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 – supply chains are disrupted by pandemic , increasing transportation and logistics costs, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Low bargaining power of suppliers
– Suppliers of Netflix in the Services sector have low bargaining power. Netflix has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Netflix to manage not only supply disruptions but also source products at highly competitive prices.
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 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.
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.
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.
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.
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.
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.
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.
Weaknesses of Netflix | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Netflix are -
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.
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.
Skills based hiring in Broadcasting & Cable TV industry
– The stress on hiring functional specialists at Netflix 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
– 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.
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.
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.
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 cash cycle compare to competitors
Netflix has a high cash cycle compare to other players in the Broadcasting & Cable TV industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
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.
Netflix Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Netflix are -
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.
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.
Manufacturing automation
– Netflix can use the latest technology developments to improve its manufacturing and designing process in Broadcasting & Cable TV sector. 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.
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.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Netflix to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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.
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.
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.
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.
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 can use these opportunities to build new business models that can help the communities that Netflix operates in. Secondly it can use opportunities from government spending in Broadcasting & Cable TV sector.
Threats Netflix External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Netflix are -
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Netflix is facing in Broadcasting & Cable TV sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Broadcasting & Cable TV industry are lowering. It can presents Netflix with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Broadcasting & Cable TV sector.
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.
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.
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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Netflix 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 Netflix prominent markets.
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.
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.