Netflix Case Study

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offline and mobile devices download available can be a great opportunity. Having more contract with large supplier for unique and popular content. With new 4K and 3D TV more 4K and 3D content for customer. Having more interactive app for smart phone and Tablet and convert in to online could service.

Threats

Licensing cost for content is becoming very expensive. So to keep up with new and popular content can be very difficult. Illegal download and copyright violation. Suppliers and buyer are becoming very strong and their negotiating power is becoming high, that can be a huge threat. There are many uncertainties with content providers, and that can be one the biggest threat. Growing popularity and success of others online streaming companies like HBO GO, Amazon, Hulu, YouTube and Apple TV can huge threat. Economic and Political uncertainty abroad prove to be very difficult for Netflix to get in the foreign market.

PESTEL

In terms of political and legal procedure, Netflix is affected by any change in copyright laws. Any change in copyright law can be proven very difficult for Netflix and its customer. The Recent political issue that lots of online company facing, net neutrality can change online streaming service. Personal data usage law can have a direct effect on Netflix. The content is the product of the television industry, intellectual property right law can great impact on the business.

Considering the economic factors influencing the US television market, predicting the actual effects of the different factors can be troublesome. Unemployment rate increase and a slow economy can affect the business field. Customer income is a critical factor for the industry that Netflix operates in. Revenue is highly sensitive to economic conditions as consumers may consider online streaming am an extra expense. Therefore, the improvement in economic conditions since the financial crisis could increase future revenue. Importantly, the ability of Netflix to sustainably offer Netflix at a low monthly cost gives the company a competitive advantage because decrease of income could result in switching the expensive television services to cheaper ones. But despite the strong or weak economy, Netflix has shown significant growth regardless of the economic situation.

In term of the social landscape, demographic changes and changes in the way people interact with new technology and how people consume digital media are challenging for Netflix. More affordable, convenient, and easy access to electronic devices to all age and demographic of people is affecting Netflix’s access to each market. Netflix store huge amount of customer information and keeping them safe and secure represents a strong threat to Netflix. Recent data and identity privacy are becoming a very sensitive issue and disclosure of member data could have a negative impact on its business and reputation.

Online streaming business is mostly depending on technology. Having latest technology will always give Netflix competitive over a competitor. Its ability to stay first in the online streaming market is highly affected by the use of cutting edge technology. Netflix must develop and maintain apps for new devices especially a smartphone, tablet and TV.

Environment factor is not a significant for Netflix as all of its content is stored in stored and distributed online. It is a good business policy that is good for Netflix that the transition from physical DVDs to online streaming is eco-friendly business model and good of the environment.

Porter’s 5 Forces

The competition among established companies like Hulu, Amazon Prime and Redbox are intense. The movie rental industry is very competitive and there are large numbers of company out there who are competing each other’s. There are also many methods for consumers to obtain a movie like, rent DVD, buy DVD, rent online, buy online, stream online etc. which also increases competition. Comparable products and service can be found at many different locations and online website with almost same price. There are low switching costs which also lead to strong competition. Netflix key competitors have a large amount of capital and Low levels of product differentiation.

The threat of new potential entrants is moderately low due to very high cost or capital requirements. The strong branding and popular image of the largest firms in the industry also biggest barrier for entering the market. Key players in the industry include Red Box, Hulu and

Amazon Prime Video. A new entrant would have to spend a lot of money on marketing, advertising, licensing, IT infrastructure and content to become competitive.

The threat of substitute products and service is very high and costs must be low in order to be competitive. Substitute products to the movie rental industry are wide in number that includes going to a movie theater, watching TV, surfing the web or even playing games. Technology and availability of the internet have increased the threat of substitute products. More consumers are using the web to research prices, find sales and read reviews that can effect business.

In modern business bargaining power of buyers is high. Customers have a lot of power, option role in business to decide the success of the business. In this business there are no switching costs and customers have many options to choose from that make very difficult for any company to keep a customer for long time. Offering them a low price, reliable fast service and many contents to choose from is the only way in this business to keep a customer happy.

In this business bargaining power of suppliers and licensing fees are moderately high. Suppliers impose a price increase on their products piece to minimize company’s overall profit. In recent past, Netflix was forced to remove some television shows from their selection due to a conflict with the supplier on their price, licensing, policy and their terms and condition. Recently Netflix is trying to fight back with by creating their own exclusive show.

Strategic Groups

The criteria used for the strategic group map is Market Coverage and Added Value. Netflix scored very high in both areas, being known for their value, content and expanding market coverage. Although another service provider brand has surpassed Netflix, they are not known for added value in the video. They don’t offer either original content, subscription services or lack of content availability. Netflix is the leader in the industry, it has the highest market share due to its innovation way