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SWOT Analysis

The A Team

College of Integrative Sciences and Arts, Arizona State University

OGL355: Leading Organizational Innovation and Change

Dr. B

February 3, 2022
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SWOT Analysis

For the Netflix SWOT analysis, which is one of the top streaming service providers in the

industry. Netflix exceeds the count of 193 million paid customers.The service is currently

available in more than 190 countries and is one of the most successful streaming platforms

globally (Edrawsoft,2022). The company offers the customers a streaming service to enjoy

films, documentaries, and original series without commercials.

SWOT Analysis

SWOT analysis is a strategic planning tool used to help an organization identify strengths,

weaknesses, opportunities, and threats related to business competition. We will be doing the

Netflix SWOT analysis to discuss Netflix's strengths and weaknesses, figuring out its

opportunities strategies while considering the current market’s opportunities and threats. As one

of the world's top streaming companies, it has several strengths. The company can use the

opportunities to plan and prepare for market threats on the business to continue its growth.

Strengths Weaknesses

● Globalization ● No rights to non Netflix originals

● High-Quality, Original programming ● Rapidly increasing price
● Long-standing market value ● Competition rapidly adapting
● Adaptability ● Public image w/ environmental issues
compared to top competition

Opportunities Threats

● Video games ● Competition

● Global subscriber increases
● Advocacy initiatives
● Lowered subscription costs or fees
● Explore ad-based revenue
● Updated video offerings
● Market saturation
● Hacking and account sharing
● Government regulations
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Strengths

Netflix has several strengths. As Netflix has been around since 1997, their presence is

strong in the entertainment industry and in stock markets. Their highest 52-week value on

Nasdaq, under the title NFLX, is 700.99, peaking around November and December 2021

(Sherman, 2022). As of January 26, 2022, their NASDAQ stock price is around 360. Compared

to two years ago, around when the pandemic started taking shape, it was 380. Netflix’s decline

is not a bad thing, because other streaming companies rely on them as a guide for their own

success, and it also tells of their overall growth among other streaming services.

Another strength is their global market. With over 190 countries, they have a firm grasp

in the online entertainment industry (Netflix, n.d., “Where is Netflix Available”). Additionally,

because they have been around for so long, even before online streaming was plausibly

available, they have been able to fluctuate with growing online trends.

Finally, Netflix has been using original programming since 2013 (which started with

House of Cards). Since then, over 460 shows have been produced by Netflix, leading the way

with original content (Wheelwright, 2020). And with so many options available, plus their

entertainment history, Netflix has the highest quality shows amongst all others, according to

viewers, at 37% (Shevenock & Epstein, 2021).

Netflix can play off these strengths by highlighting how they have created original

viewing content and can play off that with opportunities for original game content. Using a

statement of having a vast variety of entertainment options can allow Netflix the advantage of

keeping viewers tuned in. And, by utilizing portable game offerings, in addition to its current

streaming capabilities, customers can incentivize keeping a Netflix account for a longer period

of time. These are three strengths that will impact how customers interact with Netflix.
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Weaknesses

Despite being a force to be reckoned with, as well as the mainstay for streaming

services, Netflix does have some alarming recent downsides that I would like to highlight. These

are not necessarily detrimental to the overall success of Netflix, but they could be indicative of

things to come, should these trends continue. The overall landscape of streaming content is

constantly changing and highly competitive.

While Netflix has made an effort to increase the amount of Netflix original content, many

of the shows that their subscribers loved were not original content. Because of this, Netflix could

not control how long that content would stay in their library, no matter how popular and highly

demanded they were by their customer base. This actually creates a lot of frustration with

current and prospective customers.

Netflix, because of increasing debt to get into overseas markets, has decided to

drastically increase their price of streaming service. While this can be an effective strategy in the

long run, subscribers don’t necessarily care about Netflix’s financial issues. They merely see the

price hike relative to the competition’s price and show selection. While Netflix is still the top dog,

Amazon, Hulu and Youtube have all been adapting their strategy and upping the ante in order to

claw away at the gap between Netflix and themselves. The price increase could result in

customers jumping ship in order to save money and still stream quality content.

While our company is adapting to ensure they stay competitive and relevant, other

companies are as well. Youtube TV is combining streaming and live television at an affordable

price. Hulu and Amazon have both injected a lot of resources and money into being multiple in

their approach at getting at Netflix as well.

Lastly, Netflix has had a pretty sizeable PR nightmare in the form of carbon emissions

vs. the competition. While companies like Amazon have viable new technologies to reduce their

carbon emissions from servers and their streaming tech, Netflix has not adapted, drawing a lot
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of negative attention from environmentalist groups and media groups. This could lead to more

money being spent by our company in order to soften the blow to their appearance. In the end,

while being ever increasingly indebted, this could lead to more debt and dissatisfaction amongst

their customer base.

Opportunities

A huge opportunity for Netflix at the moment is increasing global subscribers. A few

ways that Netflix can go about this are by creating great original content focused on specific

areas that Netflix runs in, adding more languages with subtitles, and becoming more accessible

to countries around the world. “There is a strong demand from foreign audiences for both more

and different content. In 2016, Netflix had focused mainly on English-language films and series,

with an 80/20 model of U.S. vs. local content in most territories. It had focused much of its local

investment on marquee original productions — with foreign-language series such as Columbian

crime drama Narcos, French political thriller Marseilles or Hibana (Spark), a series set in the

world of Japanese stand-up.(Dynamic,2020.)“ Netflix has already increased their amount of

television shows and movies that have been dubbed so that more viewers can enjoy them

without the language barrier being a huge affect. Netflix has plans in the works to add more

languages, “2-3 languages each year… pointing to Greek and Romanian as some of the

languages that are next on the list” which can ultimately attract new

subscribers.(Dynamic,2020.)

According to researchers Karim Yaici and Martin Scott, Netflix has also started to reach

out to countries such as Kenya in an attempt to gain appeal and potential future subscribers

stating, “Netflix has sold its services in Africa since 2016. In September 2021, it launched a free

plan for Android users in Kenya. The plan does not require payment information, is

advertisement-free and supports up to five profiles. However, it comes with a few restrictions:

limited shows and movies, zero downloading or offline access, and content can only be played
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through mobile devices.” This is a great way to show people what Netflix has to offer without

giving it all away for free. Sharing this concept with other countries and promoting Netflix at an

affordable price for their economic status could bring in tons of potential customers.

Another option for Netflix is exploring a few options to increase revenue such as ad-

based data and tuning in on the gaming industry. The ad-based data is a potential opportunity

that carries some risks as one of Netflix’s largest appeals is the fact that ad’s aren’t crowding

their servers and fogging up the platform. Although it makes for a less attractive layout, it is a

potential way to drive in a little bit of income if they can manage it successfully. Video games on

the other hand pose their own risks. Netflix has to be able to do it right and make sure that their

services can handle that kind of content. Netflix’s focus has always been around storytelling, so

if they can find a way to incorporate games that fit their message and advertise them in a way

that brings in the viewers' attention this could be a promising prospect. Another factor is the

need to price accordingly. Many individuals of varying ages are willing to spend good money on

quality and visually attractive games, especially those with catching stories. If Netflix could find a

way to incorporate popular Netflix original series, this could be a whole new market for future

games to come. “Adjacency strategies that aim to cross-sell the core business tend to be more

successful, as the new offers must be different and worthy enough to warrant incremental

spending by customers. (HBR,2021.)“

Bad publicity is always a weakness at first, but it can also be looked at as an opportunity

for growth and development. Despite the negative publicity linked to carbon emissions, “Netflix

has created a plan to achieve net zero greenhouse gas emissions by 2022 by reducing internal

emissions and addressing indirect emissions in partnership with their suppliers. We’ll focus

especially on projects that advance sustainable livelihoods, biodiversity, climate resilience, and

environmental justice.”(Netflix,2021.) Netflix also has the opportunity to gain more respect in the

industry and to the everyday consumer by continuing its efforts towards advocacy. Netflix hears

the concerns of those watching and wants to make a difference, by doing so Netflix may grow
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it’s appeal to those focused on positive impacts within the world. One of Netflix’s initiatives is to

decrease the use of tobacco products used in show’s that aim towards younger audiences

(Keveney,2019.) Lastly, one of Netflix’s biggest funding projects was it’s “$100 million global

fund aimed at increasing outreach to underrepresented communities looking to work in

entertainment.(Flint,2021.)” Netflix’s attempts at making a positive impact in the world,

especially after making mistakes in the past is an opportunity for the company to do better as a

whole.

One more potential opportunity is to decrease prices to make Netflix more affordable

again. If this can’t happen, coming up with better packing deals that make this streaming service

feel “worth it” could also do. If other tactics such as a new variety of entertainment, video

games, or positive publicity fails- affordable pricing is always an attractive option to those who

want the content but cannot afford to be spending $15-$20 a month for a subscription service.

Many companies have started doing annual fees at a discounted rate. Other’s have various

promotions that offer discounts. Streaming services have partnered with one another to get two

or three accessible services for the price of one. Perhaps, Netflix can look into partnering with

their competitors or new platforms so that they all win in the long run.

Threats

Organizational threats “are negative external trends or changes that may hinder an

organization’s performance.” (Coulter, 2013. p.57). For Netflix, those threats are competition,

market saturation, hacking and account sharing, and government regulations. Netflix has

multiple competitors and will need to separate itself from other streaming services like Amazon

Prime, Hulu, Disney+, HBO Max, and Youtube. Netflix’s subscriber goal for the fourth quarter of

2021 was 8.5 million, but they reported 8.3 million subscribers on their quarterly earnings report

(Vlessing, 2022). In addition, Netflix added 18 million paid subscribers in 2021, compared to 37
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million in 2020. Netflix admitted to shareholders that “added competition may be affecting our

marginal growth some…” which is a change from prior shareholder communications. (Sherman,

2022). The significant loss in subscribers caused Netflix to lower its forecast for 2022, and some

business analysts believe a recent price increase may deter subscribers. Netflix raised its

standard plan price to $15.49 from $13.99, making it the most expensive mainstream streaming

service (Sherman, 2022).

Market saturation occurs when there are no more possible customers (Market

saturation, n.d.). With 222 million subscribers in 190 countries, Netflix could be nearing its

market saturation point. However, despite the dip in subscribers and a change to their 2022

forecast, Netflix does not believe the streaming market has reached saturation. Chief Executive

Officer Reed Hastings states that half of the households in the United States do not own smart

televisions and 85% of Netflix’s customers watch Netflix on TV (Jay, 2022). In addition,

streaming makes up 28% of the United States’ total TV viewing, and in that aspect, Netflix has

room to grow (Faughnder, 2022). But 90% of Netflix’s 2021 growth came from international

markets, and Netflix is not available in China, the largest global market.

Hacking is the act of gaining unauthorized access to a user’s computer, mobile

device, or account information. For example, bad actors can access a user’s Netflix account by

getting their login credentials on the dark web. Streaming accounts are typically billed to a

subscriber’s credit or bank card monthly and are not the most secure, making it easy for

hackers to gain banking information. However, there is an indication that hackers want

personal information on subscribers and their habits, which will help them guess other

passwords used on other websites (Mitra, 2021).

Another threat to Netflix’s success is account sharing. Netflix subscribers can establish

four profiles to use on their account, and the intent is that all four profiles are for users that
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reside in the same household. Unfortunately, it is common for subscribers to share their login

credentials with friends and family who live in other households. This practice exposes the

subscriber’s account to hackers and also cuts into potential revenue sources for Netflix.

Therefore, in March 2021, Netflix began testing an account holder verification prompt when

users logged in (Smith, 2021). If the user could not verify their logon with the account holder,

they were encouraged to open their own Netflix account. While Netflix did not immediately purge

accounts, it signals they are testing ways to crack down on account sharing. Customers shared

their concerns on social media, and industry watchers predict significant backlash against

Netflix if they deter account sharing.

Netflix must also consider government regulations as a threat to their business. The

federal government targets technology companies like Facebook/Meta and Amazon for antitrust

reform policies. Netflix has not been called to testify before Congress yet, but a recent executive

order from President Joe Biden is directing federal agencies to scrutinize proposed mergers

(Gardner, 2021). The executive order could impact Netflix’s ability to acquire content for its

streaming platform. Biden’s order also directs the Federal Trade Commission (FTC) to establish

rules of data surveillance which could affect Netflix’s ability to gather information on user habits

to inform its programming algorithm (Gardner, 2021). The programming algorithm is a feature

that sets Netflix apart from its competitors by suggesting programs the subscriber might like

based on user patterns and other data.

Conclusion

Netflix SWOT analysis reveals that there are weaknesses of the company but just as many

opportunities. With Netflix being in over 190 countries, that has an advantage over all other

streaming services in the industry. One of the main threats to Netflix’s success is account
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sharing. Netflix subscribers can establish four profiles to use on their account, and the intent is

that all four profiles are for users that reside in the same household.

We advise Netflix to bring in new ideas as they have to strengthen this threat. One more

potential opportunity is to decrease prices to make Netflix more affordable again. If this can’t

happen, coming up with better packing deals that make this streaming service feel “worth it”

could also do. If other tactics such as a new variety of entertainment, video games, or positive

publicity fails- affordable pricing is always an attractive option to those who want the content but

cannot afford to be spending $15-$20 a month for a subscription service. No account sharing

and high prices need to be taken into account. In order to support the business in decreasing

streaming prices it is to find other ways to drive revenue by exploring ad-based data and tuning

in on the gaming industry.

APPROVAL: (sign off with initials by 12pm AZ time 2/2/2022) - plan to submit by 1-2pm

2/3/2022

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References

Coulter, M. (2013). Strategic Management In Action (6th ed.). New York, NY:

Pearson.

Faughnder, R. (2022, January 25). Netflix’s bad week shows the challenges of the

streaming business. Retrieved from Los Angeles Times:

https://www.latimes.com/entertainment-arts/business/newsletter/2022-01-

25/netflix-returns-to-earth-this-is-why-streaming-is-hard-the-wide-shot

Flint, J. (2021, February 26). Netflix to spend $100 million to help

underrepresented communities in entertainment. The Wall Street Journal.

Retrieved January 26, 2022, from https://www.wsj.com/articles/netflix-to-

spend-100-million-to-help-underrepresented-communities-in-entertainment-

11614348003

Gaming isn't Netflix's best opportunity for Growth. Harvard Business Review.

(2021, November 6). Retrieved from https://hbr.org/2021/11/gaming-isnt-

netflixs-best-opportunity-for-growth

Jay, A. (2022). Number of Netflix Subscribers in 2022/2023: Growth, Revenue,

and Usage. Retrieved from Finances Online:

https://financesonline.com/number-of-netflix-subscribers/

Keveney, B. (2019, July 8). Netflix vows to go 'smoke-free' in shows like 'stranger

things' aimed at kids and teens. USA Today. Retrieved January 25, 2022,
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from https://www.usatoday.com/story/entertainment/tv/2019/07/02/tobacco-

images-rise-tv-targeting-youth-study-says/1613329001/

Market saturation. (n.d.). Retrieved January 26, 2022, from Cambridge Dictionary:

https://dictionary.cambridge.org/us/dictionary/english/market-saturation

Mitra, M. (2021, March 19). Hackers Are Coming for Your Netflix and Hulu

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password-hack/

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Sherman, A. (2022). For Netflix stock, it’s like the pandemic never happened.

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april-2020-on-subscriber-concern.html

Sherman, A. (2022, January 20). Netflix quietly admits streaming competition is

eating into growth. Retrieved from CNBC:

https://www.cnbc.com/2022/01/20/netflix-quietly-admits-streaming-

competition-is-eating-into-growth.html

Shevenock, S. & Epstein, A. (2021). Critics Think HBO Has the Highest Quality

Content. Viewers Say It’s Netflix. Morning Consult.

https://morningconsult.com/2021/10/19/prestige-tv-netflix-hbo/
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Smith, C. (2021, December 31). It sure looks like a Netflix password sharing

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sure-looks-like-a-netflix-password-sharing-crackdown-is-coming-soon/

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Content? WhistleOut.

https://www.whistleout.com/Internet/Guides/streaming-original-content

Yaici, K., & Scott, M. (2021, October 11). Netflix has launched a free plan in Kenya

to promote growth as competition increases in the rest of the world.

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kenya-rdrk0-rdvs0/
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