1.0 Introduction
Netflix Inc is one of the American subscriptions streaming based company which was incorporated in the year 1997. It is headquartered at California, USA and the areas served by them are worldwide. The key people included are Reed Hastings, who is the CEO of the company. Till 2021, there are around 12135 employees working with Netflix and there has been tremendous increase in the revenue which is approximately US$29.7 billion till 2021. The services offered by them include film production, video on demand, and pay television along with television production (Netflix.com 2022).
The major strategic issue which is faced by the company Netflix Inc is that owing to the highly competitive market, there has been issue with the international growth of the company. The big level of imbalance in Netflix is that the majority were the US viewing as well as subscribers. However, on the other hand, YouTube as well as Facebook have 20% US and 80% international. This stiff level of competition has impacted the overall profitability and revenue generation of company in negative way.
Netflix mainly tries and sees the broader market in the US. Its domestic streaming segment mainly produces highest level of revenue among business segments. In US Market, the brand is heavily dependent and the revenues of the company are completely based on it (Daidj and Egert 2018). This is considered to be the major weakness of Netflix. Even though Netflix operates internationally, it mainly relies on the North American market. During the fiscal year 2019, the company Netflix had reported around $10.05 Billion revenue from the North American market, that also represents about and almost 50% of the total revenues. This is considered to be the major weakness as the North American market is near saturation.
In The Current Scenario, It Is Noted That The Customers Have Strong Bargaining Power As They Have Different Other Options Available In The Market They Demand the customized pricing with more level of options (Fagerjord and Kueng 2019). Unfortunately, in case of Netflix, the model of pricing is quite rigid with the three major tiers like basic, standard as well as premium. The lack of the several options impacted the growth of company and also stagnated in number of the new kind of subscriptions present in the competitive business environment.
The key competence of Netflix during the year 2021 included the excellent customer service, keeping up with the technological advancement and innovation, providing the one month free kind of subscription to the different new customers and creating the Netflix Original Series that can be accessed only if the subscriber is having the monthly subscription (Fernández Gómez and Martín Quevedo 2018). It is seen and researched that the overall growth of Netflix has been driven mainly through the focus of the company on technological innovation. Netflix has different rivals present; however, they have been successful in achieving the greater level of penetration in the markets which are leading than the rivals. With the help of this, the company Netflix is capable of achieving the sustainable competitive advantage and gain profitability and there is increase in the revenues in the market.
2.0 Findings
The strict regulations and legislations from the government regarding the different service providers like the company Netflix in different countries will be considered to be the big kind of threat (González, Membiela-Pollán and Cuns 2020). For instance- The expansion of Netflix to China economy will be quite unlikely to happen. The reason behind the same is the restriction on the foreign content. Due to this, it hampers the overall profitability and revenue generation of the company in the present scenario. In addition, the users of Netflix is growing in the rapid manner, and therefore, Netflix was asked by the European Union Commissioner for reducing data in the video streams and urged the users to watch it in the standard instead of HD.
Netflix is not only one which will be helpful for providing the digital streaming around world. The competitors are keeping on increasing each year. Disney+, Hulu along with YouTube are competing in the continuous manner with Netflix through providing the repeated level of access to the new as well as original content to the different subscribers. Moreover, in the recent years, the growth has slowed down as the American market is reaching saturation and this hampers the overall effectiveness of Netflix which was present in the previous times (Hadida et al. 2021).
Level of Industry Rivalry and how this will likely impact Sustainable Competitive Advantage
From the analysis of the external environment analysis of the Netflix Company, it is found that the Amazon Video, Disney plus along with Hulu are major competitors which impacts growth of Netflix in the 21st century. Netflix is facing severe level of competition from the different traditional level of broadcasters and rival organizations providing the videos on the demand and retailers who are selling the DVDs. Amazon is considered to be the direct competitors as they are targeting the similar target market and it impacts the competitive advantage of Netflix to a large extent. Due to this stiff level of competition, it is becoming difficult for Netflix to acquire the rights for displaying content in the accurate way.
3.0 Conclusion
From the analysis of the internal and external strategic gaps which are faced by Netflix during 2021, it becomes quite clear to understand that competitive pressure and stagnancy in the international growth are the strategic issues faced by them. In such scenario, proper emphasis should be given on the resources and capabilities which will be working in favor for Netflix to enhance the growth of the company in the long run (Martín-Quevedo, Fernández-Gómez and Segado-Boj 2021).
First and foremost, Netflix should be incorporating the Continued Product Improvements in different parts of the world. The reason behind the same is that it will be helping them in adapting the market and increase the level of user engagement and maintain the product lead. They must be continuing to develop the product enhancements which will be capable of keeping the users within Netflix based Application.
Moreover, there should be different pricing brackets available for Netflix which will be allowing them to grow in the significant manner. From the resources and capabilities analysis, it becomes quite clear that Netflix has the scope to attract customers; however, with different annual subscription plans, they will be able to attract different income group customers and the competition will be reduced to a certain extent as well (Mier and Kohli, 2021).
The corporate strategy of Netflix is to serve the customers with the stellar service, and the suppliers with the valuable partner. Going Digital is the overall growth strategy of Netflix during 2021 wherein the main aim is to expand worldwide and this will be giving them the scope to generate the high level engagement metric (Rahe, Buschow and Schlütz 2021). In the current scenario, Netflix is following the backward vertical integration to buyer and suppliers as they have been successful in establishing at end of the supply chain as it was the platform for distributing the films and the TV shows which are created by different content creators. Moreover, the forward vertical integration mainly focuses on owning their content and also using the distribution system for delivering the content to the different subscribers (Rataul, Tisch and Zámborský 2018). Through this, Netflix is able to keep revenues rather than just sharing with different distributors. Lastly, the horizontal integration of Netflix helps them in creating more original kind of content in the bid for attracting large number of customers. To a certain extent, Netflix diversified their content for reaching to more people, create the better level of content along with attract different customers around the world for gaining a certain level of competitive advantage.
References
Daidj, N. and Egert, C., 2018. Towards new coopetition-based business models? The case of Netflix on the French market. Journal of Research in Marketing and Entrepreneurship.
Fagerjord, A. and Kueng, L., 2019. Mapping the core actors and flows in streaming video services: What Netflix can tell us about these new media networks. Journal of Media Business Studies, 16(3), pp.166-181.
Fernández Gómez, E. and Martín Quevedo, J., 2018. Connecting with audiences in new markets: Netflix´ s Twitter strategy in Spain. Journal of media business studies, 15(2), pp.127-146.
González, C., Membiela-Pollán, M. and Cuns, M., 2020. Relationship marketing and brand community: the case of Netflix. Redmarka. Revista de Marketing Aplicado, 24(2), pp.251-274.
Hadida, A.L., Lampel, J., Walls, W.D. and Joshi, A., 2021. Hollywood studio filmmaking in the age of Netflix: a tale of two institutional logics. Journal of Cultural Economics, 45(2), pp.213-238.
Martín-Quevedo, J., Fernández-Gómez, E. and Segado-Boj, F., 2019. How to engage with younger users on Instagram: A comparative analysis of HBO and Netflix in the Spanish and US markets. International journal on media management, 21(2), pp.67-87.
Mier, J. and Kohli, A.K., 2021. Netflix: reinvention across multiple time periods, reflections and directions for future research. AMS Review, 11(1), pp.194-205.
Netflix.com 2022 Netflix Inc (Online) Retrieved from https://www.netflix.com [Accessed on 20th April 2022]
Rahe, V., Buschow, C. and Schlütz, D., 2021. How users approach novel media products: Brand perception of Netflix and Amazon Prime video as signposts within the German subscription-based video-on-demand market. Journal of Media Business Studies, 18(1), pp.45-58.
Rataul, P., Tisch, D.G. and Zámborský, P., 2018. Netflix: Dynamic capabilities for global success. SAGE Publications: SAGE Business Cases Originals.
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