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https://www.rancord.org/netflix-business-model-generic-strategy-intensive-growth-
strategies-competitive-advantage

Netflix�s Business Model & Design

Netflix Inc.�s overall business model is a hybrid of various business models. This
hybrid organizational system is due to the company�s operations involving on-demand
streaming of entertainment content, and the production of original content, such as
movies and series. In line with the corporation�s generic strategy for competitive
advantage, these business models determine Netflix�s value chain and the associated
competitive advantages based on the VRIN/VRIO analysis framework. The company is a
strong example of how online business modeling provides the capability for large-
scale high-efficiency operations, while minimizing costs. Netflix�s operations
exhibit the following business models:

Platform (digital media marketplace) and Pipeline (entertainment content

production, etc.) business models
Cutting-out-the-middleman business model (production to distribution)
Unlimited subscription business model (revenue model for unlimited online access)
Pipeline and Platform Business Models. Netflix Inc. mainly has a platform business
model for its online streaming operations. Through the company�s platform, which is
filtered to some extent, content producers reach consumers. Consumers access their
preferred entertainment content through the same platform. It is in the platform
business model that Netflix�s generic strategy is most significant, considering the
competitive advantages based on cost efficiencies possible through information
technologies for global digital content distribution. On the other hand, the
pipeline business model applies to the company�s content production operations. For
example, through its generic strategy, Netflix Inc. uses the traditional pipeline
approach to create new movies and series. The pipeline business model enables the
company to control content production in a straightforward approach, while the
business growth potential via the platform business model supports Netflix�s
intensive growth strategies and generic strategy for competitive advantage.

Cutting-Out-The-Middleman Business Model. Netflix Inc. bypasses middlemen or

intermediaries by directly distributing its original content to customers via its
own streaming service. The company uses its competitive advantages and capabilities
to apply this business model. For example, the platform�s large scale enables
Netflix to efficiently distribute its original content to members. Such efficient
capability links to the online company�s efforts in implementing its generic
strategy. Also in this business model, other entertainment content producers can
directly transact with Netflix to reach target audiences around the world, thereby
supporting the company�s intensive growth strategies. Along with the generic
strategy, this situation eliminates some intermediaries or middlemen that are
traditionally involved in the distribution, sales, and marketing in the
entertainment industry.

Unlimited Subscription Business Model. Netflix�s organizational design involves

unlimited subscription, which is actually a revenue model that characterizes the
company�s overall business model. In unlimited subscription, customers have
unlimited access to entertainment content on the platform. This unlimited nature is
a result of Netflix�s cost minimization efforts, in connection to the enterprise�s
generic strategy for competitive advantage. For example, the corporation relies on
cost efficiencies to ensure profitability despite such unlimited subscription
offer. This revenue model helps attract and retain customers, and increases the
success rates of Netflix�s intensive growth strategies.

Netflix�s Generic Competitive Strategy

Cost Leadership. Netflix Inc.�s generic strategy is cost leadership, which in
Michael E. Porter�s model ensures competitive advantage through minimized costs
and, frequently, minimized selling prices. This generic strategy enables the online
entertainment company�s business model�s competitiveness based on low costs and the
corresponding ability to sell at affordable prices, without necessarily being a
best-cost provider. In this generic strategy, Netflix broadly acquires more
customers in the online entertainment market, in contrast to focus strategies that
concentrate on specific market segments. For example, the media streaming company
uses its competitive advantages to reach more customers in the international
market. This broad approach of the generic strategy aligns with Netflix�s intensive
growth strategies, which prioritize market penetration. The approach relies on the
company�s business model and value chain, which satisfy customers partly through
personalized customizations, such as in mobile app settings. Through intensive
growth strategies, the cost leadership generic strategy for competitive advantage
gains the biggest market share, relating to Netflix Inc.�s corporate mission and
vision statements, which point to the strategic plan and goal of attaining and
maintaining leadership in the international online entertainment industry.

Differentiation. Even though Netflix mainly applies cost leadership as its generic
strategy for competitive advantage, the business also uses differentiation in its
operations. As a generic strategy, differentiation involves developing the online
business and its products in ways that make them different from the competition.
For example, Netflix develops its competitive advantage by producing its own
original content, aside from streaming content from third parties. The
differentiation generic strategy enables the business model to attract and retain
customers, thereby supporting intensive growth strategies for further expansion of
the online operations.

Netflix�s Intensive Growth Strategies

Market Penetration is the main intensive growth strategy of Netflix Inc. in
expanding its business operations and multinational market reach. In the Ansoff
Matrix, this growth strategy involves selling more of the online company�s
streaming services in the markets that the business already has. This growth
strategy�s objective of growing revenues and market share depends on how Netflix�s
generic strategy maintains competitive advantages to gain and retain more customers
in current markets. Other strategic areas also influence how the generic strategy
and intensive growth strategies are applied as part of the online business model.
For example, Netflix Inc.�s marketing mix or 4Ps defines the business strategies
and tactics used for market penetration. Moreover, in using this intensive growth
strategy, the corporation strengthens its business to successfully penetrate
digital content streaming markets despite competitive rivalry. The business
strengths discussed in the SWOT analysis of Netflix Inc. are factors for such
strengthening of overall competitive advantage.

Market Development supports Netflix�s organizational development, but only as a

secondary intensive growth strategy. Market development works by selling the
company�s current online streaming service and original content to new markets. For
example, in applying this growth strategy, one of Netflix�s goals is to grow the
business by entering more countries, which serve as new markets. The company�s cost
leadership generic strategy contributes to the success of this intensive growth
strategy by making the online service attractive on the basis of price
affordability. Competitive advantages are essential in making Netflix�s business
model effective in generating profits in these new markets.

Product Development is another secondary intensive growth strategy that supports

Netflix�s development and expansion. According to Igor Ansoff, this growth
strategy�s objective is to develop and sell new products in the online company�s
current markets. For example, Netflix uses its generic strategy for competitive
advantage to efficiently produce new content for current subscribers, whose time
spent watching such content adds to the company�s profits. This support for new
entertainment content production is part of the pipeline business model within the
company�s overall business model. Success in the product development intensive
growth strategy depends on how Netflix Inc.�s organizational culture supports
relevant product innovation processes.

Diversification is rarely applied to grow Netflix�s operations, arguably because of

the high risks involved in this strategic direction. This intensive growth
strategy�s goal is to grow the business through new operations outside the
company�s current business of online streaming and original content production.
This growth is possible through Netflix�s generic strategy and the business model�s
capacity for new operations. Considering its competitive advantages, the enterprise
is likely to focus on businesses or industries related to online media streaming
when applying this intensive growth strategy. The functional changes involving this
growth strategy could require new components in Netflix Inc.�s organizational
structure.