External Opportunities
- Low-Cost Mobile Streaming Option – In order to attract and keep members in the global market, Netflix can provide a more affordable option. In India, Netflix has been trying a $3/month mobile-only subscription (Netflix, 2021). It can broaden this more affordable choice internationally to compete more successfully with less expensive options like Apple+, Disney+, Peacock, and so forth.
- Take advantage of the ad-based business model. Companies like Google, Facebook, Amazon, and many more earn billions of dollars from advertisements. By switching to a business model centered on advertising, Netflix may increase its income.
- Increase Global Customer Base – With such a sizable, present subscriber base, Netflix may grow its services and subscribers to many other nations. They might start concentrating on the nations where it is not yet accessible (Netflix, 2020). In recent times, Netflix increased the number of countries in which it operates. Nevertheless, it is still not available in Syria, North Korea, Crimea, or China.
- Update Material Library – By growing the relationships with various movie distributors, it may increase the licensing of its content. Netflix should also update its catalog of available content now that it is creating original programming.
External Threats
- Pressure from the competition – There are other companies that offer digital streaming globally. Every year, its rivals grow more numerous: Disney+, HBO, Apple TV+, Hulu, Amazon, and YouTube are consistently challenging Netflix by providing its users with ongoing access to the fresh and original content.
- Government Regulations – In many countries, providers like Netflix may face severe restrictions from the government. For instance, given China’s restrictions on foreign material, Netflix’s growth there is improbable.
- Piracy – Due to hefty monthly fees that many people cannot pay, online piracy is at an all-time high, with millions of individuals across the world finding methods to obtain media material. It poses yet another serious danger to Netflix.
- Market saturation – Netflix increased US members by 420,000 in Q4 2019, falling short of its goal of 600,000. It had a target of 218,000 members in Canada but only added 125,000. Due to market saturation, North American membership growth has slowed for the third consecutive quarter (Sherman, 2020). Due to market saturation, Netflix will have a harder time acquiring new users in the future.
Porter’s Five Forces Analysis
Netflix competitor’s analysis demonstrates that competition in the streaming market is a strong force. Due to the expenses and limited profitability, there are observable hurdles for new entrants. For businesses who are currently active in the market and are attempting to implement this operating model, it is, nevertheless, quite simple. Another powerful influence is the danger posed by new competitors. Only a few newcomers to the market are successful since it takes time to fully understand what customers want.
Since there is a very low switching cost for consumers and virtually all services are provided at a very little price difference, the bargaining power of suppliers is a strong force. Additionally, because users pay every month, the five forces model proposed by Netflix cannot be based on year contracts. In the market, there aren’t many alternatives to the material. In Netflix Porter’s five forces, the threat of substitute services is, therefore, moderate. Companies who produce the same material for DVDs or streaming pose a threat to Netflix. The availability of other pastimes and entertainment options, though, poses a greater danger.
References
Netflix. (2021). 2021 Annual Report.
Netflix. (2020). 2020 Annual Report.
Sherman, A. (2020). Netflix paints a happy face on growing threat of US competition.