Netflix is one of the most well-known streaming companies in the USA and other countries across the globe. The company was established in the mid-1990s as an innovator who borrowed DVDs and later CDs via mail (“Long-term view,” n.d.). The firm managed to foresee the outcomes of the development of the Internet, as well as digital content and was one of the pioneers in the market of online streaming services. Netflix is displaying substantial financial success and increasing revenues (Feiner, 2019).
The organization intends to expand to new markets by developing relationships with partners and creating its own media content (“Long-term view,” n.d.). These measures can ensure the organization’s sustainable development in the long-term perspective. However, it is necessary to analyze its business- and corporate-level strategies, market cycles, and competitive environment in order to estimate the prospects of Netflix.
Business-Level Strategies
Companies develop certain business-level strategies to create their competitive advantage. One of the business-level strategies Netflix has adopted to achieve its organizational goals is differentiation. This tactic implies the use of measures to produce affordable services and goods “customers perceive as being different in ways that are important to them” (Hitt, Ireland, & Hoskisson, 2013, p. 122). Netflix positions itself as an online streaming service provider that offers a “large on-demand platform” (“Long-term view,” n.d., para. 10). The company concentrates on the delivery of films and TV series to customers since these products are regarded as the preferable content.
As compared to other companies, Netflix does not stream TV-based content with its fixed schedules and advertisements. Customers provide a regular fee and can access a wide range of popular or promising TV series and films irrespective of their running time or production date (“Long-term view,” n.d.). The organization also started developing its own products that can be accessed through their on-demand platform exclusively, which creates a meaningful competitive advantage.
In addition to providing media content, the company attempts to boost its competitiveness using measures aimed at quality improvement and diversification. The streaming services provider invests considerable funds in the creation and distribution of various products (“Netflix, Inc.,” 2018). Netflix also improves the quality of the provided services by enhancing the interface, introducing more features, and extending the lists of available products and services. Customers can download some films and TV series, which attracts many people worldwide.
This business-level strategy can help the organization to remain one of the leaders in the global online streaming market in the long-term perspective. It has already proved to be effective as Netflix is witnessing significant growth in the USA and on the international market (Feiner, 2019). The company focuses on some of the most popular media products making its services valuable for customers (“Long-term view,” n.d.). The company implements marketing research regularly to identify customers’ preferences and develop the most complete and appealing range of products.
This strategy can be specifically winning in the global market since people tend to watch products that have received high international acclaim. Such TV series as Game of Thrones or House of Cards are popular worldwide, although the last episodes of these television sagas were broadcast a certain time ago. Nevertheless, thousands of people only start watching these products or watch all the episodes more than once. Importantly, films and other products available through Netflix are not interrupted for advertisements and can be paused or rewound, and some of them can even be downloaded. This flexibility is one of the features of online streaming. Customized products and services attract new clients and win markets, which is the trend that will remain a peculiarity of the industry.
Corporate-Level Strategies
Corporate-level strategies are chosen depending on the organizational goals, firms’ top management choices, and the peculiarities of the industry. These tactics can be regarded as an instrument to increase profits and revenues. According to Hitt et al. (2013), corporate-level strategies are measures undertaken to win a competition by “selecting and managing a group of different businesses competing in different product markets” (p. 175). Diversification is one of the primaries focuses in this respect, and firms can choose different types of diversification. As for the company under consideration, their corporate strategy involves the development of relationships with firms providing online streaming products and developing associated services in different parts of the world.
As mentioned above, the chosen corporate-level strategy depends on the company’s goals. Netflix aims at winning a considerable share of online streaming services in the global market, so the organization enters alliances with Internet providers, software developers, and networks (“Long-term view,” n.d.). However, this strategy can have a negative impact on the company’s growth in the long run. The corporation does not have the necessary platforms for providing its services in various locations.
Netflix should consider acquiring companies that produce the corresponding software (both computer- and mobile-based) and provide networking services. This can be specifically important for the organization’s development and growth in the global market. Since the firm also starts producing media products, it can be beneficial to acquire a company producing this kind of content as the development of relationships with such partners is associated with certain risks.
Competitive Environment
Online streaming is quite a new industry, but it is evolving at an unprecedented pace. Netflix was one of the pioneers in the industry, which contributed considerably to the organization’s success. However, online streaming is becoming a highly competitive environment where global leaders start gaining substantial market shares. For instance, Disney, Amazon, and Google have entered the industry, making the competition rather intense, although Netflix claims it will still maintain its success (Feiner, 2019). All these corporations are well-known and have properly established brands and millions of loyal users.
The considerable market commonality is one of the peculiarities of the competition to consider. Netflix has to compete with the companies mentioned above in several markets, including media content production, software development, and online streaming. It is necessary to stress that companies have different resources and capacities, which affects their competitiveness in the mentioned markets. However, such large players as Disney or Google can win a leading position in the three industries.
Therefore, it is essential to pay attention to resource similarity when analyzing the competitive environment of Netflix. Disney is one of the leaders in such markets as media product development, and it has worldwide recognition. Google and Amazon are the top software products and services developers. Although online streaming can be a comparatively new type of activity for the organizations, their revenues and their previous expansion suggests that these are serious players that are likely to win the lion’s share in the industry.
It is possible to compare the profits of the organizations to estimate the potential for their competitiveness. Google and Amazon reported revenues of over $110 million in 2017, and Disney also had substantial financial success with over $55 million in the same year (Belinchón & Moynihan, 2018). The revenue of Netflix for the same period was $11,693 (Belinchón & Moynihan, 2018). It is clear that the organization under analysis will face fierce competition in the nearest future.
As far as the long-term perspectives of the four companies are concerned, it is possible to assume that Disney and one of the digital giants are likely to win the competition. Disney is one of the primary producers of films and TV series that have acquired many studios and other companies creating a diversified network producing a wide range of products. Disney has sufficient resources to enter new markets and can become successful due to its effective strategic management.
At the same time, Google and Amazon have entered online streaming with their own products (music and games), as well as such content as films and TV series. So far, the companies collaborate with diverse copyright holders and networks, but the organizations have also implemented several profitable acquisitions, which shows the effectiveness of their strategies. Netflix has comparatively limited resources and has not revealed any plans related to mergers or acquisitions, so it can be acquired by one of the abovementioned corporations or merge with one of them (or another organization) in the long-term perspective.
Market Cycles
Netflix operates in the industry characterized by a remarkable peculiarity as it combines the features of the slow- and fast-cycle markets. In slow-cycle markets, companies’ competitive advantages are protected from imitation for a significant amount of time (Hitt et al., 2013). Patents and copyrights ensure this kind of protection, and media content production is associated with this type of market cycle. Other companies cannot use the products developed by their competitors, and it can be difficult or impossible to imitate them. Therefore, Netflix, especially when it comes to its own products, can maintain its competitive advantage for a prolonged period. It is possible to assume that the organization is likely to be successful in the low-cycle market.
At the same time, Netflix has to function in the fast-cycle market as well. This kind of market cycle is characterized by a low level of protection of competitive advantage (Hitt et al., 2013). Technology-based industries are often associated with this kind of competition, so firms have to innovate rapidly and respond effectively to customers’ needs. Online streaming is an industry that relies heavily on technology and innovation.
New technological advances appear each day and shape the existing markets and industries. Netflix won its competitive advantage in the market a decade ago as the firm managed to evaluate the potential of the market that was only emerging.
However, the industry is evolving at a considerable pace, which requires substantial investment and efficient management. The organization under consideration has managed to identify some of the most promising trends. For instance, Netflix pays much attention to mobile-based technologies since customers value this feature highly (“Long-term view,” n.d.). The company’s ability to remain as effective as it has been so far will largely define its success in the long-term perspective. Netflix should consider diversifying horizontally or vertically in order to address the risks it has now. The intensifying competition in the industry calls for new instruments and tactics. The development of new technologies can be boosted if effective strategic management is implemented.
Sources
Belinchón, F., & Moynihan, R. (2018). Twenty-five giant companies are bigger than entire countries. Business Insider. Web.
Feiner, L. (2019). Netflix drops on earnings report showing weak guidance, CMO retires. CNBC. Web.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and Cases: Competitiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.
Long-term view. (n.d.). Web.
Netflix, Inc. (2018). Web.