External Environment Analysis
There are external factors which ha influenced Netflix and contributed towards becoming one of the largest internet companies within the entertainment industry. The external Environment is inclusive of factors like Political, Economic, socio-cultural, technological, Environmental, and finally legal. Under the political factors, concerns of regulating have aided a lot towards the growth of this industry. Regulations in terms of copyright and content laws have played a significant role in the growth and expansion of this industry (Bolland 2017, p 91). Besides, licensing is another crucial factor since it has enabled the company to operate freely due to the subscriptions. The aspect of political stability is another important factor since it has aided a lot in creating a conducive environment of doing business.
About the Economic factors, the United States has recorded some substantial growth in the economy, which has increased the purchasing power. Besides, robust economic growth leads to an increase in the disposable income where there is enough to spend even in the Entertainment industry. It is also noted that exchange rates from other countries that subscribe to Netflix contribute to the growth of this entertainment industry. Typically, Netflix company being in one of the strongest economies in the world gives it advantages of having massive subscribers both locally and internationally.
Regarding the concern of Socio-Cultural factors, it is noted that UK markets, younger viewers are shifting from watching third less traditional television to online streaming services to get entertainment. Besides, the recent discovery has shown that many customers are preferring to watch movies and videos through their smartphones rather than using traditional big screens. It is a kind of a trend which shows the demand for content shifting to fit the comfortability of the users (Bolland 2017, pp 102 -104). Additionally, the tendency of a customer seeing the costly cable options as less pleasing makes them shift to the options of viewing videos online. Wi that perspective, the services offered by Netflix become the favorite hence gaining a lot of popularity.
On the issue concerning technological factors, it can be noted that Netflix has invested money into R&D in supporting 4K efficient streaming. The aspect of having a technological shift to 4K screens has established a boost on online streaming services. Furthermore, if the brand patented technology is created, it will be an innovation that will earn a tremendous competitive advantage to Netflix (Bolland 2017, pp 114 -117). Besides, this technological progress in the field of online streaming services has resulted in the lower market requirements, which has dramatically boosted Netflix Entertainment Company.
Regarding the issue of Environmental factors, Netflix company has already established an excellent relationship with other countries. The aspect of adding services such as Chinese, Korean, Arabic, and other languages has boosted it towards achieving popularity.
Internal Environment Analysis
In analyzing the internal Environment of the Netflix company, two concepts will be considered. These two concepts are the strengths and weaknesses of the company and how they have affected the company either positively or negatively. Regarding the strength, it is noted that Netflix Inc has higher brand equity. The brand quality is the business benefit and the corresponding value associated with the brand of the company comparative to its competitors (Böttger et al. pp.28 -31). The brand has enabled Netflix to maintain its popularity and also aids it to gain the capability of penetrating to the current markets.
Additionally, it has a broad platform of the content producers as well as consumers, which is a strength that allows Netflix Inc. to exploit its operations. Through maximizing its activities and services, the company tends to achieve positive growth, which is a desirable factor. A perfect example is that when the content creator increases within a platform, it attracts a massive population of the consumers. The increase of the consumers will lead to a rise in producers, which means that the company will experience desirable growth. Another concept that is perceived as the strength of Netflix Inc. it’s capable of creating original content. It is an aspect which means that the company obtains its vast earnings from the original shows and movies and also additional revenues from the steaming activities (Böttger et al. p.33). These kinds of strengthens are classified as among the core competencies through VRIO analysis and the value chain analysis of the company. It is also a fact these internal factors influence business performance when it comes to creating content and technological innovation, of course, through human resource capabilities.
On the issue of the weakness, Netflix Inc is noted to have an imitable business model. It is an internal strategic factor that indeed weakens the business. A perfect example is when a potential competitor copies a similar business model and come up for on-demand online media streaming. It is an aspect that means there is a sharing of the competitive advantage and market segmentation since the clients will go for the cheaper model. Another form of weakness is too dependent on the content producers, which makes the company vulnerable to the consequences of strategies of producers (Böttger et al. pp. 31 -34).
Additionally, the business is dependent on the Internet service providers, which in turn determines the speed of connectivity of customers. The speed is an essential factor since it influences the satisfaction of the client within the services of Netflix. Through these internal strategic concerns, there is a reflection of a strategic challenge of reducing vulnerability as a method of improving business performance.
The Problem Identification
As a company that operates and relies on online subscriptions, various challenges must be encountered. Among the many problems is the maintenance of the current and the new subscribers though having excellent internet service provider relations. The aspect of maintaining new subscribers has been noted to be the biggest challenge not only to Netflix Inc but also to other companies relying on online streaming services. After its launch in the year 1997, Netflix Inc. did have a relative to worry about since they were the very first company to mail the DVD to customers and other subscribers. It is a process that gave the subscribers the option to pick the plan, which was suiting them well. It is an aspect that shows that the collection of revenue relied strongly on the growth of subscribers. The membership of Netflix is based on frequent subscriptions, whether through the mail – delivered DVDs or the streaming. Additionally, for Netflix to expand its services outside the United States, Netflix has to risk regulation and the culture and competition from overseas movies and shows. It is among reasons why most customers chose to favor Hulu or Amazon due to the expansion of competitors. It is a fact that has made Netflix become rare and not possible to copy since it can’t operate without the subscribers.
Regarding the Internet service provider relations, it adds more problems to the already existing challenge. There are complaints from currently subscribed members about slow download rates experience. It is an issue that can make clients shift from one service to the one which is faster. It is through improving the online streaming services that increase the level of competition where clients choose a quick and exciting service.
The solution
It is noted that Netflix is facing a challenge of competition, and there is a need to come up with strategies for counterattacking that challenge. The best two selected methods include differentiation and cost leadership strategy. About differentiation, Netflix Inc. needs to become more of the premium company by delivering a higher profile value as well as supporting lower selling costs. They c also offer ranged subscription prices depending on the needs of the subscribers. Another aspect of solving the problem is through signing contracts with Hollywood Studios to have the videos and movies with only themselves being subscription service. It is a scenario that can eliminate some competitors. Other steps of differentiation may include; keeping and improving theirs show known as “The House of Cards,” provision of broad sections of both old and new movies together with Tv Shows, providing excellent customer service, among others. Besides, Netflix Inc. should give access to its application from tablets, smart TVs, Smart iPhone, among other household devices. It is also necessary for the company to sign the contract with Internet service providers of availing fats internet for customers’ satisfaction and comfortability. Lastly, the company should ensure that its clients can access the services anytime, anywhere, and any device as long as it can use the internet. On the issue of Cost leadership, the company needs to come into agreement with Comcast and other related ISPs that the subscribers will always have access to fast internet. Besides, the company starts producing its content to cut the content costs. Lastly, the company should ensure that they have an intense expansion of their services overseas where the market has already grown beyond that of the United States. If those strategies can be implemented then, the Netflix Inc Company will continue to rise and gain more popularity over its competitors