Netflix, Inc.

Research Paper

In Partial Fulfillment for the Requirements in

Strategic Management

By

Aclan, Marylord

Alcantara, Allyna

Babao, Mark Anthony

Bibat, Jhaimie

Cantre, Rianah

To be Submitted to:

Mr. Marcos Borbon

Date of Submission: 22 December 2021

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 I. Company Background

Current Performance

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

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distribution. On the other hand, the pipeline business model applies to the company’s

content production operations. 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.

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.

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.

Financial Statement Analysis

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KumintangIbaba, Batangas City
(043) 702-4395 / 702-9584
KumintangIbaba, Batangas City
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Mission

Netflix’s mission statement is “We promise our customers stellar service, our

suppliers a valuable partner, our investors the prospects of sustained profitable

growth, and our employees the allure of huge impact.” The statement resounds what

the company is best known for – providing outstanding and unparalleled video

entertainment services. It also shows how the company balances the satisfaction of its

customers with the financial needs of its other stakeholders.

Vision

Netflix’s vision statement is “Becoming the best global entertainment

distribution service.” The vision statement is all about what the company wants to

achieve. It stresses the desire to set a quality bar in the provision of on-demand video

services. Specifically, this vision statement is a reflection of the leadership position Netflix

aspires to attain and secure in the sectors.

Objectives

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 Netflix has been a dominant focal point of the television and film streaming war,

moving from being the home of your favorite sitcoms to creating their own movies and

series to attract customers away from other streaming services. Though their business

strategy has changed as the streaming service competition has grown, their company

objective has remained the same: “To continue being one of the leading firms of the

internet entertainment era.” They don’t just want to compete with streaming services

like Hulu and HBO, they also want to push their “strategic objective of being at the top

of the competition, considering large players like Amazon and Walmart.”

Netflix’s objectives, based on its mission, are focuses on three important keys: to

provide the best service to keep customers happy, to keep an attractive outlook for their

suppliers and investors, and to make themselves an impactful company that employees are

excited to work for. By keeping their mission statement objectives, Netflix will keep

themselves on track to reach for this vision statement objective.

Policies

How Netflix Leads the Way in HR

They only hire “fully formed adults”

They’re no bullsh*t

They trust employees to “act in Netflix’s best interest”

They’re straight forward and extreme

They don’t pit employees against one another

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II. External Environmental Porter’s Five Forces

Supplier power – High

• High power of suppliers as they are able to select the content providers that they go

with whether, with online distributors or traditional broadcasting businesses.

• The supplier of the major cinema chains has the power to demand a window of 45

days before a movie moves into on-demand streaming services.

• Netflix and supplier have to subject in bidding wars or ownership negotiations.

• Netflix had to lower its profits to maintain contracts with the supplier in order

establish customer base and highlight the bargaining power of its supplier.

Buyer power – High

• Netflix provide services for a low cost with no annual contracts.

• Termination of service will only have minimal consequences with no termination

fees.

• Netflix competes with other providers such as Amazon, Hulu, Disney, and HBO.

• The buyer has a high power due to low switching cost.

• Netflix do not charge high price to maintain its pricing strategy.

Competitive Rivalry – Moderate to High

• Rivals such as traditional broadcasting, other on demand services, and retailers

selling DVD’s

• Netflix competes with other providers such as Amazon, Hulu, Disney, and HBO.

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 • Netflix is low cost but highly volatile.

• Netflix introduced their own series of movies and shows to compete with its rival.

Threat of substitution –Moderate

• Internet becomes the principal vehicle for distributing films in years to come.

• Substitute arising such as DVD’s, satellites, and cable TV.

• Piracy

Threat of new entrant - Moderate to High

• New technologies and video delivery are constantly innovating and could be new

entrants or other businesses investing.

• New entrants with low investment capital are less likely to enter this market, but

bigger companies like Google and Apple with strong financial and technical

capabilities can be a huge threat to Netflix.

• High product differentiation because Netflix began streaming content that was

unique and created by them to differentiate themselves from their competitors.

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KumintangIbaba, Batangas City
(043) 702-4395 / 702-9584