Business Policy & Strategy

Prelim Output

In partial fulfillment of the requirements to the subject MGNT410:

Business Policy & Strategy

Submitted to:

Professor Jacqueline Morta

Submitted by:

Estrella, Adrianne Dennise P.

Miranda, Royette B.

Navarro, Trisha Ysabelle M.

February 29, 2020

 Porter’s Five Analysis of Netflix

Threat of New Entrants

 Netflix is a part of the media and entertainment industry, where the threat of
new entrants is low.
 The low level of threat of new entrants is because of the rapid changing in
technology and not all companies in media and entertainment industry can
keep up in the competition. Netflix has been able to adapt in the changing
technology and trends by shifting from DVD rentals online to streaming and
dispatching rented DVDs through post.
 Being in the media and entertainment industry, developing a competitive
advantage requires a capital investment, supplier contracts and networking
industry which can be difficult to follow for a new entrant in the competition.

Threat of Substitute Products

 The threat of the substitute products for Netflix is high.

 Netflix faces threat from substitute services which are offering similar
products through rentals of DVD and online streaming. The traditional media
content provider also constitutes another example of substitute product.
 Youtube vines and vlogs are also a substitute product for their entertainment
services.
 Even though the company faces these threats, they handled to by updating
their content library by adding TV shows, movies, and etc. which are in
demand by the customer base. Basically Netflix, offers an all in one service
which the other companies doesn’t offer.
Bargaining Power of Buyers

 The Bargaining Power of Buyers for Netflix is high.

 The sales and revenues generated by the company is dependent on the
number of their subscribers located in different regions across the globe.
 Within the US, the company also caters to the need of the customers getting
rented DVDs through mail.
 Low switching cost allows customers with the option to cancel their
subscription with Netflix and seek other media providers increasing the
business threat to the company. Given this situation, Netflix can’t charge for
a higher price to customers and need to keep the pricing strategy according
to market demand.
 Moreover, the high bargaining power from customers result in maintaining
the service quality that is in accordance with their preferences.

Bargaining Power of Supplier

 Netflix can be viewed as holding high bargaining power.

 This high degree of influence on pricing is due to the few numbers of entities
producing media and entertainment-based content. Obtaining a contract and
acquiring the license to distribute the content involves negotiation on pricing,
where the suppliers have an edge.
 Netflix is competing against traditional media distributors; it has to show
greater flexibility in agreement than traditional businesses.

Competitive Rivalry

 Netflix faces a high-level competitive rivalry.

 The company is facing severe competition from traditional broadcasters,
rival companies providing videos on demand and retailers selling DVDs
  Amazon is the main direct competitor of Netflix as both companies provides
DVDs on rent, thus competing for similar target market in this domain.
 Apart from Amazon, there are many companies that are in competing with
Netflix like HBO, Youtube, and Disney.

References

https://www.businessinsider.com/netflix-stock-price-creating-a-competitive-
advantage-adding-700-shows-2018-2

http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_NFD(_2
017.pdf

Shuen, A. (2018). Web 2.0: A Strategy Guide: Business thinking and strategies
behind successful Web 2.0 implementations. Canada: O'Reilly Media.

Sonenshine, J. (March 1, 2018). Netflix is creating a 'competitive advantage' by

adding 700 new and original shows this year.

Williams, C. (2015). Effective management. USA: South-Western Cengage

Learning.