Case Analysis for Netflix

Case Analysis for Netflix

Section 1: Identify the Firm’s Core Strategy

As a global streaming business, Netflix’s core strategy is to grow a large subscription business by combining streaming and DVD’s. Their focus is subscription-based, commercial-free streaming of TV shows and movies, and they pursue new content deals aggressively. Specifically, the more content they can offer to consumers, the more subscriptions they will sell. However, since they realized that this competitive advantage would diminish over time, they expect to develop other advantages deeply, such as brand, distribution, and proprietary merchandising platform.

Section 2: External Analysis (Opportunities & Threats)

 Opportunity:

The development for the technology in the world leads to demand for digital streaming increasing. Netflix could expand internationally in the international marketplace, such as Canada.

 Threats:

1. The growth of online commerce leads Netflix to alter its business model, which requires more regulation.

2. Content deals are becoming more expensive

3. More and more competitors imitating and duplicating Netflix products and services less expensively

4. Networks which are beginning to offer free streaming of content on their websites is increasing

5. Issues with renegotiating contractual agreements with distributors and electronic partners because of their short term contractual agreements.

 Five Forces

1. Rivalry among competing firms: High. Buyer costs of switching brands is low and product offerings are weakly differentiated. The number of competitors is growing and rivals have diverse strategies for providing their services.

2. Bargaining power of consumers: Medium to high. The cost of switching to competing products is low, as well as the level of convenience for switching. Products are for the most part undifferentiated.

3. Bargaining power of suppliers: Low to medium. There are a large number of suppliers within the industry and a variety of ways in with to gain access to the needed material. However, most sellers cannot self-manufacture these movie titles; whereas the suppliers could easily begin offering these services themselves.

4. Potential development of substitute products: Low. The cost per DVD to buy is greater than that to rent or stream a movie. Buyer demand for purchasing DVDs is decreasing due to the lack of disposable income created by the financial crisis, as well as the practicality of owning a vast collection of physical DVDs. (On Demand, Hulu, Apple, Google TV, YouTube)

5. Potential