In this assignment, you are to use the same corporation you selected and focused on for Assignments 1, 2, and 3.
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Week8Assignment3JoannaNasser.doc1
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Week 8 Assignment 3
Joanna Nasser
Strayer University
BUS499 Business Administration Capstone
Dr. Keller
02/22/2019
Week 8 Assignment 3
Netflix uses a combination of business strategies and corporate strategies that are critical in providing the success that the organization has enjoyed over the last couple of years. Business level strategies and corporate level strategies are closely related in function in teat they are geared at ensuring that the organization achieves its objectives. However, business strategy entails boosting and widening the customer base while the corporate level strategies entail the identification of products and services as well as effective measures to improve the products so as to meet the clients demand. Netflix has employed an effective business level strategy as well as corporate level strategy that will be discussed into depth in this paper. Competition is also essential in business activities and effective strategies must be put in place to alleviate the levels of competition.
Business-Level Strategies
Business level strategies entails the choices that an organization has to make to place the organization strategically to meet the competition that is offered by competitors in the market. Business level strategies can therefore be viewed as the strategies that the organization must put in place to enable it to compete fairly in the market or even provide it with additional competitive advantage over the other organizations that offer the same products or close substitutes to the products the company offers (Hitt, Ireland, & Hoskisson, 2013). There are several strategies that can be used for business level strategies. The strategies always revolve around differentiation of the product and cost leadership techniques. This strategies can be used together to provide competitive advantage or each strategy may be employed on its own to provide the desired market status.
Netflix uses a combination of differentiation strategies and cost leadership to place them strategically to beat competition. The business level strategy employed by Netflix is the integrated cost leadership/ differentiation. The integrated cost leadership/ differentiation is a strategy that organizations can use to ensure that the desire of the customers to acquire highly differentiated products at low prices (Hoffman, 2008). The strategy is aimed at efficiently, to imply with minimized costs, produce highly differentiated products so as to provide customer satisfaction.
Netflix has been able to use the resources and technological advancements within its reach to ensure that it enjoys a market advantage over its competitors. On top of minimizing the cost of production that the organization incurs in the process of production, the company reduces the prices that clients have to pay to access the services and products. This strategy helps the company to attract clients in the movie and theatre products to purchase from the company since it offers competitive prices that sometimes are slightly lower than the other companies. Additionally, Netflix has ventured in the sale of only what is highly demanded in the market as such ensuring that the company offers highly differentiated products. To achieve this strategies, there are some tools that the company has used effectively. One of the tools is information technology structure and infrastructure. The company ensures that its services and products are highly advertised through social media and other online platforms. Additionally, the company runs on the website as well as Netflix application that provides the option to purchase the company’s product with ease (Hoffman, 2008). The website and application are widely available in the market to provide the company with additional market coverage and product differentiation.
The business level strategy that the company uses us highly effective in achieving its objectives and functions. The movie and theatre is highly competitive and to maintain relevance in the market, it is important to ensure that the business level strategies are well implemented to provide the company with additional market advantage. Netflix has been able to use this strategies effectively. Integrated cost leadership/ differentiation provides the company with the opportunity to conduct market segmentation by critically conducting market analysis the company can identify the need of various groups of customers hence ensuring that each market group is satisfied and attended to at their own specific levels.
Corporate-Level Strategies
A company employs the corporate level strategy to help it to become diversified and hence create and add value to the products that it deals with. Corporate level strategies are those strategies that a company implements during the choice of the products and services that the company should deal with to gain a competitive advantage over other companies dealing with the same or similar products in the market (Hitt, Ireland, & Hoskisson, 2013).
Netflix employs corporate level strategies that are value creating diversification. This are strategies that entail creating value to the resources and abilities of the company. Netflix uses economies of scope effectively to implement the strategies that give it a competitive advantage over the other companies. Economics of scope are those practices that a company may use to cut on costs while minimizing on the value of the products.
Netflix adds value tot eh products it deals with using four major tools. The tools are technology, delivery, customization, geographical mobility and reputation. First, the organization uses the internet to deliver its products. By use of the wide reach the internet has globally, the company positions itself strategically to meet the demand of the customers hence boost the superiority of its products in the market. The company employs the use of high level functionality hence increasing the value of the consumers. Second the delivery system and tome for the DVD that are rented out is minimal. Customers are able to receive DVDs once they hire them within one business day. This delivery time boosts customer experience hence boosting the position of the company in the market by helping the company to beat existing and future competition since it becomes the customers company of preference in the business of hiring and leasing out of DVDs and other theatre products. Netflix offers products that are highly differentiates and provide customization services. This function is achieved through the provision of movies that are attractive to the market. Through this factors the company has been able to employ a value creating diversification strategy.
The strategy is proving to be highly effective since the products that the company deals with are highly demanded. Due to the nature of the products and services and the value that the company adds to the customers. The company has built itself to be the biggest company in the business of renting out DVDs. However, the company should adjust the strategy to ensure that it builds a good rapport with the producer of the DVDs that are rented out.
Competitive Environment
Competitors form a critical aspect to the existence of any company in the market. Competitors come in two main ways. One is the direct competitors who offer products that are similar to those produced by the company in study or indirect competitors who offer products that may be used as close substitutes to those that a company deals with hence cutting down on the market superiority of the company. Porters five forces (appendix A) are used to analyze the basics of the competitive environment however, deeper analysis to the market can be conducted by studying other variables such as market commonality, resource similarity, competitive behavior and competitive dynamics. The biggest competitor to Netflix currently is Amaxon.com.
Amazon is an online retail company that is gaining much popularity in recent years. The company ventures in e-commerce services in several countries hence attracting customers through a wide range of services and boosting the market share of the company. According to a research published in the company’s website, more than 73% of the American citizens who are attracted to the online video subscription industry prefer to use Netflix or Amazon. The report indicates the status of the two companies in the market as well as the level the two companies is posing to each other. Several variables can be used to conduct the competitive analysis.
i. Market commonality
Competition brings about the aspect of sharing market between the competitors. Market commonality entails the number of markets that the competitors have ventured jointly and the degree of individuals market to supporting each other (Hitt, Ireland, & Hoskisson, 2013).
Both Amazon and Netflix are online organizations which rely on the use of the internet to reach the market. As such, the market comprising of online users is shared within the two companies (Mac, 2016). However, although Amazon has been in the online industry for longer and is more popular than Netflix, amazon has recently started venturing into the subscription video services giving Netflix a bigger influence in the market segments. Amazon beats Netflix in reaching the market with the hard copy DVDs through its stores which are strategically placed in various countries.
ii. Resource similarity
The resource similarity entails the extent to which competing organizations resources are comparable. Amazon and Netflix rely on the internet as the biggest resource to supply the products. While Amazon may enjoy bigger and more advanced resources such as a more developed online platform as well as human resource, Netflix offers cost leadership that puts it in a position to compete with Amazon (Wiles, 2004). The companies use similar resources but Amazon is advantaged due to its well-developed infrastructure.
iii. Competitive rivalry
Netflix remains to be the biggest selling company in the DVD renting and Subscription video services. However, Amazon and other smaller competitors are venturing the market. The market is open to new entrants putting the position of Netflix intact. Netflix can be able to survive the competition and remain relevant by conducting competitor analysis and understanding the abilities of the competitors. Additionally, the strategies implemented should be used to drive Netflix into beating any kind of competition.
iv. Competitive dynamics
This variable entails studying the rate at which competition is growing within the business venture and industry. The DVD renting and subscription video services sector is attracting competition from other companies other than Amazon as well. However, Amazon is viewing the industry as a potential advancements in the sector hence the competition is rapidly growing
Due to specialization in the sector, Netflix still enjoys a more superior market share as compared to the other competing companies such as Amazon. The strategies have been implemented to a great effect in providing the company with cover from competition. However, the company should improve on its strategies to ensure that the services provided are more customer-endeared to help it remain relevant in the market.
Market Cycles
Market cycles entail trend that are new and emerging in the market or any business environment. There are two main types of market cycles. Slow-cycle markets are those where firms are shielded from competitive advantage or the sector is protected by difficulties in entrants of new companies (Hitt, Ireland, & Hoskisson, 2013). Amazon is a company that is centered on minimizing costs of production hence achieving maximum profitability. If the market was a slow-cycle market, Amazon would not be a significant competitive factor. This is because other competitors are willing to put more effort in meeting the market standards so as to match Netflix. Amazon on the other hand is well established in other sectors of ecommerce therefore it would be wary of incurring high costs to venture into the market.
Fast cycle markets on the other hand are those markets where a company’s competitive advantage is not protected and is therefore vulnerable to imitation (Hitt, Ireland, & Hoskisson, 2013). Amazon has bigger infrastructure and has vast resources to use. If the market was a fast-cycle market, Amazon would remain to be the biggest threat in the market to Netflix since they placed in a better position to compete with Netflix.
References
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.
Hoffman, H. (2008, Sep 30). Netflix Adds 2,500 Streaming Movies From Starz. Retrieved from CNET.com. : http://news.cnet.com/8301-13515_3-10055367-26.html
Mac, R. (2016, May 4). Forget AWS, Amazon has another billion-dollar business on its hands. Retrieved from Forbes: https://www.forbes.com/sites/ryanmac/2016/05/04/amazon-business-1-billion-sales/#13deace71f8f.
Wiles, G. (2004 , August 19). Amazon.com to Acquire China’s Joyo.com for $75 Million. Retrieved from Bloomberg: http://bloom.bg/13SHPx5.
Appendices
