The leading provider of an internet television network is Netflix. The business serves more than 93 million clients who are spread over 190 different nations. Over 125 million hours of entertainment are consumed by Netflix users in a single day (""Netflix: Overview,"" 2017). As long as they are online, Netflix subscribers have the freedom to watch whatever content they choose, wherever they are in the globe.
SWOT Analysis: Critically Examine Internal Resources and Capabilities That Give the Organization a Competitive Advantage.
Netflix was indeed the first corporation to delivers streaming movie services, and since then it has transformed its services to produce better services at a favorable price. The company should optimize content suggestion: Netflix has been utilizing the system of making its commendation to its customers. The company has expanded its library viewership up to 85 percent of the total number of titles per quarter. The utilization of title rentals provides a higher value of their library, and this is taken to be the value-added benefit of consumer thereby giving the user a competitive edge over the customer.
Weaknesses
The suppliers in this market have greater bargain thereby determining the price of the content they sell to Netflix. This scenario arises from the fact that films that consumers prefer most are produced by a handful of larger studios that mean that there is the lack of competition which increases their high control over licensing. The cost of content is indeed uncertain because the suppliers can extort millions of dollars in agreement renegotiation or extension.
Opportunities
There is an opportunity for international growth. The company should take advantage of emerging market especially in Africa (Barr, 2011, p.26). By doing so, it is likely to increase its market base. Netflix can also capitalize on the internet services that are available in many countries, and the international expansion will be a better strategy when streaming online content to its suppliers.
Threats
Netflix should expect a stiff competition in future because of the number of online streaming companies such as Yahoo and Amazon. An entry of many firms in this industry will drive price competition thereby reducing the amount of profit that Netflix generates. The company can alleviate this threat by providing quality services as compared to its customers to retain their loyalty.
Identify the Key Drivers of Change in the External Environment and Evaluate Their Impact on the Entrepreneurial Activities of the Organization
Porters Five Forces
Netflix Inc. Primary competitors include Redbox, AT&T, EchoStar, Apple, Amazon, Wal-Mart, Best Buy, DirecTV, Comcast, Times Warmer, and Blockbuster. The competitors do exist in the large market with different segments and offer services that are substitutes (Ciara Healy, 2010). Despite this stiff competition, Netflix has grown to a dominant force in the entertainment sector. The company which started as a mail DVD delivery company has transformed into a giant business where people can reach customers can freely watch online.
Threat of New Entrant
The rate of competition in the online streaming sector is likely to intensify as years go by. Many of the companies joining this market are likely to the future indirect competitor (Fitzpatrick, Nguyen, & Cayan, 2015, p. 14). The traditional provider of movie and television imitating Netflix are also likely to push harder to gain an extra share of this market. In 2014 bell media introduced Crave and Shoni TV to the Canadian people. Both the two companies offer the same products. Crave TV is available to its customers at the rate of $4 monthly as compared to Netflix which $8.99 ("Netflix Inc.", 2017).
Bargain Power of Buyers (High)
Netflix customers receive high bargaining power, and that can be attributed to the business model it uses. Consumers face minimal penalties for counseling Netflix subscription. The customers are free to cancel their subscription without any charge, and the company stores their information for one year. The price sensitivity in this market makes it difficult to alter the prices, in fact, the price of $8.99 offered by this company is relatively inexpensive when it is compared with what the traditional media outlets do provide (Segal, 2014, p.9). A relatively lower price and more content are actually what makes the company remain dominant over the traditional media outlets.
Threat of the Substitution of Its Products (Moderate)
The digital streaming sector continues to have so many substitutes that are readily available. The substitute commodities include DVDs and DVD rentals, cables, and satellite television and movies (Kung, 2016, p.32). Currently, the online movie and television through an online stream have become a popular mean that people around the world use to access content. The rise in the declining in the population of the traditional media outlet and the growing of digital streaming reduces the threat of product substitution. However, there are some viewers resistant to change and won't just adopt the new technology. Despite the fact that smooth streaming is cheaper and user-friendly, some people may opt to use the traditional methods of traditional and movie viewing.
Bargaining Power of Supplier (Very High)
The majority of Netflix content comes through licensing agreements with the original owners. As soon as the contract duration is the service provider might decide to terminate the relationship with Netflix, therefore, reducing the content that Netflix offers to its customers. For example in 2014 when the agreement duration with Viacom ended, Netflix lost the right to Viacom programs.
Evaluate the Impact of the Competitive Forces That Are Influencing Entrepreneurial Activities of the Organization and Profitability within the Industry
Rivalry among the Existing Competitors (Moderate)
The arrival of newer firms into the industry is an indication that future competition will be fierce. The industry has numerous streaming services that includes Amazon Instant, YouTube, Google Play and Hulu. The most interesting part of this form of competition is the emergence of collaborative competition among the digital competitors. For instance, in 2014 Amazon introduced an amazon fire TV stick, this is a USB stick that enables customers to access video streaming services, as well as other streaming services that includes Netflix.
Currently, Netflix is focusing on increasing the streams of revenue while increasing the number of customers. The company has established itself as a market leader in this digital streaming market (Gamble, Thompson and Peteraf, 2013, p.37). There are however certain aspects of its current business model such as reliance on suppliers for its content and price sensitive market which make gives consumers stronger bargaining power have created a market where the Netflix remains vulnerable to the existing competition forces.
Section 2
Select And Critically Evaluate Two Strategic Options That Could Be Pursued By Your Selected Organization, To Increase Its Entrepreneurial Opportunities In The Market.
Short-Term Strategy Implementation
Netflix should partner with multi-channel Television provider to increase content. By partnering with international corporations to offer its streamline content along with the recognized channels such as Showtime and HBO, Netflix will significantly increase the customer base (McDonald & Smith-Rowsey, 2016, p.62). Furthermore, such a move is likely will strengthen Netflix band because it will provide more channels of communication to its customers.
Long-term strategy implementation: streaming
In the long run, the company’s primary focus should be to dominate and implement online streaming entirely. The company is in a good position because it has already invested in the streaming technology so the best move now should be to expand the number of titles. The management should act as quick as possible to make sure they control in this industry ("Netflix, Inc. (NFLX) Recommendations", 2017). Moving from streaming while decreasing DVD rentals is a good move because it lower will the cost. Ideally, the new and current customers will use the streaming feature that means that even if the DVD rental services decreases revenues won't fall. If this move is successful Netflix is likely to shut down some of the warehouses that increase cost. When Netflix takes advantage of the streaming, it will gain international customers without incurring so many costs. As the streaming feature expands, Netflix should focus on producing its content to increase its bargaining power.
Justify The Selection Of Each Strategic Choice Using Suitability, Acceptability, Feasibility (Safe) Criteria.
Partnering with the multichannel television programs will speed up the speed of business growth. The company should also focus on the management of its brand. In the past, the customers have been dissatisfied with the decision to split services into streaming units and separate by mail. The company should regain consumer trust by ensuring that the services they provide meet customers' expectations (Muzumdar, 2009, p.21.). The management ought to come up with appropriate means to manage two distinct units (increasing streaming and declining by mail business) under a single brand. The company management ought to keep the keen eye open and continue the expansion into the international markets. By this extension, Netflix stands to gain significant competitive advantage over other firms. Such an increase advantages include high mover benefits and economies of scale. The benefits that arise from international expansion overweigh the costs. The organization should, therefore, remain diligent in managing its efforts, deliberate in its global growth plan, be smart and control costs. Netflix should leverage the mobile technology by creating additional value for its customers by offering interface access and easy to use applications.
Dominating the online streaming is likely to increase the company’s market thereby promoting its sustainability. Netflix should try to grow its independent studios; with the increase in numbers of the independent film studios that do stream their content. Netflix should produce its content if it aims at reducing the suppliers bargaining power (Nguyen, 2017, p. 68). Such a move is likely to increase profitability because of the increased power to negotiate better terms with distributors of content. Netflix should take advantage of the growth in mobile internet segment. According to projections available the mobile data, the tariff is expected to rise. This implies that there will be more customers willing to access this online content through their mobile devices. The company should, therefore, lay a good foundation to take care of these new mobile subscribers.
Netflix digital streamline has given it an advantage over its competitors over other businesses that offer the same services. This allows it to simultaneously implement the cost leadership strategy. The mode of distribution has proved to be efficient because the Netflix can now offer commodities at a lower price when compared with other firms. The company also provides its customers a unique viewing experience (Rayburn, 2007, p. 39). The company provides customized viewing experience through the use of data mining techniques. The entertainment sector has transformed for better and thanks to Netflix innovativeness. The company has revolutionized movie and television, and it is intact considered to be a threat to the current television viewing platforms. The company’s recent aggressive international growth is a good indicator since the market share will significantly increase.
The company should find other ways of creating an additional revenue stream; this can be done through providing high-quality content, decreasing the reliance on the volume of sales to remain relevant and incorporating advertisements in its program. The company can also maintain a good relationship with its suppliers (Kelly & Boyle, 2010, p. 35). The company should think about providing added value incentives to its supplier, and this can be done through increasing the brand awareness by including logos in its movie listing and television. The world is always transforming, and innovation is critical, Netflix should keep the consumers changing needs updated, innovative products that meet customer need to be offered. The company should also continue to concentrate on worldwide expansion (Srinivasan, 2010, p. 29). The sales volume is essential for the economic viability of Netflix business growth. The company will have to move first and market in new regions so that it can gain a competitive advantage over other firms.
Conclusion
Netflix has been a successful company because it has so many customers across the world. The company heavily relies on the outside suppliers for the content; it also faces a lot of expectation for the quality and price, as well as the number of entrants in this market. The market is always changing, and the current success does not guarantee that the Netflix will still hold future dominance. By implementing the strategies mentioned above, the company's growth is assured.
References
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McDonald, K. & Smith-Rowsey, D. (2016). The Netflix effect (1st ed.). New York, NY: Bloomsbury Academic.
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Segal, L. (2014). The decoded company (1st ed.). New York, N.Y.: Portfolio/Penguin.
Rayburn, D. (2007). Streaming or Digital Media Project Management: How to Implement and Manage a Profitable Business. Streaming and Digital Media, 99-116. doi:10.1016/b978-0-240-80957-1.50011-9
Srinivasan, S. (2010). SWOT Analysis. Wiley International Encyclopedia of Marketing. doi:10.1002/9781444316568.wiem01057
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