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Transcript
NETFLIX INTERNATIONAL EXPANSION
INTRODUCTION
PORTERS 5 FORCES MODEL
BARGAINING POWER OF BUYERS
- Bargaining power of buyers is high due to low switching cost
- Netflix have to maintain novelty and original content
- Pricing strategy depends upon customer's preference
BUYERS
BARGAINING POWER OF SUPPLIERS
SUPPLIERS
- Bargaining power of suppliers is very high
- Netflix have to pay high premiums for global licensing deals and exclusive distribution rights from Hollywood producers
- Netflix is aiming to produce its own content in order to minimize supplier's threat
THREAT OF NEW ENTRANTS
ENTRANTS
- Threat of new entrant is moderate in media industry due to rapid upgradation and evolution of technology
- Netflix successfully adapt the changes i.e. shift from store DVD rentals to online streaming.
- Media industry requires huge investments to provide original content
- Netflix spent $5 billion on creation of international content
- Multinational IT companies (Amazon) are posing threats as new entrants
- Joint venture of Television groups (Hulu LLC)
THREAT OF SUBSTITUTES
- Threat of substitute products is very high in media industry
- Traditional media act as a substitute product
- Movie Theatre chains
- Television groups e.g. NBC Universal Television, 21st Century Fox Inc., The Walt Disney Company
- Netflix entered into liscense agreement and partnerships
SUBSTITUTES
RIVALRY
- Competitve rivalry is very high due to incubment pay television operators, established subscription VOD service providers
- Eros Now have 30 million users while Ditto TV have customer base of 20 million
- Rakuten showtime and Hulu Japan have huge content of 100,0000 and 13000 movies and TV programs respectively
RIVALRY
SWOT ANALYSIS
STRENGTH
STRENGTHS
- Successfully made exclusive license agreements to develop content
- Developing exclusive agreements with content providers and produced award winning content House of cards, Orange is new black
- Adapts the change in industry from mail order to online streaming
WEAKNESSES
WEAKNESSES
- Dependent upon content providers
- Report losses of $68 million in third quarter of 2015
- Low profit margins due to higher operating cost ($1882 million)
- Regulatory restrictions imposed by US govt., Indonesian, Malaysian & Vietnamese censorship board and China
- Local adaption (service available in 20 languages only)
OPPORTUNITIES
OPPORTUNITIES
- International expansion
- Increase in customer base through regional language content
- Develop own content for local and international audience
- Potential customer base at China and other developing countries
THREATS
THREATS
- Increasing number of new entrants in the market
- Competition from diversified organizations e.g. Amazon video have customer base of 44 million
- Under developed infrastructure of developing countries
SUGGESTIONS
SUGGESTIONS BASED ON SWOT
- Continue to develop its own content
- Development of regional language content
- Meet the requirements of censorship boards
- Continue its international expansion and collaboration with local partners
COMPETITIVE ADVANTAGE
- Collaborating with content provides for exclusive content (House of Cards), exclusive distribution rights, license of feature films (Beasts of No Nation)
- Provision of huge and diverse content to audience
- Adapting the change
- Increased spending on new and own content
- International expansion
COMPETITIVE ADVANTAGE
STRATEGY TO OVERCOME CHALLENGES
STRATEGY
- Analyze the customer's preference i.e. what they want to watch and develop the content accordingly
- Continue spending on developing exclusive content
- Provision of offline streaming technology
- Provide better services on mobiles i.e. easy user interface
- Partnership with key local companies e.g. cable operators
- Investment in dubbing of famous contents
- More focus on demographic segmentation
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