Parami International College
Master’s in Business Administration
Course Name:MGMT 404
- Strategic Management Assignment
Strategic Plan of Netflix Co., Ltd
Submitted to;
Submitted by;
U Atar Thaung Htet
Ms. Aye Nandar Tun
Batch – 3
Date of Submitted
03 /12 / 2022
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Table of Content
Serial No
Topic Name
Page Number
01
Introduction
3
02
History of Netflix
3
03
International Expansion of Netflix
4
04
Financial Analysis of Netflix
5
05
SOWT Analysis
6
06
Netflix Corporate Strategy
8
07
Future Business Strategy
9
08
Conclusion
10
09
References
11
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Introduction
Video Streaming and internet connections help users around the earth download and watch large
video files from the comfort of their homes. Taking advantage of the technology, the American
company Netflix launched a video streaming website on 2009 where Netflix users could watch the
most recent Television episodes and Hollywood Blockbusters. Netflix changed the entertainment
industry and led to the vanishing of the mainstream video rental store in North America. For
today’s audiences of the entertaining industry it’s all about mobility, the content they are looking
for must be just a click away to fit their needs. Nowadays everything is possible. Sometime you
may watch an episode of your favorite show when you are traveling, or maybe each member of
your family wants to watch something jointly or separately in the house so by Netflix it is possible.
All of these demands are being fulfilled with the help of video streaming. Now if you want to play
movies, music or watch an episode of your favorite TV show you can easily do it wherever you
may be. If you want to fully understand the impact of video streaming in society of the
entertainment industry you must first look at the technological advancements you must look for
Netflix and so on.
Netflix is a streaming service that offers a wide variety of award-winning TV shows, movies,
anime, documentaries, and more on thousands of internet-connected devices. You can watch as
much as you want, whenever you want with one low monthly price. There is always something
new to discover and new TV shows and movies are added every week.
History of Netflix
Netflix is an American technology and media services provider and production Company
headquartered in Los Gatos, California. Netflix was founded in 1997 by Reed Hastings and Marc
Randolph in Scotts Valley, California. They got the idea of creating Netflix when Hastings forgot
to return a DVD by the subscription date and ended up paying 40$ as late fee. They launched the
website on April 14, 1998 with a more traditional pay-per-rental method. The website later
introduced the monthly subscription method in September 1998.
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Netflix launched as the world's first online DVD-rental store, with only 30 employees and 925
titles available in the entire catalogue of DVDs at the time, using the pay-per-rent model, with
rates and due dates.
Netflix is leading the world in the online media streaming service industry by offering its services
to not only to the US, but also to the rest of North America and South America, as well as several
countries. With over 83 million subscribers in 190 countries, 125 million hours of movies and TV
shows, it has more media for one lifetime. And unlike other platforms, members just have to buy
subscription once and can watch as much, on any device with an internet connection including
computers, smart TV, tablet PC and even mobile phones. After the huge success of DVD rentals
business, Netflix started producing its own content of movies and TV series.
Today, Netflix streams movies and has more than 151 million paid subscribers in over 190
countries around the world. It offers a wide range of TV series, documentaries, and feature films
across a wide variety of genres and languages, including original productions. While its streaming
services became the biggest revenue generator—with more than 130 million subscribers in 2018—
the rental division remained profitable.
International Expansion of Netflix
How Netflix Expanded to 190 Countries in 7 Years
For Netflix, international expansion was a careful, well calculated process. Expansion efforts
started in 2010 to make up for slowing domestic growth. Netflix did not try to enter all markets at
once. The company aimed to bottom into markets that were geographically, culturally close to the
company’s country of origin. So they decided to first set in Canada. Latin America and Europe
followed with amazing results. Netflix always enters a new market through a limited- time
offering. This allows the company to minimize the risks associated with expansion.
The global growth of Netflix is a big factor for the company’s success. By 2017 it was operating
in over 190 countries and today close to 130 million subscribers outside the U.S. In the second
quarter of 2018, its international streaming revenues exceeded domestic streaming revenues for
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the first time. This is a remarkable achievement for a company that was only in the U.S. before
2010 and in only 50 countries by 2015.
How Netflix Goes Beyond Localization:
Netflix has worked with the new markets it’s entered. The company has partnered with key local
companies to form relationships. In some cases, it has joined with cell phone and cable operators
to make its content available as part of their existing video on demand offerings. For example,
when Vodafone launched a TV service for its customers in Ireland, it included a dedicated Netflix
button on its remote controls.
The company is also applying its deep customer insight to international markets, using that
knowledge to create content that appeals to a wide range of customer segments. Netflix is able to
try different approaches in different markets. The elements of Netflix’s expansion strategy
constitute a new approach that called exponential globalization. The approach has helped the
company expand far more quickly than competitors. Going forward, Netflix will face increasing
competition not only from other global players such as Amazon Prime but also from new entrants.
Netflix’s Greatest Expansion Challenges
In spite of its success, Netflix’s expansion process was not a garden of roses. Australian TV
stations refused to recognize Netflix’s entrance into the country because being classified as a
technology company, instead of a broadcaster. In 2016, the Kenya Film Classification Board, the
Indonesian, Vietnamese and Malaysian governments prevented Netflix’s expansion because the
company didn’t comply with its censorship policies. Similar regulatory differences prevent Netflix
from penetrating into perhaps the most promising international market like China.
On the other hand, the American streaming platform was unable to defeat competitors in India.
When Netflix got to India, it was welcomed by four major platforms- Hotstar, Ditto TV, Spuul and
Eros Now. Netflix also had a hard time in Japan, with both local and foreign competitors having
very sizeable and very attractive content libraries. Netflix’s partnership with local content
producers and license purchasing is reaping good results, but it has the company operating at a
short term loss.
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Financial Analysis of Netflix
Financial Summary (Quarterly)
For the six months ended 30 June 2020, Netflix Inc. revenues increased 26% to $11.92B. Net
income increased from $614.7M to $1.43B. Revenues reflect Revenue per Customer - Average
DVD US increase of 5% to $13.17. Net income benefited from marketing decrease of 23% to
$938.2M (expense). Basic Earnings per Share excluding Extraordinary Items increased from $1.41
to $3.25.
Financial Statements
Income Statement:
The income statement reports on the performance of Netflix, the result of its operating activities.
Quarterly
Period Ending
June 30,2020
March 31,2020
Dec 31,2019
Total revenue
Gross profit
Operating profit
Net profit
6148.29
2705.58
1357.93
720.2
5767.69
2385.99
958.26
709.07
5467.43
2001.41
458.51
586.97
Balance Sheet:
The assets report major classes number of resources owned or controlled by Netflix.
The liabilities and stock holders’ equity reports major classes and amounts of external claims on
assets and owners’ capital contributions and other internally generated sources of capital.
Quarterly
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Period Ending
June 30,2020
March 31,2020
Dec 31,2019
Assets
Liabilities
Equity
37,175.28
27,840.53
9,334.75
35,059.91
26,650.62
8,409.29
33,975.71
26,393.56
7,582.16
SOWT Analysis
Netflix’s Strengths and Weaknesses (Internal Analysis)
Strengths:
1. High Brand Equity: Netflix Inc.’s one of the major strengths is its high brand equity that the
company has developed over the years. Netflix is seen as the most trusted brand in the internet
television networking segment. It focuses more on customer service, and because of this, it has led
to high popularity, customer loyalty, and trust. Having good brand equity also led to higher sales,
thereby increasing its revenue.
2. Large Platform of Content Producers and Consumers: Its large platform of content producers
and consumers is also a strength that maximizes Netflix’s operational effectiveness, service
attractiveness, and business growth.
3. Large Customer Base: Through serving 190 countries, Netflix has access to over 137 million
subscribers. This strength gives the company bargaining power when in talks with studios to secure
exclusive content.
4. Competitive Pricing: The pricing strategy of the company has designed are affordable and offer
great value to the customers. It is also a great strength of Netflix. Subscribers can watch unlimited
movies for an affordable price of $8.99 a month. It is less expensive than cable movies or going to
the cinema. It also offers higher value for higher value for higher price. For a higher price,
subscribers can even get premium plans.
Weaknesses:
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2. Increase in Operational Costs: The cost of unique content that the company produces is growing.
Netflix is spending far more on producing content than the profit it earns. Not only is that Netflix’s
spending on its various operational cost being increased to a greater extent where each year it keeps
rising. Because of this the company runs into negative cash flow.
3. Increase in Debt: Netflix is serving its diversified content in many countries around the world
which requires huge amounts of money. Netflix keeps adding to its long-term debt to fund new
content. The increase in debt every year is the sign of a significant weakness.
4. Limited Copyrights: Netflix does not have ownership of the most of its original programming
which affects the company negatively. The rights taken from other studios expire after few years,
and that content starts appearing on other sites. This way, Netflix would tend to lose its customers,
thereby
losing
its
brand
image
as
well.
Netflix’s Opportunities and Threats (External Analysis)
Opportunities:
1. Expand Customer Base: Netflix can enter many other countries and expand its services and their
subscribers. The company can start to target the other countries where it does not have its
operations yet.
2. Recover Content Library: It can expand its content licensing by increasing the contracts with
many other movie distributors. Netflix should time and now keep refreshing its content library as
it produces unique content.
3. Alliances: Netflix should partner with many telecom providers and provide excellent packages
in many other countries. Having various partnerships and alliances with them can offer more
benefits to Netflix. Also, it can partner with local broadcasters and get more customers for it.
Threats:
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1. Competition: Netflix has many competitors that provide digital streaming. Amazon, HBO,
YouTube, etc. are few of the top brands that the company competes with.
2. Digital piracy: There is a digital piracy threat for the brand. Many people across the world
would try to download online media content illegally.
3. Government Regulations: There are strict government rules for service providers like
Netflix. These rules and regulations many vary indifferent countries. It can be a big threat for
them. For example, Netflix expansion to China will be unlikely because of its restriction on
foreign content.
Netflix Corporate Strategy
Netflix follows Vertical Integration strategy.
The company started as a DVD rental business. Then it moved into online streaming of films and
movies licensed from major studios. Then, Netflix executives realized that they could improve
their margins by producing their own original content. So first the company leap into content
creation and production then acquired film studios’. In addition to buying, producing and
commissioning its own content, also acquiring film studios, it is to go through distributing its own
content in offline sphere, either on other media distribution channels such as a broadcasting
network, or in movie theatres.
Netflix business model (Present)
Netflix is take place to be unique of the most successful entertainment mass-media-companies in
the world. It is successful startup and the fast changes that technology introduced overtime. Today,
the platform has advanced to streaming technologies that have improved and innovated Netflix’s
overall business structure and revenue. The platform provides its viewers the capability to stream
and watch a variety of the shows, movies, documentaries. Netflix convert its business model or
structure from mail-in-system to streaming content based on subscription. Netflix business model
is called subscription-based business model. Netflix present business model are given below:
Netflix’s Key partners
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First of all, Netflix has built more than 35+ key partners across their media business. Today, Netflix
has millions of different types of categories for subscribers to choice from and enjoy watching or
viewing.
Netflix has built on alliances with smart TV companies like SONY and LG for new emerging
markets and the numerous other aspects. It has set an alliance with Wii, PlayStation, X- BOX and
other varieties in the gaming industry. Netflix built partnerships to provide and supply “gamer –
clients” with an entertainment video game.
Netflix essential stage of converting the business from mail-in-system to streaming. It established
a partnership with apple, android and Microsoft. Netflix linked with the network and big data
providers like Google and amazon. Netflix has combined forces and partnered with TiVo, Dish
and others TV network.
Netflix’s value propositions
Netflix strategies has provided the best customer experience by deploying valuable propositions.
Its View shows and movies in high-definition. Users can stream 24-7, minus the ads.
Netflix is avoid commercial advertising. Some people like looking at commercials advertisement
and some people avoid them. Sharing accounts option is one of the rarest features a movie platform
can provide. Netflix allows friends, group, family to share an account with specific filters and
preferences already established. Netflix users have flexibility to turn on notifications and
suggestions or keep them switched off.
Netflix’s key activities
Netflix has developed its pricing strategy and subscription model ensure affordability and new
customer acquisition. Negotiate the deals with studios, content providers and movie production
house and Comply with the laws.
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Netflix is expanding and maintaining the platform on the website, TV apps and mobile apps. It has
developed a roadmap to enter into the new market. Netflix has Built and secured a partnership with
studios and content production house.
Netflix’s customer segments
Netflix platform is designed to offer a huge collection of different types of categories for
subscribers to select from. Their collection are designed appropriately for individuals, who is
interested to watching movies, TV shows, documentaries and games. Netflix goals to promote
family-friendly educational and entertaining content to help capture the better interests of families.
Netflix offers content for children and adults.
Future Business Strategy
At present Netflix is in the business of online video streaming services and buying and making
contents and it is experiencing remarkable achievement with the existing business model. But I
think Netflix should come up with new business strategies to sustain and leverage their position in
the future competitive market as competition is increasing day by day. Some strategies that might
be taken by the company in future are given below
1. In future Netflix should focus more on original content development and spending less on
content licensing.
2. Netflix can add facilities to their existing platform that will allow third party content
providers to sell directly to subscribers, but prices will be controlled by Netflix.
3. The company should focus more on delivering more local contents comparing to its
competitors.
4. Netflix can make partnership with major airlines companies. At present, many major
airlines have installation of Wi-Fi broadband routers in their aircrafts. Netflix can use this
as opportunity and can offer their streaming library to airlines. If it able to make agreement
with major airlines companies then it can become an exclusive content provider for flights,
which can be a major competitive advantage for the company.
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5. We know that there are a lot of people around the world who are less interested in movies
but more interested in games. So, Netflix can make agreement with major video game
companies to permit them the facility to rent out video games by directly streaming them
onto the consumers gaming consol. This strategy will unlock a new market for Netflix and
will attract new subscribers who are interested in games.
6. I think the company should focus on smart contents based on study of customers’ choices
and withdraw contents that are not used. As a result streaming content expenditures will be
reduced. And it should try to get new and fresh contents before its competitors.
7. The 3D movies and 4K contents are becoming more popular in many countries. If Netflix
offer 3D movies and 4K Contents then it will be extremely beneficial for the company as
market demands of these segments are growing very fast.
Conclusion
Netflix, Inc. is now one of the biggest and popular technologies and media services provider and
production companies of America.
Its primary business model included DVD sales and rental by mail. On that time they were the
world's first online DVD-rental store. Later on the company started to think that providing only
DVD rental services is not enough to survive in the business. So they came up with a new idea of
online video streaming services. In 2007, Netflix started its online video streaming services in the
USA. In 2010, the company initially began to offer streaming services to the international market.
At present it provides its services over 190 countries. In 2013, Netflix began to produce their own
contents and their first original series was House of Cards.
I think Netflix should come up with some actions that will focus on their strengths, eradicate their
weaknesses, will also help the company to grab opportunities and reduce the threats it is facing
now like interning into new geographical locations by partnering up with their local cable
providers and streaming their local contents as well as international contents in various languages.
I think it should try connecting with IMDB, Rotten Tomatoes, Criticked and other sites to provide
a variety of ratings and other information regarding its programs for its users. To evade digital
piracy, Netflix should strengthen its security system. They can also offer even more flexible
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subscribing packages focusing on different economic classes. They can also use better technology
to improve their application and website by providing a more user-friendly interface for its
subscribers.
References
https://blogs.commons.georgetown.edu/cctp- 748%20fall2014/2014/04/22/notes-for-classdiscussion-netflix-and-movie-streaming/
https://www.netflix.com/bd/
https://en.wikipedia.org/wiki/Netflix
https://interestingengineering.com/the-fascinating-history-of-netflix
https://inspectcompany.com/netflix?fbclid=IwAR1dLHPDcwEATXwgGwn_h
OBbfq6P2WYBihi9OpYH7yaQo9iYHrshm_g_Ca8
https://www.rancord.org/netflix-swot-analysis-internal-external-strategic- factors
https://bstrategyhub.com/netflix-business-model-how-does-netflix-make- money/
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