Introduction
Netflix is among the largest corporations in the mass media industry. Nowadays, Netflix has enough resources to help it to remain one of the global leaders in streaming services. Understanding companies’ key weaknesses and strengths are critical to properly evaluate their current position in certain industries. This report analyzes Netflix with attention to factors that impact its global success positively and negatively and discusses potential improvement opportunities.
Netflix and Its Strengths and Weaknesses
Being a recognized streaming giant, Netflix has a variety of strengths related to its approaches to competition, customer service, and product novelty. Speaking about the corporation’s strong sides, Netflix manages to meet the needs of different clients since it both offers well-known media products and contributes to cultural development when creating the original content (Aguiar & Waldfogel, 2018). Other strengths include the effectiveness of development strategies that have turned Netflix into a global market leader, technological flexibility when it comes to access to Netflix’s products, and affordable prices for subscribers.
The potential weaknesses may include the lack of efforts to support the idea of environmental sustainability that is extremely popular (Aguiar & Waldfogel, 2018; Netflix, Inc., 2019b). Also, there is the need to repurchase the right to distribute some products, and the costs of content production tend to increase globally.
To take the maximum advantage of its strengths, the corporation can design the strategy to further increase the number of territories where its services are available. In fact, the combination of customer-oriented pricing strategies and product diversity is expected to cause significant audience gains. As for the discussed weaknesses, to fix them, the corporation needs the strategy to strike the right balance between the original products and other producers’ content. The decisions should be based on the predictions of some products’ popularity, and they can be helpful in maximizing profits to be invested in sustainable development.
Resources, Capabilities, and Competencies
The corporation would not be able to achieve success in the global market without its resources. The tangible resources that Netflix possesses include the corporation’s buildings, financial assets, office property, computer and filming equipment, and so on (Netflix, Inc., 2019b). As for the intangible resources, there are Netflix’s digital products, the right to distribute some content, patent grants, trademarks, and, importantly, the corporation’s social image and reputation among subscribers.
Businesses’ core capabilities, also referred to as core competencies, present factors contributing to companies’ competitive advantage. In the case of Netflix, it is possible to single out two core capabilities. The first one is adaptability – Netflix reacts to all IT trends and tries to facilitate access to its digital content (Aguiar & Waldfogel, 2018). Also, its core capability is customer-orientedness that helps the corporation to hold its leadership position in the market. Thus, in addition to compliance with some local laws, the products to be distributed in different countries are selected based on the studies of customer preferences related to cultural norms and values.
General Environment and Forces of Competition
To learn more about threats to any company’s financial stability and reputation, it is helpful to analyze its position with reference to the segments of the general environment. All six external segments impact both the discussed corporation and the mass media industry, but some of them are associated with more significant threats. The first segment that deeply influences the corporation and the industry is a legal one.
To begin with, Netflix’s opportunities to expand geographically are limited due to the laws of specific countries. Netflix belongs to the number of companies whose services are not to be accessed by the residents of China, which significantly impacts its ability to increase profits (Aguiar & Waldfogel, 2018). At the same time, due to the widespread use of VPN, many users manage to access the geo-blocked content provided by Netflix, thus committing illegal actions and violating the rights of some companies (Aguiar & Waldfogel, 2018). The same issues are relevant to the mass media industry in general since piracy is a growing concern.
In addition, both Netflix and the industry are significantly impacted by the social segment of the general environment. The segment refers to relationships between companies and the public, and Netflix has been criticized due to the social impact of its original products many times. As an example, many mental health experts in English-speaking countries regard Netflix’s 13 Reasons Why, a drama series about young people with mental issues, as a product that distorts the perceptions of mental illness (Weale, 2018).
According to them, such media products lead to the romanticization of health problems, thus increasing the risks of suicide among young citizens (Weale, 2018). More than that, there have been some scandals related to illegal firings, including the cases of employees discharged from work for using specific words during group meetings (Aguiar & Waldfogel, 2018). The mass media industry is also affected by the social component of the general environment because some customers’ religious and philosophic views often lead to the boycotts of certain movies. With that in mind, companies in the industry are expected to thoroughly analyze potential reactions prior to launching some products.
The two forces of competition that are extremely significant for Netflix are the threat of substitutes and competitive rivalry. As for the first force, Netflix is not the only company to provide access to some popular films, and this is why making the product selection more unique is its key priority. In the recent past, the corporation has implemented numerous measures to diversify its services, including purchasing the exclusive rights to distribute new products and increasing investments in the production of original content (Netflix, Inc., 2019a; Netflix Media Center, n.d.).
The second force, competitive rivalry, has been partially addressed with the help of the corporation’s copyright protection groups, the diversification of content, and efforts to improve brand recognition (Netflix, Inc., 2019a). To be able to reduce these forces’ impact in the future, the corporation may need to lower its subscription plan prices to prevent customer attrition.
Threats and Opportunities
Speaking about threats, digital piracy can be regarded as the key barrier to Netflix’s success. To address it, the corporation may need to develop other strategies apart from the establishment of copyright protection teams (Netflix, Inc., 2019a). For instance, to prevent customers from accessing pirated content on other online resources, Netflix can improve its current pricing strategies and rely on new technology to increase the quality of audio and video.
Being offered cost-effective solutions, Netflix’s potential customers will be more likely to purchase official subscription plans instead of accessing low-quality movies and TV series. As for the most significant opportunity, Netflix can increase its competitive advantage by collaborating with telecommunication service providers. To take advantage of this opportunity, it can be helpful to find new international partners to make sure that there are no conflicts between popular devices and Netflix’s media products.
Conclusion
To sum up, the key factors related to Netflix’s success include its effective service expansion strategies, adaptability to changes in technology, and customer-orientedness. At the same time, there are threats to its further growth, such as controversies related to some products targeted at young people, the need for sustainable practices, and piracy. To remain a market leader, Netflix is recommended to pay focused attention to new inter-industry partnerships and legal issues.
References
Aguiar, L., & Waldfogel, J. (2018). Netflix: Global hegemon or facilitator of frictionless digital trade? Journal of Cultural Economics, 42(3), 419-445.
Netflix, Inc. (2019a). Form 10-K. Web.
Netflix, Inc. (2019b). Form 10-Q. Web.
Netflix Media Center. (n.d.). Only on Netflix. Web.
Weale, S. (2018). Netflix criticised over return of suicide drama 13 Reasons Why. The Guardian. Web.