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Referencing Styles : Harvard | Pages : 15
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Executive summary:

In this report, various strategic analysis tools like SWOT analysis and PORTER’ 5 force analysis have been applied on the business model followed by Netflix Inc. The results of the analysis methods reveal the various strengths, opportunities, weaknesses and the threats are being experienced by the organization. The present condition of the online movie industry and the competition that the organization faces from its rivals have also been demonstrated in this report.

 

 

Introduction:

Strategic management can be considered as a branch of management studies that is associated with the process of designing and implementing the vital strategies and policies incorporated by the higher management of an organization. Such decisions are taken by the higher management based on the assessment of the external or the internal environments of the organization, along with the consideration of the various resources available to the organization.

 Using the policies of strategic management, an overall analysis of the business module of any organization can be achieved, which includes the objectives of the  organization, the plans and policies incorporated by the organization,  the processes used to allocate the resources of the organization and so on and so forth.  

Background of the company:

Netflix, Inc. is an organization that provides movie or media through the internet on the demand of the suppliers. It is a USA based  company and provides services to all their subscribers who are located in  North America, South America, New Zealand,  Australia, and some countries of  Europe, like that of  Denmark, Germany, France, , Norway,  The Netherlands, Sweden, Austria,  Finland, Belgium, Switzerland, Luxembourg, United Kingdom and Ireland. The organization also provides DVDs of movies at flat rates throughout the United States of America, where they send the Blue-ray copies and DVDs of the movies through Permit Reply Mail. The company was established in 1997 and has its headquarters at Los Gatos in California. By 1999, Netflix had started their services that were entirely based on the subscriptions by customers. By 2009, Netflix had as many as 10 million subscribers, to whom the company could provide the copies of about   100,000 movies (Birkinshaw, 2004).

The economic condition of the company:

The financial reports of the organization state that by the 25 th February 2007, Netflix had delivered more than one million movies on DVDs. By the month of   April in the year 2011, the number of customers who had a Netflix subscription had reached a new height of 23 million only in the United States: the total number of people all over the world, who had Netflix subscriptions, was far above 26 million. In this particular financial year, the total revenue generated by the organization was more than 1.5 billion US dollars.

However, the financial reports released by the organization in the month of October in 2012 stated that in the third quarter of the year, there was a decline of 88% in the revenues collected by the organization. In the next two years, the number of customers who subscribed to the organization increased by one million. However, the revenue collection increased by only 8 percent.

Strategic Analysis of Netflix Inc: 

The strategic analysis of Netflix Inc has been done in the following section, using a SWOT analysis and PORTER’s analysis procedure (Brown, 2006).

·        SWOT analysis:

SWOT analysis methodology is used to analyse the strength and weaknesses of the strategies that have been incorporated by the organization and the opportunity and/ or threats that the organization currently faces.

STRENGTH

WEAKNESS

  1. A very strong awareness among the customers about the brand name.
  2. A very strong brand value (DeVaro, 2006).
  3. A unique operational domain: Netflix is the leader in the industry of online television network, and has more than 33 million of subscribers in as many as 40 countries.
  4. Value proposition system
  5. Unique and profitable mode of making movie DVDs available to the customers.
  6. A wide range of digital contents.
  7. A ‘no advertisement’ policy (Williams, 2009).
  8. Digital contents supported on a wide range of devices, like game consoles, smart TVs, blue ray players, etc (Jeyarathnam, 2008).
  9. Strong integration with various social media sites.
  10. The organization had damaged their brand value in 2011 while they attempted at changing their brand name.
  11. The market of providing DVDs of movies is reducing at an alarming rate (Jeffs, 2008).
  12. The company had introduced the option of streamlining movies to customers: however this option has not been as profitable to the company as that of the DVD business.
  13. Newly imposed license agreement is stopping the company from making available various digital contents.
  14. As t this point of time, the studios are deciding the release dates of various digital content, Netflix is slowly loosing the control over the market.
  15. The company has to spend a huge portion of the generated revenue for licensing of contents.
  16. As many subscribers share their accounts with others, the company loses revenue worth a few billions (Saloner, Shepard and Podolny, 2001).
 

OPPOTUNITIES

                            THREATS

  1. Producing original contents for the company itself.
  2. The company can emphasize on the international film industries (Sanchez, 2006).
  3. Make business collaboration with manufacturers of smart TV s such that such devices are produced with inbuilt Netflix applications.
  4. Offer shared subscription models for those households where more than one member of the family has a Netflix account.
  5. The control over the contents provided by Netflix lies in the hand of the suppliers.
  6. New brands are slowly emerging in the market.

 

 

 

 

·        Porter’s analysis:

Using the Porter’s analysis method, a clear insight of the competitive environment that exists in the online movie industry can be developed. The diagram showing the results of Porters analysis method on the business model of   Netflix Inc has been provided in this section of the report (Schoenmakers and Duysters, 2006).

Fig: Porter’s analysis method on Netflix. Inc

Conclusion:

In this paper, a strategic analysis of the business module followed by Netflix Inc has been conducted, based on a case study on the organization that had been provided.  SWOT analysis and Porter’s 5 Forces analysis are two commonly used analysis tools that are used for the purpose of strategic analysis.  These two tools have been applied to the business model of Netflix. Inc and the results of this analysis have been provided in this report.

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