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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, there is backlash against globalization, increasing commodity prices, cloud computing is disrupting traditional business models,
competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, 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.
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.
Ability to lead change in Strategy & Execution field
– Netflix Dvds 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 Dvds in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Ability to recruit top talent
– Netflix Dvds is one of the leading recruiters in the industry. Managers in the Netflix Inc.: Streaming Away from DVDs are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Training and development
– Netflix Dvds has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Netflix Inc.: Streaming Away from DVDs 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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Netflix Dvds digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Netflix Dvds has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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 -
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.
Low market penetration in new markets
– Outside its home market of Netflix Dvds, firm in the HBR case study Netflix Inc.: Streaming Away from DVDs needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Netflix Inc.: Streaming Away from DVDs, in the dynamic environment Netflix Dvds has struggled to respond to the nimble upstart competition. Netflix Dvds has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Netflix Dvds 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 Dvds 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.
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.
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.
Products dominated business model
– Even though Netflix Dvds 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 Inc.: Streaming Away from DVDs should strive to include more intangible value offerings along with its core products and services.
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.
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 -
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 Dvds can use these opportunities to build new business models that can help the communities that Netflix Dvds operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Netflix Dvds 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 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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Netflix Dvds is facing challenges because of the dominance of functional experts in the organization. Netflix Inc.: Streaming Away from DVDs case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Netflix Dvds has opened avenues for new revenue streams for the organization in the industry. This can help Netflix Dvds to build a more holistic ecosystem as suggested in the Netflix Inc.: Streaming Away from DVDs case study. Netflix Dvds can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Netflix Dvds 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.
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 Dvds 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.
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.
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.
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 -
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.
Increasing wage structure of Netflix Dvds
– 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 Dvds.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Netflix Dvds with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Netflix Dvds will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Netflix Dvds 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.
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.
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.
Stagnating economy with rate increase
– Netflix Dvds 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.
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 Dvds.
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.