Case Study Description of Netflix Inc.: Streaming Away from DVDs
This case examines two of the leading video rental services in the United States, Blockbuster and Netflix, and how each adapted to changing technology and market forces. At the end of the case, Blockbuster has declared bankruptcy and Netflix has seen its first decline in subscribers since its founding in 1997. Netflix also faces a number of new threats, including illegal file sharing, rental kiosks and new low cost video-on-demand (VOD) services. Netflix responds to these threats by announcing that it will split the company in two. Netflix will focus exclusively on streaming content, while a new subsidiary called Qwikster will be restricted to providing DVDs by mail. Customers overwhelmingly react negatively to the announcement, and Netflix's stock price plunges by more than 50 per cent.
Swot Analysis of "Netflix Inc.: Streaming Away from DVDs" written by Luis Alfonso Dau, David T.A. Wesley includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Netflix Dvds facing as an external strategic factors. Some of the topics covered in Netflix Inc.: Streaming Away from DVDs case study are - Strategic Management Strategies, Innovation, Marketing, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Netflix Inc.: Streaming Away from DVDs casestudy better are - – technology disruption, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs,
there is increasing trade war between United States & China, there is backlash against globalization, etc
Introduction to SWOT Analysis of Netflix Inc.: Streaming Away from DVDs
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix Inc.: Streaming Away from DVDs case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix Dvds, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Netflix Dvds 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 Inc.: Streaming Away from DVDs can be done for the following purposes –
1. Strategic planning using facts provided in Netflix Inc.: Streaming Away from DVDs case study
2. Improving business portfolio management of Netflix Dvds
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 Dvds
Strengths Netflix Inc.: Streaming Away from DVDs | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix Dvds in Netflix Inc.: Streaming Away from DVDs Harvard Business Review case study are -
Diverse revenue streams
– Netflix Dvds is present in almost all the verticals within the industry. This has provided firm in Netflix Inc.: Streaming Away from DVDs 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.
High brand equity
– Netflix Dvds has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix Dvds 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 Dvds 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.
Successful track record of launching new products
– Netflix Dvds has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Netflix Dvds 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.
Analytics focus
– Netflix Dvds is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Luis Alfonso Dau, David T.A. Wesley can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Netflix Dvds 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 Inc.: Streaming Away from DVDs HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Netflix Dvds
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Netflix Dvds does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Netflix Dvds is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Netflix Dvds has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Netflix Inc.: Streaming Away from DVDs - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Netflix Inc.: Streaming Away from DVDs 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 switching costs
– The high switching costs that Netflix Dvds has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Netflix Dvds in the sector have low bargaining power. Netflix Inc.: Streaming Away from DVDs has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix Dvds to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Netflix Inc.: Streaming Away from DVDs | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix Inc.: Streaming Away from DVDs are -
Lack of clear differentiation of Netflix Dvds products
– To increase the profitability and margins on the products, Netflix Dvds needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Netflix Dvds 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Netflix Inc.: Streaming Away from DVDs, it seems that the employees of Netflix Dvds 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Netflix Inc.: Streaming Away from DVDs, is just above the industry average. Netflix Dvds 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.
Aligning sales with marketing
– It come across in the case study Netflix Inc.: Streaming Away from DVDs 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 Inc.: Streaming Away from DVDs can leverage the sales team experience to cultivate customer relationships as Netflix Dvds is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Netflix Dvds is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Netflix Inc.: Streaming Away from DVDs can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Netflix Dvds needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
No frontier risks strategy
– After analyzing the HBR case study Netflix Inc.: Streaming Away from DVDs, 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.
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 Dvds supply chain. Even after few cautionary changes mentioned in the HBR case study - Netflix Inc.: Streaming Away from DVDs, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Netflix Dvds vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Netflix Inc.: Streaming Away from DVDs 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 Dvds has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Netflix Inc.: Streaming Away from DVDs has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Netflix Dvds 's lucrative customers.
Opportunities Netflix Inc.: Streaming Away from DVDs | 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 Inc.: Streaming Away from DVDs are -
Learning at scale
– Online learning technologies has now opened space for Netflix Dvds 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Netflix Dvds 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.
Building a culture of innovation
– managers at Netflix Dvds 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Netflix Dvds 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 Dvds to hire the very best people irrespective of their geographical location.
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 Dvds can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Netflix Dvds can develop new processes and procedures in Strategy & Execution 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Netflix Dvds in the consumer business. Now Netflix Dvds can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Netflix Dvds can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Netflix Dvds 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 Inc.: Streaming Away from DVDs, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Netflix Dvds can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Netflix Inc.: Streaming Away from DVDs 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.
Using analytics as competitive advantage
– Netflix Dvds 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 Inc.: Streaming Away from DVDs - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix Dvds to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Netflix Dvds 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Netflix Dvds can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Netflix Inc.: Streaming Away from DVDs External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Netflix Inc.: Streaming Away from DVDs are -
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Netflix Dvds can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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 Inc.: Streaming Away from DVDs, Netflix Dvds 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 .
Environmental challenges
– Netflix Dvds 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 Dvds can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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 Dvds needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Netflix Dvds is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Netflix Dvds has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Netflix Dvds needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Netflix Dvds in the Strategy & Execution industry. The Strategy & Execution 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Netflix Dvds 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 Inc.: Streaming Away from DVDs .
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 Dvds in the Strategy & Execution sector and impact the bottomline of the organization.
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 Dvds business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Netflix Dvds 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.
Consumer confidence and its impact on Netflix Dvds 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.
Weighted SWOT Analysis of Netflix Inc.: Streaming Away from DVDs 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 Inc.: Streaming Away from DVDs 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 Inc.: Streaming Away from DVDs 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 Inc.: Streaming Away from DVDs 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 Inc.: Streaming Away from DVDs 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 Dvds needs to make to build a sustainable competitive advantage.
