[IB - Group 3] Netflix’S Cultural Environment PDF

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Warning: TT: undefined function: 32FOREIGN TRADE UNIVERSITYFACULTY OF ECONOMICS & INTERNATIONAL BUSINESSTHE DIFFERENCE IN NETFLIX’S CULTURAL ENVIRONMENTBETWEEN THE US AND INDIALecturer: Nguyen Hong HanhClass: CTTTKT K56 - Group: 3Members: 1, Nguyen Vu Ngan Hanh – 17111400282, Hoang Linh Chi ...

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FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS & INTERNATIONAL BUSINESS

THE DIFFERENCE IN NETFLIX’S CULTURAL ENVIRONMENT BETWEEN THE US AND INDIA Lecturer: Nguyen Hong Hanh

Class: CTTTKT K56 - Group: 3 Members: 1, Nguyen Vu Ngan Hanh – 1711140028 2, Hoang Linh Chi - 1711140013 3, Dao Thuy Duong - 1711140022 4, Ngo Phuong Anh – 1717140004 5, Nguyen Phuong Linh - 1711140052 6, Vu Thuy Van Trinh - 17111400

Hanoi, September 2020

TABLE OF CONTENTS I.

Overview of Netflix ............................................................................................ 4 1.

Brief history .................................................................................................... 4

2.

Vision and mission .......................................................................................... 4

3.

American market............................................................................................ 4

II.

Theoretical background .................................................................................... 6 1.

Definition of culture ....................................................................................... 6

2.

Factors affecting culture (components of culture) ...................................... 6

III.

Impacts of cultural differences on Netflix’s business activities in India ..... 10

1.

Habit of using credit card in India ............................................................. 13

2.

Variety of languages requires diversity...................................................... 15

3.

Indian opinion on price ................................................................................ 18

IV.

Netflix’s adaptation strategy ........................................................................... 19

1.

Contents and subtitles adjustments ............................................................ 20

2.

Price adjustments ......................................................................................... 21

V.

CURRENT PROBLEMS AND SUGGESTED SOLUTIONS ..................... 22 1.

Results ........................................................................................................... 22

2.

Problems and suggestions ............................................................................ 23

REFERENCES: .......................................................................................................... 26

ABSTRACT Netflix is an American media online service provider, whose feature mostly films and television shows popular in America and worldwide. Currently Netflix is considered a giant in the online media platform industry and has had footprints on over 190 countries and territories across the globe. Understandably, Netflix has expanded its services to India, the country with the most mobile streaming viewers in the world. Albeit being a potential and lucrative market, India proved to be a challenge to Netflix due to cultural barriers. Like any other multinational corporations, Netflix needed to make due diligence research about Indians and their culture during their market infiltration. From there, Netflix can come up with appropriate plans and decisions for a successful integration. We will look most closely into the cultural difference between America and India and highlighting the importance of culture in international branching.

I.

Overview of Netflix

1. Brief history Netflix is an American entertainment services company that provides online video streaming and videos on demand, founded in 1997 by Marc Randolph and Reed Hastings. Its headquarter is in Los Gatos, California. Initially, it was a DVD distribution company, had only 30 employees and 925 titles available. At the time, it operated on a pay-per-rental basis. The rate and maturity date are similar to that of its traditional rival, Blockbuster. Their sales method is to send DVDs to customers via email (DVD emailing). On February 25, 2007, Netflix distributed the billionth DVD. At the same time, in the same year, Netflix completely restructured its way of doing business. Despite being very successful with the form of DVD distribution via email, they also found that it would be replaced by videos on the Internet (video streaming over the Internet), so they decided to make a change.

2. Vision and mission At the Consumer Electronics Show (Las Vegas), Reed Hastings, Netflix’s chief executive, said: “Right now, you are witnessing the birth of a global TV network.” According to the CEO of Netflix, his company has not only been successful in dominating the global market, but also fundamentally changing the way customers use television. Hastings said he was aiming to invest in a core technology of online transmission. "We hope to be able to show exactly what shows you need based on your mood", he said. Netflix has also announced a mission that: "We are committed to providing our customers with outstanding service, providing partners with values, giving investors sustainable earnings, growth prospects and enormous positive effects to employees”.

3. American market In June 2014, Netflix unveiled a global branding: a new logo, using a modern typeface with drop shadow removal and a new website UI. At the Consumer Electronics Show 2016, Netflix announced the expansion of major international services to 150 other countries. Netflix has maintained the expansion, today it operates in almost every country where the company can do legally or reasonably. In 2017, Netflix was present in more than 190 countries.

2007

Netflix begins streaming in the US.

2010

Netflix starts to provide streaming services to international markets for the first time in Canada.

2011

Netflix expands its services to Latin America, the Caribbean, Belize and Guianas.

Netflix begins expanding into Europe, launching in UK, Ireland, 2012 Denmark, Finland, Norway and Sweden 2013

Netflix decides to expand slowly to control subscription costs, only extended to the Netherlands.

2014

Netflix is already present in Austria, Belgium, France, Germany, Luxembourg, and Switzerland.

2015

Netflix expands to Australia and New Zealand, Japan, Italy, Portugal and Spain.

2016

Netflix announces that it is available worldwide except for China, Syria, North Korea and the Crimean territory.

2017

Netflix confirms it has reached a licensing agreement in China for the content Original Netflix with IQiyi. Table 1: Netflix market expansion timeline

By the end of 2019, the global number of Netflix subscribers reached 167.1 million, of which 61 million were registered in the US. A survey in 2019 by Statista also found that 85% of Americans who use online video services are Netflix users. Forecasts released at the end of 2017 show that by 2023, the US will have the highest number of Netflix subscribers in the world, with sources predicting a total of 69.1 million subscribers in the country. Following closely will be the UK with around 12 million subscribers, while Mexico, France and India are expected to have fewer than six million Netflix subscribers by 2023.

Figure 1: Numbers of Netflix subscribers in the US and globally from 2015-2019 (Source: Statista)

II.

Theoretical background

1. Definition of culture Culture is one of those terms that has a number of meanings to it and yet it is still notoriously difficult to define. Clifford Geertz defines the concept of culture as follows: “It denotes a historically transmitted pattern of meanings embodied in symbols, a system of inherited conceptions expressed in symbolic forms by means of which men communicate, perpetuate, and develop their knowledge about and attitudes toward life” (Geertz, 1973). According to Geert Hofstede, culture is “the collective programming of the mind that distinguishes the members of one group or category of people from others. [...] the following four together cover the total concept rather neatly: symbols, heroes, rituals, and values.” (Hofstede, Hofstede and Minkov, 2010). Meanwhile, Zvi Namenwirth and Robert Weber see culture as “systems of ideas rather than behavior or material or material artifacts” (Namenwirth and Weber, 1987). Regardless, we should acknowledge the fact that cultures are unique in their own way and learn to respect them individually. Just as world-renowned social psychologist Geert Hofstede once said: “National Culture cannot be changed, but you should understand and respect it.”

2. Factors affecting culture (components of culture) a. Language Language is an obvious and most prominent way to distinguish countries and also one of the characteristics that help define culture. We can learn a lot about a certain culture as we learn a language. As means of communication, there are two types of language: -

Spoken language: helps demonstrate the way people perceive the world and acts as means of communication. Spoken language has always been one of the defining factors of cultures. There are about 7000 languages spoken today, showing the dynamic of the rapidly changing world.

-

Unspoken language: refers to nonverbal communication. Many nonverbal cues are culture-bound. For example, giving someone a thumbs up in the US and some other

countries shows that you are satisfied or are agreeing with him/her; however, in Greece, this gesture is considered to be obscene. b. Religions Just like culture, the definition of religion is still outstanding since there are too many meanings to it, some are quite ambiguous to be of value. As to Clifford Geertz’s definition, he says a religion is: “a system of symbols which acts to establish powerful, pervasive, and longlasting moods and motivations in men by formulating conceptions of a general order of existence and clothing these conceptions with such an aura of factuality that the moods and motivations seem uniquely realistic.” (Geertz, 1973). Religion has a huge impact on people's daily activities, their behaviors and thus affects business activities. Things like opening or closing times, holidays, ceremonies, taboos, etc. must never be taken for granted. Therefore, business operating activities or marketing activities must cater to the religion that is dominating the market in which the business is engaged in. Businesses that are thinking of expanding internationally must at least pay attention to these four issues regarding religion: dominating religion; the importance of religion in society; the degree of homogeneity of religion; freedom of belief in society. c. Societal structure The Hofstede model of national culture is a composition of six dimensions. These cultural dimensions represent traits and preferences that could most likely distinguish countries from each other. Hofstede’s 6-D model allows for comparative research by putting together scores for each nation (with 1 being the lowest and 100 being the highest on the scale) and thus facilitates cross-cultural communication and the international comparison between different cultures.

Figure 2: Comparison of India and the US according to Hofstede’s cultural dimensions theory (Source: hofstede-insights.com)

The dimensions of national cultures are: 

Power Distance Index (PDI) Inequality exists among the fact that everyone is unique. PDI expresses "the extent to

which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally" (Hofstede, Hofstede and Minkov, 2010), addressing the fact that individuals in societies are not equal but more importantly, how a society handles inequalities among people. People in societies where there is high Power Distance are more likely to accept hierarchy and hierarchical order without doubt or further justification. In societies with lower degree of PDI, people demand justification for inequalities of power and thus attempt to equalize the distribution of power. India scores high on this dimension, 77, indicating prominent hierarchy and a top-down structure. This is not only salient in Indian families but it is also a thing in a lot of Indian businesses where paternalistic leaders and managers assume the obedience of their team members and employees expect to be clearly directed and instructed on what is expected of them. Communication is top-down and oftentimes negative feedback is never offered up the ladder. Control is common, and attitudes towards managers are formal. 

Individualism vs. Collectivism (IDV) IDV explores the “degree to which people in a society are integrated into groups”

(Hofstede, 2011). Individualism can be referred to as the preference for a loosely-tied social framework where individuals are expected to take care of only themselves and their immediate families. Collectivism represents a preference for a tightly-knit framework in society in which individuals can expect relatives or group members to care for them in exchange for almost absolute loyalty (the word Collectivism has no political meaning as it refers to groups, not to States). In short, an individualistic society is an “I” society whereas a collectivist society is more like a “We” society. The relatively low score on Power Distance (40) and very high IDV (91) of the US truly speak for one of the most individualistic cultures in the world where there is an explicit emphasis on equal rights in all aspects of American society. Communication is less formal; in fact, for most Americans it is quite direct and expressive. Managers and employees both expect to be consulted by one another. Employees are self-reliant and free to deliver their initiatives.

Americans are deemed to be independent quite early in life; they are not shy about approaching others and strive for one’s own right. 

Masculinity vs. femininity (MAS) The Masculinity side in this dimension is referred to as “a preference in society for

achievement, heroism, assertiveness and material rewards for success”, while femininity is "a preference for cooperation, modesty, caring for the weak and quality of life" (Hofstede, 2011). A masculinity society at large is “tougher” and more competitive whereas a femininity society is “tender” and more oriented towards living in harmony. The American society is more on the Masculinity side scoring 62 on the scale. This could probably be explained by the fact that it is one of the strongest nations as of now and thus with a diversified flow of labor, people are expected to carry the “strive to be the best” attitude in order to earn a place for themselves in this society. India is actually quite Masculine as well in terms of success and power. Advertising one’s success is widely practiced. Work is oftentimes the center of life for many and being successful in the workplace could mean great respect from other people. 

Uncertainty avoidance Index (UAI) The Uncertainty Avoidance dimension expresses "a society's tolerance for ambiguity"

- the extent to which members of a society feel uncomfortable with uncertainty and ambiguity. In other words, societies exhibiting high scores on this index are somewhat stiff and tightly regulated. People have strong beliefs in absolute truth and that it is guidelines and laws that are key to everything. On the contrary, a lower degree of UAI implies societies with fewer regulations and more acceptance towards different thoughts and ideas. Both India and the US have a low score on this dimension, indicating that there is a fairly high degree of acceptance of imperfections and new, innovative ideas. People are open to trying new things and have greater tolerance of freedom of expression and of different ideas and opinions. 

Long-term orientation vs. short-term orientation (LTO) LTO deals with the way that societies maintain the links with its own past while taking

on the challenges of present and future. As a matter of fact, societies prioritize these two goals differently.

Societies that score low on this dimension prefer to maintain and honor traditions and norms and are reluctant to societal changes. On the other hand, high LTO societies usually take a more pragmatic approach: they encourage adaptation and changes for the better; and efforts are put in modern education as a way to prepare for the prosperous future. Scoring low on this index (26), Americans may be open to new ideas and not reject them right away but they are prone to take time analyzing new information. Americans are quite confident in a sense that they have strong beliefs in what they think is right; thus, with all that implicit bias, the analyzing process could take a long time. One latest example is exhibited in the frustration of experts and authorized entities like CDC when trying to convince Americans of wearing masks to mitigate the spread of COVID-19 despite all the approachable studies and evidences already laid out in front of them. No dominant preference in Indian culture can be determined. This is because although Indians value traditions and ancestry, the concept of “karma” dominates. Time is not linear and rather than opting for an exact life plan, one goes on discovering the right path as one goes along. As a developing country where career success is respected, India is quicker to adopt ideas and knowledge to better their lives. 

Indulgence vs. restraint (IVR) Indulgence stands for "a society that allows relatively free gratification of basic and

natural human desires related to enjoying life and having fun". Restraint stands for "a society that controls gratification of needs and regulates it by means of strict social norms" (Hofstede, 2011). The score of India, 26, means that it is more of a Restraint culture. Indians are more prone to working and control of desires. Hence, indulging and leisure time are not their preference. In contrast, the US is considered an Indulgent society. Despite the aforementioned working attitudes, America is still one of those countries that are famous for its night parties and high rates of drug usage (Ritchie and Roser, 2018)

III. Impacts of cultural differences on Netflix’s business activities in India An overview of Netflix’s performance in the Indian market "India is one of our key markets," said Jessica Lee, Vice President of Communications of Netflix Asia-Pacific region claimed - "You look at the population size, the growth of the

internet as well as the business opportunities in this country, the challenge is how to get the biggest 'pie' possible." According to data from the World Population Report Research Organization based in the US, in 2019 India has become the 5th largest economy in the world. India is developing an open market economy and its GDP in 2019 will reach 2,940 billion USD. The report also stated that in terms of purchasing power parity (PPP), the GDP of India is 10,510 billion USD, ranking 3rd in the world. The service sector of India is the fastest growing industry in the world, accounting for 60% of the economy and 28% of the workforce. Apart from having a large population with a average age structure, India is a country with a huge growth rate of internet users thanks to the capital flow from Silicon Valley as well as government investments in an attempt to modernize the infrastructure of this country.

Figure 3: India’s video streaming market, calculated for the year 2019, July 2020 (Source: Statista)

In 2016, Netflix officially launched in India with the ambition to acquire 100 million account subscriptions from...