Case Study - Case Study: “I JUST CAN’T WORK WITH HER:” TEAM CONFLICT IN THE NORTHEAST SALES DIVISION" (pp. 98 - 102)

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Case Study Number One: Netflix

Organizational Change

University of the Incarnate Word

Dr. Garza

Presented by: Student

23 January 2022

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Case Study: Netflix

Netflix is a popular subscription-based streaming service with hubs and subscribers

across continents. However, Netflix is also a company that has successfully shifted its business

model over the years. This is evident when it went from DVD-based distribution to solely

streaming. As of 2019, Netflix faced several challenges, ranging from internal decisions to other

streaming competitors. Though environmental factors, internal drivers, competition, and

organizational culture all affected Netflix, it remains steadfast in its product delivery and

organizational values.

Environmental Factors

Founded in 1997 by Reed Hastings because of a fine from Blockbuster, the original intent of

Netflix was a DVD rental service conducted by mail, fueled by the desire to be an “Amazon of

something” (Rodriguez, 2017). It soon evolved into a subscription-based service, with price

points dependent on DVDs rented per month. Eventually, just before 2010, streaming became a

popular modality of video consumption, and Netflix moved away from the DVD model to

become a streaming service. Each of these swerves in their business model highlights various

environmental factors, particularly in social, technological, and political realms (Palmer et al.,

2022, p. 42). Netflix’s shift from DVDs to streaming came when household internet became

more readily available, with faster connection speeds, the dawn of “Smart” technology, and

DVDs became increasingly obsolete. This rapid shift in technological factors presented an

opportunity for Netflix to shift its product delivery to its customer base.

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In addition to technology shifts, social and political factors have influenced Netflix

(Palmer et al., 2022, p. 42). As recently as 2020, the Protecting Lawful Streaming Act was

enacted to provide legal coverage to legitimate streaming companies or those that distribute

media online. This law helps target platforms that steal content to profit from it. The political

shifts in streaming regulation, global and national Internet regulation, and telecommunications

are all factors driving Netflix and its decisions. Additionally, socially, Netflix was utilized

during the initial lockdown phases of COVID as a popular refuge while also introducing social

viewing with friends, where groups could collaborate and watch Netflix shows together. The

social factors of need for connectivity during an isolating event drove this feature.

Finally, Netflix was affected by an extreme example of Environmental pressures from the

COVID-19 pandemic (Palmer et al., 2022, p. 67). Just as Netflix was shifting to focus more on

its production rather than restreaming shows it had gathered rights to, production was more

difficult due to public health concerns, shifting local and national government regulations and

lockdown mandates. This impacted the current internal driver of Netflix’s goals to develop its

own content, like similar competitors like Amazon Prime or Disney+. Collectively these factors

highlight disruption, or “critical foundations of industry structure – the economic fundamentals,

the power balance between buys and sellers, the role of assets, the types of competitors, even the

borders of industries- are rapidly shifting” (Palmer et al., 2022, p 67).

Internal Drivers

There are many internal factors that affect Netflix and its current state. Specifically, these

internal factors include new product and service delivery, accidents, scandals, and internal

organizational politics. At Netflix, an internal driver was their shift from DVD delivery to

streaming (Palmer et al., 2022, p 65). In addition to new delivery methods, Netflix also decided

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to create content - a new product - for its subscribers. Recent hits have included “You” and “The

Squid Game,” garnering international acclaim and buzz. However, there have also been some

shifts in the relocation of key offices and facilities, with production hubs in London, Marid, and

Toronto (Palmer et al., 2022, p 64).

Another internal driver unique to Netflix is its flat organizational structure. While pay is

above the standard and there is no dress code, the CEO of Netflix claims he makes fewer and fewer

decisions, focusing instead on empowering his employees, remnant of a coaching role while

encouraging shifting mindsets for employees to embrace and think about change. This unique

culture may provide a different decision-making process than a traditional hierarchical structure is

used to. With four hundred content employees worldwide, that can provide a challenge to ensure

each employee has the space to provide input and insight into a decision-making process. Without

a true “director” to drive intended change, it is difficult to management images as the text describes

applied (Palmer et al., 2022, p. 37). However, the flat organizational structure is a culture that has

attracted talent and “has a reputation among arts and viewers for its willingness to develop

specialist content” (Palmer et al., 2022, p. 93).

Competition

Several services can be called a competitor with regards to Netflix. Amazon Prime,

Disney+, Paramount, and even YouTube offer competition to the streaming market network.

While Netflix previously relied on popular content like The Office or Friends, once licensing

rights were no longer available, Netflix lost viewers of those beloved classics. However, one area

that Netflix has not focused on is divesting itself into anything but streaming entertainment.

Peacock is an NBC-owned company with studios in New York City and traditional television

providers. Disney has theme parks, an animation studio, and an entire empire of books,

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products, and even cruises. Amazon Prime encompasses basic books, music, and a variety of

other products. Netflix’s approach to competition is one of focus (Palmer et al., 2022, p. 93).

This allows control over internal drivers to forge steadily through a shift to more content

creation.

Specifically, Netflix has focused on diversifying its content creators to cast a wide net in

its content. Its target demographic is all demographics, to include international audiences and

films, exemplified by the recent wildly popular The Squid Game. While the case study does not

indicate a clear outcome to this approach, competitors have noticed and indicated that the focus

of the company is the key to the company. Marc Randolph noted, “Netflix always behaves like a

startup, which means it’s always willing to do what it has to do to make sure it meets customer

needs. This ability to forge change, respond to environmental factors, and tackle emergent and

internal change is a strength, with limited impact of various disruptions throughout its existence

as an entertainment company (Palmer et al., 2022, p. 74).

Organizational Culture

Because of its unique internal drivers, Netflix’s organizational culture is its key to

competitive advantage. “The way they do things around here” is what attracts creatives who

want artistic freedom to pursue meaningful projects that do not shy away from tough stories and

topics (Palmer et al., 2022, p. 154). While niceties like no dress code and unlimited vacation

time provide an autonomy that many cannot imagine, they may provide a lack of direction if the

intent is not carefully curated by the organizational leaders. Thus, like the Starbucks scenario,

slight changes to free up creative budgets and content creation opportunities may be ideal. As

the global market continues to evolve and popular culture transcends continents, continued

investment in K-Dramas, for example, and other diverse content from a range of ethnicities,

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races, and sexual orientations, in addition to international perspectives, will set the bar for

attracting talent and providing the customer with content they care about.

Netflix’s culture can certainly capitalize on diverse social, environmental factors, as they

are invested in creating content available for many niche markets rather than specific general

populations. While decision-making is decentralized, those making decisions are closer to the

customer on many levels therefore their empowerment has a profound influence on the

company’s outcomes. Collective, Netflix’s organizational culture does what it is supposed to do

– shapes a positive public image, influences effectiveness, provides a direction, and attracts,

retains, and motivates staff (Palmer et al., 2022, p 145). There is no need to change.

Conclusion

Despite a noted loss of subscribers in the United States in mid-2019, Netflix has taken

that feedback from those lost viewers to navigate environmental factors, internal drivers,

organizational culture, and various competitors to create a culture employees want to work in

and for, while devising creative solutions to provide viewers with what they most desire – a

variety of available content via the storied streaming service. While their methods may seem

unorthodox, Netflix has a strength in its focus and ability to constantly shift with each challenge

– whether it be product delivery, environmental factors, disruptive environments, or feedback

regarding content. Netflix adapts and overcomes, providing their customers with a service that is

constantly adjusting itself.

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References Palmer, I., Dunford, R., & Buchanan, D. (2022). Managing organizational change: A multiple

perspectives approach (4th ed.). McGraw Hill.

Rodriguez, A. (2017). Netflix was founded 20 years ago today because Reed Hastings was late

returning a video. Retrieved January 23, 2022. https://qz.com/1062888/netflix-was-

founded-20-years-ago-today-because-reed-hastings-was-late-a-returning-video/