Strategic Management Problem-

SolvingTemplate (SMPT)

MGMT 661

Course Section - 24

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The Strategy Choice Cascade

The Strategy Choice Cascade has five major elements.

Your Winning Aspiration

The definition of what winning looks like for your organization. This is an essential question, as the answer defines what you’re really
trying to accomplish together.

Where to Play

The playing field on which you will, and will not, choose to compete. This includes five dimensions:

● Geography: What parts of the region, country or world will you play in?
● Customer: Who are the customers at the heart of your strategy?
● Channel: How will you reach your customers - directly, or through dealers, wholesalers, or retailers?
 ● Offer: Which products and services will be the core of what you sell?
● Stages of Production: What will you do yourself and what will you leave to suppliers, channels and partners?

How to Win

Your competitive advantage, how you will win with customers sustainably. This is done in one of two ways:

Lower Cost: you offer a product or service to customers that they see as equal in value to other offers, but which costs you less to
produce.
Differentiation: you offer a product or service that is distinctive in a way that customers value (that is, that they will pay more for).

Capabilities

Activities that you will need to build your competitive advantage. If you don’t have or develop a distinctive set of capabilities, you
won’t have a distinctive way to win. “Capabilities” are things you do, like customer service, innovation, and manufacturing.

Management Systems

The infrastructure, systems, processes, and metrics that support and measure your strategy over time. “Management Systems” can
include things like IT platforms, organizational structures, train- ing programs and key measures.
Strategy Process Map
The Strategy Process Map has seven major steps. Here’s more about each one:

Step One: Identify Your Strategic Problem

Articulate the biggest problem with your current strategy (i.e., The choices you’re making today). What isn’t working? What’s
stopping you from achieving your organization’s aspirations? The problem you identify is the one you will work to solve throughout
the rest of the strategy process.

Step Two: Frame a Strategic Question

Turn the problem into a strategic question to set the stage for generating possibilities. For instance, you can use a “How might we”
question to help you get ready to brainstorm new ideas.

Step Three: Generate Strategic Possibilities

To answer your question, brainstorm strategic possibilities. Possibilities are different strategic choices you could make to solve your
problem and to answer your question in a compelling way.

Step Four: Ask “What Would Have to Be True?”

Surface conditions for your possibilities: In this step, you define the conditions under which each possibility could be a winning
strategy. You go through this process for each possibility you’ve generated.

Step Five: Identify Barriers

Select the conditions – the things that would have to be true–that feel the most worrisome or uncertain. These are the conditions you’ll
need to test before you can choose a possibility as your new strategy.

Step Six: Test to Learn

Conduct research, design tests, and build iterative prototypes to learn to what extent your barriers, the things that would have to be
true for a possibility to be a winning strategy, actually are true or not.

Step Seven: Make a choice.

Bring together all that you’ve learned and use that information to choose a strategic possibility to pursue.
Diagnosis Section
Table 1.1 The Five Forces of Competition in the Industry
Rivalry among Competing
Sellers
Potential Entry of New
Competitors
Competitive Pressures from
Substitute Products
Competitive Pressures from
Supplier Bargaining Power
and Supplier-Seller
Collaboration
Competitive Pressures from
Seller-Buyer Collaboration
and Bargaining
High Competition: There are several rivals in the subscription
streaming and content development market. Many of them
have enough finances and can afford to operate at a loss to
force the closure of competitors. Some of the competitors for
Netflix are Amazon Prime, Apple TV+, Disney+, HBO Max,
Hulu, Paramount+, Peacock, and YouTube TV. Each is
attempting to outplay the other to gain a larger consumer base.
High Potential Entry: The fact that Netflix showed that video
streaming is profitable has led to new entrants in this business.
The Covid 19 lockdown also sparked huge increase in
customers leading to entry of competition.
Low to Medium Competitive Pressure: Although traditional
entertainment alternatives such as cable television and DVDs,
Netflix's dominance in the streaming sector strengthens its
position. The case study emphasizes the vast content libraries
and worldwide reach of rivals such as Disney+, Apple TV+,
and Amazon Prime. However, Netflix's large subscriber base,
profitability, and original programming, such as "Stranger
Things" and "Squid Game," give it a competitive advantage.
High Competitive Pressure- Because of big players with deep
pockets their bargaining powers are also big thus causing
pressures on Netflix in their negotiations. Supplier–supplier
collaborations also have led to strong competitive pressures.
Some of them are – Amazon buy out of MGM Studios /
Amazon acquiring IMDb / Disney with Hulu and acquiring 21st
Century Fox / Dish Network with Blockbuster / Walmart+ with
Paramount+
High: Buyers exert pressure on pricing since there is a surplus
of sellers offering similar products cheaper than Netflix. As of
2022, Netflix subscriptions were priced at $9.99 p.m for basic,
$15.49 p.m for standard & $19.99 p.m for premium. In
comparison, Google’s YouTube Premium is at $11.99 p.m,
Amazon Video at $8.99 p.m, Paramount+ from $4.99 to $9.99,
Hulu from Disney from $7.99 p.m with Ads to #24.99 p.m w/o
Ads. This makes the bargaining power of buyers that much
stronger.
Table 1.2 Industry Key Success Factors

Technological Rollout of 5G / increased internet penetration globally

related

Operations Development of a user-friendly interface. Implementing easy

related navigation, personalized suggestions (AI), and seamless playback
controls.

Distribution Increased subscriber base with penetration into other countries than
related the USA and Canada. Develop content with multiple language options
to broaden the audience.

Marketing related Development of pay-worthy content. Content is crucial for success.

Utilize big data analytics to create tailored marketing efforts.
Leverage social media and influencer connections.

Skills related Development of original content. Also developing plans that appear
different to subscribers. Create more “only Netflix” streaming content
such as “Squid Games” and “Stranger Things”

Organizational Must be able to develop flexible plans to be able to cover more and
capacity more subscribers.

Other Changes in government policies across countries. Workaround

societal tastes and choices in different markets. For example,
compliance with content filtering rules, taxation policies, and data
confidentiality guidelines in different countries. Also, explore
diversification into gaming opportunities.

Table 1.3 Industry Prospects and Overall Attractiveness

i) The huge market and high growth rate make it very

Factors making attractive for established big players.
the industry ii) The bargaining power of suppliers of a specific media
attractive
entity thus having an edge in price negotiations
i) Large number of competitors with deep pockets
Factors making ii) High initial cost of investment
the industry iii) Threat from various physical branches of the
unattractive
entertainment industry
 i) Anticipated shakeout stage in the streaming industry
Special industry ii) Acquiring content for streaming is a constant challenge.
issues/problems iii) Using advertisements while streaming has potential
privacy concerns.
i) The global video streaming software market is estimated to
Profit outlook hit USD 19537.1 million and grow with a CAGR of around
20.4% from 2022-27.

Table 1.4 The Business Environment

Opportunities Threats

Political Working around Chinese USA govt restrictions to do business with

government restrictions to enter the certain countries like North Korea, Syria
large Chinese market etc.

Economic Use subscription bundling tactics Exchange rate fluctuations impact cost and
with telecom carriers locally to business.
provide reduced streaming services
as part of larger entertainment
bundles.

Societal/Cultural Developing content locally to cater Extreme religious or cultural factors will
to local religious and cultural impact content. Cultural sensitivities about
tastes. specific content topics may cause public
outrage, culminating in content boycotts.

Technological Use upcoming technologies like
augmented reality (AR) and virtual
reality (VR) to improve the
streaming experience, especially if
gaming is expanded into Netflix
streaming.
Cybersecurity issues such as data breaches
or hacking could harm user privacy or
intellectual property rights, impacting
Netflix’s reputation.
Table 1 - SWOT Analysis of the Company

- Extensive content library

Strengths/ - Original programming
Positives - Global reach across 190 countries
- User-friendly interface
INT
- Data-driven approach
- Investment in innovative technology
- Brand recognition

- International expansion
- Original content production
Opportunities - Strategic partnerships- collaborate with telecom providers
locally.
- Merchandising to monetize their subscriber base.
- Expansion into new areas- Gaming Industry
EXT - Development of interactive content- Use of AR/VR technology
- Increased competition
- Online piracy
Threats - Changes in content licensing
- Technological advancements
EXT - Economic downturn
- Government regulations
- Dependence on licensing agreement
Problems/ - High content production costs
- Regional content restrictions
Challenges/ - Subscription model
Weaknesses - Limited advertisement revenue
INT
Table 2 – Analysis of Current Strategy
Winning Aspiration and goals:
What does it really mean to win
in this business?
What are you trying to
accomplish? Name your top
goals/targets?
Where to Play:
Geography: In what
countries/regions do you seek to
win?
Customer: Which segment(s) –
demographic and attitudinal – do
you seek to win with?
Channel: Through which
distribution channels do you seek
to win?
Offer: What offerings (e.g.,
product categories, content,
services) do you design and
execute this strategy against?
What offering is needed to win
with
this customer?
Stages of Production: What parts
of production do you do
yourself?
How to Win:
What, specifically, is your
competitive advantage? Will it be
a low-cost advantage or a
differentiated advantage?
What is your winning customer
value proposition?
Win in Business- increase its subscriber base and increase average monthly revenue
per paying membership ( $11.67 in 2022).
Top Goals/Targets
- Add advertising to raise revenues to be able to control price increases.
- Manage binge-watching and customer churn
- Add more subscribers to generate revenue
- Expand to gaming platforms to have a competitive advantage over rival
platforms.
Geography: Try to grow in markets other than USA & Canada which have matured.
Potential markets are African Continent, East and South Asian countries.
Customer: Target diverse demographics including millennials, Gen Z’s and Gen
Alpha’s. Tap all segments in a family using AI to prepare profiles of viewers as per
their taste. Even children are targeted.
Channel: Both online and offline distribution channels since the target customer can be
reached through both and of course strategic partnership with telecom providers.
Offering(s): Create content tailored to regions across its global market and implement
plans for a diverse set of products, including original series, films, documentaries, and
interactive experiences. Also heavily use tailored suggestions to appeal to a wide range
of audiences.
Stages of Production:
- Full control over content creation to maintain creative and quality standards.
- Video streaming plus original content development including games.
- Collaboration with external manufacturing partners for specialized
experience. For example- Netflix’s integrated K drama knowing its
widespread popularity
Being innovative and able to develop good quality content is its competitive strength.
The integration of “Netflix Originals” is its biggest competitive advantage, where they
stream content just for Netflix viewers.
Original content has to be its differentiated advantage. The strategy is to retain existing
customers in the tapped market and gain new customers in an untapped market.
Winning Customer Value Proposition
Table 2A - Strategic Analysis – Stakeholder Positions on Current Strategy

Stakeholders Position (opinion) on current strategy

Stakeholder 1: Employees and Leadership Team (Including Shareholders)

Employees can do research and develop cutting-edge solutions, whereas the

leaders Lead the company to short and long-term goals while keeping in mind
the company’s vision. Shareholders may see big content investment as
required to remain competitive in the streaming industry and attract new
users. Both institutional and individual shareholders have financial interests in
the company.

Stakeholder 2: Subscribers

Strength of over 213 million ; need to be constantly satisfied so they do not

leave and result in revenue loss to the company. Netflix’s biggest stakeholders
are their subscribers since they appreciate Netflix's focus on original content
and technical innovation as these factors lead to a more enjoyable experience.

Stakeholder 3: Independent Producers

They have a big role in developing original content and thus the success of the
company. Netflix's commitment to creating its content allows producers to
share their work with a worldwide audience. Partnerships with international
production firms also provide Netflix with access to specialized skills and
resources, especially in international markets.

Stakeholder 4: Competitors

They push the company so that its content and other resources give it a
competitive advantage. Netflix’s emphasis on unique content and technical
innovation creates a high standard for rivals to meet or exceed.

Feel free to add/remove stakeholders as necessary

Table 2B - Strategic Analysis – Impact of Critical Issues on Current Strategy

Department Critical Issues with Current Strategy

Finance Critical issues with current strategy – Netflix relies heavily on the
development of new content and funding is very crucial here. Its
spending on content development was almost $17mill in 2022. High
expenditures on content creation and production result in severe financial
losses. According to the case study, Netflix has struggled to balance
content spending with revenue generation.

Marketing Increased competition and subscriber churn require more effective

marketing techniques. Decisions of how to market and in which markets
are part of its strategy. Tie-ups with ISPs also help in its marketing. With
increasing competition from other streaming, Netflix is facing the issue
of retaining existing viewers.

Operations Includes decisions on content development, extensive content bank and

quality of its products. The issue arises in balancing content delivery
dates to reduce subscriber churn. Netflix's present method of releasing
complete seasons of series at once encourages binge-watching
behaviours, which leads to membership cancellations.

IT Top-end IT infrastructure impacts its ability to develop relevant software

that helps it to deliver good quality content. As Netflix grows into new
areas and experiences fast membership growth, ensuring a consistent
streaming experience becomes critical. So investing in scalable IT
infrastructure and refining streaming algorithms are important for
customer retention.

Human Resources The quality of its manpower enables the development of effective
software to analyze viewership data. Netflix's win is primarily based on
providing engaging and diverse content that appeals to a worldwide
audience.

Feel free to add/remove any departments as necessary

Table 3.1 - Critical Issues in the Context of Management Strategy

CRITICAL
ISSUES
How is it manifested? Why is it happening? 1) Why Important?
Cause(s)?
2) Implications if not
dealt with?

Issue 1 It is manifested by sluggish Mainly due to supposedly Investor's reaction to this is

growth in average monthly
Fall in number revenue per paying
of subscribers membership from $10.82
in 2019 to $11.67 in 2022
better options from
competitors. Buyers now
are spoilt for choice with
so many companies
offering varied services at
very competitive prices.
The economic downturn
also is forcing customers
to try to spend less and get
more in return.
drastic. The share price has
fallen by over 72% and
market capitalization fell
from $306 billion in
Nov’21 to $74 billion in the
end of 2022.

Issue 2 Very high content
development cost / upfront
Original content production cost or more
development than $17 billion in 2022.
The company needs to
constantly
upgrade/enhance its
content library to support
offline viewing.
This high production cost
will eat into earnings as
subscription charges can’t
be increased due to very
strong competition.

Issue 3 Could cannibalize into the Netflix needs to constantly This high production cost
more expensive but upgrade/enhance its will eat into earnings as
Password profitable ad-free services. content library to support subscription charges can’t
sharing & Ad- offline viewing. be increased due to very
supported tier strong competition.

Issue 4 Increased churn rate of More attractive options are Important as even a slight
3.3% in 2022 though still being offered by increase in customer churn
Binge watching lower than industry norm competition. Its cost of on a large user base directly
& customer of around 7%. subscription is among the impacts its profitability.
churn highest in the industry

Feel free to add/remove issues as necessary

Additional Issues or Insights which are critical to the success of the organization

OR will critically impact on the success of your recommended management strategy

The biggest struggle that Netflix is facing is retaining existing subscribers and engagement. The case
demonstrates Netflix's high churn rates, which means that many users sign up but immediately cancel their
memberships, most likely owing to causes such as binge-watching all of their favourite episodes and then losing
interest. This continual churn of members makes it difficult for Netflix to generate consistent revenue and grow
over time.
Table 3B – Development of What Need to Be Addressed Statements

1. What Needs to Be Addressed

Focus on User Growth; not streaming revenue growth.

Implications if not Addressed Opportunities if Addressed

While Earnings Per Share have been
reasonably good, it has fallen from 2021
figures. & revenue has stagnated. The fall in
net new paid subscribers has affected its share
price. Market Capitalization has also crashed.
Netflix needs to grow subscribers by investing
in growth markets like Latin America and
Asia-Pacific. America is saturated for all
purposes and the company is losing
subscribers there. Giving discounts to new and
existing customers could help to minimize
churn. While this could increase the cost of
services, it will surely help grow gross
revenues.
 2. What Needs to Be Addressed

Focus on Consumer Products

Implications if not Addressed Opportunities if Addressed

With competition breathing down its neck, just This will also help to elevate and build on its
relying on subscription revenues will not help. brand equity and provide indirect marketing.
As such, the growing consumer base is
becoming tough. It should look at consumer
product licensing opportunities. This will give
it a steadier cash flow source that it can use to
finance its investments in content.
 3. What Needs to Be Addressed

Continue investing in Top – Quality Original Content

Implications if not Addressed Opportunities if Addressed

The competition will chip away at its
subscriber base with lower-priced products.
Also, the company will lose its USP of an
original content provider and could find it
difficult to remain relevant in a content war.
Quality content development will lead to the
hiring of top talent and the development of
top-notch technology. This will help it to retain
and grow its subscriber base and also charge a
premium for its quality offerings.
 4. What Needs to Be Addressed

Expanding Internationally- Market Presence

Implications if not Addressed Opportunities if Addressed

Missed revenue from potential clients in areas Access to new target customers, diversified
that remain untapped, restricted growth income sources, less dependency on just
potential, and exposure to local market one market, and improved worldwide brand
changes. awareness.
 5. What Needs to Be Addressed

Optimizing Content Suggestion Algorithms

Implications if not Addressed Opportunities if Addressed

Reduced viewer satisfaction, lower content Increases user engagement, usage of content,
consumption, and wasted possibilities for customer satisfaction, and viewer retention
tailored experiences. rates.
Observations and Conclusions Regarding Diagnosis
Step 1: Explain the Existing Strategic Problem

From all the “What needs to be addressed” statements above, define the strategic problem that the company is facing

Netflix has always been providing its services without ads and thus has covered its higher production costs for
new content by charging its customers higher than the competition. It has had to invest very heavily in new
content development of such quality to keep satisfying its customers. Also, its major market has been North
America where the USA market has saturated. While it has forayed into many other markets and presently has a
presence in 190 odd countries, its share in its basket is very low. Netflix has found it difficult to create and
provide differentiated services to cater to the cultural and religious requirements in localized markets.
Government pressures and legislation also have hampered it in foraying into some markets like North Korea,
Syria and Crimea. Password sharing among its subscriber families and customer churn also affect its
productivity. It is being battered by large and small competitors. The big ones have deep pockets enabling them
to digest losses. Also, most of its competitors have a mixed product with and without ads giving the customer
more choices.

Step 2: Frame the Strategic Question: “How might we ......”

Examples:

● Nike: How might we use AI-powered personalized recommendations to drive customer loyalty?

● Starbucks: How might we create innovative community experiences within our stores for deeper engagement?

● LEGO: How might we combine physical and digital play experiences to attract new generations of customers?

● Peloton: How might we expand our content offerings beyond cycling to become a holistic fitness platform?

● Disney: How might we leverage virtual reality technology to create immersive storytelling experiences?

Netflix: How might we sustain Netflix's competitive advantage through subscriber growth, tackle customer churn and go for a mix of
products with and without advertisements?
Recommendations
Section
Table 4.1 – Evaluation of Alternative Solutions & Recommendation

WNTBA Statement #1

Alternative #1 Pros Cons

Alternative #2 Pros Cons

Recommendation & Rationale

Table 4.2 – Evaluation of Alternative Solutions & Recommendation

WNTBA Statement #2

Alternative #1 Pros Cons

Alternative #2 Pros Cons

Recommendation & Rationale

Table 4.3 – Evaluation of Alternative Solutions & Recommendation

WNTBA Statement #3

Alternative #1 Pros Cons

Alternative #2 Pros Cons

Recommendation & Rationale

Table 4.4 – Evaluation of Alternative Solutions & Recommendation

WNTBA Statement #4

Alternative #1 Pros Cons

Alternative #2 Pros Cons

Recommendation & Rationale

Table 4.5 – Evaluation of Alternative Solutions & Recommendation

WNTBA Statement #5

Alternative #1 Pros Cons

Alternative #2 Pros Cons

Recommendation & Rationale

Table 5 – Recommendation Detail

Recommendations and Supporting Detail Timing Priority

(See Note to the Marker)

Rec #1

Rec #1 - Critical Success Factors & Risks to be Managed

Rec #2

Rec #2 - Critical Success Factors & Risks to be Managed

Table 5 – Recommendation Detail

Recommendations & Supporting Detail Timing Priority

Rec #3

Rec #3 - Critical Success Factors & Risks to be Managed

Rec #4

Rec #4 - Critical Success Factors & Risks to be Managed

Table 5 – Recommendation Detail

Recommendations & Supporting Detail Timing Priority

Rec #5

Rec #5 - Critical Success Factors & Risks to be Managed

Table 6 – Proposed New Management Strategy

Winning Aspiration and goals:

What does it really mean to win

in this business?

What are you trying to

accomplish? Name your top
goals/targets?

Where to Play: Geography:

Geography: In what
countries/regions do you seek to
win?

Customer: Which segment(s) – Customer:

demographic and attitudinal – do
you seek to win with?

Channel: Through which

distribution channels do you seek
to win? Channel:

Offer: What offerings (e.g.,

product categories, content,
services) do you design and
execute this strategy against?
What offering is needed to win Offering(s):
with
this customer?

Stages of Production: What parts

of production do you do
yourself? Stages of Production:

How to Win:

What, specifically, is your

competitive advantage? Will it be
a low-cost advantage or a
differentiated advantage?
What is your winning customer
value proposition?
Add Appendices and References as Necessary