Case Study Description of Netflix Inc.: The Disruptor Faces Disruption
Netflix Inc. (Netflix) had surpassed Blockbuster, the previous movie rental leader, before making the successful transition to digital delivery of video content. But despite Netflix's success, in 2017, numerous competitors, including both established, mainstream content producers and digital upstarts, were making it difficult for Netflix to recreate its earlier dominance. Critics pointed to Netflix's slowing acquisition of subscribers and accelerating debt levels. Netflix's chief executive officer was confronted with disruption from a variety of digital rivals. How should he respond? Should Netflix continue to try to be a content producer, competing with Hollywood's industry leaders? Should it form a partnership with other media companies to align everyone's incentives? Perhaps it could move into other media content areas outside of traditional entertainment. Further, there remained the question of how to treat its legacy DVD-by-mail business. As the incumbent firm, Netflix needed to respond to competitors and avoid a fate similar to that of Blockbuster. Chris Kemerer is affiliated with University of Pittsburgh.
Swot Analysis of "Netflix Inc.: The Disruptor Faces Disruption" written by Chris F. Kemerer, Brian Kimball Dunn includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Netflix Netflix's facing as an external strategic factors. Some of the topics covered in Netflix Inc.: The Disruptor Faces Disruption case study are - Strategic Management Strategies, Technology and Technology & Operations.
Some of the macro environment factors that can be used to understand the Netflix Inc.: The Disruptor Faces Disruption casestudy better are - – increasing household debt because of falling income levels, there is backlash against globalization, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Netflix Inc.: The Disruptor Faces Disruption
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix Inc.: The Disruptor Faces Disruption case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix Netflix's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Netflix Netflix's 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.: The Disruptor Faces Disruption can be done for the following purposes –
1. Strategic planning using facts provided in Netflix Inc.: The Disruptor Faces Disruption case study
2. Improving business portfolio management of Netflix Netflix's
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 Netflix Netflix's
Strengths Netflix Inc.: The Disruptor Faces Disruption | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix Netflix's in Netflix Inc.: The Disruptor Faces Disruption Harvard Business Review case study are -
Organizational Resilience of Netflix Netflix's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Netflix Netflix's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Netflix Netflix's 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 Netflix's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Netflix Inc.: The Disruptor Faces Disruption Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Technology & Operations field
– Netflix Netflix's 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 Netflix's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Netflix Netflix's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix Netflix's 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 Netflix's 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.
Strong track record of project management
– Netflix Netflix's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Netflix Netflix's is one of the most innovative firm in sector. Manager in Netflix Inc.: The Disruptor Faces Disruption Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Netflix Netflix's 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.: The Disruptor Faces Disruption HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Netflix Inc.: The Disruptor Faces Disruption 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.
Training and development
– Netflix Netflix's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Netflix Inc.: The Disruptor Faces Disruption Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Netflix Netflix's is present in almost all the verticals within the industry. This has provided firm in Netflix Inc.: The Disruptor Faces Disruption case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Low bargaining power of suppliers
– Suppliers of Netflix Netflix's in the sector have low bargaining power. Netflix Inc.: The Disruptor Faces Disruption has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix Netflix's to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Netflix Inc.: The Disruptor Faces Disruption | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix Inc.: The Disruptor Faces Disruption are -
Workers concerns about automation
– As automation is fast increasing in the segment, Netflix Netflix's 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.
Skills based hiring
– The stress on hiring functional specialists at Netflix Netflix's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Netflix Inc.: The Disruptor Faces Disruption, in the dynamic environment Netflix Netflix's has struggled to respond to the nimble upstart competition. Netflix Netflix's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Netflix Netflix's, firm in the HBR case study Netflix Inc.: The Disruptor Faces Disruption needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Netflix Netflix's 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Netflix Netflix's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Netflix Inc.: The Disruptor Faces Disruption can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Netflix Netflix's 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.: The Disruptor Faces Disruption should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Netflix Netflix's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Netflix Inc.: The Disruptor Faces Disruption, is just above the industry average. Netflix Netflix's 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.: The Disruptor Faces Disruption 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.: The Disruptor Faces Disruption can leverage the sales team experience to cultivate customer relationships as Netflix Netflix's is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Netflix Netflix's is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Netflix Netflix's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Netflix Netflix's to focus more on services rather than just following the product oriented approach.
Opportunities Netflix Inc.: The Disruptor Faces Disruption | 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.: The Disruptor Faces Disruption are -
Loyalty marketing
– Netflix Netflix's 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.
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 Netflix's can use these opportunities to build new business models that can help the communities that Netflix Netflix's operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Creating value in data economy
– The success of analytics program of Netflix Netflix's has opened avenues for new revenue streams for the organization in the industry. This can help Netflix Netflix's to build a more holistic ecosystem as suggested in the Netflix Inc.: The Disruptor Faces Disruption case study. Netflix Netflix's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Netflix Netflix's 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Netflix Netflix's 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.: The Disruptor Faces Disruption, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Netflix Netflix's 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 Netflix's 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.
Learning at scale
– Online learning technologies has now opened space for Netflix Netflix's 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.
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 Netflix's in the consumer business. Now Netflix Netflix's can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Netflix Netflix's 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.: The Disruptor Faces Disruption - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix Netflix's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Netflix Netflix's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Netflix Netflix's 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.
Buying journey improvements
– Netflix Netflix's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Netflix Inc.: The Disruptor Faces Disruption suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Netflix Netflix's 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.
Threats Netflix Inc.: The Disruptor Faces Disruption 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.: The Disruptor Faces Disruption are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Netflix Netflix's in the Technology & Operations industry. The Technology & Operations 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Netflix Netflix's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
High dependence on third party suppliers
– Netflix Netflix's 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 Netflix's 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.
Shortening product life cycle
– it is one of the major threat that Netflix Netflix's is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Netflix's.
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 Netflix's in the Technology & Operations sector and impact the bottomline 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.: The Disruptor Faces Disruption, Netflix Netflix's 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 .
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 Netflix's needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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 Netflix's business can come under increasing regulations regarding data privacy, data security, etc.
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 Netflix's 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.
Increasing wage structure of Netflix Netflix's
– 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 Netflix's.
Weighted SWOT Analysis of Netflix Inc.: The Disruptor Faces Disruption 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.: The Disruptor Faces Disruption 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.: The Disruptor Faces Disruption 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.: The Disruptor Faces Disruption 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.: The Disruptor Faces Disruption 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 Netflix's needs to make to build a sustainable competitive advantage.