SWOTS ANALYSIS OF NETFLIX.

SWOTS ANALYSIS OF NETFLIX.

Netflix is an online video streaming company that offers a wide range of content for entertainment. This content includes award-winning TV shows, documentaries, and movies, among others. With Netflix, you can watch unlimited content without having to watch any commercials. Like any other business, Netflix is affected by certain factors; it wins and fights its battle. An evaluation of the strengths and opportunities clearly shows Netflix is at an upper hand in the entertainment industry. Its major weakness and threats are a concern that needs to be addressed sooner or later to maximize its income and market its brand.

STRENGTHS

It has the first-mover advantage. Netflix has been advantaged by the fact that it was the only company that offered streaming services. Netflix has provided its services to over 190 countries. It provides its services at a more reasonable price, for instance, at only 7.99$ per month, it enables streaming of unlimited content on an unlimited number of devices.  The already subscribed persons will be unlikely to shift to another company. Also, users will be attracted to it due to its low service prices. At present, it is publicly traded in the US as the pure-play video streaming Company.[i] By being the only company providing streaming services, it has expressively leveraged as the industry leader.

Optimize content suggestion. Netflix has a strong management team, and their business decision has proved so. It was the first company to notice the perspective of online entertainment. Netflix has been able to collect information from its users which has enabled them to set up a recommendation platform. Through the platform, they have been able to make their extensive library of content more accessible to its subscribers. They have been able to provide what their subscribers prefer. This has allowed their library viewership to grow by 85%  The decision to produce original content was a great move that Netflix made, which in return paid off. In 2011, it was able to pull through from their Qwikster debacle; a clear prove it was listening to its users. Again, the release of a single episode of the season is one of the greatest things Netflix has done for its users.[ii] The content suggestion has greatly improved Netflix service to its subscribers and users.

Netflix has robust financial health. The financial state of Netflix has enabled it to venture in various opportunities in nearly any aspect of the entertainment industry. Netflix has signed an agreement with certain content providers on a revenue-sharing deal. This has allowed Netflix to provide low on content, providing more financial stability and flexibility.[iii]Therefore, robust financial health has ensured the company is in no danger financially.

Netflix ready devices. Netflix has been successful in working with the manufacture of the tools to ensure their devices will have an integrated Netflix app. It has made itself more available on video streaming platforms such as Apple TV and Roku video game consoles, smart TV’s, tablets, smartphones, and many others. It went internationally in 2010, starting with the availability of services in Canada. In the last decade, users have spent so much cash on these devices more so the younger generation. Online streaming plays a dynamic role in how the younger generation spends their free time.[iv]Netflix has proven the future of online entertainment through its ready devices.

WEAKNESS

Netflix faces increased competition.  Netflix would sign an agreement with content creators to have the rights to offer content to its subscribers. Those companies have now become competitors to Netflix; an example is Disney who failed to renew their contract. HBO is named as ”the biggest long term competitor for content” as the two bid against each other for original content. It has HBO go app which is a smart move on their side. HBO has over 114 million subscribers, while Netflix has 50 million subscribers worldwide.[v] Thus, the increased completion may become a threat if Netflix will be unable to retain market share against its competitors.

Lack of proper management. Netflix poor relation with the consumers concerning price and company restructure outlined a negative feeling. This caused Netflix to lose customers as well as experience a decline in stock value. This showed a lack of faith in management decisions.[vi] Therefore, the lack of proper management is a weakness that Netflix has faced and has caused it a great fortune.

Netflix has an outdated Catalog. Its catalogue is seen as obsolete and uneven. It is known to change frequently but without any notice. An example is the Tv series ”Absolutely Fabulous” which is no longer being offered. Its recent release is months old, and it has less Academy Winning Awards.[vii]  Netflix catalogue is old and needs to be thoroughly updated.

OPPORTUNITIES.

Opportunity for international growth. Netflix has a better chance to become a worldwide video streaming company. They have already started to tap into the foreign market, tailoring contents towards exotic taste and providing foreign language support. A large portion of the population lacks the credit card, which is the primary payment method in Netflix. Also, internet connectivity is another thing to look at as it is required for the population to subscribe. If they can be able to overcome political, culture and language, then they can be able to increase the number of subscribers immensely.[viii] Opportunity for international growth is possible provided all barriers are dealt with.

Continued vertical integration. It refers to the combing of content creation, aggregating and distribution. Netflix can work directly with smaller studios to produce exclusive content. The integration will, in turn, reduce the bargaining power of suppliers, and also reduce cost. Creating more original content will highly benefit Netflix in two main ways. One, creating more content will significantly attract more subscribers to Netflix. Two, the original content will legitimize Netflix in the market field and make it even more popular in the entertainment business.[ix] Continued vertical integration is the best way to win more subscribers and grab more share in the entertainment industry.

Opportunity for partnership. With the growth of data traffic, we expect more users to access streaming video content. Connection with mobile and home entertainment platforms would be a great thing to do According to Ireland, 64% of the population of the world uses mobile phones.  They can try platforms such as video games, tablets, and mobile phones, among others. Is a great way to make Netflix an essential part of any mobile or home entertainment system.[x] The partnership can effectively boost the number of subscribers.

THREATS.

Increase in internet fraud. With the rise of online fraud, some customers may be hesitant to submit their payment and personal information on the website. Internet fraud will significantly affect the cash flow of the company. [xi] Therefore, internet fraud can cause loses in large amounts.

Increased competition. Companies such as Amazon and Yahoo create more competition for Netflix. This kind of competition leads to reduced subscription growth. Baring in mind that Netflix’s sole source of revenue is the subscription fee puts it in a very critical situation. Lack of other sources of income, such as advertisements can lead to the decline of Netflix.[xii]  Therefore, increased competition is a significant threat to the financial health of Netflix.

Increased complicated regulations.  Netflix faces barriers to expand internationally. Countries like China, for example, are opaque, cumbersome and more often considered as corrupt. Increased control makes it hard for Netflix to expand overseas. But with the dedication of more resources can make it possible.[xiii] Hence, regulation is an excellent barrier for the growth Netflix.

High exchange rates. Netflix is an international business, will be exposed to an increased amount of currency risk. High exchange rate affects the transaction of any global company. Thus, exchange rates can be a significant threat to Netflix.

In conclusion, an evaluation of the strengths, weaknesses, opportunities, and threats of Netflix clearly shows a connection between them. Netflix is in a better position to bridge the gap of online entertainment only if it reinforces its strengths, overcome its weakness and deal with the threats accordingly. Also, if the opportunities mentioned above are optimized then, Netflix should be at a much higher rank compared to its competitors.

[i]  Bowen,

[ii]  All Answers Ltd,

[iii]  Lew, Patrick, and Weiss,

[iv] Mazumdar,

[v]  Ramsaran,

[vi] All Answers Ltd

[vii] Bowen,

[viii] Ramsaran,

[ix] Bowen,

[x] Bowen,

[xi] Mazumdar

[xii] All Answers Ltd

[xiii] Lew, Patrick, and Weiss,

Bibliographies

Ramsaran. An Analysis of Netflix’s Business Model and Strategy From CEO Reed Hastings’ Long-Term View, September 2014, 18-47.

Lew J., T. Patrick, and B. J. Weiss. Netflix, Inc. Client Report Danger Zone Consulting (n.d.).

Christian R., and W. Spooner. Krause fund research, January 2017, 11&12.

All Answers Ltd. “Netflix SWOT Analysis.” Business Teacher | SWOT, PESTEL and Case Studies. Last modified 2019. https://businessteacher.org.uk/swot/netflix.php.
Bowen R. Netflix case study, 2014, 16-22.