Netflix: Designing the Netflix Prize (A), Spanish Version SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Netflix: Designing the Netflix Prize (A), Spanish Version
In 2006, Reed Hastings, CEO of Netflix, was looking for a way to solve Netflix's customer churn problem. Netflix used Cinematch, its proprietary movie recommendation software, to promote individually determined best-fit movies to customers. Hastings determined that a 10% improvement to the Cinematch algorithm would decrease customer churn and increase annual revenue by up to $89 million. However, traditional options for improving the algorithm, such as hiring and training new employees, were time intensive and costly. Hastings decided to improve Netflix's software by crowdsourcing, and began planning the Netflix Prize, an open contest searching for a 10% improvement on Cinematch. The case examines the dilemmas Hastings faced as he planned the contest, such as whether to use an existing crowdsourcing platform or create his own, what company information to expose, how to protect customer privacy while making internal datasets public, how to allocate IP, and how to manage the crowd.
Authors :: Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar
Swot Analysis of "Netflix: Designing the Netflix Prize (A), Spanish Version" written by Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hastings Netflix facing as an external strategic factors. Some of the topics covered in Netflix: Designing the Netflix Prize (A), Spanish Version case study are - Strategic Management Strategies, Innovation, Knowledge management, Technology and Technology & Operations.
Some of the macro environment factors that can be used to understand the Netflix: Designing the Netflix Prize (A), Spanish Version casestudy better are - – geopolitical disruptions, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing government debt because of Covid-19 spendings,
there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Netflix: Designing the Netflix Prize (A), Spanish Version
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix: Designing the Netflix Prize (A), Spanish Version case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hastings Netflix, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hastings Netflix 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: Designing the Netflix Prize (A), Spanish Version can be done for the following purposes –
1. Strategic planning using facts provided in Netflix: Designing the Netflix Prize (A), Spanish Version case study
2. Improving business portfolio management of Hastings Netflix
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hastings Netflix
Strengths Netflix: Designing the Netflix Prize (A), Spanish Version | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hastings Netflix in Netflix: Designing the Netflix Prize (A), Spanish Version Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Hastings Netflix in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Hastings Netflix 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.
Training and development
– Hastings Netflix has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Netflix: Designing the Netflix Prize (A), Spanish Version 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.
Ability to lead change in Technology & Operations field
– Hastings Netflix 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 Hastings Netflix in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Hastings Netflix is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Hastings Netflix has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hastings Netflix to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Technology & Operations industry
– Netflix: Designing the Netflix Prize (A), Spanish Version firm has clearly differentiated products in the market place. This has enabled Hastings Netflix to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Hastings Netflix to invest into research and development (R&D) and innovation.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Hastings Netflix digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hastings Netflix 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.
Low bargaining power of suppliers
– Suppliers of Hastings Netflix in the sector have low bargaining power. Netflix: Designing the Netflix Prize (A), Spanish Version has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hastings Netflix to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Hastings Netflix 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.
Operational resilience
– The operational resilience strategy in the Netflix: Designing the Netflix Prize (A), Spanish Version 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.
Diverse revenue streams
– Hastings Netflix is present in almost all the verticals within the industry. This has provided firm in Netflix: Designing the Netflix Prize (A), Spanish Version 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.
Weaknesses Netflix: Designing the Netflix Prize (A), Spanish Version | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix: Designing the Netflix Prize (A), Spanish Version are -
No frontier risks strategy
– After analyzing the HBR case study Netflix: Designing the Netflix Prize (A), Spanish Version, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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 Hastings Netflix supply chain. Even after few cautionary changes mentioned in the HBR case study - Netflix: Designing the Netflix Prize (A), Spanish Version, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hastings Netflix vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Netflix: Designing the Netflix Prize (A), Spanish Version HBR case study mentions - Hastings Netflix 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.
Need for greater diversity
– Hastings Netflix 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Netflix: Designing the Netflix Prize (A), Spanish Version, in the dynamic environment Hastings Netflix has struggled to respond to the nimble upstart competition. Hastings Netflix has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Hastings Netflix 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 bargaining power of channel partners
– Because of the regulatory requirements, Karim R. Lakhani, Wesley M. Cohen, Kynon Ingram, Tushar Kothalkar suggests that, Hastings Netflix 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.
Slow decision making process
– As mentioned earlier in the report, Hastings Netflix 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. Hastings Netflix 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.
High cash cycle compare to competitors
Hastings Netflix 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hastings Netflix is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Netflix: Designing the Netflix Prize (A), Spanish Version can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Netflix: Designing the Netflix Prize (A), Spanish Version 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 Hastings Netflix has relatively successful track record of launching new products.
Opportunities Netflix: Designing the Netflix Prize (A), Spanish Version | 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: Designing the Netflix Prize (A), Spanish Version are -
Leveraging digital technologies
– Hastings Netflix 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.
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 Hastings Netflix 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hastings Netflix in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Developing new processes and practices
– Hastings Netflix can develop new processes and procedures in Technology & Operations 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.
Better consumer reach
– The expansion of the 5G network will help Hastings Netflix to increase its market reach. Hastings Netflix 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hastings Netflix can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Hastings Netflix has opened avenues for new revenue streams for the organization in the industry. This can help Hastings Netflix to build a more holistic ecosystem as suggested in the Netflix: Designing the Netflix Prize (A), Spanish Version case study. Hastings Netflix can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Hastings Netflix 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.
Loyalty marketing
– Hastings Netflix 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.
Building a culture of innovation
– managers at Hastings Netflix 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 Technology & Operations segment.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hastings Netflix 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. Hastings Netflix 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, Hastings Netflix 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: Designing the Netflix Prize (A), Spanish Version, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hastings Netflix 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: Designing the Netflix Prize (A), Spanish Version External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Netflix: Designing the Netflix Prize (A), Spanish Version are -
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: Designing the Netflix Prize (A), Spanish Version, Hastings Netflix may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
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 Hastings Netflix in the Technology & Operations sector and impact the bottomline of the organization.
Environmental challenges
– Hastings Netflix 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. Hastings Netflix can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Stagnating economy with rate increase
– Hastings Netflix 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.
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 Hastings Netflix business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hastings Netflix 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, Hastings Netflix 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: Designing the Netflix Prize (A), Spanish Version .
High dependence on third party suppliers
– Hastings Netflix 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.
Increasing wage structure of Hastings Netflix
– 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 Hastings Netflix.
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.
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. Hastings Netflix needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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.
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 Hastings Netflix.
Weighted SWOT Analysis of Netflix: Designing the Netflix Prize (A), Spanish Version 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: Designing the Netflix Prize (A), Spanish Version 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: Designing the Netflix Prize (A), Spanish Version 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: Designing the Netflix Prize (A), Spanish Version 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: Designing the Netflix Prize (A), Spanish Version 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 Hastings Netflix needs to make to build a sustainable competitive advantage.
