Introduction
Netflix is a video streaming organization whose central unit of business is located in the United States. Established by Reed Hasting and Marc Randolph, this American-based firm has emerged as one of the most successful corporations operating in the media and entertainment segment (Burroughs, 2019). It serves consumers from all markets globally, with a geographical presence in continents such as North America, Europe, and some emerging economies. When it was created in 1997, the streaming giant started operating as a movie rental (Hastings & Meyer, 2020).
Today, Netflix is engaged in the distribution of films and has a consumer base of approximately 151 million paid subscribers in almost 190 countries in the world (Hastings & Meyer, 2020). Its product assortment includes television series, movies, documentaries, and other categories of motion pictures that are appealing to the customers. This paper analyzes the strategic environment in which Netflix operates and develops a blue ocean idea to help it increase its market share and also proposes a message strategy to help the organization achieve its marketing objectives.
Mission, Vision, and Core Values
Netflix’s strategic ambitions are highlighted in its mission and vision statements. These elements are modified to guarantee the peak performance of the American brand. For example, the company’s mission declaration is to ensure that the world is entertained. It focuses on the activities in the film segment as the syndicate thrives on meeting customers’ desires and needs for the media (Jenner, 2018). The critical components of this strategic element are the concept of entertainment and international reach. Therefore, the first section highlights the corporation’s products and services, whereas the second segment focuses on its objective of constantly developing to worldwide markets to continue entertaining the world.
Moreover, Netflix’s vision statement provides a clear picture of where it intends to be in the future. As such, the firm plans to continue being at the forefront of the Internet and entertainment segment. According to this strategic element, the American brand has to continuously improve its performance to maintain market leadership (Lobato, 2018). In particular, the consortium aims to improve its headship in the streaming industry while also enhancing operational effectiveness and increasing membership to meet its objectives. Another significant component of the vision statement is the “Internet,” which represents its primary landscape of operations (Burroughs, 2019). Moreover, the brand’s philosophy of entertaining the world is also incorporated in the vision statement to emphasize its goal of ensuring customer satisfaction.
The success of Netflix is attributed to several core values. For example, judgment allows the employees to make prudent decisions irrespective of various uncertainties. Moreover, it also helps in the identification of the causes and consequences of multiple problems. Communication also constitutes a vital part of the streaming company’s core values. As such, Netflix wants its staff workers to have an understanding of developing concise and articulated speech and writing (Lobato, 2019).
The employees are also required to develop the art of listening and understanding to maintain calm composure in challenging times. Curiosity is also a significant aspect of Netflix’s corporate culture because it ensures the continuity of the organization’s tasks (Hastings & Meyer, 2020). In addition, innovation has enabled the finding of appropriate talents with the ability for novelty and e-conceptualizing problems to develop alternatives.
Inclusion has enabled the brand to create an environment that promotes collaboration and creativity that helps the firm to accomplish its objectives. As such, the corporation focuses on developing employee skills by advocating for cooperation with people from diverse backgrounds. Lastly, Integrity is a crucial part of Netflix’s core values (Jenner, 2018). It helps in creating an environment that promotes co-existence and respect for others.
Competition
Netflix primarily operates in an oligopolistic industry dominated by other significant players. An oligopoly is a market structure comprising a few numbers of organizations, none of which can have a considerable impact on the market. Therefore, the American brand’s key competitors are consortiums such as Amazon, Hulu, Disney, and HBO. Such a market structure has the probability of having instances of price wars occurring (Shattuc, 2020). This fact suggests that if one competitor decides to lower the rates of its services, then the others will counter by minimizing the same to remain competitive. In Netflix’s case, its industry is a perfect example of an oligopolistic environment as all the firms operating it has comparably priced packages for the services (Biesen et al., 2019).
However, while Netflix holds the leading position, it has a considerable influence over this segment. Therefore, if it decides to lower prices, then Hulu ad Amazon will have to do the same or risk the customers switching to other brands. The barriers to entry in this industry are also considered to be high since emerging firms will require massive capital investments and information technology professionals to help in monitoring databases (Jenner, 2018). Moreover, new organizations will find it hard to penetrate this segment due to the economies of scale. Since the incumbents have operated in this sector for a long time, their cost of production will be greatly reduced.
Analysis of Competitors
The video streaming realm continues to exhibit a series of growth. Since the impediment to entry is low, particularly for old media companies such as HBO and Fox 21st Century, a corporation like Disney has greater chances of successfully operating in this space (Dias & Navarro, 2018). As such, this corporation will have to produce appealing content to maintain and attract viewers. There is currently aggressive competition among the firms, primarily based on getting popular licensed content from other media conglomerates or developing their content. Amazon Prime Video dictates nearly 100 million in its consumer segment (Wayne, 2018).
Moreover, both Netflix and Amazon are considered the largest video streaming giants for content distribution, having recorded approximately $8 billion and $5 billion respectively in 2018 (Wayne, 2018). Irrespective of Amazon, the entertainment sector has not identified another strong revenue generator.
YouTube Premium is considered a consistent viewer platform and content distribution, but its subscription segment has not been effective since it is more adjusted toward the music streaming business. Therefore, it has the potential to become a niche rival in the video streaming podium as it is more influenced by the creators on the platform. Moreover, this industry also has other competitors, such as Hulu, commanding a consumer base of approximately 20 million viewers (Wayne, 2018). Therefore, the competition in this industry will continue to be stiff as technology advances.
Structure and Differentiation of Product
Netflix uses a differentiation strategy to effectively make its products competitive in the entertainment industry. It enables the American brand to attract and retain consumers, thereby reinforcing its intensive techniques to develop its business model (Fagerjord & Kueng, 2019). Therefore, this approach allows Netflix to develop its products to make them unique in the video streaming sector. For example, the company is engaged in making original content, regardless of streaming television series and movies from third parties (Hastings, 2020). In essence, this tactic has enabled the American consortium to improve its sustained competitive advantage, thereby maintaining peak performance in the industry.
Five Forces of Porter
The video streaming segment is dominated by firms such as Hulu, Amazon, HBO, and Disney Plus, thereby making the competitive environment aggressive. In essence, this rivalry is based on price factors as stipulated by the oligopolistic nature of this environment. The American brand also has rivals from traditional platforms such as organizations selling videotapes (Lobato, 2019). Firms are continuously looking to increase their market share by winning more customers, and they accomplish this by setting competitive prices to attract new viewers. However, Netflix has managed to remain the market leader by offering differentiated product offerings and competitive prices to its consumer segment.
The level of threat posed by substitute products in the video streaming segment is moderate. The productivity of Netflix is jeopardized by traditional media platforms irrespective of the brand’s transition to an online-based operation. Moreover, viewers may also opt for other recreational activities, such as amusement parks offered by Disney (Hastings & Meyer, 2020). Since the prices of products in this industry are competitively set, consumers can easily switch from Netflix’s content to watching television series and movies distributed by Amazon Prime Video and Hulu (Wayne, 2018). Therefore, Netflix addresses these challenges by renewing its content library.
The customers’ bargaining power in the video streaming space is important for Netflix, specifically in determining its pricing approaches. Therefore, the dynamics of this industry allow the buyers to have an elevated influence over the American brand. In addition, the profits of Netflix are largely dependent on the viewers who are located in different regions of the world. Low switching costs from one brand to another give the buyers a chance to choose other products, especially since Netflix can cancel subscriptions (Fagerjord & Kueng, 2019). Therefore, the buyers will continue to have a great impact on the American streaming giant.
Netflix’s suppliers exhibit significant bargaining power due to the few numbers of companies generating content. In addition, obtaining a license for the distribution of movies entails negotiating price terms, where producers have an advantage. Therefore, Netflix has to lower its revenues to maintain an agreement with the merchants to bolster its viewership, suggesting that the suppliers have high power (Dias & Navarro, 2018). As such, this element of the industry analysis framework is essential for Netflix because it helps it gain insight into the forces influencing its supplier relationship management.
The threat of new entrants in the video streaming space depends on the resources and capabilities of the enterprising organizations. For example, major conglomerates such as Apple, Disney, and HBO are either unveiling or have introduced their new entertainment platforms. Therefore, the threat of new establishments successfully entering the streaming segment is high for enterprises with sufficient capital, resources, economies of scale, and supplier contracts (Dias & Navarro, 2018). However, new organizations have limited chances of entering the industry due to barriers such as high investments in content production.
Blue Ocean Strategy
A blue ocean approach is a technique that organizations use to simultaneously pursue differentiation and cost-leadership in an attempt to introduce a new product to satisfy a particular demand. Therefore, the blue ocean idea identified for Netflix would be to introduce a new platform for online music distribution. The suggested value proposition for the new business idea would be to allow the customers to tailor their music preferences, thereby creating and customizing their preferred songs for playlists.
Strengths, Weaknesses, Opportunities, and Opportunities (SWOT) Analysis
Strengths
One of the leading core competencies of Netflix is its high brand equity as compared to its competitors. This capability enables the American giant to maintain its attractiveness and ability to successfully enter new markets. Additionally, the consortium has a large platform that accommodates many content producers and consumers, maximizing its operational effectiveness and enterprise growth (Burroughs, 2019). For example, the large number of consumers attracted by the corporation is attributed to its content creators. Lastly, Netflix’s capacity to develop original films is considered a significant core capability. It suggests that the video streaming behemoth earns from its unique product catalog, in addition to revenues from streaming operations.
Weaknesses
Irrespective of these strengths, Netflix also has several weaknesses in its internal structure. For example, the company’s business model is imitable, which means that its competitors can easily copy it. Moreover, the organization largely depends on content producers to drive operations. However, this factor makes it susceptible to the impacts of the producers’ approaches. Netflix also relies on Internet Service Producers, organizations that determine the connectivity speed of viewers (Hastings & Meyer, 2020).
It is a critical element in determining consumer satisfaction with the services offered by the American conglomerate. Moreover, it is also limited by increasing operational costs attributed to the production of its original content. For example, in 2018, the budget allocation for this segment was approximately $13 million (Jenner, 2018). As such, the corporation can utilize its opportunities to neutralize its weaknesses in the external environment.
Opportunities
Netflix’s macro-environment has several opportunities that can either help it or undermine its performance. For example, the company can expand its product mix by introducing other commodity divisions or improving its current offerings. The American brand can consider developing new entertainment content accessible via its website and mobile applications (Wayne, 2018). Penetration of new markets is also a market opening that the conglomerate should effectively utilize. Following its huge consumer segment, Netflix has not invested in the Chinese market. Therefore, this is a big opportunity for the corporation; this country has about 500 million people who can stream content on their smartphones and computers (Lobato, 2018).
European diversity indicates that several unexploited markets are speaking various languages other than English that Netflix can consider. In addition, the emergence and availability of Virtual Reality and 4K technologies at affordable prices are considered an opportunity for Netflix to create more offers for their consumers.
Threats
The external environment of Netflix has several threats that jeopardize its business model and product offerings. For example, competition increases as other brands are also looking to improve their presence in the industry. Digital piracy is also a critical factor that threatens the profitability of Netflix (Shattuc, 2020). Irrespective of the laws stipulated to curb this issue; it remains a challenging factor since there is always a website that offers similar products provided by Netflix free for download (Jenner, 2018). The company is losing substantial amounts of money each year due to cybercrimes. Therefore, the American brand should find a way to address this problem since it affects its strategic existence.
PEST Analysis
Political
Organizations need to consider the political drivers shaping their operations. Netflix operates in an online space, and as such, its business activities are subject to various government review programs. Governments have increased their involvement in commercial activities, and data collection is no exception. In the European Union (EU), regimes have heightened their control over technology firms participating in anti-competitive habits. Therefore, the American brand has to customize its services to meet the legal requirements as per the level of regulation in different markets around the world (Burroughs, 2019). Moreover, the government’s role is also intensified in the context of taxation, especially within the EU, where various administrations are considering new tax laws for organizations that could increase their tax liability of Netflix.
Economic
Economic drivers are increasingly influencing how firms operate in the global market. Therefore, as the per capita income increases, individuals are more likely to spend their money on subscribing to Netflix’s offerings. Over the years, the world’s financial output has been outstanding, allowing consumers to purchase Netflix’s services (Hastings & Meyer, 2020). Moreover, since the emergence of the COVID-19 pandemic, the American firm has seen a considerable increase in its subscriptions.
Economic activity is anticipated to start improving once social distancing rules are relaxed in the US and other places in the world. However, decreased economic levels for extended periods can have dire consequences on the operations of Netflix since consumers will be looking to save more money (Shattuc, 2020). Therefore, the American brand should understand the markets to adjust its financial approaches.
Sociocultural
Social and cultural elements of an environment are also important for the business of Netflix. Therefore, the company needs to gain insight into the various consumers’ tastes and preferences. The American brand has specifically developed content that suits its diverse viewers. A considerable factor influencing the growth of this organization is the emerging group of millennials who opt for watching television series on digital platforms instead of traditional media avenues (Jenner, 2018). According to researchers, this cohort is more likely to subscribe to Netflix’s services than the older population (Hastings & Meyer, 2020). In essence, social trends are essential for the American organization to improve its performance.
Technological
Netflix is at the forefront of technological advancement since it primarily relies on the Internet to make profits. Its fast surge in popularity is attributed to customer experience, emanating from its improved user interface, which is intuitive. The American giant also utilizes different machine learning algorithms to suggest shows and motion pictures for its customers (Drucker, 2016). As such, this has enabled it to create an exclusive and differentiated experience for its viewers. In essence, technology has played a vital role in assisting Netflix to establish peak performance and market leadership.
Consumer Profiling
Consumer profiling refers to the process of summarizing buyers’ information related to their purchasing patterns, income level, psychographics, and preferences. It allows organizations to gain insight into their consumer segment and aid in identifying and understanding the target market. Netflix’s demographic profile involves both genders, between the ages of 17-60, with household incomes of approximately $30,000 and more (Appel et al., 2020). This consumer segment includes various racial groups with a variety of foreign and global films. In addition, the consumer’s psychographic profile includes individuals who are often busy attending cinemas or going DVD shopping (Chaffey & Smith, 2017). Netflix utilizes various social networking avenues to promote its content. For example, it uses Facebook, Instagram, and Twitter to reach its customers.
Message Strategy
The message strategy identified for Netflix’s blue ocean idea would be to provide better services for its consumers who are interested in streaming music. Therefore, the tagline will revolve around the intentions of the company in establishing a platform that allows consumers from around the world to listen to their preferred music at any given time.
As such, it will take the following form as identified below.
“Music for the soul, enjoy it at any given time on our platform” (Drucker, 2016).
SMART Goals
Table 1. SMART Goals.
Media/Marketing Plan
Social Media
Marketing plays a vital role in any business setting, and as such, it is recommended that Netflix utilize various social media outlets to promote its new idea. Currently, the American firm uses its social media strategy to entertain its customers through films and motion pictures and develop witty content (De Pelsmacker et al., 2018). It primarily gathers feedback to understand what the audience is saying and customizes content that exceptionally resonates with them. Therefore, it is recommended that Netflix should utilize various social media influencers in platforms such as Instagram, Tik Tok, and Twitter to create awareness for its new business idea.
Conversions/Optimizations
Anticipated Benefits
Blue ocean ideas are beneficial for organizations only if implemented and properly executed. Netflix is an organization that has the resource and capabilities to successfully venture into online music streaming benefits (Deepak & Jeyakumar, 2019). With its strengths, the American firm can utilize its brand equity, worldwide recognition, and advanced technologies to successfully create a platform to compete against organizations such as Spotify, SoundCloud, Deezer, and TIDAL (Mothersbaugh et al., 2019). As such, the company will be able to increase its market share while also increasing sales and revenues.
Recommended Media Planning
Media planning refers to the steps involved in delivering a promotional message to an identified group of customers. Netflix should utilize two significant strategies to ensure the effectiveness of its message delivery to the identified consumer segment. For example, earned media refers to any act of publicity that is not entirely generated by the company but by other organic measures such as the customers, social media enthusiasts, and bloggers (Kamps & Schetter, 2018). This approach will be effective because it is essential in distributing and amplifying content for the customers to view it. Moreover, Netflix should also incorporate a paid media method, which involves external promotional efforts such as branded content and pay-per-click advertising (Kannan, 2017). This approach will be effective because the American brand will gain insight into their target market, retain customers, boost content visibility, and increase chances of reaching their identified consumer group.
Conclusion
This paper has analyzed the strategic landscape of America’s leading video streaming platform Netflix for the development of a blue ocean idea. The proposed business opportunity for the multinational organization would be to invest in an online music streaming platform. Since it has the resources and capabilities to venture into this new sphere, the corporation will have to assemble various teams and capabilities to realize its objectives as highlighted in the SMART goals. Netflix’s strategic ambitions are stipulated in its mission and vision statements. These components are specifically developed to ensure the organization maintains market leadership in the video streaming space.
Moreover, American brand’s key competitors are consortiums such as Amazon, Hulu, Disney, and HBO, and this rivalry is mainly based on price wars. Netflix’s differentiation strategy is based on making original content, regardless of streaming television series and movies from third parties. A blue ocean strategy is a methodology used by companies to pursue differentiation and cost leadership simultaneously to launch a new product to meet a specific need. As a result, the identified blue ocean concept for Netflix will be to launch a new channel for streaming music sharing.
References
Appel, G., Grewal, L., Hadi, R., & Stephen, A. T. (2020). The future of social media in marketing. Journal of the Academy of Marketing Science, 48(1), 79–95.
Biesen, S. C., Campbell, P., Castellano, M., Davis, A., Gauthier, P., Maganzani, P., Mcclantoc, K., Meimaridis, M., Murray, J. C., & Sirianni, J. (2019). Netflix nostalgia: Streaming the past on demand. Rowman & Littlefield.
Burroughs, B. (2019). House of Netflix: Streaming media and digital lore. Popular Communication, 17(1), 1–17. Web.
Chaffey, D., & Smith, P. R. (2017). Digital marketing excellence: Planning, optimizing and integrating online marketing. Taylor & Francis.
De Pelsmacker, P., Van Tilburg, S., & Holthof, C. (2018). Digital marketing strategies, online reviews and hotel performance. International Journal of Hospitality Management, 72, 47–55. Web.
Deepak, R. K. A., & Jeyakumar, S. (2019). Marketing management. Educreation Publishing.
Dias, M., & Navarro, R. (2018). Is Netflix Dominating Brazil. International Journal of Business and Management Review, 6(1), 19–32.
Drucker, P. (2016). Culture eats strategy for breakfast. Doesn’t It.
Fagerjord, A., & Kueng, L. (2019). Mapping the core actors and flows in streaming video services: What Netflix can tell us about these new media networks. Journal of Media Business Studies, 16(3), 166–181. Web.
Hastings, R. (2020). No Rules Syriana: Netflix and the Culture of Reinvention (Random House Large.
Hastings, R., & Meyer, E. (2020). No rules efficiency procedures: Netflix and the culture of reinvention. Penguin Press New York, NY.
Jenner, M. (2018). Netflix and the Re-invention of Television. Springer.
Kamps, I., & Schetter, D. (2018). Performance marketing. Springer.
Kannan, P. K. (2017). Digital marketing: A framework, review and research agenda. International Journal of Research in Marketing, 34(1), 22–45. Web.
Lobato, R. (2018). Rethinking international TV flows research in the age of Netflix. Television & New Media, 19(3), 241–256. Web.
Lobato, R. (2019). Netflix nations: The geography of digital distribution. NYU Press.
Mothersbaugh, D. L., Hawkin, D. I., & Kleiser, S. B. (2019). Consumer behavior: Building marketing strategy. McGraw-Hill Higher Education.
Shattuc, J. (2020). Netflix, Inc. And Online Television. A Companion to Television, 145–164. Web.
Wayne, M. L. (2018). Netflix, Amazon, and branded television content in subscription video-on-demand portals. Media, Culture & Society, 40(5), 725–741. Web.