Netflix Inc.’s Strategic Audit for 2019-2020

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Executive Summary

As of 2020, Netflix is the leading video streaming service in the world, with over 180 million members. The portal initially started as a DVD rental service in 1997 in California, and gradually built its way up to being one of the most successful businesses in the entertainment industry. The new concept of monthly subscriptions for DVD rentals quickly became popular among Americans, and the company became well known for its innovative way of restructuring the entertainment system. Unlimited access to thousands of movies and TV shows without commercials, and with an ability to watch on multiple devices attracts millions of people to buy Netflix memberships. However, with the rapidly changing market, the service must quickly adapt to new trends to keep their leading positions. This report analyses the internal and external environment of Netflix Inc. conducts analyses in different matrix’s and proposes recommendations and alternatives for strategic planning.

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Strategic Planning

Current Performance

Netflix’s performance in the past few years has been steadily growing. According to the last quarterly report of 2019, the service added 8.76 million members worldwide, overachieving all forecasts. However, in the company’s home country – the United States, less than half a million new subscribers were added, due to the newly launched competitor Disney Plus. For the third quarter in the row, the number of new members in the U.S. has been much lower than expected. The 4th quarter revenue also exceeded global expectations with $5.47 billion, 31% more than the previous year.

Mission

“We promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact.”

The company’s mission statement calls for what Netflix is best known for – unique, excellent streaming services. From the mission statement, one can understand that the corporation equally values customers’ satisfaction with the service and the interests of their stakeholders. By analyzing the mission statement, it is clear that Netflix aims to impact the lives of its members, by setting high goals for corporate social responsibility. The service also does not aspire to be a stable company, vice versa; it continually works on improving and exceeding the expectation of every customer and investor. Lastly, Netflix’s ultimate goal is to deliver high-quality entertainment to keep its members excited about the new releases and fill them with joy every time they launch the service.

External Strategic Factors (EFAS)

For several years, Netflix has possessed itself as a leader in the streaming and rental industry. Unlimited access, in combination with affordable costs, has put the service on the top of the list for customers when it comes to choosing a streaming service. With such a global coverage political, economic, and social factors of the countries in which Netflix operates significantly impact its business. Besides, keeping all of the personal information of their customers safe from any hacking risks has always been a priority for Netflix. The well-strategized external environment is a crucial factor in maintaining strong positions in the global market. Therefore, Netflix must adapt to the rapidly changing digital world and accordingly tailor its current and future strategies.

External Factors Weight Rating Weighted Score Comments
Opportunities
  1. Expansion of the produced content
0.2 4.7 0.94 Netflix should continue to produce original pictures.
  1. Exclusive Original Netflix Content
0.2 4.8 0.96 Ability to watch only movies and shows created by Netflix production
  1. Global Expansion
0.1 4.9 0.49 Put more effort into expanding the service to other countries
  1. Video Game Rentals
0.05 3.5 0.175 Adding the rentals of video games can expand the members circle
Threats
  1. Big emerging competitors.
0.15 4.5 0.675 Competing companies might steal Netflix’s working business strategies.
  1. Decline in DVD rentals
0.07 2.7 0.19 Significant loss of revenue may be cause due to the future decline in DVD rentals need
  1. On-Demand Video
0.1 2.3 0.23 Such services are emerging high competitors
  1. Unstable Pricing
0.13 3.9 0.5 The price can rise, according to the financial situations
Total 1.00 4.16

Internal Strategic Factors (IFAS)

Netflix is widely known for its desire to provide the best customer service and high-quality content within the service. The progressive strategies, excellent management and admirable corporate culture is what helped the company to achieve the main goals and put them among the most successful businesses. Netflix Several years ago, the company started producing original pictures, which now win numerous cinematography awards; therefore, it is not only a streaming service; it is a full production center now. Continual development and innovation keep Netflix the leading streaming service on the global market.

Internal Factors Weight Ratings Weighting Score Comment
Strengths
  1. Unique Corporate Culture
0.22 4 0.88 Netflix’s corporate culture has been distinguished multiple times for being thoughtful and employee friendly.
  1. Creation of Original Content
0.13 3 0.39 Unique movies created by Netflix and available only on their platform.
  1. Stable Pricing System
0.14 2.7 0.432 If the subscription price raises, the stock prices drop.
  1. Exclusive relationship with studios that provide content
0.08 3.4 0.272 Broadcast Networks provide exclusive content for Netflix, through their excellent communication strategy.
  1. Great customer service
0.07 2.9 0.203 The service is known for having fast and effective customer service.
Weaknesses
  1. Negative Cash Flow
0.11 2.8 0.308 The budget spent on original pictures is tremendous
  1. DVD Subscribes decline
0.03 3.7 0.111 Demand for DVD rentals is significantly dropping
  1. Dependence on the Networks
0.09 4.2 0.378 Supplier come out with their streaming services and become competitors.
  1. Bad reputation as an environmental preserver
0.02 4 0.08 Has bad publicity as one of the companies with low ecological awareness
  1. No ownership to all content
0.11 4.3 0.473 Only owns original movies by Netflix
Total 1.0 3.527

Key Strategic Factors

Core Strategy

As a company, Netflix has one core strategy they are constantly working on, and it sounds like s following “Our core strategy is to grow our streaming subscription business domestically and globally”. Netflix has a goal of primarily focusing on delivering high-quality content to fulfill the entertainment need of its customers. The service tries to find an individual approach of appealing to every member by customizing the exploring page according to their watching preferences. The annual objective also helps optimize and strengthen new strategies, so at the end of every year, the indicators of members, media library, profit, etc. only rise.

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Competitive Strategy

In the developing entertainment market, every year marks more strong competitors for Netflix; therefore, the company must develop robust strategies to stay in the leading positions. Netflix states that in terms of competitive tactics, they focus on three main factors: user experience, content, and spending. According to the annual reports, Netflix invests a significant part of its budget into creating original content. Companies focus majorly shifted in comparison with previous years, as it would mainly put the money into licensing more movies from influential movie productions. Such strategy sift was created to build up a library of lasting content that does not get removed after some time, and even though it brings a lot of financial damages to the company at the moment, the strategy must play out in the future. In 2020, Netflix is leading Oscar nominations with 24 nods, proving that the company’s original content is on the highest level of quality.

Global Strategy

Operating in 190 countries, Netflix is a worldwide enterprise. To maintain the leading positions not only on the national but also on the international market, Netflix must create specific global strategies. After analyzing Netflix’s annual report, the company has been exponentially growing on the global markets; moreover, the revenue from foreign members has been significantly exceeding US profits.

The uniqueness of Netflix’s global strategy is that every country has different content availability due to diverse foreign regulations. There are many challenges the company faces on the global market, like the language barrier, inconvenience for people to play for content, high pricing for developing countries, and many others. However, gradually Netflix accommodates and solves such issues. For instance, the service incorporates more translated audio and subtitles to hundreds of available movies. Netflix needs to acknowledge all the competitors in each country to develop individualized strategies for more rapid expansion.

Strategic Alternatives

The market of streaming services is rapidly expanding, and Netflix as a leading platform must develop compelling strategies and adapt to the new standards to remain the market leader. The best strategy for Netflix would be focusing on and boosting its substantial assets – original content. Increased focus on the original movies will broaden the unique media library and consequently outrun threatening competitors like Amazon or Hulu.

The latest ratings prove that Netflix must put more focus on the domestic market, as the number of members became static and do not reach the expected value with every quarter. New products and improvements in the technological area could raise the interest of old customers and inevitably attract new ones. Such a strategy may include collaborating with tech giants like Apple or Samsung on developing an innovation connected with movie streaming.

To reduce competitiveness, especially in smaller countries, Netflix could buy local streaming companies. These methods would benefit the company in many ways: reducing competition and taking leading positions in countries where Netflix is less prevalent. Moreover, acquiring new companies may bring new ideas, services, and innovations to the companies together with gifted employees.

Therefore, working towards gaining new customers, creating new products, partnering with tech companies, and buying off competitive firms should create a powerful combination that will keep Netflix on a stable leading level domestically and globally. Satisfying customers must be the company’s primary goal, which consequently will attract new loyal members to the service and eliminate competition. With such alternatives, Netflix will inevitably keep the leadership of the best streaming service.

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Conclusion

Netflix is the leading streaming service that operates in 190 countries, with over 180 million members in total. Amidst such global coverage, the company faces many strategic challenges. However, the current performance indicates that each quarter Netflix exceeds the predictions and exponentially increases not only the revenue but also the customer base. Netflix has an influential both external and internal environment; thus, some issues with domestic outreach have been apparent in recent years. Focus mainly on a vast international expansion, has left the local audience less entertained, especially with rapidly rising competitors. Original content has taken a large portion of Netflix’s budget, which became their primary competitive strategy, as with the creation of unique quality content, the viewers choose Netflix over other streaming services. Some strategy alternatives must be implemented to remain the biggest streaming service. Alternatives must be implemented to remain the biggest streaming service.

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BusinessEssay. (2022) 'Netflix Inc.'s Strategic Audit for 2019-2020'. 12 May.

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BusinessEssay. 2022. "Netflix Inc.'s Strategic Audit for 2019-2020." May 12, 2022. https://business-essay.com/netflix-inc-s-strategic-audit-for-2019-2020/.

1. BusinessEssay. "Netflix Inc.'s Strategic Audit for 2019-2020." May 12, 2022. https://business-essay.com/netflix-inc-s-strategic-audit-for-2019-2020/.


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BusinessEssay. "Netflix Inc.'s Strategic Audit for 2019-2020." May 12, 2022. https://business-essay.com/netflix-inc-s-strategic-audit-for-2019-2020/.