Strategic Analysis of Netflix Term Paper Example | Topics and Well Written Essays - 1750 words

Strategic Analysis of Netflix - Term Paper Example Growth opportunity for Netflix is dependent on Subscriber Acquisition Costs (SAC), churn rate and Average Revenue Per User (ARPU). Lack of switching cost has decreased ability of Netflix to control above mentioned three verticals. Opportunity Threat Netflix has already entered into digital distribution of video content in order to create a bridge between physical DVD formats and digital streaming. Netflix has already established strategic partnership with Microsoft in order to launch â€Å"Netflix compatible Xbox†; such product diversification strategy will definitely open new revenue earning paths for the company. Many customers prefer to watch movies on premium movie channels such as HBO, Showtime, Starz and Cinemax instead of renting movie from Netflix. HBO has launched HBO Go which is a video streaming service in order to increase competitive threat for Netflix (Thompson, â€Å"Netflix's Business Model and Strategy in Renting Movies and TV Episodes†). Porter 5 Force Analysis According to Michael Porter (1980, 1985) five force frameworks is a useful tool to understand competitive advantage associated with a particular industry. The study will use five force frameworks in order to understand competitive scenario for Netflix. Threat of New Entrant Attractiveness of the DVD renting industry has decreased for new entrants due to involvement of high cost related to acquisition of distribution rights from studios such as Time Warner, Sony Pictures and Universal Pictures. However, capital cost regarding setting up â€Å"brick and mortar† shop has decreased due to increase in online distribution of DVDs. Exit cost for the industry is dependent on capital investment done for establishing brick and mortar shop; for example, exit cost for an...It is evident from the SWOT analysis, that the company focuses on maintaining consistency in its offered service by using various techniques like customization in terms of DVD selection, decreasing lead time for service quality, offering Blue-ray or high definition DVD to customers, offering wide variety of latest movies and TV episodes to customers etc. It is evident from the above analysis that Netflix needs to think beyond video rental industry in order to expand its business. In long term, Netflix needs to focus on implementing a fully digital streaming of content in order to tap the potential market for online streaming. The company has already invested capital in developing digital streaming facility, hence the next move for the company will be to increase the number of digital titles and generate awareness among customers about digital streaming facilities developed by Netflix.