Netflix: International Expansion case study focuses on the company as it expanded and dominated the video streaming industry all over the world. It discusses the challenges the company faced with such expansion and how it tackles such issues.
Won-Yong Oh and Duane Myer
Harvard Business Review (W16236-PDF-ENG)
April 26, 2016
Case questions answered:
- Analyze the global profitability of the industry in which Netflix operates. Use the model of Porter’s five forces.
- Perform an analysis of Netflix’s strengths, weaknesses, opportunities, and threats (FODA). Provide strategic suggestions based on that analysis.
- Define Netflix’s competitive advantage. Why is Netflix so successful?
- How would you recommend that Netflix overcome its challenges in the international market?
- In the future, what strategic actions might Reed Hastings consider?
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Case answers for Netflix: International Expansion
1. Analyze the global profitability of the industry in which Netflix operates. Use the model of Porter’s five forces.
The rivalry between existing competitors: High
Netflix was the most reliable company in the industry since its inception. However, in recent years it faces a significant challenge due to competitors who have decided to enter this area as well. Some of them are Amazon Prime Video, HBO, FOX, Disney, among others.
The primary motivator of users to subscribe to any of these pages is the variety of their content. Hence, Netflix must continue to increase its catalog. The company also needs to acquire the rights to known films or series. This acquisition would be in addition to continuing with the release of exclusive material of the brand.
Power of negotiation with suppliers: Medium – Low
As mentioned in the previous point, the main attraction of these pages is content, any company that does not always renew its content and adds eye-catching material to users. Unfortunately, it will no longer be eye-catching to customers and unsubscribe. That’s why providers have high power over Netflix, because, without the content they offer, the company will lose many users.
However, Netflix realized this situation, and that’s why it decided to start creating and launching its content, so it no longer had to rely on 100% of the providers.
Trading power with clients: High
This factor is high because Netflix, over the years, has earned a recognized name in the global market due to the correct service provided. In 2015, they already had more than 74 million people who paid for a monthly subscription. Netflix gives them a diverse variety of movies, series, documentaries, among others for entertainment purposes, with the ease of which platform gives you options based on your history or your preferences. It should be noted that Netflix, a few years ago, started releasing exclusive content that will only be available on the platform, which makes it more eye-catching for the industry.
Threat of new entrants: High
As a growing market, many large companies want to enter this area. Companies like Cinepolis or Google Play are some of the ones that have adapted their business model. They are looking into being able to offer a service similar to that of Netflix.
On the other hand, the big film producers, companies that are currently providers, can also be a significant threat if they decide to enter the market under their own name, as it would be taking away content attractive to users.
As an additional factor, potential competitors in each country that decide to launch their content platform for a specific geographic sector should be analyzed.
Substitute threat: High
While it’s true that Netflix provides a good entertainment experience on the internet or in the different media, there are countless options to choose from, and Netflix becomes one more option within them.
Reading books, tv, or listening to music are some of the actions that can replace the service. This factor would also include entertainment options such as cinema, theater, fairs, among many other options, but due to the current juncture by the COVID 19, these are not considered.