Netflix (NFLO) SWOT Analysis / TOWS Matrix / MBA Resources
Broadcasting & Cable TV
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Netflix (Germany)
Based on various researches at Oak Spring University , Netflix is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , wage bills are increasing, increasing government debt because of Covid-19 spendings, there is backlash against globalization, increasing transportation and logistics costs, geopolitical disruptions,
there is increasing trade war between United States & China, increasing energy 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 Germany
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 -
Operational resilience
– The operational resilience strategy of Netflix comprises – understanding the underlying the factors in the Broadcasting & Cable TV 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.
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.
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.
High switching costs
– The high switching costs that Netflix has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
Highly skilled collaborators
– Netflix has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Broadcasting & Cable TV industry. Secondly the value chain collaborators of Netflix have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Ability to lead change in Broadcasting & Cable TV
– Netflix is one of the leading players in the Broadcasting & Cable TV industry in Germany. Over the years it has not only transformed the business landscape in the Broadcasting & Cable TV industry in Germany 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.
Cross disciplinary teams
– Horizontal connected teams at the Netflix are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Diverse revenue streams
– Netflix is present in almost all the verticals within the Broadcasting & Cable TV industry. This has provided Netflix 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.
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 Germany 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.
Ability to recruit top talent
– Netflix is one of the leading players in the Broadcasting & Cable TV industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Netflix | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix are -
Compensation and incentives
– The revenue per employee of Netflix is just above the Broadcasting & Cable TV industry average. It 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.
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.
Employees’ less understanding of Netflix strategy
– From the outside it seems that the employees of Netflix 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.
Ability to respond to the competition
– As the decision making is very deliberative at Netflix, in the dynamic environment of Broadcasting & Cable TV industry it has struggled to respond to the nimble upstart competition. Netflix has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 supply chain. Even after few cautionary changes, Netflix is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Netflix vulnerable to further global disruptions in South East Asia.
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.
High bargaining power of channel partners in Broadcasting & Cable TV industry
– because of the regulatory requirements in Germany, 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.
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.
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.
Aligning sales with marketing
– From the outside it seems that Netflix needs to have more collaboration between its sales team and marketing team. Sales professionals in the Broadcasting & Cable TV industry have deep experience in developing customer relationships. Marketing department at Netflix can leverage the sales team experience to cultivate customer relationships as Netflix is planning to shift buying processes online.
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.
Netflix Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Netflix are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Netflix in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Broadcasting & Cable TV industry, and it will provide faster access to the consumers.
Buying journey improvements
– Netflix can improve the customer journey of consumers in the Broadcasting & Cable TV industry by using analytics and artificial intelligence. It 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.
Leveraging digital technologies
– Netflix can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
Using analytics as competitive advantage
– Netflix has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Broadcasting & Cable TV sector. This continuous investment in analytics has enabled Netflix to build a competitive advantage using analytics. The analytics driven competitive advantage can help Netflix to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
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.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Netflix can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
Threats Netflix External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Netflix are -
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 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.
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.
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.
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.
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.
Regulatory challenges
– Netflix 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 Broadcasting & Cable TV industry regulations.
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.
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.
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.
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.
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.
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.
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.
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.