Netflix: Analysis of the Strategy

Current Situation

Current Performance

In 2019, Netflix demonstrated successful performance in its business industry. The company’s total assets are estimated at $33,975,712, while the market shares reached $437,799 (basic) and 451765 (diluted). As a result of its investment activity, Netflix received $387,064 of cash.¹

Strategic Posture

1. Mission: Netflix provides customers with access to TV shows, movies, and other entertainment products.
2. Objectives: The corporate objective is to provide quality services according to the customers’ demands; the business objective is to develop globally and increase the number of clients. The functional objective of the company is to improve customer convenience.² The objectives seem to correspond to the company’s mission and its current values and priorities.
3. Strategies: Netflix collaborates with electronics companies to provide access to its products on different devices. It also develops original content to increase customers’ interest and offers its services abroad (for example, in Canada).³ The strategies are aimed at improving the quality of products and developing globally.
4. Policies: Netflix provides data and privacy protection; its content is protected by copyright and trademarks, which can only be used under permission. DVDs and streaming provided by the Netflix service are covered by patents.⁴ Netflix regulations cover the most important aspects of the company’s business and comply with its main goal, objectives, and environment.
5. The discussed characteristics are clear and consistent with each other. The company’s objectives and strategies demonstrate the tendency of its global development, as well as the maintenance of its status as a leader.

Corporate Governance

The company’s governance body includes eight officers and eleven directors. These employees with significant experience obtained their university diplomas in different institutions around the world (for example, in America, Australia, and Germany).⁵ There are five most significant members of the company’s management:

• Reed Hastings is the founder and CEO of the company, specializing in artificial intelligence.
• David Hyman is the Chief Legal Officer with experience of work as a senior corporate counsel.
• Jackie Lee-Joe, the Chief Marketing Officer, has more than twenty years of marketing experience.
• Jessica Niel is the Chief Talent Officer responsible for careers in the engineering department.
• Spencer Neumann is the Chief Financial Officer with the experience of working in the Walt Disney Company.⁶

External Environment: Opportunities and Threats

Societal Environment

1. Economical trends:
   1. There is increasing financialization in the sphere of media and entertainment.⁷ It can be a threat to the company since the success of Netflix may be solely evaluated by its market performance.
   2. A shift in international expansion may be considered an opportunity for a company to boost its global success.⁸
2. Technological trends:
   1. Cable and data providers control distribution; therefore, collaboration with such companies is the opportunity to succeed.⁹
3. Political-legal trends:
   1. The role of privacy data is increasing and can be a threat to the company in case if it does not regulate privacy policy appropriately.¹⁰
4. Socio-cultural trends:
   1. Increasing media influence leads to audience fragmentation; the company needs to adapt to different groups of audience, for example, families. The inability to perform it may become a threat to its success.¹¹
5. The discussed forces may vary due to the economic or political situation in particular regions.

Task Environment

The threat of new entrants

The company is successful in the industry, and new entrants are not an immediate threat.

Bargaining power of buyers

The bargaining power of buyers is high since there are certain demands of the audience concerning the price and quality of Netflix products.

The threat of substitute products or services

This aspect may vary, as in some regions, movies and TV shows are available online: for example, in America, the threat of substitute products may be significant.

Bargaining power of suppliers

Supplier bargaining power is rather high: for example, content suppliers like Amazon compete with the company in this business sphere. To make its services available on different devices, Netflix should also collaborate with popular technology providers like Apple.

Rivalry among competing firms

Netflix’s competitors are other big companies like Disney + and Amazon, providing access to movies and TV shows.

Immediate Environment

Today, the opportunity for Netflix is connected with the foreign audience and collaboration with technology providers. At the same time, its competitors with the same or better offers may become a threat to its prestige.

Opportunities and Threats that are Facing the Organization

The following opportunities are significant for the company: expanding globally, expanding the customer base, and collaborating with electronics providers. They all are connected with domestic and global development. The threats of the company include competition, finance, and social issues. Netflix needs to adapt to current trends to correspond to immediate market conditions.

“Strategic Group” Analysis

Amazon is the major competitor of Netflix with the same price for products and services; moreover, like Netflix, it develops its own original shows. Disney + follows the same customer-oriented strategy by providing content for different groups of clients.¹² Both companies are rather developed and successful abroad, which makes them a possible threat.

Table 1. Netflix External Environment.

Table 1 demonstrates that Netflix should pay more attention to its market share, partners, and privacy policy. Targeting different groups of customers, reaching foreign clients, and developing online and offline technologies may positively influence its performance.

Summary of External Factors

Netflix can mostly be affected by technological and social changes since the world is experiencing shifts in technologies and globalization. At the same time, with the increasing role of finance, Netflix should pay attention to its investments and market share, as these factors may become decisive for its success.

Footnotes

1. Netflix (2019). Q4 2019 Financial Statements. Web.
2. Lussier, R.N. (2019). Management fundamentals: Concepts, applications, and skill development. SAGE Publications.
3. Lussier, R.N. (2019). Management fundamentals: Concepts, applications, and skill development. SAGE Publications.
4. Legal notices. (2018). Netflix. Web.
5. Officers & directors. (n.d.) Netflix. Web.
6. Officers & directors. (n.d.) Netflix. Web.
7. McDonald, K., & Smith-Rowsey, D. (2016). The Netflix effect: Technology and entertainment in the 21st century. Bloomsbury Publishing USA.
8. McDonald, K., & Smith-Rowsey, D. (2016). The Netflix effect: Technology and entertainment in the 21st century. Bloomsbury Publishing USA.
9. McDonald, K., & Smith-Rowsey, D. (2016). The Netflix effect: Technology and entertainment in the 21st century. Bloomsbury Publishing USA.
10. McDonald, K., & Smith-Rowsey, D. (2016). The Netflix effect: Technology and entertainment in the 21st century. Bloomsbury Publishing USA.
11. Johnson, D. (Ed.). (2018). From networks to Netflix: A guide to changing channels. Routledge.
12. Moskowitz, D. (2020). Who are Netflix’s main competitors? Investopedia. Web.