Despite its humble beginning, Netflix has rapidly grown to a dominant position in the internet industry. Today Netflix is a global leading Television Network provider with 74 million subscribers worldwide. Netflix was founded in 1997 by the present CEO Reed Hastings and entrepreneur Marc Rudolf at a time when the video industry was initially dominated by Blockbuster (Oh & Myer, 2016). In 1999 Netflix introduced a service of subscription moving away from the stand-alone rental shop that was dominated by Blockbuster (Oh & Myer, 2016). And in 2007, Netflix redesigned its strategy, moving away from DVD rentals to live internet streams (Oh & Myer, 2016). The company thus started to experience periods of rapid growth in its profits. According to a report released by Netflix in 2015, the company has employed more than 35 000 full-time workers causing its revenue to rise upwards to $6. 78billion (Netflix,Inc., 2015). Despite its rapid growth, the company faced several challenges in the push to expand more internationally. Using Netflix as a case study, this report aims to conduct a SWOT analysis and an in-depth description of the key organizational events.
Using its broad resources, Netflix's focus on brand equity has served as the company's strength. The company has managed to build a high brand recognition not only in the United States but also further diverse to other continents (Netflix, Inc., 2015). Netflix is one of the most trusted brands due to its major focus on customer experience and loyalty. The company also offers a broad variety of original movies, documentaries, and the content of video series. Original content has helped to reduce competitive pressure from other similar content providers. Additionally, Netflix has invested in developing its user interface that allows for user-friendly and technologically advanced operations (Oh & Myer, 2016).
Netflix faces a high cost of operations and investment. To provide outstanding services, Netflix had to beat its competitors through product differentiation. The company paid large amounts of premiums for licensing, which led to the high cost of investment in the international market. For instance, in 2015, the company reported losses of $68 million; more than twice the amount lost in the previous year (Netflix. Inc., 2015). The company's investment in research and development in a competitive market has also led to high operational costs.
The rapid growth of internet use globally is a promise for further growth to Netflix. Netflix moved its focus to internet streaming in 2007, and by 2010, the company experienced significant growth and expansion of its service and customer base (Oh & Myer, 2016). With technology advancing from television sets to mobile devices such as phones and laptops, Netflix still stands a higher chance of capitalizing from the internet. Internet success is one main unique characteristic that enables Netflix to work towards future accomplishment.
Competition is the primary threat faced by Netflix. Amazon Prime and YouTube, among other sites, have ventured into offering movie streaming services. Netflix's customer base could reduce due to Amazon's tremendous investment in internet research and development (Allen, Feils & Disbrow, 2014). Amazon is a threat since it is taking advantage of its extensive online customer base, robust infrastructure, and strong brand name to venture into movie provision. Additionally, increased oversight and regulation in different countries also act as a threat to the growth of Netflix.
The Main Change Events on Netflix
Netflix's main organizational change was its rise in competition and the fall of Blockbuster. In 1999, Netflix introduced a new method which was subscription-based strategy of sale and moved from Blockbuster's dominant area; a stand-alone rental store (Allen et al., 2014). The provision of streaming services gave Netflix a competitive advantage causing Blockbuster to decline in market share. In 2007, Netflix redesigned mail-order DVD rentals to internet streaming (VOD) (Allen et al., 2014). In 2014, a significant milestone was achieved by Netflix by reaching 50 million subscribers worldwide; among them, 36 million were from the United States (Oh & Myer, 2016). Despite its rapid rise, Netflix started to face a competition challenge when the market recorded an increasing the number of stronger entrants such as Hulu LLC, Walt Disney Company, and Amazon Prime. This competition was a threat to Netflix (Oh & Myer, 2016).
Netflix thus developed new strategies to overcome the strict competition that it faced. Netflix CEO, Mr. Hastings, then took into action strategies such as entering private licensing partnerships to help establish original content. Additionally, to overcome competition, Netflix moved into active international expansions to expand its wings from out of the United States to other nations.
In establishing its strategy of international expansion, Netflix faced challenges such as regulatory restrictions, which led to countries such as Syria and China miss from its list of expansion. Another problem was the adaptation of different content to match the local markets. In addition to these challenges, Netflix also incurred a high financial cost in investing in the international market.
In conclusion, Netflix has achieved a global presence due to rapid growth in online entertainment. With more international growth, the company is enjoying revenue due to increased consumer base. Brand equity is Netflix's main strength, while the high cost of operation is the company's major weakness. It also faces competition as a threat but delights in the rapid growth of internet technology as the main opportunity for growth. To beat an increasing rise in competition, the company has increased its focus in providing original content. With its expansion strategies, there is still possible growth of the company in the coming years.
Allen, G., Feils, D., & Disbrow, H. (2014). The rise and fall of Netflix: what happened and where will it go from her. Journal of the International Academy for Case Studies, 20(1), 135-143. Retrieved from https://www.abacademies.org/articles/jiacsvol20no22014.pdf#page=129
Netflix, Inc. (2015). 2015 Annual Report. Retrieved from https://s22.q4cdn.com/959853165/files/doc_financials/annual_reports/2015_Annual_Report.pdf
Oh, W., & Myer, D. (2016). Netflix: International Expansion. Retrieved from https://www.uni-erfurt.de/fileadmin/public-docs/Betriebswirtschaftslehre/09_Netflix__Case_Study__Strat_Man_II_BA_UE_SS_19.pdf
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