Netflix - International Expansion

By:
Nasir Butt
Zoya Farooq
M Talha Malik
Introduction
• Netflix was founded in 1997 in California by Hastings and Marc
Randolph.

• In 1998, Netflix website was launched, which initially worked as a

pay-per-rental DVD mailing service.

• Introduced the concept of subscription-based service in 1999. Offers

online video streaming, online DVD and Blu-ray Disc rental services,
all for a flat fee of US$7.99/month.
Competitive Advantage
• Pioneer in the online streaming industry.
• First to introduce subscription based video service.
• Advertisements free streaming.
• Original and exclusive content.
Why is Netflix successful?
• Became popular as streaming technology improved and more people
adopted mobile viewing platforms.

• Wide range of content, including exclusive shows and movies.

• Low price of $7.99 for monthly subscription.

Porter’s Five Forces Model
• Threat of new entrants: Moderate
- New entrants require huge financing to enter into the video
streaming business.
- Require distribution rights from content providers.

• Rivalry among existing firms: High

- Financially strong and well established groups in the industry.
Porter’s Five Forces Model
• Threat of substitute products: Moderately High
- TV network providers and movie theatres.

• Bargaining power of buyers: High

- Customers can easily switch to other service providers.

• Bargaining power of suppliers: High

- Content providers can give distribution rights to other competitors.
SWOT Analysis
• Strengths
- Market leader in subscription streaming services.
- Competitive prices in the US and European markets.
- Large customer base of 74 million subscribers in 190 countries worldwide.
- Original and exclusive content.

• Weaknesses
- Language barrier – Service in 190 countries but only in 20 languages.
- Internet dependency – Cannot be used without steady internet connection.
- No alternate source of revenue generation apart from the subscription fee and
DVD rental service.
- High creation costs of original content.
SWOT Analysis
• Opportunities
- Business expansion into new international markets.
- New sources of revenue generation such as limited advertisements.
- Diversification of content by introducing music albums and videos.
- Implementation of technological innovations to improve viewing
experience.
• Threats
- Presence of local TV operators and VOD service providers.
- Regulatory restrictions imposed by the US and local governments.
- Video file sharing websites which offered pirated content.
- Weak infrastructure in developing countries.
 EFE Matrix

Weighted
External factors Weight Rating Comments
Score
Opportunities
Business expansion into new international markets. 0.18 4.5 0.81 Netflix has expanded into all major markets except China.
New sources of revenue generation such as limited advertisements. 0.14 2 0.28 Alternatre sources not yet utilized by Netflix.
Diversification of content. 0.11 3.5 0.385 Diversification in terms of TV shows and movies only.
Implementation of technological innovations to improve viewing experience. 0.07 4 0.28 Compatibility with laptop, smartphones and tablets.

Threats
Regulatory restrictions imposed by the US and local governments. 0.16 4 0.64 Expanded into majority of countries despite the regulations.
Video file sharing websites which offered pirated content. 0.14 3 0.42 Websites like PirateBay and Megaupload.
Weak infrastructure in developing countries. 0.12 2.5 0.3 Lack of internet availability and technological advancement.
Presence of local TV operators and VOD service providers. 0.08 4.5 0.36 Developed regional content to compete with local competitors
1 3.475
Recommendations
• They can try proposing to the US government to remove regulatory
restrictions on countries like Syria.
• They may provide translations (voice) in local languages.
• They should provide their services in other countries at competitive
rates to overcome competition from local TV network providers.
• They must analyse how much would they earn from the content they
create for international markets.
Future Strategic Initiatives
• They can look into the possibility of adding limited advertisements in
order to generate an alternate source of revenue.
• Could think of providing content in virtual reality (VR) and 3D to make
consumers’ experience better.
• Provide diversified content such as latest releases of music albums to
capture another market segment.