Netflix (NFLX) SWOT Analysis / TOWS Matrix / MBA Resources
Broadcasting & Cable TV
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Netflix (United States)
Based on various researches at Oak Spring University , Netflix is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs,
increasing energy prices, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Netflix can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Netflix, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 can be done for the following purposes –
1. Strategic planning of Netflix
2. Improving business portfolio management of Netflix
3. Assessing feasibility of the new initiative in United States
4. Making a Broadcasting & Cable TV sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Netflix
Strengths of Netflix | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Netflix are -
Organizational Resilience of Netflix
– The covid-19 pandemic has put organizational resilience at the centre of everthing Netflix does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Broadcasting & Cable TV
– Netflix is one of the leading players in the Broadcasting & Cable TV industry in United States. Over the years it has not only transformed the business landscape in the Broadcasting & Cable TV industry in United States but also across the existing markets. The ability to lead change has enabled Netflix 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 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Netflix to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Netflix has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Netflix 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.
Innovation driven organization
– Netflix is one of the most innovative firm in Broadcasting & Cable TV sector.
Ability to recruit top talent
– Netflix is one of the leading players in the Broadcasting & Cable TV industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Netflix 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 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Netflix emphasize – knowledge, initiative, and innovation.
Training and development
– Netflix has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Digital Transformation in Broadcasting & Cable TV industry
- digital transformation varies from industry to industry. For Netflix digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. 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.
Analytics focus
– Netflix 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 Broadcasting & Cable TV industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Netflix in Broadcasting & Cable TV industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Netflix has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Netflix staying ahead in the Broadcasting & Cable TV industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses of Netflix | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Netflix is slow explore the new channels of communication. These new channels of communication can help Netflix to provide better information regarding Broadcasting & Cable TV products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the Broadcasting & Cable TV industry, Netflix 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.
Lack of clear differentiation of Netflix products
– To increase the profitability and margins on the products, Netflix needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Netflix 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.
Slow decision making process
– As mentioned earlier in the report, 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 Broadcasting & Cable TV industry over the last five years. 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 bargaining power of channel partners in Broadcasting & Cable TV industry
– because of the regulatory requirements in United States, 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 Broadcasting & Cable TV industry.
Capital Spending Reduction
– Even during the low interest decade, 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 Broadcasting & Cable TV industry using digital technology.
Products dominated business model
– Even though Netflix has some of the most successful models in the Broadcasting & Cable TV industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Netflix should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, Netflix has high operating costs in the Broadcasting & Cable TV industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Netflix lucrative customers.
No frontier risks strategy
– From the 10K / annual statement of Netflix, it seems that company is thinking out the frontier risks that can impact Broadcasting & Cable TV industry. 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.
Increasing silos among functional specialists
– The organizational structure of Netflix is dominated by functional specialists. It is not different from other players in the Broadcasting & Cable TV industry, but Netflix needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Netflix to focus more on services in the Broadcasting & Cable TV industry rather than just following the product oriented approach.
Netflix Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Netflix are -
Creating value in data economy
– The success of analytics program of Netflix has opened avenues for new revenue streams for the organization in Broadcasting & Cable TV industry. This can help Netflix to build a more holistic ecosystem for Netflix products in the Broadcasting & Cable TV industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Broadcasting & Cable TV industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. 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. 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.
Developing new processes and practices
– Netflix can develop new processes and procedures in Broadcasting & Cable TV industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Netflix 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 Netflix to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Netflix to increase its market reach. 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 Netflix can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Netflix 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 to hire the very best people irrespective of their geographical location.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Broadcasting & Cable TV industry, but it has also influenced the consumer preferences. Netflix 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 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.
Building a culture of innovation
– managers at 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 Broadcasting & Cable TV industry.
Use of Bitcoin and other crypto currencies for transactions in Broadcasting & Cable TV industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Netflix in the Broadcasting & Cable TV industry. Now Netflix can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Netflix External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Netflix are -
Technology acceleration in Forth Industrial Revolution
– Netflix has witnessed rapid integration of technology during Covid-19 in the Broadcasting & Cable TV industry. As one of the leading players in the industry, Netflix needs to keep up with the evolution of technology in the Broadcasting & Cable TV 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.
Increasing wage structure of 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 Netflix.
Easy access to finance
– Easy access to finance in Broadcasting & Cable TV industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Netflix can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 needs to understand the core reasons impacting the Broadcasting & Cable TV industry. This will help it in building a better workplace.
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 in the Broadcasting & Cable TV sector and impact the bottomline of the organization.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, 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 Broadcasting & Cable TV sector.
Environmental challenges
– 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. Netflix can take advantage of this fund but it will also bring new competitors in the Broadcasting & Cable TV industry.
Consumer confidence and its impact on Netflix 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 Broadcasting & Cable TV industry and other sectors.
High dependence on third party suppliers
– 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.
Stagnating economy with rate increase
– 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 Broadcasting & Cable TV industry.
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 business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Netflix in Broadcasting & Cable TV industry. The Broadcasting & Cable TV 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.
Weighted SWOT Analysis of Netflix Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Netflix 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 Netflix 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 Netflix 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 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 needs to make to build a sustainable competitive advantage.