Netflix International Expansion Case Studies Analysis
Introduction
Netflix was the first company to offer a DVD rental service. Customers would order the movies online and receive them in the mail, returning them to the enclosed envelopes provided. It was hailed as a godsend for people who could not easily find video rental stores. Today, the company boasts over 151 million paid subscribers across 190 countries. Among its many services are Netflix Originals, which offer exclusive TV series and movies to subscribers.
The company launched in 1997, and Reed Hastings handled its success. Reed had the idea after spending $40 at a blockbuster store for returning an Apollo 13 movie late. His investment in Netflix included a $2.5 million investment from the sale of Pure Atria. It took a couple of years for Blockbuster to get on board with the new service, but eventually, he quit. And he did. The company now has over 239,000 subscribers worldwide and is one of the most profitable companies in the world.(Myer, 2016)
Problem Statement
While international expansion is essential for the company’s future, there are many challenges involved. It must balance the short-term expectations of shareholders with a long-term goal of 130 countries. One of the greatest challenges is developing content for specific markets. Netflix will also face fierce competition from local companies that have local content. The economy is a big force in determining the success of streaming services, so Netflix has to address its impact on the environment. Streaming services use 78% more energy than DVDs to ship their content, and this results in a higher carbon footprint. Much of this higher impact comes from inefficient data centre equipment. While DVDs are relatively lightweight, streaming services use more energy to deliver and process content, and it’s not always possible to ship large products like televise done. The company will have to create original content that appeals to consumers in those regions. If Netflix cannot meet these challenges, its international expansion will probably fail.
External Analysis
PESTLE Analysis
Political Forces
As the company continues to expand its reach internationally, it must pay attention to political factors. One factor is immigration. Netflix is recruiting talent from other countries, and the political environment in a country may impact hiring talent from other countries. However, it is important to consider the immigration policies and laws of the prospective market.
Economic Forces
The economy is a big force in determining the success of streaming services, so Netflix has to address its impact on the environment. Streaming services use 78% more energy than DVDs to ship their content, and this results in a higher carbon footprint. Much of this higher impact comes from inefficient data center equipment. While DVDs are relatively lightweight, streaming services use more energy to deliver and process content, and it’s not always possible to ship large products like televisions.
Social Forces
Despite the high price of their service, Netflix employees are well-treated. They receive generous vacations, and they get paid well. The company also has a generous culture. For example, Netflix employees may wear casual attire and take annual vacations. The company also provides scholarships for students and other low-income groups. The CEO, Reed Hastings, also donates personal money to many charities. Analyzing the gender composition of the labor market, determines how liberal the society is. The company can also take advantage of gender equality and the right to control the income of women. Netflix Blockbuster can leverage digitalization to improve their supply chain partners. High rates of inflation make it difficult to use Cost-Based Pricing.
Technological Forces
As the company continues to develop, its technological capabilities become more important. This includes the ability to make the streaming service even more user-friendly. While it has been hit by a few downtimes, it has maintained a high level of reliability. Technology is one of the most important sources of Netflix’s competitive advantage. Netflix has been investing heavily in research and development to improve its technology and overall services.
Environmental Forces
As the company continues to develop, its technological capabilities become more important. This includes the ability to make the streaming service even more user-friendly. While it has been hit by a few downtimes, it has maintained a high level of reliability. Technology is one of the most important sources of Netflix’s competitive advantage. Netflix has been investing heavily in research and development to improve its technology and overall services.
Legal Forces
The company is in a conflict with government regulators, which could lead to increased costs and a skewed customer base. In addition, Netflix is facing challenges in figuring out the local laws in each jurisdiction, including the requirements for streaming content providers. This includes technical barriers that could be hacked. Other legal forces Netflix faces include the environment. While Netflix uses essentially zero electricity, it has heavy office paper and electricity consumption. In addition, it faces copyright issues with a small group of customers.
PORTER’s Five Forces Analysis
The Threat of New Entrants in The Video Streaming SVOD Industry
The SVOD industry is gaining momentum as mobile broadband penetration has increased. This has increased the adoption of mobile devices for streaming live content. Other factors driving the industry’s growth include youth inclination to live sports events and fitness training. North America accounts for the largest share of the video streaming market, followed by Europe.
The Threat of Substitution Video Streaming SVOD Industry
Despite this growing competitive environment, some segments of the customer base will still rely on substitutes. These customers will still use television to watch live shows and go to the cinemas to watch newly released films. However, with the rapid advancement of technology, new substitutes may emerge. Therefore, VoD providers need to continue aiming for new consumer propositions and offer new services to meet those needs.
Competition Video Streaming SVOD Industry
Competition is fierce in the Video Streaming SVOD industry. The costs to gain and develop content are unlikely to decline, so SVOD provides a need to control churn and improve customer experience. Providers also need to develop new content options that cater to different audience segments. They need to offer value across entertainment options. Although the SVoD market remains competitive, the growth of Netflix and Amazon Prime Video has weakened its monopoly of Netflix. The company’s market share has declined over the years, demonstrating the fragility of market share. With these changes, the SVoD industry has become more fragmented and has a lower level of product differentiation. The SVoD industry will eventually be dominated by only a few firms.
Bargaining Power of Supplier Video Streaming SVOD Industry
The streaming industry has a low price point and high bargaining power because the market is subscription-based and switching costs are minimal. Since many providers provide similar services, the price is sensitive. The most important differentiation for the industry is original content. Here, streaming services will have high bargaining power if they can differentiate their products from those of the competitors.
Bargaining Power of Buyer Video Streaming SVOD Industry
While suppliers have a higher bargaining power than buyers, traditional media companies have weaker bargaining power. In this situation, suppliers enjoy a distinct advantage over buyers, since they are the exclusive providers of a media entity. In the US, for example, Netflix owns over one-third of the streams, making it more likely to influence price negotiations. Although Netflix has less bargaining power than traditional media distributors, its sheer size gives it a negotiating advantage.....
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