Data About Netflix

Netflix Inc. is an American production company that provides entertainment services, particularly T.V. shows and movies from around the world. The company’s main office is headquartered in Los Gatos, California, with several other offices in the United Kingdom, France, India, the Netherlands, Brazil, South Korea, and Japan. Hosch (1) writes that Netflix was founded in 1977 by Reed Hastings and Marc Randolph; therefore, it has been in existence for over twenty-three years. According to “Netflix Mission Statement 2020 | Netflix Mission & Vision Analysis” (n.p), its vision is to become the best global entertainment distribution service. The vision aims to become the best by offering its customers user-friendly features. According to the same website, the mission statement is “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.”

Netflix is a content provider business that allows its subscribers to stream T.V. shows and movies through a subscription renewed after a specific time, usually monthly. The subscribers get unlimited types of entertainment, ranging from popular T.V. shows, movies, documentaries, and many more based on the quality they pay for among S.D., H.D., and Ultra H.D. Besides, the company also provides services on DVD rentals.

 According to Yahoo Finance.com (n.p), Netflix’s total number of full-time employees is 8,600. Its approximate number of subscribers is 195 million across 195 countries. Depending on the figures, the company is relatively large. It is ranked the world’s most popular entrainment platform, meaning it has grabbed the market’s largest share among other platforms. Its main target audiences are males and females, mainly between seventeen and sixty-year and medium- and first-class households. Feedough.com (n.p) website says that Netflix has grouped its market according to three psychographic factors. The first one is those who are busy to shop for movies, renters of movie buffs, and those who value their money and want to get the best out of it. Still according to Yahoo Finance.com (n.p), in 2017, Netflix’s gross profit was 7,659,666, in 2018 it was 9,967,538, and in 2019 it was 12,440,213. Hence, its growth rate is between 2 and 3 million, which is significantly a high-speed rate where the monthly subscriptions are the main revenue source.

Trends that define Netflix’s Macro Environment (PESTEL Analysis)

Netflix Inc. depicts vital strategic issues regarding political, economic, social, technological, legal, and environmental based on the case study. To start with the political issues, even though the company did not directly face government issues in the U.S, it faced them as it tried to expand internationally. With advancements in technology and the entire entertainment industry, many countries are likely to influence how the industry will work, and companies operating under the industry are expected to comply. In this case, in its international expansion strategy to countries such as Canada and Asia, Netflix had to abide by those countries’ political standards. For instance, the case has mentioned the need to comply with taxes. This is a political factor that might challenge the existence of the company and may lower the profits.

Secondly, the case has not shed light much on the economic factors surrounding Netflix. However, basically, the inflation rates of any given currency are expected to fluctuate occasionally. Depending on the gross profits presented in the case study across the years, it can be concluded that the fluctuations of the gains have been affected by many factors, including economic factors. Also, the profits are different across different countries, meaning that these countries’ economies are different; for example, inflation affects the company’s operations differently.

Onto the social factors, Netflix was affected by several factors, including cultural trends and demographics. For the cultural trends, in its attempt to enter the international markets, some countries presented some aspect of culture limitation. For instance, the case indicated that one of the main challenges the company faced when the Latin-American market was that the population there was not familiar with the on-demand streaming video service, which forced Netflix to invest more in awareness so that people could accept the service. This made it drain more of its profits on advertising and marketing to continue providing the service to Latin-America people, making it one of the social factor hindrance. In terms of income, only a few households could afford the streaming devices, which limited the number of subscribers the company gathered in Latin America.

The significant factors in the macro environment of Netflix are technological. This is mainly accounted for by advancements in technology witnessed between the nineteenth century when Netflix was founded and the twentieth century. According to the case study, as technology advances, Netflix subscribers also increase. It is majorly attributed to the ease of its customers accessing the services such as streaming or getting the DVDs on time by minimizing the number of days taken to process orders. The case study has presented several technological innovations that have enabled Netflix to thrive in the entertainment industry. One of them is convenient and easy to use movie selection software. With the software, its customers can get much information on a movie before deciding whether to stream it or not. The software has attracted many subscribers as many people desire to know about a film or show prior to streaming it.

Additionally, the advancement in technology, especially regarding devices, has enabled the company to make its services more useful. The devices such as smartphones and all the internet devices have attracted many people into the streaming of movies industry, thus, favoring Netflix. Lastly, on technological factors, the internet-based platforms such as face book enabled the company to advertise its services and gain more subscriptions.

The legal factors that the case mentioned fall under the external legal aspects of obtaining licenses in international markets. The case points out that one of the main challenges Netflix faced during its entrance into the new global market was the expense of getting an operating license from the movie studios and T.V. shows owners within those countries, meaning the countries’ legal process and laws of obtaining the permit were quite expensive. As a response, Netflix included the marketing and advertising category’s expense, which lowered the net profit. Lastly, Netflix’s environmental factors are favorable since the case has not indicated any challenge to do with weather, climate, or geographical location. However, in the future, the weather may likely affect the signals that support the satellites for internet connection due to the global climate changes being witnessed.

Industry Analysis

 Porter’s Forces Model

The first force, which is the competitive rivalry, is very stiff, as the case study points out. Like any other industry, the entertainment industry is faced with competition, whereby, in this case, the main rivals of Netflix were Hulu Plus and Amazon Prime Instant Video. The competition was mainly on the streaming service. It was majorly based on subscription prices, episodes, how popular the movies are shows are, the entertainment degree, and the videos’ quality. The second force is the threat of new entrants. The entertainment industry is no exception when it comes to new companies being set up each day. Due to the advancement in technology that is easing entry into the industry, more companies are likely to enter the industry. According to the case study, companies such as Goggle, Hulu Plus, and Amazon Prime Instant Video came after Netflix.

Thirdly, the threat of substitutes is not very high because Netflix has focused more on live streaming, which is the new normal as the technology advances. Hence, reserves such as pay-per-view and DVDs are slowly vanishing, minimizing the risk of substitutes. The force of the bargaining power of buyers is another factor Netflix considers. For instance, when the company decided to have separate websites for its services, the CEO apologized because its subscribers complained about the strategy and many of them even unsubscribed. The separation aimed to increase the prices as one had to subscribe to both services amounting to double prices compared to before separation. In this case, the customers had the power to affect subscriptions in the entire industry. Lastly, the force of the bargaining power of suppliers broadly applies to this case. Since Netflix depends on content creators of shows and movies, the creators may hike up the prices at which Netflix buys the content, affecting the prices. Similarly, the content creators also have the power to the quality Netflix offers its subscribers because they produce the entertainment content.

Strategic Group Analysis

The strategic group analysis examines a company’s position among its competitors and the factors that promote its profitability. It also looks at the competitive dynamics within an industry. According to the first information provided, Netflix’s position in the entertainment industry is at the top in Netflix’s case. The main reason being, the case points out that it has been ranked one of the best and has more subscribers to the extent of competing with popular companies like Goggle and Apple. Secondly, several factors underlie the company’s profitability. One of them is investing aggressively in advertising and marketing of its services and products and increasing the number of subscribers, installing new soft wares that improve customer’s experience such as the movie selection software that eases how customers find information about movies. It has also extended its services such that subscribers can view a movie’s information, including ratings, which enable them to make informed decisions. Other companies such as Amazon Prime Video, Hulu, and others mentioned in the case have kept their prices a bit low, have a free trial period for their subscribers, and improve the quality of content to support their profitability at the top. In general, the entertainment industry providing movie and shows streaming is quite competitive.

Internal Environment Analysis

Value Chain Analysis

Netflix is dedicated to creating value for its products and services. For instance, providing software that eases the selection of movies and shows creates value in the service. After its initiation, the software was successful, and this brought in more subscribers to the platform.  Secondly, even though the separation of DVDs and streaming was not successful, it aimed to add value to the services by allowing customers to quickly access the service they want. Another activity that adds value is its prices; they are affordable, making customers enjoy entertainment at affordable prices. Fourthly, when the DVD service was popular, the company had set up many stations to enable the DVDs’ delivery faster and, in turn, reduced the delivery to one business day. Lastly, diversifying its content has also made value. For instance, the case mentions introducing a new section named “Just for Kids,” where content related to kids is available.

Internal Organizational Structure and Systems

The case study has not clearly outlined the organizational structure of Netflix, but according to rancord.org (1), the company has a unitary system in which there are three main characteristics. One, functional groups that oversee the online and non-online operations. Two, geographical divisions for regional markets, and lastly, divisions managing various product and operation types. The structure has seven departments that foresee the company’s operations. They include; the CEO, legal office, talent office, finance, product, content and communication departments. The company has both domestic and international streaming as it has expanded its territories internationally. Under products, it has original and other content sections.

Core Competencies

One of the core competencies that Netflix Inc. possesses is the diversity of services under one website. For instance, kids section and adults’ sections. Also, a variety of types of shows and movies are grouped differently according to their content. This enables customers to enjoy the fast selection of what they want. Secondly, the software (movie selection software) that the company installed to allow customers to get a lot of information about a particular show or movie before streaming it. For instance, the ratings, reviews, and a short video preview. It is an excellent competency that has distinguished its services from its competitors.

Works Cited

Feedough.com. “Netflix Business Model | How Does Netflix Make Money? | Feedough.” Feedough, 12 Aug. 2017, www.feedough.com/how-does-netflix-make-money/#:~:text=Netflix.

Hosch. “Netflix.” Encyclopedia Britannica, www.britannica.com/topic/Netflix-Inc.

“Netflix Mission Statement 2020 | Netflix Mission & Vision Analysis.” Mission Statement Academy, 11 June 2020, mission-statement.com/netflix/.

Rancord.org. “Netflix Inc.’s Organizational Structure & Its Strategic Implications.” Rancord Society, 10 Nov. 2019, www.rancord.org/netflix-organizational-structure-design-organizational-chart-characteristics#:~:.

Yahoo Finance.com. “Netflix, Inc. (NFLX).” Yahoo Finance – Stock Market Live, Quotes, Business & Finance News, finance.yahoo.com/quote/NFLX/profile.