Case 4 - Netflix

case 7 Netflix’s 2020 Strategy for Battling Rivals in the Global Market for Streamed Video Subscribers ASSIGNMENT QUESTIONS 1. Five Forces Analysis a. Threat of New Entrants: (Moderate) The streaming industry is very competitive but for new entrants to enter the industry it would take extensive amounts of money for someone to gain the technology and content needed to be successful with a streaming service. b. Competition From Substitutes: (Moderate to Weak) Competition for the streaming industry include, DVD’s, Cable, VHS’s, VCR’s. Although the internet and technology have become very prominent today, it is unlikely that substitutes will drive demand for streaming services to decrease. c. Buyer Power: (Strong) Since there are so many different streaming platforms, buyers have a wide range of options to choose from. Also since streaming is so popular consumers will more than likely have at least one or multiple streaming services. This causes for demand and profitability to increase and remain positive in this industry. d. Supplier Power: (Strong) Since suppliers are where streaming services get their content, the impact of supplier power is very high. They can deny platforms the rights to use content leading to a decrease in demand and profitability since consumers will likely not want to pay for a platform that does not have specific shows. e. Rivalry: (Strong) The streaming industry is very competitive. There are tons of rivals in this industry. The demand for streaming services is at an all-time high and will likely stay this way. Although profitability will potentially decrease for certain platforms due to rivals. 2. All the driving forces are favorable in terms of competition and profitability for the streaming industry. a. Driver of change #1 pervasive consumer access to both wired and wireless high-speed internet connections. The high-speed data connections increase demand for user who

want to stream content on multiple devices. This also causes for competition to increase due to different streaming apps having different content that users may want. b. Driver of change #2 shift in consumer preferences worldwide. Demand for streaming services and competition increase since more consumers are switching to streaming services to watch content at any time they want instead of when it was aired on cable tv. c. Driver of change #3 product innovation. Companies are creating bigger and better content libraries to bring in more consumers. This increases demand and competition because each company must try and have the most wanted content in order to get consumers to want to pay for their streaming service. 3. The strategic group map indicates that the streaming industry is competitive and crowded. The companies listed do not all equally compete since they are all priced differently and offer different amounts of content variety. However, Netflix is positioned well on the map with one of the largest revenues and content varieties offered. 4. Key factors that will determine a streaming company’s success in this industry in the next 3- 5 years include content, technology, and business models. Content will affect the success based on how good the quality and variety is that is offered. Technology will only continue to grow and advance. Companies that stay up to date with technology and ensure that their platforms are easy to use better also the best quality they will succeed. As for business

Operating Profit 2019 2018 2017 ($2,604.3/$20,156.4) *100% ($1,605.2/$15,794.3) *100% ($838.7/$11,692.7) *100% 12.92% 10.16% 7.17% Current ratio 2019 2018 2017 ($6,178.5/$6,855.7) *100% ($9,694.1/$6,487.3) *100% ($7,670/$5,466.3) *100% 90.12% 149.43% 140.31% Working Capital 2019 2018 2017 ($6,178.5-$6,855.7) ($9,694.1-$6,487.3) ($7,670-$5,466.3) (677.2) 3,206.8 2,203.7 Total Debt-to-Assets Ratio 2019 2018 2017 7,582.2-33,975.7= - 26,393.5 -26,393.5/33,975.7 5,238.8-25,974.4= -20,735.6 -20,735.6/25,974.4 3,582-19,012.7= -15,430.7 -15,430.7/19,012.7 (0.78) (.80) (.81) Total Debt-to-Equity Ratio 2019 2018 2017 - 26,393.5/7,582.2 -20,735.6/5,238.8 =15,430.7/3,582 (3.48) (3.96) (4.31)

8. Apple is positioned weak as of mid 2020 because they only had 20 multi-episode shows and 5 films available. Their main competitive weakness was their failure to resonate with consumers. To correct this weakness, they need to offer more content that subscribers would want to watch to make it worth their money to pay for it. 9. Netflix’s competitive strength compared to the rivals listed is relatively high with top ranking factors in quality, price, and brand image. There top competitor is amazon prime video. They rank higher than all the other rivals. Subject Company Netflix Rival 1 Amazon Prime Rival 2 Disney+ Rival 3 Apple Tv + Rival 4 Peacock Importanc e Weight Strengt h Rating Score Stren gth Ratin g Score Streng th Rating Score Streng th Rating Scor e Strengt h Rating Scor e Quality 0.50 8 4 9 4.5 7 3.5 5 2.5 7 3.5 Price 0.20 9 1.8 7 1.4 10 2 9 1.8 7 1.4 Brand image 0.15 9 1.35 9 1.35 9 1.35 6 0.9 6 0.9 distribution 0.10 6 0.6 8 0.8 7 0.7 4 0.4 6 0.6 manufacturing 0.05 8 0.4 9 .45 8 0.4 7 0.35 8 0.4 Sum 1 Overall 8.15 8.5 7.95 5.95 6.8 10. What 2–3 top priority issues do Netflix management need to address? Priority Issue 1: Financial performance pressure Priority Issue 2: Lose of content to competitors