Five forces analysis of the movie rental business
Porter’s Five Forces model provides a framework for a company to perform an analysis framework of an industry in a foreign country before it chooses to enter that market. The elements to be studied within the framework include industry competitors, suppliers, buyers, potential entrants, and substitutes. The overall competitive advantages of the US movie rental business revolve around the quality of products transacted. However, Netflix needs to choose a proper entry mode to capture other markets at a faster pace than the world’s average growth rates. These involve a selection of entry mode, ranging from exporting, licensing, franchising, joint venture, and direct investment.
Key Success Factors in the movie rental business
These include technological innovation and strategic management. The main strategic recommendation for the company is to focus on producing luxurious DVDs of premium quality at a relatively lower cost to attract prospective buyers who are only limited by their level of income. This would be a sure way of achieving success in the company. Therefore, in cases where the external environment posed a great threat to the internal affairs and strategies of the company, especially in the DVD production industry and market, the management should adopt competitive policies, which would help in fighting off the competition in the market. Certainly, this would lead to the advancement of innovative products and the use of effective marketing strategies to minimize such effects.
SWOT Analysis of the Netflix Company
The Strengths, Weakness, Opportunity, and Threats (SWOT) analysis of the Netflix Company can be presented in the following table.
Netflix’s Strategy
To achieve cost and differential competitive advantages, Netflix Company positions itself strategically to reap from the growing world market in other places. This could be realized from the global market recovery. Though this strategy focuses on the emerging markets, Canada and the United States remain the primary targeted market for Netflix’s products. The management of the company understood the fact that the global market would develop and that the company needed to be innovative and develop strategic policies to remain viable in the market. This is justifiable by the positive feedback that the product’s users have shown over a long time as well as the company’s strategic and development policies.
Notably, the proliferation of cheap models in the market affected the strategic operations of Netflix, yet, the company still commands a large number of potential high-class buyers. Netflix’s DVD products were comfortable for people in the top market, thus the company maintained this market by changing the operation strategies that allowed it to reduce their cost considerably, without affecting its profitability. Therefore, the strategic planning that the company has employed is instrumental in maintaining the brand’s name and success around the globe.
The strategic operations of the company have targeted the United Kingdom, Ireland, and Denmark, markets have become a priority for the company because of the purchasing power of the people in such areas, leaving the majority in developing countries to opt for relatively cheaper DVDs from other companies. This approach, although important, threatened the strategic operations of the company since the middle and low-income population forms the majority, thus Netflix could not attract them to buy its DVDs.
Netflix found it difficult to shift its strategic policies to manufacture DVDs that could be affordable to the masses. This was a result of its strategic planning continued to focus on improving the quality of the DVDs, thus translating to a higher cost of acquiring the DVDs. With the upcoming Toyota and cheap models, the strategy and priority of Netflix’s management will be to develop quality DVDs, which are relatively affordable to a large number of people from the UK, the United States, and other parts of the world.
One of the strategic capabilities lies in the company’s stability that has enabled it to get financial assistance from global financial institutions. This has become possible due to the increasing favorable capital conditions. Since the company was able to come out of the global crisis and regain its position to even a much better level, it created a reputation among the public, thus showing the organization’s capability.
The second strategic capability of the organization is its focus on premium brands, which attract more customers. This creates a special preference for brands across the world, especially between the middle and high-income class. Notably, these groups of consumers prefer durable products that the company is capable of producing. Certainly, the company looks into the future with confidence because its premium models present an excellent growth projection in the US market zones and other parts of the globe. As a result of their quality, premium DVDs have a great demand because they present individuality and a sign of affluence.
The other strategic capability of the company is its ability to use modern and appropriate technology in producing DVDs. As a result of technological applications, the company produces state-of-the-art DVDs that appealing to potential users. Moreover, the company employs the finest engineering techniques in its production and most of the workers are of top quality and with relevant experience in DVDs making. This is a strategic capability that the company uses for its progress and further success.