NetFlix Case Study
Netflix strategy in 2018: Does the company have sufficient competitive strength to fight off aggressive rivals?
Netflix is a leading streaming service that permits its members to watch various movies, documentaries, TV shows, and other content on devices connected to the internet. Nevertheless, despite the company experiencing great success over the years, it has encountered stiff competition from competitors over the last few years. This paper analyzes that company to identify the challenges it faces and thereafter recommends what the company will need to do to ensure that it effectively addresses the problem faced.
Situation analysis helps an organization to have a clear understanding of its position in the specific sector that it is operating in. In the case of Netflix, a SWOT analysis is an ideal tool to carry out the situation analysis since it makes it possible to understand the company’s strengths and weaknesses as well as the opportunities available in the market and the threat that the company could face.
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Netflix SWOT analysis
One of the major strengths of Netflix is the strong brand name as Netflix is well known as a leading streaming service provider in different countries around the world. In addition, it can also be explained that Netflix has a large customer base as it operates in more than 190 countries and has over 100 million subscribers. From the large customer base, the company can benefit from economies of scale while simultaneously bargaining good terms with content providers. In addition, it can also be noted that Netflix offers its customers a wide variety of original content that appeals to them. Finally, Netflix has a good understanding of the market as it has been operating in the movie business since 1997.
In view of the weaknesses, it can be noted that the company incurs high costs in securing original content with forecasted negative cash flow of $3 to $4 billion in the year 2018 attributed to the increased costs for original content. Another weakness of Netflix is that the company does not have exclusive rights to most of the content it shows on its platform, as the content can be streamed from other platforms.
In the perspective of opportunities, Netflix has the option to expand in different countries where it is yet to establish a presence into while also aggressively promoting itself in markets that it is already operating in so that it can increase its market share in such markets. Moreover, the company could also establish strategic partners so that it gets access to prime content.
As far as the threats faced by Netflix are concerned, one of the major threats entails stiff competition posed by competitors such as Amazon, Hulu, HBO, and others. These competitors have used different strategies and have managed to capture some market share from Netflix. In addition, increased costs of original content pose a threat to the company’s profit margin.
From the analysis of the case study, it can be explained that the main problem that Netflix is facing entails the increased competition posed by the company’s competitors. Specifically, it can be pointed out that unlike in the past when the company enjoyed ‘the first mover advantage as it was the first company to offer online movie streaming services, many companies such as Amazon, Hulu, and HBO have joined the sector and committed a lot of resources to ensure that they have a good market share. As a result, Netflix has found that it has to change its strategy to ensure that it can compete with the different competitors it is facing effectively.
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Despite stiff competition, Netflix is still the market leader in online streaming services as it has the highest number of subscribers. In that perspective, it can be explained that if the company adopted the best strategy, it is better positioned to counter the stiff competition posed by the different competitors.
Specifically, in the context of generic strategy, the ideal strategy to be pursued by Netflix entails cost leadership strategy which entails selling the service at a price that is lower than what is charged by other competitors. Indeed, the fact that Netflix has the highest number of subscribers compared to its direct competitors means that by adopting the cost leadership strategy, the company will be able to increase its number of subscribers, which means more revenues will be generated.
Moreover, it can be explained that differentiation and focus strategy for Netflix would not be ideal since these strategies would require more finances that the company does not currently have. Thus, to counter the competition posed by the different competitors, Netflix should adopt the cost leadership approach since it will ensure that the company can increase its subscribers without spending extra amounts in acquiring additional exclusive content.