Netflix Environment

Netflix Environment
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Netflix Environment
Netflix, Inc. is an Internet subscription service organization that offers subscription service streaming TV shows and movies by sending DVDs through the mail and over the Internet. It runs its business via various segments, such as the Domestic DVD, Domestic streaming, and International streaming (Bradshaw, 2017). The company receives content from different studios and various content suppliers via fixed-fee licenses, direct buying, and revenue sharing contracts. Netflix markets its service via different outlets, such as the online advertising, partnerships, and broad-based media like radio and television. Finally, the company was founded on August 29, 1997, by Wilmot Reed Hastings Jr. and Marc Randolph and it’s headquartered in Los Gatos, CA.
General Environment
Political Segment
The United States markets consist of viewers moving from old-fashioned TV to on-demand video streaming services. Nevertheless, the rise in the Internet consumption has forced the US telecom titans AT&T have contacted the Federal Communications Commission to remain firm on more stringent consumption protocols (Bradshaw, 2017). If the regulations are passed via Congress, the price of the Internet could increase and, therefore, threatening the business structure of Netflix’s online streaming service.
Economic Segment
It is reported that in 2016, the company had more than 100 million subscribers using their service worldwide.

One crucial factor is their competitive pricing as compared to traditional TV services. With the current global economic slump in which several consumers’ expenditure budgets are fixed, services such as Netflix are more appealing than relatively expensive traditional broadcasting subscriptions (Roettgers, 2017). Besides, an important factor that impacts Netflix’s growth is the rates of exchange. The organization wants its prices around $10 charge, but this can be as higher as $19 because of VAT and exchange rates (Darrow, 2017). This can be seen by some customers as a luxury and could impact attracting markets where customers are price-sensitive.
Technological Segment
There has been a 43% growth in ten years in the US due to the 4K TV market, with the market totaling to $71.9 billion (Roettgers, 2017). Netflix has taken advantage of this by investing in R&D to promote an efficient 4K streaming. The company’s R&D Labs have further advanced new software called ‘Hermes’ that routinely rates the Netflix display translation. The invention will facilitate quicker and higher-quality attempts of translation for the company to provide for its programming to 190 nations globally.
Evaluation of the Three Segments
It can be said that the technological segment can offer opportunities for the company because of the potential rise in business efficiency. Conversely, the political environment seems to be a threat to the business model of Netflix as it limits the Internet usage. The economic segment can be both a threat and opportunity because of the exchange rates differences and competitive pricing of the company services, respectively.
The Industry Environment: Porter’s Five Forces Framework
Bargaining Power of Buyers
The switching cost for the services is easy. Subscribers do engage in annual agreement, and the signing up cost for service is also low. Besides, most movie streaming service suppliers provide a free trial. Customers can easily subscribe to one movie streaming service for a given period and switch to the next. They can move from Netflix to HBO, Hulu, or Showtime Anywhere (Roettgers, 2017). There are also several video and viewer preferences, as well as the TV show and movie selections available. The clients can also bargain on the brand. Thus, Netflix’s customers have strong or higher bargaining power. It is important for the company, therefore, to refine its brand to attract a broad range of users and subscribers.
Bargaining Power of Suppliers
Some suppliers may form strategic partnerships or alliances. For example, Hulu (Netflix rival) is a merger between the Fox Broadcasting Company, ABC TV Group, and NBC Universal Television Group. Besides streaming their content, Hulu also releases a portion of its own content (Darrow, 2017). This can offer more flexibility for the company than Netflix. Moreover, some of the company’s suppliers have turned to be its rivals as they are less ready to share their content with Netflix. The chances are that these suppliers can keep choice content only for their websites or charge Netflix higher prices for the content, which impact Netflix competitiveness. Thus, the bargaining power of suppliers is also high.
Rivalry among Existing Firms
Netflix has direct competitors like Amazon and Hulu. Major networks like Fox and CBS have their video streaming service available on their platforms and apps like Apple TV. They can stream their whole catalogs of shows, which can attract subscribers more than Netflix, which cannot have all its shows on a single network. Also, the providers have very low product differentiation, which increases the rivalry among them. Thus, the providers only compete on selection, with Netflix not having a larger section (10,000 titles) than Amazon Prime (17,000 titles) (Roettgers, 2017).The providers also engage in price wars, although the cost difference is insignificant. It can be said that the degree of rivalry among existing firms is high and, therefore, Netflix should ensure that its title selection matches with the higher price it charges to remain in the market.
Threats of New Entrants
Several companies are trying to engage in niche offerings by not competing with Netflix directly but appealing to a given niche that makes subscribers switch services. Disney, for instance, directs its channels toward kids while Fandor provides foreign films and documentaries. Also, other new companies have introduced individualized experience founded in the viewer preferences and habits, including content for younger audiences (Roettgers, 2017). It can be said that there is a high threat of new entrants in the market, which can affect the performance and profitability of the company. Netflix should, thus, differentiate its services.
Threats of Product Substitutes
Netflix competes against free provision by pirates. The video pirates who get the videos from the piracy platforms on the Internet or other means pose a significant cost for Netflix. The company also competes against other video streaming providers that offer their content without charges. Several streaming apps like PBS also provide some content for free. Besides, live streaming also offer substitutes for the TV Shows and Movie streaming services. Sports fans or individual who enjoy viewing the news via their existing cable services perceive that the cable services can offer many types of entertainment. Netflix, should, thus, review its competition strategies to survive in the market and attract subscribers (Mundy, 2016). Nevertheless, the streaming cable network provider can act as service complement by facilitating the movie and TV show streaming service offered by Netflix, and this is viewed as an opportunity for the company to attract more subscribers.
Competitor Analysis
The top three competitors of Netflix include Amazon.com, Vudu, and HBO Go. In regards to Amazon.com, Netflix offers a DVD mail-order that it does not offer to the market, thereby gaining a competitive advantage. Besides, Netflix has a competitive advantage of price over its competitors. It offers quality original content at a relatively lower price than its rivals. On the other hand, the competitors like HBO Go plan to expand its service to Finland, Sweden, Norway, and Denmark as a new service called HBO Nordic (Mundy, 2016). This will grab some of the market coverage of Netflix. Amazon.com also plans to expand its section titles, which will offer a competitive advantage over Netflix as consumers will have a broader range of video preferences. Finally, Netflix can remain competitive by expanding its selection titles, differentiating its service to include aspects of age, viewer habit, and video preference, as well as offering both HD and standard definition for pricing purposes and provision of free subscription (Roettgers, 2017).
The Organization’s Resources
The current strategic choice of Netflix will raise the value of the video streaming content that it offers. The consumers will gain access to more movie titles through online streaming that will reduce the already low difficulty that their customer support offers (Mundy, 2016). Besides, the company is currently positioned in fairly sustainable position. They have created a distribution model that is much beyond the competitors’ offerings. The DVD distribution via mail makes it easier for the consumers as they do not need to travel to acquire the DVDs. The customer service portion is also important to Netflix as it allows the consumers to rank movies they will achieve in the mail. The company has developed a sophisticated structure where they arrange and distribute their films from their several sites. The online streaming capability is a sustainable edge, including the reduction of the shipping costs. The company also retains its customers by linking its services and products to the customers. The movies can be obtained in one store, and the distribution modes are easy for consumers to operate and use.
Further, concerning the value chain of the company, the inbound activities include maintaining relationships with other video streaming providers like Time Warner Bros and creating standardized physical modes of distribution (Roettgers, 2017). The company also ensures that the operations like the provision of quality customer service are managed. Netflix also offers free physical transportation of movies and TV shows, builds collaborations with other providers, carries out innovation via R&D processes, and works under clearly defined company objectives (Mundy, 2016). It can be said that the technological development activity offers the most value because of the activity allows the company to stream its services via various devices like PCs, gaming consoles, and Mac. The activity also facilitates the R&D processes, which ensures that the company’s services match the changing consumer demands. Ultimately, the outsourcing activities of Netflix involve partnering with other streaming cable network providers and supply chain partners like Apple for product and service distribution and streaming to the global markets.

References
Bradshaw, T. (2017). Netflix boosted as viewers outside the US tune in. Financial Times.Darrow, B. (2017). Greenpeace Just Dropped This Video to Push Netflix on Energy Use. Fortune Tech.Mundy, S. (2016). Netflix to make first original series in India. Financial Times.Roettgers, J. (2017). How Netflix Wants to Rule the World: A Behind-the-Scenes Look at a Global TV Network.