The 'Netflix' case describes how Netflix created the business model of delivering DVDs using mail services. Essentially, Netflix exploited a whitespace that other players, such as Blockbuster, could not engage in primarily because they were constrained by their own business models. The case allows the instructor to develop the details of the capabilities that have allowed Netflix to deliver the values its customers desire. The case can then explore the competitive dynamics between Blockbuster, Netflix and Wal-Mart, a new entrant, in this space. Finally, the case describes future technologies, such as Video on Demand (VOD), that in turn pose a threat to Netflix's business model.
Authors :: Sayan Chatterjee, Elizabeth Carroll, David M. Spencer
Swot Analysis of "Netflix" written by Sayan Chatterjee, Elizabeth Carroll, David M. Spencer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Netflix Blockbuster facing as an external strategic factors. Some of the topics covered in Netflix case study are - Strategic Management Strategies, Strategic planning and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Netflix casestudy better are - – there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, wage bills are increasing,
there is increasing trade war between United States & China, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix Blockbuster, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Netflix Blockbuster 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 can be done for the following purposes –
1. Strategic planning using facts provided in Netflix case study
2. Improving business portfolio management of Netflix Blockbuster
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Netflix Blockbuster
Strengths Netflix | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix Blockbuster in Netflix Harvard Business Review case study are -
Strong track record of project management
– Netflix Blockbuster is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Netflix 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Netflix firm has clearly differentiated products in the market place. This has enabled Netflix Blockbuster to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Netflix Blockbuster to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Netflix Blockbuster in the sector have low bargaining power. Netflix has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix Blockbuster to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Netflix Blockbuster is one of the most innovative firm in sector. Manager in Netflix Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Netflix Blockbuster has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Netflix 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.
Highly skilled collaborators
– Netflix Blockbuster 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 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Netflix Blockbuster 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.
Learning organization
- Netflix Blockbuster is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Netflix Blockbuster is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Netflix Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Netflix Blockbuster has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Netflix Blockbuster 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.
Ability to recruit top talent
– Netflix Blockbuster is one of the leading recruiters in the industry. Managers in the Netflix are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Netflix Blockbuster has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix Blockbuster to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Netflix | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix are -
Increasing silos among functional specialists
– The organizational structure of Netflix Blockbuster is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Netflix Blockbuster needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Netflix Blockbuster to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Netflix, it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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.
Slow decision making process
– As mentioned earlier in the report, Netflix Blockbuster has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Netflix Blockbuster even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As Netflix HBR case study mentions - Netflix Blockbuster takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Netflix, is just above the industry average. Netflix Blockbuster needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Products dominated business model
– Even though Netflix Blockbuster 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 should strive to include more intangible value offerings along with its core products and services.
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 Blockbuster supply chain. Even after few cautionary changes mentioned in the HBR case study - Netflix, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Netflix Blockbuster vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Netflix 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 can leverage the sales team experience to cultivate customer relationships as Netflix Blockbuster is planning to shift buying processes online.
Interest costs
– Compare to the competition, Netflix Blockbuster has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Netflix, it seems that the employees of Netflix Blockbuster don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Netflix Blockbuster has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Netflix | 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 are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Netflix Blockbuster can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Netflix Blockbuster has opened avenues for new revenue streams for the organization in the industry. This can help Netflix Blockbuster to build a more holistic ecosystem as suggested in the Netflix case study. Netflix Blockbuster can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Netflix Blockbuster to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Netflix Blockbuster to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Netflix Blockbuster 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 Blockbuster 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.
Leveraging digital technologies
– Netflix Blockbuster 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.
Learning at scale
– Online learning technologies has now opened space for Netflix Blockbuster to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Netflix Blockbuster 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 Strategy & Execution segment.
Loyalty marketing
– Netflix Blockbuster 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Netflix Blockbuster in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Netflix Blockbuster 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 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix Blockbuster to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Manufacturing automation
– Netflix Blockbuster can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Netflix Blockbuster can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Netflix 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Netflix Blockbuster can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Netflix External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Netflix are -
Regulatory challenges
– Netflix Blockbuster 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 Strategy & Execution industry regulations.
High dependence on third party suppliers
– Netflix Blockbuster high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Netflix Blockbuster can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Netflix, Netflix Blockbuster may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Netflix Blockbuster with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Netflix Blockbuster is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Netflix Blockbuster 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.
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 Blockbuster.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Netflix Blockbuster 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 .
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 Blockbuster business can come under increasing regulations regarding data privacy, data security, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Netflix Blockbuster needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Netflix Blockbuster
– 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 Blockbuster.
Weighted SWOT Analysis of Netflix 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 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 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 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 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 Blockbuster needs to make to build a sustainable competitive advantage.