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 household debt because of falling income levels, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, technology disruption, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, 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 -
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.
Ability to lead change in Leadership & Managing People field
– Netflix Aggressive 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 Aggressive in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Netflix Aggressive 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 Won-Yong Oh, Duane Myer can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Netflix Aggressive 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: International Expansion HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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.
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.
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.
Strong track record of project management
– Netflix Aggressive 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 switching costs
– The high switching costs that Netflix Aggressive 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.
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 -
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Netflix: International Expansion, it seems that the employees of Netflix Aggressive 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.
Capital Spending Reduction
– Even during the low interest decade, Netflix Aggressive 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Netflix Aggressive is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Netflix: International Expansion can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– Netflix Aggressive 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.
Products dominated business model
– Even though Netflix Aggressive 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: International Expansion should strive to include more intangible value offerings along with its core products and services.
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.
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.
High operating costs
– Compare to the competitors, firm in the HBR case study Netflix: International Expansion 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 Aggressive 's lucrative customers.
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.
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 -
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Netflix Aggressive can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Netflix Aggressive 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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Netflix Aggressive to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Netflix Aggressive to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Netflix Aggressive 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: International Expansion - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix Aggressive to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Netflix Aggressive 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.
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 -
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.
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: International Expansion, Netflix Aggressive may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Netflix Aggressive 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: International Expansion .
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.
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.
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.
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.
Stagnating economy with rate increase
– Netflix Aggressive 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Netflix Aggressive in the Leadership & Managing People industry. The Leadership & Managing People 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.
High dependence on third party suppliers
– Netflix Aggressive 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.
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.
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.