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Strategic Analysis of Netflix

BMGT650 Winter 2014

Simon Huang

on 16 June 2014

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Transcript of Strategic Analysis of Netflix

Strategic Analysis
BMGT650 Final Project
Group Members: Simon, Lancer, Jet, Chuck, Charlie
Company Overview
Products/Services Overview
External Analysis
Driving Force of the Industry
Key Success Factors of the Industry
Industry Attractiveness Analysis
Internal Analysis
Current Strategy Assessment
SWOT Analysis
Problem Identification
Strategic Alternatives
Recommendation &
The Netflix Company was established in 1997 and is headquartered in California. It started its subscription-based digital distribution service in 1999. By 2009 it was offering a collection of more than 100,000 movie titles and more than 10 million subscribers. Netflix had become the world’s leading online entertainment subscription service provider.
Netflix is a subscription-based movie and television show rental service that offers media to subscribers via Internet streaming and via US mail.
External Analysis
Internal Analysis
Recommendation & Implementation
In 2007 Netflix introduces streaming that allows members to instantly follow television shows and movies on their personal computers.
In 2010 Netflix is available on the Apple iPad, iPhone and iPod touch, the Nintendo Wii, and other Internet connected devices.
In 2013 Netflix reported to have 33 million members. Netflix has got “most satisfied web site” for five times.
In 1997, Reed Hastings and Marc Randolph co-found Netflix to offer online movie rentals.
At the end of 2005 Netflix has 4.2 million members, 3.6 million more than 2002.
History of Netflix
"The mission of Netflix is that it revolutionizes the way people watch TV shows and movies."
Becoming the best global entertainment provider in an easy, fast and reliable way.
Licensing entertainment content around the world.
Helping content creators around the world to find a global audience.

Driving Force of the Industry
New technologies:
Blu-Ray technology, 3D vision, high–speed network systems

Electronic products:
DVD player, wide-screen, high-definition TV.

Key Success Factor of the Industry
Wide selection
Brand image
Low price
Customer base

Market Size
In- store rentals (2007 revenues $5.8 billion)
Rental via mail (2007 revenues $2.0 billion)
Video-on-demand (2007 revenues $1.3 billion)
Vending machines (2007 revenues $0.4 billion)

2006 to 2007, decreased 1.13%
2007 to 2008, increased 2.51%
Growth Rate
2007-2011 rented DVDs increase 68% to $3.2 billion, or about 37.5 percent of the total video rental market.

Netflix profit margin in 2004 is 4.3%, in 2005 is 6.16%, in 2006 4.93%, in 2007 is 55.6%

Blockbuster profit margin in 2005 is -10.2%, in 2006 is 0.7%, in 2007 is -1.5%

Five Force Analysis
of Substitutes
Buyers have low costs in switching to substitutes.
Online stores are offering more convenient services.
Comparable features such as movie theaters, cable companies, iTunes, TV programs.
Sellers Bargaining Power
Movie studios
Technology Company (software)
Logistics Company
Cable line
Distribution channels

Rival Firms
Buyers switching cost are very low.
Industry products are barely no differentiated.
The fixed cost and storage cost are high and necessarily

Buyers Bargaining Power
Low switching cost.
Industry products are undifferentiated.
Buyers are well informed about the products.

New Entries
Capital requirement
Technology requirement
Sizable economy requirement (2~4 million)
Access to distribution channels
Current corporate strategy assessment
Providing comprehensive DVD selections
An easier way to choose movie
Fast delivery of selection
Convenient rental & return procedure
Aggressive marketing
Subscription plans
Multiple marketing
Marketing spending.

Evaluation of
the Current Strategy
SWOT Analysis
Number of subscribers
Monthly fees options
Net Income
$0.3 Million
$ 8.4 Million
$35.9 Million
$1,205.3 Million
- $20.61
$67 Million
- $58.5 Million
Large movie titles.
provided subscribers with all the benefits of a local movie rental store
Fast delivery and efficiency.
Strong network system.
Movie copyrights.
Large number of subscribers
Incapable to solve problem efficiently.
Compared to competitors, Netflix doesn’t have very good popularity
Add video games to its product line
Updating information technologies allow high speed online streaming.
Have cooperation with cinemas, to offer special prices for Netflix’s subscribers.
Competitions from Internet infrastructure services providers.
Bootlegging, and people copying Netflix' ideas.
Deregulation of how movies are streamed over the internet.
4. Movies are not exclusive, competitors can also purchasing the copyrights of movies then give access to the same movies and television shows.
1) Netflix only doing business through the Internet, it doesn’t have offline store.
2) The portfolios are mostly covered movies and TV shows, but not cover the gaming market.
3) Netflix’s awareness is generally located in North America.
4) How to keep high stable growth rate.

Problem Identification
Expand to foreign market
1. Gain market share at first place
2. Expand the economies of scales
3. Gather resources
4. Establish good reputation

Stay in North America market
1. Keep leader status and stable growth.
2. Prevent from competitors.
3. Avoid the other costs and risks to enter foreign market.

Strategic Alternatives
1. Require large number of capital.
2. Deal with regulation, policy and the cultural differences.
4. Difficult to build distribution channel

1. The market is limited in the same area.
2. Hard to improve Netflix’s popularity efficiency.
3. Limited by local suppliers

Foreign Market Expansion
1. Expand to Canadian market
2. Expand to European Union countries
3. Expand to Asian countries
Enhance technology
to provide better services
1. Access for other devices
2. Keep in upgrading the movie screaming quality.
3. Provide video game rental services
4. Use automation technologies

1. Cooperate and make agreement with movie companies
2. Cooperate with movie theaters

1. Social network marketing tools

Thank you
Full transcript