Internal And External Factors Of Netflix: Analysis, SWOT, And Business Model Canvas

Company Introduction

With the introduction of modern channels of entertainment, the use of television has reduced considerably with the greater influence being on the entertainment channels that operate online. Netflix is one such modern day phenomenon that has taken the world by storm with its quirky content and subscription based services for films and television series. This media service provider has proved to be a boon in the fast-paced life of the modern world where the people has less scope for the stagnant entertainment channels (Matrix 2014). The report here is an analysis of Netflix, about the company, the external SWOT analysis, the internal business model canvas. The following paragraphs also highlight on the recommendations that the company can use based on the internal and external analysis of the service provider.

Netflix is one of the premium and top media service provider that has been founded on August 29, 1997 at California in USA (Netflix.com. 2018). The founders of the company are Reed Hastings and Marc Randolph. The company started its trade in streaming video on demand and now has reached upto 190 countries of the world with their subscription plans. According to Netflix.com (2018), the company started its operation as selling DVD and renting out the videos through mail and now it is one of the largest subscription based streaming media channels that has a library of films and other media services for their set of ever-growing customer base. The company has a massive consumer base in every part of the world except for Mainland China, Syria, North Korea and Crimea. The company other than streaming films and other videos is into production of content from the year 2012 for its 130 million worldwide subscriber base as of July 2018.

Strength

• Brand Value – One of the biggest strengths of Netflix is the fact that the company has niche a name for itself in the field of online streaming. The company in spite of steep competition has arched its name and managed to have over 6000% increase in their share prices.
• Customer Base – Netflix has one of the most efficient and loyal customer base which is ever expanding to a major extent. The customer base of Netflix is approximately 130 million as of July 2018 which is tremendous for any particular company streaming videos and making content of its own (Bauman et al. 2013).
• Interesting Content – Another major strength of Netflix is the interesting content that the company makes in association with great artists and stories. The independent series and content has been a favourite of most of its users which has proved to be one of the biggest strengths.

Weakness

• Paid Service – One of the biggest weakness of Netflix is the paid content. Not everyone is interested to pay for their content and so restricts their videos to a limited audience base.
• Environmental facts – The environmental marking of Netflix is very low compared to Facebook or Amazon Prime (Bauman et al. 2013). The company fails to use renewable energy sources whereas their competitors use over 40% of the renewable energy.
• Losing major markets – According to Gomez-Uribe and Hunt (2016), Netflix does not operate in China and North Korea which is why they are losing a major market in terms of the customer base and subscription number.

Opportunity

• Market of China – One of the biggest opportunities of Netflix is the expansion of the company into Mainland China (Adhikary et al. 2012). China is one of the potential markets for the videos and film streaming and can increase the customer base to a major extent which creates ample opportunities for the company.
• Technological growth – Netflix can improve their technical aspects by introducing 4K quality and high end digital screening in all of their videos and streamings. The growth of technology can be a major opportunity (Hallinan and Striphas 2016).

Threat

• Competition from rivals – Netflix has a major threat in Amazon Prime as they both have their loyal set of customers and are prone to substitution due to their similarity in content and audience target (Amatriain 2013).
• Piracy– Another major threat to the company is the level of piracy that is surfacing in the digital world. According to Matrix (2014), an addition, the leaking of the video to YouTube can prove detrimental to the company in terms of revenue and exclusivity.

Business Model Canvas

Table 1 – Business Model Canvas of Netflix

(Source: As created by the author)

Key Partners- The organization Netflix has different partners who have helped it to succeed across different countries. They are Television partners, Satellite Providers, TV, Movie studios

Smart TV, Smartphone and content owners. All these partners play a key role in carrying out the operations of the firm (Kaplan 2012).

Key Activities- It is an online platform with high standard in terms of content. It has its presence across 190 countries across the globe. According to Kaplan (2012), with its different forms of innovative programs, the organization has a large amount of customer base.

External analysis – SWOT analysis

Value Proposition- It provides one month free service to all its new users. After 1^st month, it opts for Subscription plan after 1 month. There are different forms of subscription plan which a customer can opt for and any customer can cancel its ongoing plan at any given point (Weill and Woerner 2013). The organization also takes a feedback from all its customers and thus it has succeeded in the creation of a large customer base.

Customer Relationships- It holds a strong customer relationship and there are different channels for different ages of customers. It also has a separate kids channel designed for kids and their family. It has helped the company in create a niche market segment in comparison with its competitors.

Customer Segments- It caters all the segments of customers who are interested in movies and entertainment.  It has different programs for all segments of customers.

Key Resources- Since Netflix operations in an online platform, therefore, it needs to have a strong online platform for its high end operations. According to the views of Euchner and Ganguly (2014), in addition to this, in case of entertainment industry copyright plays a key role. Therefore, it is also important to have a strong intellectual property and the organization is following the same.

Channels- It operates mainly via online platform. According to the opinios of Hallinan and Striphas (2016), Netflix.com is the primary channel where a user can watch different programs 24*7 throughout the year. A customer can watch his/her favourite program via television, pc, laptop and mobile phones.

Cost Structure- The organization Netflix mainly operates on Value based and cost based business model. It works original production and content and mainly deals with short term projects and investments (Hallinan and Striphas 2016). Due to this reason, the variable cost is low and controllable.  This can be considered as a positive sign for the organization

Revenue Streams- It mainly operates on the basis of online streaming and subscriptions. It is also an independent licensed distributer and therefore, it can generate revenue from its distribution channel as well.

Based on the SWOT and Business Model Canvas of Netflix, it can be said that the company holds a stable position in the market. However, certain recommendations can be stated as follows –

• The company should expand their presence in China and North Korea which can further acclerate their business and increase profit.
• Another recommendation is to reduce the cost that is being offered for the subscription as for most of the third world countries, the cost deemed is quite high.
• The company should be concerned about the environmental facts associated with the renewable energy which will improve the respect and their corporate social responsibility status in the longer run.
• The company should increase their marketing strategies to overpower their rival Amazon Prime.

Conclusion

In conclusion, it can be said that Netflix is one of the most celebrated companies of the world with a huge customer base and business strategies. The company has most of the strengths and has a good stand in terms of both customer and product innovation. The following paragraphs analysed about the company with the facts about the company. Both the internal and external analysis are done to shed light on the company and also to value recommendations after the analysis. At last, it can be concluded that Netflix is one of the booming companies in the global circuit which will receive tremendous hike in the coming years with their innovation and good economic and loyalty value.

References

Adhikari, V.K., Guo, Y., Hao, F., Varvello, M., Hilt, V., Steiner, M. and Zhang, Z.L., 2012, March. Unreeling netflix: Understanding and improving multi-cdn movie delivery. In INFOCOM, 2012 Proceedings IEEE (pp. 1620-1628). IEEE.

Amatriain, X., 2013, August. Big & personal: data and models behind netflix recommendations. In Proceedings of the 2nd international workshop on big data, streams and heterogeneous source Mining: Algorithms, systems, programming models and applications (pp. 1-6). ACM.

Bauman, L., Deal, N., Ishak, P. and Johnson, S., 2013. Netflix Environmental Scan/SWOT Analysis. Retrieved April, 22, p.2013.

Euchner, J. and Ganguly, A., 2014. Business model innovation in practice. Research-Technology Management, 57(6), pp.33-39.

Gomez-Uribe, C.A. and Hunt, N., 2016. The netflix recommender system: Algorithms, business value, and innovation. ACM Transactions on Management Information Systems (TMIS), 6(4), p.13.

Hallinan, B. and Striphas, T., 2016. Recommended for you: The Netflix Prize and the production of algorithmic culture. New Media & Society, 18(1), pp.117-137.

Kaplan, S., 2012. The business model innovation factory: How to stay relevant when the world is changing. John Wiley & Sons.

Matrix, S., 2014. The Netflix effect: Teens, binge watching, and on-demand digital media trends. Jeunesse: Young People, Texts, Cultures, 6(1), pp.119-138.

Netflix.com. 2018. Netflix United Kingdom – Watch TV Programmes Online, Watch Films Online. [online] Available at: https://www.netflix.com/in/ [Accessed 23 Aug. 2018].

Weill, P. and Woerner, S.L., 2013. Optimizing your digital business model. MIT Sloan Management Review, 54(3), p.71

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