Strategy in Action (1)
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Apr 3, 2024
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NETFLIX
CASE STUDY
4
Netflix International Expansion
International Strategy - Benefits + Challenges By the early 2010s, Netflix already captured most of the US market (saturated) and they needed to expand and tap into new potential (Netflix
gaining around only 1 million US subscribers per year over the next 5 years). They wanted to tap into markets with high broadband penetration and
mobile-focused countries. The industry became very competitive; specifically in global markets so Netflix needed to continue being the leader and expand into new markets.
Technology advancements around the world allowed Netflix to overcome technological barriers to entry: they were more able to target a global
audience.
Economic growth leading to greater disposable income and therefore higher demand for streaming services; Netflix needed to tap into that potential
Strategy - The international strategy is focused on expanding services globally and providing streaming to a larger audience. They did this through
content localization, creating and maintaining a global content library for people around the world, partnerships, and flexible pricing for different
economic conditions in other countries. Eg - "Barbarians" in Germany, "Sweet Home" in South Korea, and "Lupin" in France, which also gained popularity in the U.S.
Benefits: Expanding supplier numbers: capturing a global audience will improve viewer numbers and reduce dependence on one region for growth. Economies of scale: expansion leads to economies of scale as their fixed costs can be spread over a large consumer base; leading to profit and
production of more high-quality content.
Brand image and recognition: expanding into new regions grows the brand presence and recognition: retains existing subscribers and attracts new
ones. Challenges:
Cultural missteps: content that works well in one country may not work somewhere else; it’s hard to find the balance and produce content that your
wide customer base appreciates
Competition: streaming market is super competitive, it might be hard to penetrate (India with Hotstar services)
Countries have their own set of regulations and licensing needs; impact’s the quality of content and may be hard to navigate in that landscape
Technological - The growth of high-speed broadband and greater internet
usage globally is a great opportunity. The Netflix streaming model relies on fast internet
infrastructure; with more countries becoming more
technologically advanced, it’s an attractive opportunity for
Netflix to expand. Social - Changing consumer preferences for original content
creates opportunities. Creating content that attracts a global audience from
different cultures is a great opportunity. PESTEL Opportunity PESTEL Threats
Legal National regulatory restrictions are a threat to their
operations.
Countries have a lot of content restrictions and laws
that make it difficult for Netflix to expand. Stricter content or changes in government policy can also
make it hard.
Economic Economic fluctuations can impact discretionary spending
like streaming subscriptions.
This may also impact Netflix’s pricing strategies to deal
with the downturn
PORTERS forces
Threat of substitutes
Less Attractive: alternative entertainment like TV, DVDs, and emerging technologies can increase the threat from substitutes. If
consumers are more attracted to alternative offers, this would impact the streaming industry & Netflix. Bargaining power of suppliers Less Attractive: content creators and suppliers have high bargaining power. If they change their demands, the profitability of Netflix may
be impacted. Suppliers also have more leverage with increasing demand for exclusive content
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Text:
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