{"id":74997,"date":"2018-08-27T19:10:52","date_gmt":"2018-08-27T19:10:52","guid":{"rendered":"https:\/\/essays.homeworkacetutors.com\/netflix-competitive-advantage-analysis\/"},"modified":"2018-08-27T19:10:52","modified_gmt":"2018-08-27T19:10:52","slug":"netflix-competitive-advantage-analysis","status":"publish","type":"post","link":"https:\/\/www.colapapers.com\/us\/netflix-competitive-advantage-analysis\/","title":{"rendered":"Netflix Competitive Advantage Analysis"},"content":{"rendered":"
\n

1. Introduction<\/h2>\n

Netflix, founded in 1997, is a young company which has capitalised on the ever-increasing appetite for on-demand entertainment<\/a>. With $8.8bn in revenues for 2016, y-o-y growth of 30%, and over 109 million members globally, it is the market leader for in its field. (Netflix, 2017) Their product mix includes licenced content and original production offering a mix suitable to all subscribers. <\/p>\n

2. Corporate Strategy<\/h2>\n

Netflix is a
\nglobal internet TV network offering movies and TV series commercial-free, with
\nunlimited viewing on any internet-connected screen for an affordable,
\nno-commitment monthly fee. (Long Term View, 2017)<\/p>\n

3. Scope of the Firm:<\/h2>\n

3.1 Internet providers<\/h3>\n

Netflix, from its outset, utilised the
\ninternet as a medium to reach its subscribers. From its initial catalogue of
\ncontent which was then dispatched through the postal service, to the current
\nstreamed content. (See Appendix 1) The dependence on Internet Service Providers
\n(ISP\u2019s) has impacted the delivery of its content in the past, now controlled
\nunder the Net Neutrality order. (See Appendix 2) However, Netflix and other
\nservice providers remain at the mercy of ISP\u2019s if the order were to be removed
\nthrough deregulation.<\/p>\n

This downstream vertical boundary is likely
\nto remain. The task of delivering internet service across a global network falls
\non a core group of providers. These have economies of scale, the ability to
\ndeliver all internet based services through one connection. They further
\ndiversify by delivering multiple other resources such as telephone and
\ntraditional TV services. The incentive simply does not exist to design, build
\nand implement a solitary Netflix delivery system, a cost ineffective
\nintegration. \u00a0<\/p>\n

3.2 Creating original content<\/h3>\n

Since Netflix\u2019s infancy, their greatest expense<\/a> has always involved the procurement of the latest material from studios. This vertical boundary left Netflix at the mercy of studios, continuously being subjected to increased licence costs, as a direct result of their success and growth. (See appendix 3) Further, some now see Netflix as a direct competitor, removing their right to their content, Disney integrating with ESPN and its streaming service.\u00a0(Castillo, 2017) Netflix saw a movement higher in the vertical chain as a key to protecting their long-run success. <\/p>\n

Content is the key to both attracting, and
\ncrucially, retaining subscribers. Utilising their deep funding pool, Netflix
\nbegan developing original material in a bid to secure a greater control over
\nthe sources of its content. The payoffs are twofold: the shows can be licenced
\nto create an additional revenue stream, and it will make Netflix a service
\nwhich people feel they have a subscription with. If the original content is the
\nonly place to find shows such as House of
\nCards<\/em> and other future projects, they retain subscribers.<\/p>\n

\n

\u201cTed Sarandos wants \u201cto become HBO faster than HBO can become Netflix\u201d<\/p>\n

(Salmon, 2013)<\/cite><\/p><\/blockquote>\n

This is a statement of intent by Sarandos, to
\nsurvive they must adjust. As highlighted by the fallout between Disney and
\nNetflix, the competition is increasing in the on-demand entertainment providers
\nand Netflix. Competitors see the decline in traditional TV, seeing the future
\nin the flexible viewing available through on-demand entertainment.<\/p>\n

3.3 Analysis of their M&A history <\/h3>\n

The acquisition of Millarword, is the first
\nin Netflix\u2019s history. Millarworld will complement their strategic move into
\noriginal content, with much of their work restricted to comics. Netflix sees
\nthis as an opportunity, like an untapped oil well, to transform the comics into
\nTV Show and movie phenomenon\u2019s. (See appendix 4) <\/p>\n

\n

Mark Millar \u2013 \u201c[Netflix] would help us take Millarworld\u2019s characters and turn them into global powerhouses\u201d<\/em><\/strong><\/p>\n

(Wile, 2017)<\/cite><\/p><\/blockquote>\n

Their vision is to mimic the success of
\npast comic<\/em> related productions and
\nthe significant returns associated. Marvel, an original creator of the likes of
\nSpiderman and X-Men but had licenced these off, has returned over $12bn at box
\noffice in the last decade off its other characters. (Cain, 2017)
\nNetflix hope to follow this success of developing the lesser known characters
\nthrough to franchise behemoths.<\/p>\n

4. Competitive advantage<\/h2>\n

Netflix generic
\nstrategy \u2013 \u201cgrow our streaming membership business globally within the
\nparameters of our profit margin targets\u201d \u2013 (Appendix 5)<\/em><\/strong><\/p>\n

The key to a competitive advantage is
\nsustainability. Through Kay\u2019s distinct capabilities, Netflix\u2019s strengths and
\nweaknesses become apparent. (See Appendix 6) Netflix\u2019s reputation and the
\nconsistent delivery of high-quality, current content and the relative dominance
\nover competitors, gives a competitive advantage at present. Is it sustainable
\nhowever? <\/p>\n

As mentioned previously, competitors are
\nentering the market and investing heavily in content, some removing their
\ncontent from Netflix to promote its service. (Castillo, 2017) The generic strategy of growth will
\nonly last while new markets are available. As shown in appendix 1, only China
\nis remains unexploited. The US market is almost fully saturated, this is a sign
\nof the long-term future of the global market. Netflix is relying on growth to
\ncover the increasing content costs. (See appendix 3). Once saturated this
\nstrategy will become an inefficient at protecting market position and margins. They
\nwill either need to cut costs or increase the monthly subscription.<\/p>\n

Weaknesses above and below on the vertical
\nchain could also diminish their advantage. They are at the mercy of these
\nproviders; Netflix\u2019s success only encourages increases in procurement costs
\nfrom these third parties and pressure from ISP\u2019s. Further deterioration in
\nrelationships could cause difficulties in the medium to long run. <\/p>\n

5. Conclusion<\/h2>\n

Netflix has a defined corporate strategy,
\none which has the potential to guide the company to success over the long term.
\nThe decisions made to date have resulted in strong financial and subscriber
\ngrowth. As highlighted within the report however, it faces increasing
\nchallenges with an ever-increasing number of competitors entering the market. Further
\nacquisitions and development of original content can protect their advantage
\nand make Netflix a must have in households throughout the world.<\/p>\n

6. References<\/h1>\n
    \n
  • Cain, R. (2017, 07 10). The Marvel Cinematic Universe Just Topped $12 Billion In Worlwide Box Office<\/em>. Retrieved from Forbes.com: https:\/\/www.forbes.com\/sites\/robcain\/2017\/07\/10\/the-marvel-cinematic-universe-has-now-topped-12-billion-in-total-worldwide-gross\/#51476f077759<\/li>\n
  • Castillo, M. (2017, 11 01). Disney will pull its movies from Netflix<\/em>. Retrieved from CNBC.com: https:\/\/www.cnbc.com\/2017\/08\/08\/disney-will-pull-its-movies-from-netflix-and-start-its-own-streaming-services.html<\/li>\n
  • Dunn, J. (2017, 04 12). Net Nutrality<\/em>. Retrieved from businessinsider.com: http:\/\/uk.businessinsider.com\/fcc-ajit-pai-net-neutrality-internet-association-google-facebook-netflix-2017-4?r=US&IR=T<\/li>\n
  • Long Term View<\/em>. (2017, 10 25). Retrieved from Netflix.com: https:\/\/ir.netflix.com\/long-term-view.cfm<\/li>\n
  • Lovett, J. (2017, 10 25). Millarworld-Netflix<\/em>. Retrieved from comicbook.com: http:\/\/comicbook.com\/comics\/2017\/08\/07\/millarworld-netflix\/<\/li>\n
  • Molla, S. O. (2016, 10 18). Netflix risky expedition<\/em>. Retrieved from bloomberg.com: https:\/\/www.bloomberg.com\/gadfly\/articles\/2016-10-18\/netflix-gambles-u-s-profits-on-pricey-global-ambition<\/li>\n
  • Netflix. (2015). Netflix Annual Report 2014.<\/em> Los Gatos, California: Netflix.<\/li>\n
  • Netflix. (2017). Netflix Annual Report 2016.<\/em> Los Gatos, California: Netflix Inc.<\/li>\n
  • Netflix Acquires Millarworld<\/em>. (2017, 08 07). Retrieved from ir.netflix.com: https:\/\/media.netflix.com\/en\/press-releases\/netflix-acquires-millarworld-1<\/li>\n
  • Netflix, I. (2017, 01 18). Long term view<\/em>. Retrieved from ir.netflix.com: https:\/\/ir.netflix.com\/long-term-view.cfm<\/li>\n
  • Salmon, F. (2013, 06 13). Why Netflix is producing original content<\/em>. Retrieved from reuters.com: http:\/\/blogs.reuters.com\/felix-salmon\/2013\/06\/13\/why-netflix-is-producing-original-content\/<\/li>\n
  • Wile, R. (2017, 08 07). Netflix buys Millarworld<\/em>. Retrieved from time.com: http:\/\/time.com\/money\/4889565\/netflix-buys-millarworld-mark-millar-kickass-kingsman\/<\/li>\n
  • Zappe, F. (2017, 01 10). Diffusion of Netflix<\/em>. Retrieved from SlideShare.com: https:\/\/www.slideshare.net\/FelixZappe\/the-diffusion-of-netflix<\/li>\n<\/ul>\n

    7. Appendices <\/h2>\n

    Appendix 1<\/h3>\n
    \"\"
    Source: (Zappe, 2017) <\/figcaption><\/img><\/figure>\n
    \"\"
    Source: (Molla, 2016)<\/figcaption><\/img><\/figure>\n

    Appendix 2<\/h3>\n

    The conflict arose through the high demand
    \nplaced on the broadband infrastructure as Netflix increased in popularity. The
    \nperceived disproportional usage by Netflix subscribers relative to overall
    \ndemands on traffic caused the ISP\u2019s to slow the speed of Netflix related
    \ncontent. This directly impacted the quality of product delivered and the fight
    \nover Net Neutrality began. The current Net Neutrality order, introduced by the
    \nUS government, states \u201cyour internet provider cannot slow down a Netflix,
    \nYouTube, or any other service and give other websites and apps preferential
    \ntreatment, nor can it charge internet companies for faster access.\u201d (Dunn, 2017) <\/p>\n

    Appendix 3<\/h4>\n
    \"\"
    Source: (Netflix, 2017) (Netflix, 2015)<\/figcaption><\/img><\/figure>\n

    Appendix 4<\/h4>\n
    \"\"
    Source: (Netflix Acquires Millarworld, 2017)<\/figcaption><\/figure>\n

    Appendix 5<\/h4>\n
    \"\"
    Source: (Netflix, 2017)<\/figcaption><\/figure>\n

    Appendix 6<\/h4>\n

    Kay\u2019s Distinct Capabilities<\/h4>\n
    \"\"<\/figure>\n

    Reputation<\/h4>\n

    Netflix, through consistent advertising and
    \nmarketing, has maintained its reputation of high-quality content. The use of an
    \nintroductory offer, one free month\u2019s subscription, gives subscribers the
    \nopportunity to experience what Netflix has to offer. Further, the professional
    \naccreditation received for the quality original content gives support to claims
    \nof a superior service.<\/p>\n

    Innovation<\/h4>\n

    Netflix\u2019s original competitive advantage
    \nthrough providing a streaming service has unfortunately been eroded through
    \nimitation. Amazon, Hulu and others have entered the market. There key advantage
    \nto retain subscribers is the recommendation algorithm which tailors the content
    \nsuggestions based on past viewing history and associated content.<\/p>\n

    Architecture<\/h4>\n

    Netflix has a distinct advantage over its
    \nrivals through the strong relationship with current subscribers. In mature
    \nmarkets as the US, Netflix has saturated the market. Crucially, it is not
    \nlosing subscribers to competitors. Once Netflix maintains customer
    \nsatisfaction, subscribers will be less willing to pay for two on-demand
    \nsubscriptions restricting the growth of competitors.<\/p>\n

    The relationship with those above and below
    \non the vertical chain and is an area of weakness. They are under the mercy of
    \nthe creators and the prices they set for their content. They have no real
    \nbargaining power to try and gain the best price possible. Further, they are
    \nreliant on ISP\u2019s to deliver the content and the Net Neutrality Order to keep
    \nthe quality to Netflix\u2019s desired standard. <\/p>\n

    \u00a0<\/h4>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    1. Introduction Netflix, founded in 1997, is a young company which has capitalised on the ever-increasing appetite for on-demand entertainment. With $8.8bn in revenues for 2016, y-o-y growth of 30%, and over 109 million members globally, it is the market leader for in its field. (Netflix, 2017) Their product mix includes licenced content and original […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7086],"tags":[9845,5294,9887,9867,9888,9889,9890,9886,9885],"class_list":["post-74997","post","type-post","status-publish","format-standard","hentry","category-assignments","tag-1-dissertation-writing-service-in-uk","tag-bishops-writing-bureau","tag-cn","tag-create-a-paper-using-the-following-criteria","tag-homework-help-assignment-answers","tag-in-1050-word-essay","tag-in-a-4-to-6-page-essay","tag-in-a-page-paper-assignment","tag-write-an-essay-in-words"],"_links":{"self":[{"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/posts\/74997","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/comments?post=74997"}],"version-history":[{"count":0,"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/posts\/74997\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/media?parent=74997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/categories?post=74997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.colapapers.com\/us\/wp-json\/wp\/v2\/tags?post=74997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}