, this can also impact the business of the
company significantly as the content might have large customer base.
Economic factors-
For the company Netflix, it is important to maintain the competitive advantage in the
operating market as it is essential to have price strategy to deal with the competitors in the
market. The business of the company depends upon the disposable income of the customers in
the market. If the growth of the economic rate of the market is slow than the purchasing power of
the customers will be impacted negatively. So, the business operations of Netflix might be
affected by the purchasing power of the customers (Sadq, 2013).
Social factors-
The business of the Netflix depends upon the attractiveness of the movies among the
consumers in the sector of target market. As the average age of the customers of Netflix are
growing older and their expenditures on the movies and videos turn out to be lesser. This factor
might affect the business of Netflix adversely.
Technological factors-
The core business operations of the company are internet based so, the company is
operating in the developed technology sector. But for this manner, company has to face some
extra online expenditure. The market share of Netflix is facing some challenges in the market
due to the entry of new companies in the industry as there is the lower barriers to entry in the
streaming the content. The changes in the technology such as internet rates and entry of
competitors in the industry can affect the business of the company. So, there is the need of
continuous modernization in the business model of Netflix to sustain its market share (Zambelli,
2013).
Porter’s five forces
Competitive rivalry-
There is the strong competition and rivalry among the companies of this industry. There
are some established companies in this industry such as Amazon, Redbox and Blockbuster. Due
to the competition, the level of marketing cost and advertisements have also increased in each

Management Theory and Practice 8
company. Netflix has also spent more than $200during last few years in the advertising. This
includes various marketing deals and online advertisements and increased its revenue by 14%.
Threats of substitute-
It is well known that there are digital cables in every home that is necessary for people in
current time. So, many customers have the collection of films and movies from the cable
network. Along with this, there are the “on demand” services provided by the cable television
providers that might be the strong substitute for Netflix (Tryon, 2013). If the cable service
providers increase the movie stock list having similar title collection than it will going to difficult
for Netflix to attract potential customers in the market. So, it is essential for the company to
focus on changing the technology continuously to maintain its success in the industry.
New entrants-
Company Netflix have to maintain its popularity of e-commerce by improving and
enhancing the inventory of the stream movies by providing HD quality movies. If this attempt of
the company is successful, more suitable earnings can be done by the company by renting of
movies ‘on demand’. This is important because there are many low-priced new entrants due to
low entry barriers that providing streaming content and can become the possible distributors in
the market.
Bargaining power of suppliers-
Company Netflix is highly dependent on the studios for the streaming content which is
required to provide the customers. In present time, Netflix is not developing own content. So, if
the suppliers stop providing their content to Netflix then it might affect the business model of the
company. So, by this fact, it can be said that suppliers have high level if bargaining power with
Netflix for content acquirement.
Bargaining power of buyers-
The movie rental industry is very active industry. At the time of slower economic growth
rate where the buyers have less amount of income, their ability to expend in this industry will be
reduced. On the other hand, at the time of wealthy economy, customers can spend more money

Management Theory and Practice 9
in this industry. At that time, customers can have high bargaining power for the movies as they
can user their money on the alternative products and services (Napoli, 2011).
SWOT analysis
Strengths-
The key strength of the Netflix is its business model. The company has online flexible
infrastructure and interface by which the company is able control its operating expenditures with
raising its subscription. The position of the company in the industry can also be improved when
the movie downloads can be based on the choice of the subscribers. Further, the company is able
to gain strong competitive advantage by providing low prices, large selection, free shipping, and
no late fee policy. By these practices, Netflix has become a household brand among the
customers (Enkins, Ford & Green, 2013).
Weakness-
Despite of various success factors, Netflix has not expanded its business in few countries
and the company is depending only on few markets. Along with this, the customers have to wait
for one or two days to get the movies. Next weakness of Netflix is that the company has small
financial resources as compared to its competitors i.e. Blockbuster. Further, the success and
growth of the company depends upon high average revenue per User, low acquisition cost and
high purchasing capacity of the customers. These factors might be difficult to control due to the
lack of transition cost in the video streaming industry.
Opportunities-
Netflix can enjoy the opportunity of expansion of movie download ability. Continuous
international expansion of DVD and the acceptance of e-commerce by the customers can provide
high level of opportunity to Netflix in industry. Along with this, digital, distribution of the video
content is progressing continuously and the company is providing the connection from DVD
system to digital streaming. It can be an opportunity for the company to improve its position in
the digital streaming as compared to other companies as Netflix has brand name in terms of
Electronic Commerce (Liu, 2017).
Threats-

Management Theory and Practice 10
DVD video streaming industry is highly competitive industry as the competitors are
offering services on cheaper rates as compared to Netflix. Further, the video rental industry is a
challenging industry also as the industry is highly developed because of the technological
innovations continuously. The products, prices and the preferences of the customers are the
factors of speedy change and create irregular and changeable markets where the competitors can
be a big threat for Netflix.
Strategy formulation
For the company Netflix, strategy formulation concept is as follows:
Mission statement-
Mission of Netflix is to build the success by providing the most expansive selection of
DVDs with the fast and free delivery. The mission statement of the company outlines the
services and offerings that make Netflix unique. The company has well defined mission
statement that describes the organizational functions effectively (Adhikari et al, 2012).
Vision statement-
Vision of Netflix is to change the way of access and view the movies for the customers.
The vision statement of the company is respectable and fit for the organizational activities of the
companies. The vision statement of the company is purpose-driven along with highlighting
unique competencies of Netflix.
Corporate objectives-
Company Netflix has business objectives to maintain proper growth and success in the
video entertainment industry. The corporate objectives of Netflix are:
 Continuous growth for the subscribers,
 Consistent growth in the revenue,
 Achieve leadership position in terms of online movie subscription, and
 Attracting and retraining broad range of customers (Nocera, 2016).
Strategy-

Management Theory and Practice 11
The key strategy of company Netflix is to focus on the development with the large
subscription of streaming videos and DVD content by the mail. The company has adopted
differentiation strategy and customer intimacy strategy along with various innovations to make
the business simple and easy for the customers. Netflix is offering innovative platform to
subscribers and delivery platform at very affordable prices to make convenient for the customers
(Forbs, 2017). The strategy of Netflix is considered as highly effective strategy as it is helpful for
the company to get success and improve best resources to gain large customer base. By adopting
differentiation strategy, Netflix is now able offer best and quality services to the customers. With
the strategy, company is famous the consumers in the video streaming strategy as the leading
brand of home entertainment (Hompson, & Arthur, 2013).
Reflection
Netflix has good position among the customers in the market. The company got this
strong position due to unique business strategies as compared to the competitors in the market.
The strategy of Netflix is to provide unique quality internet movie services to its customers at the
affordable prices. The objective of the company is to offer growing subscriber base. By adopting
this strategy, Netflix is able to maintain the cost associated with the various business operations.
So, the company is enjoying the competitive advantage over its competitors. Along with this, the
success of the company depends upon its services provided to the consumers. The company has
divided the consumer market as it knows that how and where to operate in the market to compete
with the competitors. There are some recommendations for Netflix to improve the strategic
management in the market (Walker, 2016).
Recommendations
There are some recommendations for Netflix. By adopting theses recommendations, the
company will be able to improve its strategic management within various business operations.
For the company Netflix, strategic recommendations are as follows:
 Netflix should focus on improving and expanding brand loyalty in the market. For this
manner, company should create more personal Brand, customers and value for the
customers.

Management Theory and Practice 12
 Company should collaborate with various followers to establish a mutually beneficial
relationships with the, company should allow the followers to share their viewpoints.
 Company should focus on the community participation to collect the valuable
suggestions of the customers and should allow them for more interaction. and
 Company should focus on sharing the content to become the valuable member. It should
give an effective reason to the customers to come back for availing the services.

Management Theory and Practice 13
References
Adhikari, V. K., Guo, Y., Hao, F., Varvello, M., Hilt, V., Steiner, M., & Zhang, Z. L., (2012).
Unreeling Netflix: Understanding and improving multi-CDN movie delivery. INFOCOM,
pp. 1620-1628
Bainbridge, W., (2011). Leadership in science and technology: A reference handbook. US:
SAGE Publications.
Enkins, H., Ford, S., & Green, J., (2013). Spreadable media: Creating value and meaning in a
networked culture. New York: New York University Press
Forbs, (2017). A Closer Look At Netflix's Content Strategy. Retrieved on 23rd August 2017 from
https://www.forbes.com/sites/greatspeculations/2017/04/20/a-closer-look-at-netflixs-
content-strategy/#2f6d1dd21fc5
Heisler, Y., (2016). The future of Netflix. Retrieved on 23rd August 2017 from
http://bgr.com/2016/09/22/netflix-originals-content-library-50/
Hitt, M. A., Ireland, D. R., Hoskisson, R. E., Rowe, G. W., & Sheppard, J. P. (2009). Strategic
Management. Toronto: Nelson Education Ltd
Hompson, & Arthur A., (2013). “Netflix’s Business Model and Strategy in Renting Movies and
TV Episodes.” Essentials Of Strategic Management: The Quest For Competitive
Advantage. NY: McGraw-Hill Higher Education

Management Theory and Practice 14
Liu, E., (2017). Netflix: Taking Stock of Its Original Strategy. Retrieved on 23rd August 2017
from http://www.barrons.com/articles/netflix-taking-stock-of-its-original-strategy-
1496417803
Lotz, A., (2017). The unique strategy Netflix deployed to reach 90 mn worldwide subscribers.
Retrieved on 23rd August 2017 from
http://www.business-standard.com/article/technology/the-unique-strategy-netflix-
deployed-to-reach-90-mn-worldwide-subscribers-117041200292_1.html
Napoli, P.M., (2011). Audience evolution: New technologies and the transformation of media
audiences. New York: Columbia University Press
Nocera, J., (2016). Can Netflix survive in the new world it created. Retrieved on 23rd August
2017 from https://www.nytimes.com/2016/06/19/magazine/can-netflix-survive-in-the-
new-world-it-created.html?mcubz=0
Ozer, J. (2011). What is Streaming? – Streaming Media Magazine. Streaming Media Magazine.
Retrieved on 23rd August 2017 from
http://www.streamingmedia.com/Articles/ReadArticle.aspx?ArticleID=74052
Sadq, Z. M. (2013). Analysising Netflix‟s Strategy: International Journal of Science and
Research. 6(14)
Schilling, M. A., (2010). Strategic Management of Technological Innovation. New York:
McGraw-Hill Irwin.
Sherman, E., (2012). Why Netflix got its strategy right. Retrieved on 23rd August 2017 from
https://www.cbsnews.com/news/why-netflix-got-its-strategy-right/

Management Theory and Practice 15
Tryon, C., (2013). On-demand culture: Digital delivery and the future of movies. New
Brunswick. N.J: Rutgers University Press
Walker, N., (2016). The rise of Netflix. Retrieved on 23rd August 2017 from
http://www.businessreviewusa.com/leadership/5478/The-rise-of-Netflix
Zambelli, A., (2013). A history of media streaming and the future of connected TV. Retrieved on
23rd August 2017 from http://www.theguardian.com/media-network/media-network-
blog/2013/mar/01/history-streaming-future-connected-tv