Netflix Inc.s Business Strategies

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Netflix Inc.s Business Strategies

Table of Contents

Background
Recommendation
Basis for Recommendation
Discussion
Next Steps
Reference

This recommends new strategies for Netflix that can make it more profitable globally. Implementation will take place within 60 days of approval. Improved sales and reliability will result from Netflix expanding its operations into new markets in developing countries, where opportunities for video streaming abound. Head of Sales, Mr. James, Head of Finance, Mrs. Christine, concur.

Background

Blockbuster was established by David Cook in 1985 and began as a small store. It then gained traction and developed aggressive strategy that entailed having multiple operating stores and a centralized database that linked and coordinated their activities. The different segments of data from operations helped the company accurately forecast the demand levels for its videos and, hence, met its sales objectives. The company used economies of scale to offer its products at lower costs than other firms. Its larger stores enabled it to provide customers with a variety of popular movies and became a market leader by 1993, with over 3,400 located across the US. DVD-by-mail acted as a disruptor to the business model of Blockbuster because of its pricing and shopping by mail that was of convenience to most customers as compared to the model deployed by Blockbuster. It shifted to a monthly subscription form of payment which became a $20 per month that gave customers unlimited rentals (Chris & Brian, 2017). The organization did not rely on late fees as compared to titles. Its good relationship with video suppliers ensured an upper advantage over Blockbuster by 2013.

Digital video delivery occurs through video content through devices connected by the internet. Users could access the content by downloading and storing it on their devices and playing repeatedly. The online videos disrupted the DVD-by-mail videos because customers could readily access a variety of titles without having to visit physical stores. The improved network and internet speeds, reduction in the cost of internet, availability of lower resolution videos, and compression algorithms ensured faster adoption of these videos. The source of failure risk was in 2011 when the company split its traditional DVD business with the online streaming business that resulted in price hikes of 60% (Chris & Brian, 2017). This made the organization to lose a significant number of subscribers

Its success at downloading and streaming brought a couple of risks and challenges. The first is licensing content being subjected to the terms of the content owner, and hence content owners could refuse to renew the license, and it risked losing subscribers. Second, the video streaming and downloading market was crowded by many powerful players like Google YouTube and Amazon Prime Videos (Chris & Brian, 2017). Some competitors also offered other services directly to Netflix, so it could not go hard on them, like Time Warner, which offered it with bandwidth services.

Recommendation

Alternative solutions for the company to succeed are developing its content which it has begun. The other strategy that can make the company profitable is expanding its operations to more regions outside the US where online streaming services are still abundant. These two alternatives will give the company new business opportunities to explore.

Basis for Recommendation

Video online streaming business in the developed economies is highly saturated with many powerful players, and opportunities to expand are few.
The companys financial performance has been on the decline and hence needs to improve sales and net income.
Barriers of entry into the emerging markets are substantially low.

Discussion

The company can establish regional offices in Asia, South America, and Africa and begin aggressive marketing campaigns to acquire more customers in these regions. It can also lower prices to facilitate mass adoption. The risk is low internet penetration in some emerging markets, which can lock out most customers.

Next Steps

The management of Netflix can take this recommendation to the board of directors for final approval, finance and resources can then be allocated for this expansion. Market research can also be carried out in emerging markets to understand consumer preferences.

Milestone	Timeline
Board approval	2 weeks
Resource allocation, Planning	2 weeks
Market research	1week
Establishing regional offices	4 weeks

Reference

Chris, F. K. & Brian. K. D. (2017). Netflix Inc.: The Disruptor faces disruption. Ivey Publishing.