Strategic Management - Netflix PDF

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Netflix report...

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Strategic Management - Netflix Industry: Digital entertainment industry Issues: The main issues Netflix faces are: - Increasing levels of competition in the digital entertainment industry. Already established entertainment providers are establishing their own streaming services, streaming licensed and original content, with low membership prices. - Netflix furthermore faces issues of losing licensed content. Licensed content accounts for (not sure what the stat is?%) of Netflix’s range of TV shows and movies. As the owners of this content establish their own streaming services and stop licensing content to Netflix, Netflix loses their competitive advantage as they broadcast less exclusive content. - Netflix faces the issue of retaining customers. The month-to-month contracts make it easy for consumers to switch to different streaming services with more desirable content.

Recommendations: 1. Produce more original content: a. Producing more original content would allow Netflix to invest less money in purchasing licenses to TV shows and movies that are owned by external production companies. There is no scarcity of affordable streaming services, production companies are provided with multiple avenues to air their content online. Netflix’s original series are extremely popular, House of Cards and Orange is the New Black have over 6 seasons. Netflix has the capability to generate revenues from relationships with creators and their original content. 2. Strategic alliances a. Competitors such as Disney, ESPN+, Stan and Apple TV decrease Netflix’s market share. In order to obtain a greater market share, Netflix should form a non-equity strategic alliance with another streaming service in order to gain access to their licensed and original content. 3. Pricing strategy? a. A model such as Apple’s, Apple ID should be adopted by Netflix. The customer contract is month-to-month, involving extremely low commitment levels from customers. Netflix should increase the length of the customer contract b. There are cheaper options, the only disadvantage is consumers lose Netflix originals 4. Diversify a. Provide more than just TV shows and movies, possibly move to music and form

alliances with music streaming services -

Strategic alliances: - Netflix and Foxtel - Disney Streaming service? Possible Questions: 1. How can Netflix add value to consumers if they are asking for increased commitment? a. What I mean here is that how can they retain customers- if they raise prices then they’ll lose people and if they extend contracts they might be less attractive to people- they need to add more value to the customer experience 2. If all production companies establish their own affordable streaming service, taking their content of Netflix. Could Netflix survive with just Netflix originals?

Report

External Analysis *super rough dot points! Identifying the Industry: Digital Entertainment Industry Analysis of the General Environment (USA) - Economic - Possibly GFC, consumers not wanting to spend a lot on discretionary goods? - Majority of subscribers are within the USA which has a strong economy - Less economically developed countries have a lower subscription rate as Netflix is viewed as a luxury good and not a life staple or necessity -

Socio-cultural - California is a prominent centre of activity for the entertainment industry. Increasing global accessibility to the internet has expanded the potential to reach new demographics. Organisations must consider cultural diversity and adapt their services to meet the unique needs of differing cultures. - Digital entertainment industry experiences pressure to conform their programming to the social values and norms in each respective country of operation - Bible-belt - Attitudes about the quality of work life - Shifts in product/service preferences

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Global Environment - Internet providing a platform from which the digital entertainment industry is able to expand into emerging markets on a global level - Globalisation (Major events: GFC…) - Censorship in other countries - Different licensing laws in different - Entertainment is a reflection of current culture

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Technological - As continuous advances in internet speeds and accessibility become available across the globe, increasing pressure is placed on organisations to utilise this and provide on demand access to a variety of goods and services. - Entertainment industry has adapted to technological advances, with declining use of VCR and DVDs

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Political/Legal - Talk about laws related to piracy + illegal streaming - Stable, democratic government - Age rating and censorship regarding streaming services - Less regulated on streaming services

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Demographic - Income distribution - Appealing to a wide Ethnic mix - Population size (Aging population..) - Religion

Analysis of the Industry Environment - Buyer power: High - Streaming platforms provide few specialised products, a great amount of licensed content can be accessed elsewhere. Due to the nature of short-term, low-price contracts, customers face low switching costs. -

Supplier power: High - The suppliers for Netflix are production companies - There are few suppliers for popular content and many streaming platform opportunities. - If a streaming service is after particular content, they can only obtain this content from the owners. - Talk about the existing content

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Threat of New Entrants: High - Low barriers to entry, capital to establish a website is minimal and obtaining licenses requires little capital (large amounts of cash however) - Production companies with ownership rights of content have the ability to stream their content without the need to obtain licenses

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Substitute Products: High - Cheap, easily accessible forms of digital entertainment are available at a low cost - Ever changing preferences and trends of pop culture allow avenues for new streaming services to enter the market - Substitutes within the industry and in other industries

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Intensity of Rivalry: High - Highly saturated - Low barriers allow for mass entrants - Any strategic advantages obtained don’t last long Final Analysis

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Internal Analysis Analysis of Resources and Capabilities -

Tangible Resources (make an appendix for this) - Financial - Organisational - Physical - Technological

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Intangible Resources - Human Resources - Innovation Resources - Reputational Resources - Goodwill

Core Competency Analysis SWOT Analysis - Strengths - Weaknesses - Opportunities - Threats Analysis of Current Strategies - Business level: Differentiation - Not focussed differentiation because they do not provide exclusive content, licensed content can be streamed elsewhere. However, they have a focus on providing licensed content that is different to their competitors and invest heavily in Netflix originals. - Not cost leadership because competitors provide a similar service at a lower price, therefore not integrated either as they are not in a cost centric position - Pricing strategy: month to month non-lock in contracts - Operational strategy: buying licenses + producing content ?? Articulation of Key Issues and/or Problems - Increasing entrance of strong competitors into the market - Customer retention issues - Loss of licenses - Rise of price in everything - Buying material - Licences as companies know that businesses will pay more - Rise in Production costs - Rise in human resource cost

Recommendations - Provide the statistics, heavily recommend focusing investment in talent to produce more Netflix Originals- these have proven to work for Netflix (reference statistics from Orange is the New Black and House of Cards) - Respond to the actions of competitors, Disney forming a strategic alliance with ESPN+, Netfflix should form a strategic alliance with a streaming platform that provides popular content. This not only reduces the number of competitors, which is a key issue, however; it increases Netflix’s market share and assists in retaining customers as they are given less choice of platforms. - New pricing strategy: Lock in contracts - Add adverts in between shows Implications of recommended Strategies - Buying talent doesn’t mean that they will continue to produce good shows - Adverts may cause an uproar from the global community -

http://d2oqb2vjj999su.cloudfront.net/users/000/072/456/447/attachments/Netflix.pdf

Presentation notes: - Potentially present as: - Issue 1, recommendation, implication - Issue 2, recommendation, implication - Issue 3, recommendation, implication -

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