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Netflix Goes Global and Its Profit Soars Research Paper

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Updated: Jun 8th, 2021

Introduction

Being among the most successful corporations in the digital media industry, Netflix presents a model to emulate in the world of business. To better understand the corporation’s current position in the market, it is necessary to analyze Netflix in the context of technological advancement and globalization and envision its opportunities to increase revenues. Furthermore, the paper is aimed at explaining the company’s success with reference to vision/mission statements and stakeholders’ contributions.

Globalization

Globalization belongs to the number of trends that impact the most popular business practices, the state of knowledge, and companies’ approaches to marketing. According to Hitt, Ireland, and Hoskisson (2013), all companies that decide to increase their competitive advantage by going global are expected to design new decision-making strategies that are culturally sensitive. This tendency is manifested in the case of Netflix – in 2016, the company’s executive management announced the decision to enter the global market by adding over a hundred new countries to the service map (Steel, 2017).

Due to the new service provision strategy, the corporation increased the number of subscribers by more than seven million people in 2017 (Steel, 2017). To gain benefits from the decision, it was necessary to research new clients’ interests to make predictions about the products that they would like the most.

Globalization also impacts Netflix since it constantly changes the industry’s competitive environment and leads to the growth of the company’s key business rivals. For instance, the company’s management decided to initiate the global expansion of telestreaming services due to the success of Amazon and YouTube that gained revenues from service globalization (Steel, 2017). The corporation’s need to go global and avoid losing its positions in the market helps understand the key consequences of the discussed trend such as rising performance standards and risks associated with entering new markets.

Technology

As a provider of media products, Netflix manages to use a variety of new approaches to streaming to increase its competitive advantage. Judging from the corporation’s history timeline, Netflix has changed approaches to customer service many times since 1997 (Netflix Media Center, n.d.). Twenty-two years ago, Netflix was a kind of a video rental shop offering online services; given that the Internet was just gaining momentum, the company managed to implement the most promising technology of the time (Netflix Media Center, n.d.).

The introduction of streaming media technology predetermined the next historical turn in Netflix’s development. In 2007, the company’s clients received an opportunity to watch movies and TV shows on their personal devices, which was a significant strategic move helping Netflix to create value and implement innovation (Netflix Media Center, n.d.). To some extent, streaming was a disruptive technology that diffused rapidly and impacted demand for TV sets, but Netflix only benefited from such innovations (Hitt et al., 2013; Netflix Media Center, n.d.).

Unlike many companies that lost revenues due to disruptive technologies such as iPad, iPod, and iPhone, Netflix established steady partnerships with the key innovators and made its products available on such devices (Netflix Media Center, n.d.). Thus, new technology impacted the chosen corporation in a positive way and provided it with new opportunities for development.

Industrial Organization Model

There are many theoretical approaches to increasing business profitability, and the industrial organization model is one of them. The IO model suggests that companies need to implement five steps in order to earn high profits. As for the first step, Netflix is required to thoroughly study its external environment and focus on actual and potential competitors (Hitt et al., 2013). Netflix will have to analyze the financial position of Amazon, YouTube, and other industry giants to define any needs of target customers that are still unmet (Steel, 2017).

The next step should involve the analysis of the industry’s attractiveness. Given that the digital media industry threatens the popularity of radio and TV, Netflix seems to have chosen a promising path of development (Hitt et al., 2013; Steel, 2017). Based on such findings, the corporation can design several new strategies, including, for example, purchasing exclusive rights to distribute some movies or launching new referral programs. To implement the next step and develop strengths, the corporation can redistribute its incomes and devote funds to research activities and necessary employee education. Finally, using the results of research justifying the profitability of planned interventions, Netflix will be able to determine the key strategic actions and initiate strategy implementation.

Resource-Based Model

To apply the resource-based model, Netflix will need to focus on its products’ uniqueness. The corporation’s resources and capabilities that make it different from other industry giants may include experience with different technological solutions, success in building partnerships with device manufacturing companies, product accessibility, and Netflix’s worldwide reputation (Netflix, Inc., 2019; Netflix Media Center, n.d.).

Applying the model in question, Netflix can further analyze the listed findings to determine their implications to competitive advantage. For instance, its partnerships with other companies can be used to make media products even more accessible in different parts of the world to increase Netflix’s competitive advantage. Using the knowledge of its strong sides together with the analysis of the industry, Netflix will be able to select the best development strategy transforming its unique capabilities into new revenues.

Vision

Along with other components of development strategies, vision statements help companies to generalize on their future goals. Netflix is willing to “continue being one of the leading firms of the Internet entertainment era” (Netflix Investors, n.d., para. 2). Such statements reflect companies’ aspirations and key values, thus helping stakeholders to make informed decisions about collaboration (Hitt et al., 2013). This vision encourages the corporation to search for new ways to improve customer experience and make its services more attractive, which is related to Netflix’s financial success.

Mission

The corporation does not provide an official mission statement, but Netflix’s mission can be retrieved from the presentations of its CEO. Netflix makes business decisions based on the following principles: “we promise our customers stellar service, our suppliers a valuable partner, our investors the prospects of sustained profitable growth, and our employees the allure of huge impact” (Farfan, 2018, para. 8). This statement is quite effective since it helps to understand the corporation’s values in relation to the key interested groups. However, it is unlikely to be a significant factor in Netflix’s success since, on its own, the statement is not unique enough to attract new stakeholders.

Stakeholders

The capital market stakeholders of Netflix include a large number of shareholders or investors whose financial support provides the corporation with an opportunity to expand globally and launch new products (Hitt et al., 2013; Steel, 2017). The next category of individuals and groups supporting the company’s success is presented by product market stakeholders, for instance, service subscribers and non-employees or external companies participating in the creation of digital content produced by Netflix. Without these stakeholders, Netflix would not be able to create any products and gain profits.

Finally, there is a large group of organizational stakeholders; it involves Netflix’s employees at different organizational levels, the members of the executive management team, and middle-ranking managers. These people’s concerted efforts help to properly organize the dissimilar activities of Netflix and ensure service quality, which makes their work central to the corporation’s success.

References

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competitiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.

Netflix Media Center. (n.d.). About Netflix. Web.

Netflix, Inc. (2019). Form 10-Q. Web.

Netflix Investors. (n.d.). . Web.

Steel, E. (2017). Netflix goes global and its profit soars. New York Times. Web.

Farfan, B. (2018). [Blog post]. Web.

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IvyPanda. 2021. "Netflix Goes Global and Its Profit Soars." June 8, 2021. https://ivypanda.com/essays/netflix-goes-global-and-its-profit-soars/.

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IvyPanda. (2021) 'Netflix Goes Global and Its Profit Soars'. 8 June.

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