Netflix Strategy Analysis- Free Sample Solution

Question: Discuss about the Strategic Analysis of Netflix. Answer: Introduction Netflix is the largest and leading company and service provider in the world. The company offers the opportunity to the customers to stream the movies and TV episodes by the internet. From last few years, the company is expanding in new markets and providing better services to the customers over the competitors. The company has got 50 million subscribers in 50 countries across the world. The aim of the company is to provide wide range of movie, TV shows on the internet (Napoli, 2011). Along with this, the original series of Netflix is also available on the various internet devices for the customers. This report will describe the strategy of Netflix in the market to achieve growth and success. Along with this, the aim of the report is to identify the rise of Netflix in the market by changing technology, operating online, innovations and pricing strategies. Further, the report has been described the current performance of the company to analyze the future growth of the company (Lapowsk y, 2014). Institutional Background Netflix was established in 1997 in California by Reed hasting. In starting, the company provided online movies on rental basis. But after the launching subscription services in 1999, company started to deliver purchased rental movies to the customers by US postal services. In 2009, company has increased its database and it is now providing many DVD having different title. In 2009, company had target approx 4.4 million customers. In the same year, the company had done partnership with the consumer electronics to stream on internet connected TVs and other internet connected devices. By this partnership, consumers are able to use the services of Netflix on laptops, iPad, iPhone and other internet connected devices. In present time, the company has around 23 million members in many countries such as Canada, USA, United Kingdom, Ireland, Latin America, and Carrabin (Keating, 2012). Mission: The strategy of the company is to increase the subscription of video streaming domestically and globally. For this manner, company is continuously increasing the customer experience having the focus to expand the streaming services among the customers. The aim of the company is to increase its subscribers in all over the world. Vision: The vision of the Netflix is to become the best entertainment service globally. Company wants to help the content creators across the world to find out for global audience. The company has aim to provide most expensive DVDs to the customers with the fast and free delivery (Changeme, 2015) The Rise of Netflix Video streaming and internet connections are very helpful for the people to download and watch the movies of large files in the homes. Understanding and taking the advantage of this technology, The USA Company Netflix launched the website for streaming in 2009. On the site of video streaming, the people are able to watch many television episodes and Hollywood movies. With this, the company changed content consumption model in the entertainment industry. In present time, company provides such content which can be seen in just one click and that is fit with their needs (Cohan, 2013). This is the time of immediacy and mobility and everything is possible now. Now customers want to play the videos and episodes when they are traveling or doing other things. So, Netflix has provided this facility to the customers. it is observed that the international subscriber base and revenue of the Netflix will increase and will get more success by 2020. The development and rise of the company is as fol lows: 1997- Netflix started working in the entertainment industry and was started by Marc Randolph and Reed Hastings. After one year, the company launched the product only with 30 staff and 925 rentable works. The Rental cost was 50 cents. 1999- Netflix started monthly subscriptions for the customers and subscribers. 2000- In this year, company dropped single-movie rentals and continued with subscription only. The company was also offered for the acquisition by the Blockbuster but after some time it was declined. 2003- This was the important year for the company. In this year, company started making profit. 2005- Till the year of 2005, there were around 35,000 movies available to rent for the customers. Along with this, the company was mailing around million DVDs every day. 2006 to 2011- The sales of DVDs began to decline then the company focused on the online offerings of movies. Netflix then became famous as the Americas favored streaming service. 2012- In this year, the company started to provide original content such as documentaries and stand-up shows. The company got reputation and popularity for creating this kind of shows in the world. 2013- Till the year of 2013, the company had 27.1 million streamers in US and 29.4 in all over the world. 2014- Till the year of 2014, around 40 countries were using Netflix. 2016- Now, the company has around 75 million subscribers and the company is continuously operating with the disc rental business on the monthly rate. But with this, the online service of the company is also very popular among the customers. Along with this, the company is now continuing with the Amazon Prime for high quality content (Walker, 2016). Changing Technology In starting, Netflix provides DVDs to the customers on demands. But with the change of time and demand of the customers, the company has done changes in its technology. Now, company is providing movies and shows for online streaming (Napoli, 2011). With the changing market, company has realized that every piece of content is important and unique so, company has revised its entire catalogues. Now, there are different versions of videos and delivers that file which suits to the customers. To provide the satisfactory services, company is using information technology in its business operations. Company gathers the data base from the past watches and preferences of the customers. With the help of this data, company is able provide the personalized list of shows to the customers (Business insider, 2015). Operating Online The company is operating most of its services online. Company provides DVD on mail and videos and shows for online streaming. The service of the DVD is still growing but the whole model of distributing content is changing. So, the delivery of the content is replacing with streaming of videos and shows. Along with this, the costs of shipping of DVDs are becoming too high in the competitive market. So, the streaming model of the company is considered by the customers. The streaming of videos of is on early adopter stage. The streaming videos online is getting majority by the customers which supports the companys platform (Ozer, 2011). There are the devices such as mobile phones, televisions, gaming consoles, PCs, tablets and Blu-ray players and many devices that can be connected by the internet. These devices can be Netflix enabled and get Netflix streaming services into majority options (Adhikari, et al, 2012). There are many factors such as technology innovations and customers behaviors for the online delivery of content. Netflix has achieved growth in the DVD by mail business till 2013 with the delivery excellence to the customers. Pricing Strategy The company has used both of the business i.e. DVDs by mail request and online streaming of videos. Although the attempt of the company at streaming technology has faces failure but the company provided unique services with the effective strategies to the customers. The company has dominant status in the entertainment and movie streaming market due to its technology. By the unique pricing strategy, company has established significant power in the industry. The company has attractive plans and rates for the customers while streaming online videos. In the US market, there are many subscribers of the Netflix due to its pricing of services (Pelts, 2011). The company is offering four subscription choices to the customers and those are as follows: 1 DVD at a time/ Unlimited streaming- $9 per month 2 DVDs at a time/ Unlimited streaming- $ 14 per month 3 DVDs at a time/ Unlimited streaming- $ 17 per month 2 DVDs / 2 hours streaming - $ 5 per month Netflixs Innovations The innovation in the technology is the heart of Netflix business strategy. Disruptive innovation is the characteristics of Netflix since the company has started operations in the industry. This was the first company which offered DVD by mail order through internet. Along with this, the company has provided most convenient and cheaper services to its customers so that they can enjoy DVD movies and TV shows with no late fees. The company has invested lots of amount in the innovation and development process of technology. The company has done innovations to make fast and easy process for the customers to receive and return of DVDs by mail. Although, there is the strong competition in the market due to kiosks and other mail based companies but Netflix has continuously improved its services of online videos. Company has done innovations from DVD by mail to library of online movies and expanded its business across various platforms. Open Innovation: Netflix has adopted an open innovation approach to improve the recommendation technology and to execute its platform strategy in various platforms. Netflix is engaged with the general public and community by providing around $1 million to the persons who are able to use movie rating data in making recommendation engine better that Netflix. Along with this, the open innovation supported the platform strategy of the company as company has built hundred of new apps for the mobile phone. The company Netflix has used the open innovation to speed up innovation and face the challenges related to make improvements in the recommendation software. Netflix: Dominate Provider of Online Video Streaming With the starting in 1998, Netflix easily captured the market of video store industry. it easily disrupted the entertainment market. In the delay of DVD by mail or in the exchange policy by the customers, the company offered quick turnaround and no late fees. There was another company, Blockbuster which was also operating in the same industry. As compared to Netflix, Blockbuster also provided no-late-fees scheme for the customers. Then Netflix dropped down its prices to compete with the Blockbuster. Today, Blockbuster is facing bankruptcy and its stock has drop down 79% in 2010. Further, Netflix has moved to IDV business. There are many competitors of Netflix in the market. The company is now competing with Television stations, Kiosk Machine services, Cable service providers and many content providers. But the company has unique strategy model to get the growth and success in the business. The company operates all you can eat in a month strategy which leads to the success in the market. Along with this, this has been accepted by studios which are based on DVD products as Netflix purchases DVDs in cash. So, Netflix has market strength of customers which is the main cause of the success of company. Along with this, company has existing business and customers always give preference to the existing business more than new business. So, the Netflix will dominate the entertainment market in future (Favaro, 2016). Netflix Strategy The main strategy of Netflix is focusing on the growth with the large subscription business including the streaming and DVD content by mail. To achieve the growth and success and differentiate itself in the market, the company has adopted customer intimacy strategy with the various innovations to make the business simple easy and fast for the customers. The company is offering delivery method and platform to the subscribers at the low price, which is the most convenient for the customers. This strategy of the company is considered as the highly effective strategy in the company because it helps the company to grow and increase the best resources which is the loyal customer base. By this strategy, company is able to provide best customer services. Though this strategy, Netflix is popular among the customers as the leading brands in home entertainment (Hompson Arthur, 2013). Further, Netflix is also famous in delivering the customer values and experience. The company is able to sustain the competitive advantage in the market because of its unique strategy. The company works as the leader in the market to investigate new technologies. The company is focused in investing new technology to operate efficiently in the market. Company creates values for the customers by adding extensive inventory of content by building recommendation engine. Along with this, company is delivering value to its customers by the recommendation technology. The company provides quick and modified way to the customers to experience and enjoy the content. With the pricing strategy, the company also delivers the value to the customers. Current Performance of Netflix Netflix has the position as market leader among the customers in the market. The company has this position because of its unique marketing strategy as compared to the competitors in the market. The strategy of the Netflix is to provide best internet movies services to the customers and to earn per share every year. The aim of the company is to deliver the growing subscriber base (Tryon, 2013). Through this strategy, company is now able get competitive advantage by offering best quality products and services to attract the customers. The company has ability to deliver its products in short time. Along with this, the company is able manage is cost incurred in the business operations as it has small number of inventory. So, the company has the advantage of competitive advantage over its competitors. Further, the success of the company is based on its services provided to the customers. Netflix has divided the market for the operations and it knows that where and how to compete with the competitors in the market (Zambelli, 2013) Segments: The Company Netflix has divided the segments based on the customers. The customers are differentiated according to the pay of streaming subscription of movies and TV shows. Content: The Company is focused new catalogue and new content in the services to grasp more customer base. There is no scope of other content such as news, sports, music and user generated content but company will always provide better content in pay per view and DVD (BBC News, 2013). Revenue model: The Company has simple subscription based revenue model that shows the success of the company. It is very difficult for existing competitors to copy the services of the Netflix as the company has strong revenue and strategy model for its customers. In case of customers, there are number of customers who are subscribing to Netflix in USA. Due to more subscription, company is growing continuously. Further, the company has invested in the deal of capital into expanding overseas. Along with this, company has also expanded its business in Japan and also planned to enter in the Asian markets such as Hong Kong and South Korea. With this, there is the challenge for the Netflix to penetrate the market in India and China successfully as they are very popular market and highly cost sensitive market. in these markets, Netflix will get more subscriber growth (Enkins, Ford Green, 2013) Future of Netflix There are many factors that are changing with the competitive environment. The factors include convenience, change in lifestyle of the customers, change in the economy, cost and efficiency changes and available options. The combination of these factors leads success of any organization. Based on the analysis, it can be observed that the company Netflix has good position in the market. Due to lack of large collection of physical inventories, the company is able to minimize the cost. The company is facing strong competition from the companies such as Blockbuster as it is providing many offerings to the customers. But Netflix is able to attract more customers due to innovative and unique strategies. On the other hand, the model of Netflix requires high speed internet for access but the company has ability to attract the customers because the costs of internet reduces in long-term. On the basis of these factors, it can be said that the company will get more success in the next 3 to 5 yea rs. It is predicted that Netflix will have around 75 million non-US subscribers and get around $7 billion in revenue by 2020 (Heisler, 2016). The cost is very important in the business as the company can attract more customers by the attractive and affordable prices. Hence, the company is able sustain its financial position so; it will grow in the future. Along with this, company is adopting new technologies and media that the customers enjoy very much. So, company will get customers loyalty and trust in future. Conclusion This report is the analysis of Netflix strategy for the growth and success in the market. From the above discussion, it has been observed that Netflix is the largest and leading company and service provider in the world. The aim of the company is to provide wide range of movie, TV shows on the internet. Along with this, the original series of Netflix is also available on the various internet devices for the customers. On the site of video streaming, the people are able to watch many television episodes and Hollywood movies. There are different versions of videos and delivers that file which suits to the customers. Company provides DVD on mail and videos and shows for online streaming. Further, to achieve the growth and success and differentiate itself in the market, the company has adopted customer intimacy strategy with the various innovations to make the business simple easy and fast for the customers. It has been analyzed that through this strategy, company is now able get competi tive advantage by offering best quality products and services to attract the customers. The company provides quick and modified way to the customers to experience and enjoy the content. So, the company has strong position in the USA market, and it will grow more in the future due to unique pricing and customer strategy. 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 BBC News, (2013), Marvel TV shows to debut on Netflix, accessed on 2nd Feb 2017 from https://www.bbc.com/news/entertainment-arts-24864631 Business insider, (2015), Netflix has created a clever way to help customers save data while improving picture quality, accessed on 2nd Feb 2017 from https://www.businessinsider.com/netflix-improves-streaming-technology-2015-12?IR=T Changeme, (2015), Netflix Behind the Scenes, accessed on 2nd Feb 2017 from https://rctom.hbs.org/submission/netflix-behind-the-scenes/ Cohan, P., (2013), How Netflix Reinvented Itself, accessed on 2nd Feb 2017 from https://webcache.googleusercontent.com/search?q=cache:https://www.forbes.com/sites/petercohan/2013/04/23/how-netflix-reinvented-itself/gws_rd=crei=QeWSWInhJcL_vASm97mADQ Enkins, H., Ford, S., Green, J., (2013), Spreadable media: Creating value and meaning in a networked culture, New York: New York University Press Favaro, K., (2016), Lessons from the Strategy Crisis at Netflix, accessed on 2nd Feb 2017 from https://www.strategy-business.com/blog/Lessons-from-the-Strategy-Crisis-at-Netflix?gko=1f1e1 Heisler, Y., (2016), The future of Netflix, accessed on 2nd Feb 2017 from https://bgr.com/2016/09/22/netflix-originals-content-library-50/ Hompson, Arthur A., (2013), Netflixs Business Model and Strategy in Renting Movies and TV Episodes. Essentials Of Strategic Management: The Quest For Competitive Advantage, New York, NY: McGraw-Hill Higher Education Keating, G., (2012), Netflixed: The epic battle for Americas eyeballs, New York: Portfolio/Penguin Lapowsky, I., (2014), Netflix Is Getting Its Own Cable Channel, accessed on 2nd Feb 2017 from https://www.wired.com/2014/04/netflix-cable/ Napoli, P.M., (2011), Audience evolution: New technologies and the transformation of media audiences, New York: Columbia University Press Napoli, P.M., (2011), Audience evolution: New technologies and the transformation of media audiences, New York: Columbia University Press Ozer, J. (2011), What is Streaming? Streaming Media Magazine. Streaming Media Magazine, accessed on 2nd Feb 2017 from https://www.streamingmedia.com/Articles/ReadArticle.aspx?ArticleID=74052 Pelts, S., (2011), What Is the Netflix Pricing Strategy, accessed on 2nd Feb 2017 from https://marketrealist.com/2016/10/netflix-pricing-strategy/ 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, accessed on 2nd Feb 2017 from https://www.businessreviewusa.com/leadership/5478/The-rise-of-Netflix Zambelli, A., (2013), A history of media streaming and the future of connected TV, accessed on 2nd Feb 2017 from https://www.theguardian.com/media-network/media-network-blog/2013/mar/01/history-streaming-future-connected-tv