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Netflix

Introduction

Netflix, Incorporate is presently the leading movie rental service provider, with a subscription based on over 10 million with an inventory of over 100k movie and television titles. Netflix offers their subscribers traditional DVD by mail and digital streaming of over 12,000 titles instantly to subscribers’ via computer, television, game consoles and Netflix phone applications. (Netflix, 2015).

Environmental Analysis

An environmental scan is crucial if Netflix want to continue being the leading movie rental service provider. Netflix is one of the biggest movie rental service companies which tends to function in the retail and CPG sector; where their gross earning exceeds $1 billion dollars. For the purpose to maintain a competitive position in the industry, it becomes critical for the organization to analyze and come up with possible solutions that will help the firm to stay at the planned heights and this requires thorough evaluation of both internal as well as external environments. (Pearce II, J. A., & Robinson, 2015). The outcomes generated from the environmental scan will make sure that the company applies all the strategic tactics that would greatly exploit the opportunities inside the functioning environment. Moreover, the organization will also get well prepared towards adapting any unexpected events along with trends that basically change business conditions in the upcoming years. An overall optimization in terms of internal environment will also help the company to function at its highest levels of efficiency thereby improving organizational culture. At the same time optimization in terms of external environment will provide competitive advantages to the firm. Therefore the following paper identifies the most critical factors in both external and external environments of Netflix Corporation.

External Environmental Factors

The overall external environmental factors can be differentiated on the basis of the total influence of the organization’s strategic factors. At first it becomes critical to evaluate the remote external environmental factors. The environmental scan is basically predicting three major opportunities for Netflix's for achieving continued success both in terms of demographically and also technologically. Analysts have also suggested that the greatest opportunity for Netflix possesses to be its capability in terms of expanding into in-house that Netflix-owned as its original programming’s. Netflix's one of the second opportunities is in parallel in terms of its first as the in-house content provides ways for potential expansion in the international markets. Finally, as being predicted and started in the year 2011 the crossover from the broadcast TV to the internet TV is rising because of costs and also due to widespread availability. All these stated opportunities when implemented, will greatly create and provide a competitive edge to the firm that will tend to differentiate Netflix from all its competitors, thereby prompting overall expansion both locally as well as on an international basis. (Lisa Bauman, 2013).

The legalities along with the economic environment that the organization tends to operate for its shows are its greatest threats. Netflix might face discriminatory restrictions of the Internet Service Providers (ISPs). In the year 2012 Marcia Clemmitt actually stated that "ISPs may consider the financial interest for the purpose to slow down its content traffic for the purpose to gain an overall edge over the firm. The second critical threat continues to be the strong competition offered by competitors like Coinstar and also Dish Network. Analysts basically believed that in order to gain independence from the existing licensed materials, Netflix is supposed to begin diversification with the delivered contents on a quick note. Since we have major studios along with the television networks being owned by the overarching organizations like Hulu as well as Amazon, then they might possess the opportunity towards licensing the similar content and also offering services on a more competitive note for the price-savvy customers. (Lisa Bauman, 2013).

Internal Strengths as well as Weaknesses

The overall internal functions are actually driven by the organization’s culture as well as by the operating procedures. After evaluating the management style of the organization several places of strength as well as opportunities have been identified in the internal environment. In the year 2012 Netflix had around 2100 workers and was able to establish a good employee to employer relationship. Unlike the other retail companies across the country the employees were not covered by the collective bargaining agreement. (Lisa Bauman, 2013). This can be taken as one of the strong points for the organization since it provided high levels of flexibility amongst its workforce. Moreover, it also helped the organization to provide wages as well as salaries along with benefits at a cost were more beneficial in terms of overall gross functional expenses. In other words, we can also say that a strong relationship that is maintained within the employees also creates scope to pay lower wages.

Netflix's overall physical media delivery services continue to be one of its greatest weaknesses. More than around two years ago Hastings had predicted that the overall market for DVD as well as Blu-ray Discs might gradually decline and he was actually right. Right from that announcement, Netflix greatly concentrated completely on its streaming services along with providing value adding features as well as establishing partnerships. Netflix possessed a crucial combination of the factors which constituted membership as well as brand awareness along with accessibility that allowed them to stay in competition with the similar video streaming content providers. Also, in order to cope up with the threats they faced Netflix was supposed to redirect its resources from the delivery services for the purpose to enhance its strengths. Therefore, by providing expanding streaming contents will surely enable Netflix towards serving and also attracting a wider base of customers. (Porter, M.E. & Kramer, 2006).

Competitive Position

      Right from the start of the year 1997, Netflix continues to be the leader of video streaming business. The organization gained more than around 25% of market shares inside its first tenure of ten years and also enjoys more than around 32% of the present market. Netflix's overall success has therefore motivated big competitors in order to get into competition by delivering similar services. The below stated direct competitors (Fig. 1) have actually lead to the gradual decline in Netflix's market shares right from the start of the year 2012. (Trefis, 2013).

      Moreover, aggressive growth in terms of communication technology has also lead to rise in number of indirect competitors. The two major indirect competitors are You tube along with the video piracy and also file sharing websites, such as BitTorrent as well as Bear Share. Consumers basically get attracted to their services as video streaming is simply available without any kind of subscription charges which becomes an attractive choice in this struggling economy where we see consumers continuing to seek cheaper and also the free services of home entertainment.

Gauging Competition

There is basically little or we can say at least level threats across the existing board for restrictions over data streaming in terms of entertainment and video streaming industry. Public as well as the private positions both tend to agree that the restrictions are certainly one of the worst ideas. Netflix's head general counsel Mr. David Hyman states that "bandwidth is actually cheap and also plentiful and will certainly grow with time as there lays no specific reason for bandwidth caps along with fees in order to take root." (Netflix Revenue, 2013).

      It is also true that the pirating websites tend to take customers away from Netflix, but they actually do not pose great threats in comparison to Amazon and Comcast. Since Netflix’s provides a wide selection at specifically lower monthly prices as compared to the cable-TV subscriptions along with speed in terms of delivery, we observe few individuals choosing to wrestle with the overall complexity as well as delay from the other pirated file downloads.

Conclusion

In conclusion, I would like to state that Netflix is taking its competitors as well as SWOT analysis very seriously. The organization plans for capitalizing on the internet TV popularity both internationally along with within the US through concentrating on internet streaming services and particularly through expanding as well as producing their its own contents. These intended strategies will gradually phase out all its weak performing physical media delivery services along with keeping Netflix much ahead in terms of competition. Also the organization needs to build a diverse customer base to mitigate all its existing risks.

Reference:

1. Lisa Bauman, (2013). Netflix Environmental Scan /SWOT Analysis. Retrieved from: http://lisabauman.blogspot.in/2013/02/netflix-environmental-scan-swot-analysis.html

2. Pearce II, J. A., & Robinson, J. R. (2015). Strategic management: Formulation, Implementation, and Control (12'th ed.). New York: McGraw-Hill Irwin.

3. Trefis, (2013). "The U.S. Netflix Story: Evolving Competition Threatens Growth." Trefis: What's Driving the Stock.

4. Netflix Revenue, (2013)." Macro Axis: Simple Personalized Investing. Macroaxis.Inc. Web. 26 Jan 2013.

5. Netflix, (2015). Netflix's View. Retrieved from: http://ir.netflix.com/long-term-view.cfm

6. Porter, M.E. & Kramer, M.R., (2006), 'Strategy and society', Harvard Business Review, December.