Environmental Analysis
Strengths of the company abound from the fact that it is continually becoming a household name. Notably, peoples association with the company is good. The second strength of the company is the fact that it avails a platform of all major streaming services. The company has a good streaming system that promotes customer loyalty. Additionally, strength for Netflix abounds from the companys intentions of adding quality content among what it streams to customers. Research indicates the company intends to hire content from Disney. The company has also sponsored exclusive window on some good shows such as House of Cards. Netflix still provides DVD rental services, which increases its margins as some programs are still not streamed live. Lastly, the founder of the company has a brilliant idea considering the fact that many content providers have availed their products to the company as a channel for broadcast. Weaknesses include a drop in the number of people subscribing for DVDs. Research confirms the fact that Netflix lost more than 400, 000 DVD subscribers and the company anticipates a further decline in the numbers. Another weakness abounds from show ownership. Despite the company outbidding all other companies to air programs such as House of Cards, after the show is over the owners take the right of the show again. Thirdly, the company is over-valued in comparison to other companies such as Google. This makes it hard to buy the companys stock. Lastly, Netflix will have a problem of raising prices in the future considering the Quixstergate incident that did not sit well with customers. Opportunities for the company include the fact that the company can increase its advertising on its website, television channels and Chromecast. The company can also expand internationally to other countries and continents, as well. Lastly, the company can raise more capital through selling more of its shares considering that people are willing to purchase its stock. Threats to Netflix include the fact that other media companies will raise their streaming prices and this will impact Netflix negatively. Google is a main threat to the company considering that it owns YouTube and has indicated its intention to add more content channels. This can result to a shift of attention from Netflix considering the amount of money that Google has saved for their pilot project.
External Environment (Societal and Industry Environment)
In the external environment, Netflix has various opportunities such as the fact that the company used and is currently carrying with the trend of renting out movies VHS to consumers or customers. This is an opportunity for the company considering the fact that Netflix has placed a charge for late return of VHS movies rented out. Another opportunity for the company concerns the fact that it is the only company that deals with mailing of DVDs on a monthly subscription. It should be noted that this is an opportunity for the company considering that other companies have not adopted the techniques, which is an added advantage. Additionally, with the entry of new technology, the company has adopted an online video streaming program whereby clients are charged for the content that they stream. Thus, this makes the customer as the main opportunity that the company can maximize on considering people are adapting to change of technology at a faster rate. Netflixs main external threats are their competitors. Netflix has shortlisted their competitors as Time Warner, Direct TV, Blockbuster, AT & T, Best Buy, Red Box, Apple and Amazon. Notably, these competitors exist across the array of distinguished segments of home video entertainment industry. Despite the fact that Netflix ranks in online and online rental segments, the company still competes on the other platforms because the other firms capture the share of the market through their respective channels. Notably, Wal Mart and Best Buy will continue to rank in the brick and mortar purchasing and online frontier and this eats on Netflixs sales and vice versa. Suppliers also abound as part of Netflixs external environment opportunity considering that the company commands an up to 70 percent of independent studios post-theatrical release revenues. Notably, suppliers form part of the external environment considering that they influence what the industry is selling. Netflix reveals that there are six main suppliers and these include Buena Vista, Universal, Paramount Pictures, 20th Century Fox, Sony Pictures and Warner Bros. the suppliers also influence whether a company avails latest content from time-to-time to its consumers, which abounds as an advantage to Netflix because they are in corporation with major suppliers.
Societal Environment that the company faces mostly includes the consumers. According to research, consumers can be divided into two groups that include convenience and needy consumers. Convenience consumers are a threat to the company considering the fact that they do watch video whenever they find an opportunity. This derives from the premise that they value transferability of the product, immediate access and portability. Additionally, such consumers will not mind watching content that is posted illegally on the internet. Notably, such consumers are a threat to Netflix because they have a high propensity to substitutes. Research categorizes most of these convenience consumers under the younger generation and internet savvy. On the other hand, needy consumers act as an opportunity for Netflix. This derives from the fact that they are choosy and look for a means that will facilitate comfort for them as they watch movies. Thus, they act as an opportunity because they form part of the market as they go to rent movies while others prefer to watch their favorite movies in theaters with big screens and surround systems, which also forms part of Netflix external market.
Read also: "Expository & Persuasive, Analytical & Argumentative Essays"
Internal Environment
The first internal opportunity for the company derives from its business mission. Netflix mission statement reiterates the need for the company to avail its customers with an expansive selection of DVDs, a simple way of choosing movies and ensuring a faster delivery promotes the functioning of the business. Notably, Netflix is continuing to grow and setting new goals for itself. This is evident through its internet platform that is advocated towards customer comfort. Secondly opportunity for Netflix derives from its management style. Research indicates that Reed Hastings has adopted Googles way of management that advocates for hiring of the best and living them to their devices. This is a commendable strategy for the business because it promotes employees to be creative and make their own smart decisions, which is an advantage to the company. Netflix also has an organization structure that allows for smooth running of activities. Notably, Reed Hastings abounds as the CEO and is backed by other six managers who run the six departments that the company owns. Netflix also promotes organizational controls aimed at leaving employees to their devices. This is an opportunity for the organization because employees work to their best and only report their actions to management. The company also has organizational values that promote its success. Research confirms that the organization is aimed at hiring only stunning employees who form a phenomenal work team. Additionally, the employees in the company also respect the companys values.
Netflix is valued at $2,162,000,000 as of 2009. This information is established using the share outstanding value availed in the 200810-k, Netflix fair value is $35.48 per share. It is also established that Netflixs growth horizon is slightly overstretched because of the agreement the company entered with Warner Bros. However, it is indicated that the organization expects growth from its acquisitions of titles and access to streaming video. This abounds from the fact that the company emerges as a niche giant. The organizations profit margins are healthy because the company does not have inventory and production costs. However, it is essential to mention the primary costs of Netflix, which abound in terms of packaging and shipping of titles and servers for monitoring their consumers subscriptions. Research indicates that return on equity, sales growth, operation expenses and gross profit margin abound as the significant rations for monitoring the performance of the business since the organizations business model is dependable on subscription growth.
Industry Attractiveness/ Competitive Position
At the corporate level, various options abound for Netflix. Firstly, concerns partnerships with other entities in the market such as Warner Bros home entertainment. Research asserts that Netflix partnered with Warner Bros in attempt to reduce the number of days that releases take to be available to the public. This has a positive impact on the companys revenue considering that the releases will be available in catalogue rather than for rental. Another partnership that Netflix entered to was with Nintendo. This partnership was intended to facilitate consumers to stream titles directly using the Wii console. Subscribers ought to have at least $9 per month to access this feature. This is also projected to boost Netflixs revenues. Rumelts classifications also abound as an opportunity for the company. This derives from the premise that Netflix can be considered as a dominant business. This abounds from the fact that the organization still has the potential of generating more than 75 percent of revenues despite the fact that it has partnered with other companies and provided titles. The company can be considered as a dominant firm because it has not participated in acquisitions. The organization also has an advantage that derives from its business portfolio. This is an opportunity considering the fact that the business deals with DVD rentals and online streaming. The business expansion to online streaming can be an added advantage because consumers can pay a flat rate that will be determined by the number of DVDs they rent on a monthly basis and the unlimited streaming that they require.
Current/Alternative Strategies
Currently, Netflix seems to be diverting more to online streaming of movies. These movies can be viewed by consumers on their gaming consol or computers. The business is trying to diversify into the business away from its original business level strategy of DVD rental market. From these two strategies, the company has been able to capture more than 110, 000 customers who either buy Blue-ray rentals or stream movies on their computers. The corporate strategy of Netflix can be described as focused on the US market consumers only. This abounds from the organizations little attempt to move into foreign countries. However, the company has strived to move into the European market since 2010 and significant progress has been made. This strategy is advisable because the company will be able to offer streaming videos to its new consumers. Thus, it can be asserted that their corporate strategy fits with their business level strategy considering the fact that they will still be in a position to distribute movies via online streaming. It is also projected that the company will have a major hit on its revenues, which abounds from the organizations strategy for Netflix to wait for 28 days before renting out new releases. This will impact their business model because if their competitors will not have such restrictions, Netflix will stand to benefit a lot from the new releases rented out.
Recommendations
The first recommendation is for the business to partner with content providers. Notably, partnering with content providers such as Starz will facilitate the company to make huge profit turnovers and will save them on time considering the fact that they are expanding into online rentals, which means that Starz can avail them the content they require at an earlier date. Additionally, the organization can aim at partnering with Smartphone companies. This will be an essential move as it will avail another platform for the company to air their content. Consumers will pay to watch movies via their Smartphones. The organization can also aim at expanding internationally. This will be a significant move because the company will increase the number of customers that it serves. However, it is advisable that the company focuses this strategy on Europe as the next market because it will take long for the company to form good relationships with countries that it is anticipating to move into.
Evaluation
Netflix needs to be keen while expanding into other markets. Keenness is a prerequisite because it is essential for the business to continue monitoring its performance at the local level. The company should not focus on gaining new markets while it losing customers locally. If the company ascertains a growth in the local market while it is still focusing its operations in foreign new markets such as Europe, the organization should consider ploughing back the profits into the new market. This will ensure stability in its operations because the departments will sustain one another in case of an economic downfall. Another focus area for the company is its partnership with Starz. In case it projects that the move will only benefit Starz, the company should opt out because this will have a detrimental effect on its finances.
