Case Study Description of Netflix: Pricing Decision 2011
University of California, Berkeley-Haas collectionBeginning in 2007, Netflix began offering existing mail rental subscribers the opportunity to view a limited number of movies through internet streaming and no additional fee. This "free streaming" continued until mid-2011 when Netflix announced a split to their business with separate monthly fees (and separate websites and names) for streaming and mail disk subscriptions. The resulting customer backlash and threatened defections caused the company's stock price to drop 60 percent. As movie studios (the owners of the content) saw sales of DVDs drop, they began to sharply raise their prices for online content. Moreover, Netflix which had been dominant in the mail disk rental model began to face substantial competition from other streaming video providers. The case study provides students with an opportunity learn about pricing and to develop a pricing strategy for Netflix.
Swot Analysis of "Netflix: Pricing Decision 2011" written by Max Oltersdorf, David Robinson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Netflix Streaming facing as an external strategic factors. Some of the topics covered in Netflix: Pricing Decision 2011 case study are - Strategic Management Strategies, Pricing, Public relations and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Netflix: Pricing Decision 2011 casestudy better are - – talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings,
geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Netflix: Pricing Decision 2011
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix: Pricing Decision 2011 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix Streaming, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Netflix Streaming operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Netflix: Pricing Decision 2011 can be done for the following purposes –
1. Strategic planning using facts provided in Netflix: Pricing Decision 2011 case study
2. Improving business portfolio management of Netflix Streaming
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Netflix Streaming
Strengths Netflix: Pricing Decision 2011 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix Streaming in Netflix: Pricing Decision 2011 Harvard Business Review case study are -
Ability to recruit top talent
– Netflix Streaming is one of the leading recruiters in the industry. Managers in the Netflix: Pricing Decision 2011 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Sales & Marketing industry
– Netflix: Pricing Decision 2011 firm has clearly differentiated products in the market place. This has enabled Netflix Streaming to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Netflix Streaming to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Netflix Streaming has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Netflix: Pricing Decision 2011 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Netflix Streaming has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Netflix Streaming has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Operational resilience
– The operational resilience strategy in the Netflix: Pricing Decision 2011 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Netflix Streaming has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix Streaming to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Netflix Streaming are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Sales & Marketing field
– Netflix Streaming is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Netflix Streaming in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Netflix Streaming has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Netflix: Pricing Decision 2011 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Netflix Streaming is present in almost all the verticals within the industry. This has provided firm in Netflix: Pricing Decision 2011 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Netflix Streaming in the sector have low bargaining power. Netflix: Pricing Decision 2011 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix Streaming to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Netflix Streaming
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Netflix Streaming does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Netflix: Pricing Decision 2011 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix: Pricing Decision 2011 are -
Aligning sales with marketing
– It come across in the case study Netflix: Pricing Decision 2011 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Netflix: Pricing Decision 2011 can leverage the sales team experience to cultivate customer relationships as Netflix Streaming is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Netflix Streaming is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Netflix Streaming needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Netflix Streaming to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Max Oltersdorf, David Robinson suggests that, Netflix Streaming is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
No frontier risks strategy
– After analyzing the HBR case study Netflix: Pricing Decision 2011, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring
– The stress on hiring functional specialists at Netflix Streaming has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Netflix Streaming has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Netflix Streaming supply chain. Even after few cautionary changes mentioned in the HBR case study - Netflix: Pricing Decision 2011, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Netflix Streaming vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Netflix Streaming, firm in the HBR case study Netflix: Pricing Decision 2011 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Netflix Streaming has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Netflix: Pricing Decision 2011 HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Netflix Streaming has relatively successful track record of launching new products.
Products dominated business model
– Even though Netflix Streaming has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Netflix: Pricing Decision 2011 should strive to include more intangible value offerings along with its core products and services.
Opportunities Netflix: Pricing Decision 2011 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Netflix: Pricing Decision 2011 are -
Building a culture of innovation
– managers at Netflix Streaming can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Developing new processes and practices
– Netflix Streaming can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Netflix Streaming can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Netflix Streaming can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Netflix Streaming can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Netflix: Pricing Decision 2011, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Netflix Streaming has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Netflix: Pricing Decision 2011 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix Streaming to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Netflix Streaming can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Netflix Streaming can use these opportunities to build new business models that can help the communities that Netflix Streaming operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Better consumer reach
– The expansion of the 5G network will help Netflix Streaming to increase its market reach. Netflix Streaming will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Netflix Streaming can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Buying journey improvements
– Netflix Streaming can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Netflix: Pricing Decision 2011 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Netflix Streaming to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Netflix Streaming can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Netflix Streaming has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Netflix: Pricing Decision 2011 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Netflix: Pricing Decision 2011 are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Netflix Streaming with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Netflix Streaming can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Netflix: Pricing Decision 2011 .
Consumer confidence and its impact on Netflix Streaming demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Netflix Streaming in the Sales & Marketing sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Netflix Streaming.
Increasing wage structure of Netflix Streaming
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Netflix Streaming.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Netflix Streaming business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Shortening product life cycle
– it is one of the major threat that Netflix Streaming is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Netflix Streaming needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Netflix Streaming in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– Netflix Streaming needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Netflix Streaming can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Netflix Streaming can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Netflix: Pricing Decision 2011 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Netflix: Pricing Decision 2011 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Netflix: Pricing Decision 2011 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Netflix: Pricing Decision 2011 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Netflix: Pricing Decision 2011 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Netflix Streaming needs to make to build a sustainable competitive advantage.
