Case Study Description of Netflix: International Expansion
Netflix adopted an aggressive growth strategy to establish itself as a global force in the video streaming industry. To solidify its position as an industry leader, Netflix invested heavily in the production of in-house content. In January 2016, to deal with slow growth in the domestic market, the company announced an aggressive expansion of its services into a total of 190 countries, thereby giving Netflix coverage over nearly the entire world. International expansion did not come without its challenges. Netflix faced regulatory compliance issues in its targeted markets, competition with domestic competitors, and the need to satisfy local preferences. Was the enormous cost of such an aggressive expansion strategy the right direction for the company? Won-Yong Oh is affiliated with UNIV OF CALGARY.
Swot Analysis of "Netflix: International Expansion" written by Won-Yong Oh, Duane Myer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Netflix Aggressive facing as an external strategic factors. Some of the topics covered in Netflix: International Expansion case study are - Strategic Management Strategies, International business, Internet and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Netflix: International Expansion casestudy better are - – increasing government debt because of Covid-19 spendings, technology disruption, increasing commodity prices, challanges to central banks by blockchain based private currencies, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices,
competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Netflix: International Expansion
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Netflix: International Expansion case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix Aggressive, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Netflix Aggressive 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: International Expansion can be done for the following purposes –
1. Strategic planning using facts provided in Netflix: International Expansion case study
2. Improving business portfolio management of Netflix Aggressive
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Netflix Aggressive
Strengths Netflix: International Expansion | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix Aggressive in Netflix: International Expansion Harvard Business Review case study are -
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Netflix Aggressive digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Netflix Aggressive 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.
Operational resilience
– The operational resilience strategy in the Netflix: International Expansion 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.
Successful track record of launching new products
– Netflix Aggressive has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Netflix Aggressive 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.
Low bargaining power of suppliers
– Suppliers of Netflix Aggressive in the sector have low bargaining power. Netflix: International Expansion has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix Aggressive to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Netflix Aggressive
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Netflix Aggressive does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Netflix Aggressive are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Learning organization
- Netflix Aggressive 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 Aggressive is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Netflix: International Expansion Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Leadership & Managing People industry
– Netflix: International Expansion firm has clearly differentiated products in the market place. This has enabled Netflix Aggressive to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Netflix Aggressive to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Netflix Aggressive is present in almost all the verticals within the industry. This has provided firm in Netflix: International Expansion 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 Aggressive has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix Aggressive to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Netflix Aggressive in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Netflix Aggressive 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: International Expansion - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Netflix: International Expansion | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix: International Expansion are -
Slow decision making process
– As mentioned earlier in the report, Netflix Aggressive 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 Aggressive 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
Netflix Aggressive 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.
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 Aggressive supply chain. Even after few cautionary changes mentioned in the HBR case study - Netflix: International Expansion, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Netflix Aggressive vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Netflix Aggressive, firm in the HBR case study Netflix: International Expansion needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Netflix Aggressive 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.
Interest costs
– Compare to the competition, Netflix Aggressive 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Netflix: International Expansion 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 Aggressive has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Netflix: International Expansion, in the dynamic environment Netflix Aggressive has struggled to respond to the nimble upstart competition. Netflix Aggressive has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring
– The stress on hiring functional specialists at Netflix Aggressive 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.
No frontier risks strategy
– After analyzing the HBR case study Netflix: International Expansion, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Netflix: International Expansion, is just above the industry average. Netflix Aggressive 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: International Expansion | 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: International Expansion are -
Better consumer reach
– The expansion of the 5G network will help Netflix Aggressive to increase its market reach. Netflix Aggressive 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Netflix Aggressive in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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 Aggressive can use these opportunities to build new business models that can help the communities that Netflix Aggressive operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Netflix Aggressive 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: International Expansion, 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 Aggressive can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Netflix: International Expansion 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Netflix Aggressive can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Aggressive in the consumer business. Now Netflix Aggressive can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Netflix Aggressive 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 Aggressive 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.
Loyalty marketing
– Netflix Aggressive 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.
Learning at scale
– Online learning technologies has now opened space for Netflix Aggressive 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.
Creating value in data economy
– The success of analytics program of Netflix Aggressive has opened avenues for new revenue streams for the organization in the industry. This can help Netflix Aggressive to build a more holistic ecosystem as suggested in the Netflix: International Expansion case study. Netflix Aggressive can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Netflix Aggressive can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Netflix Aggressive is facing challenges because of the dominance of functional experts in the organization. Netflix: International Expansion 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.
Threats Netflix: International Expansion External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Netflix: International Expansion are -
Increasing wage structure of Netflix Aggressive
– 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 Aggressive.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Netflix Aggressive with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Netflix Aggressive is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Netflix Aggressive 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.
Technology acceleration in Forth Industrial Revolution
– Netflix Aggressive has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Netflix Aggressive needs to keep up with the evolution of technology in the Leadership & Managing People 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.
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 Aggressive.
Environmental challenges
– Netflix Aggressive 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 Aggressive can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Netflix Aggressive can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Aggressive business can come under increasing regulations regarding data privacy, data security, etc.
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 Aggressive in the Leadership & Managing People sector and impact the bottomline of the organization.
Regulatory challenges
– Netflix Aggressive 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 Leadership & Managing People industry regulations.
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 Aggressive needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Netflix: International Expansion 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: International Expansion 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: International Expansion 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: International Expansion 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: International Expansion 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 Aggressive needs to make to build a sustainable competitive advantage.
