Netflix is a business that started because of client dissatisfaction. The CEO Reed Hastings began to his organization due to the payment of a late fee from another movie renting vendor, and this did not sit well with him thus the founding of Netflix. Netflix thereby has formulated a strategy where client satisfaction is at the peak of the organization’s goal as well as a broad customer base.
For this paper, issues with Netflix will be identified using the SWOT analysis of the organization. Also, the problems identified which will mostly be the threats and weaknesses will be analyzed. Further, a recommendation will be provided.
According to the text, it is essential for a business to find out the best method to be able to find out their problems. For this paper, a SWOT analysis will be provided to delve into Netflixs issues.
Netflix has over the years built an outstanding brand. Thompson (2018) a. buttresses this in diverse ways. About the strength, Netflix capitalizes on excellent customer service. For example, Netflix provides a download feature which allows customers to have an offline copy of their favorite shows and movies for up to two weeks before it expires. This strategic plan has helped to strengthen the brand and grow the customer base of the business at a breakneck pace. The case mentions Netflix-capable Blu-ray players, increasing numbers of Internet-connected TV models and home theater systems that were Netflix-ready, TiVo DVRs, and other individual Netflix players made by Roku and several other electronics manufacturers (c-152).
In terms of weakness, Netflix financial resources and its profits are relatively small. From the balance sheet provided in the study, there was a loss of over 100 million dollars in 2010. Although they have gradually picked up in subsequent years, it is somewhat affecting the business. The issue of pricing is another weakness. Netflix started out charging $5.99/ month for service, and the prices have doubled which is not a good thing as competitors like Amazon (which cost 6.99) for Prime (which is like Netflix and even qualifies members for free 2-day shipping), Hulu and HBO are providing similar products for less. Another weakness is the fact that Netflix takes off some good shows and replace them with boring ones.
For opportunities, Netflix can use their popularity and strategic ideas to grow the business and increase revenue while continually satisfying customers. They can start by identifying some of their weaknesses and think of measures to improve and possibly eliminate the identified gaps.
For threats, the constant increase in price may be a hindrance to the growth of the ventures. Also, Thompson (2018) indicates in the case that there is a growing bargaining power on the part of movie studios to extract higher fees from Netflix in return for granting Netflix the rights to stream movies or to purchase their movie.
The issues for Netflix thus have to do with issues of pricing and filtering content to ensure that the best content is provided for viewers.
Netflix is doing well in terms of financial and operating performance. From the data provided in the Exhibits, it could be seen that the organization is fast growing.
In terms of operational performance, Netflixs subscriber base has grown over 100% with the number of people they started within 2000. According to the author of the case, Arthur Thompson, Netflixs swift growth in the United States and its promising potential for further expanding its international subscribers pushed the companys stock price to an all-time high of $331.44 million on March 5, 2018, up from an opening cost of $124.96 million on January 3, 2017. This is a positive indication that the business is doing tremendous. Netflixs introduction of the free trial has also helped in the companys performance as they have drawn customers to them and this has become a trend for competitors like Amazon Prime, YouTube Red that have also started to provide free trial as well.
In terms of financial performance, Netflix has progressed and is doing well. From the Exhibits provided, Netflix has been making increasing profits for seven years straight. Also, the costs that go into advertising, marketing, and other administrative expenses have been declining on the other hand. This indicates how well the business is doing as it is indicative that less money is needed to make the company known to people.
On the negative aspects, the subscriber rate of Netflix has been declining concerning the price increase as well as other competing industries such as Hulu, Amazon Prime, HBO among others. Also, the companys joint ending balance and cash equivalents including the short-term investments are not as high as one will expect to see for such a company. The return on equity was 42% for 2011 against 38% for 2018. This issue as stated above in the SWOT is something that if not watched can let the loose company clients to competition.
The two most significant vital factors that will determine a companys success in this industry would be reasonable subscription rates and continuing to add/update different movies/series. For any company in this industry, it is essential to keep monthly subscription price consistent so that customers will follow the service. Sometimes people cancel their monthly cable subscription to use Netflix because they have all the latest tv series and movies that come on TV but for a much cheaper rate. Within the last month, Netflix has increased its service of streaming up to two devices from $11 to $13 per month and its primary service of one screen at a time from $8 to $9 per month. Although this may not be a massive difference in price, it is still more coming out of the customer’s pockets. Customers are continuing to keep the Netflix services also because of the tv series, comedy shows, and movies. As stated on the Netflix website they partner with content providers to license streaming rights for a variety of TV shows and movies. The content Netflix is delivering is so tremendous and affordable; therefore,s they are continuing to keep their customers and continuing to make a profit. If Netflix wants to continue to succeed within the next 3-5 years, they must continue to keep their monthly subscriptions at a reasonable cost and keep up with adding the latest tv series/months.
Thompson, A. 2018.a. Netflixs Strategy in 2018: Does the Company Have Sufficient Competitive Strength to Fight Off Aggressive Rivals? Retrieved from
Thompson, A. 2018.b. Strategy Core Concepts and Analytical Approaches. Fifth Edition. Retrieved from /www.glo-bus.com/Book2015/#/landing