LYCEUM OF THE PHILIPPINES – LAGUNA

Km. 54 National Highway, Makiling, Calamba Laguna

COLLEGE OF BUSINESS AND ACCOUNTANCY

NETFLIX

A case study presented to LPU-Laguna College of Business and Accountancy Department

In partial fulfillment of the requirements for
Strategic Management

Samaniego, Judd Ralph M.

Torres, Louella Marie V.

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 SUMMARY

Netflix is the current leader for streaming video on demand services worldwide. With new competitors
entering the market each year, Netflix establishes its competitive edge with original content and lack of
advertisements. After laying these foundations for domestic success, Netflix is now primed to target
foreign markets and expand internationally. Nevertheless, we have conducted this research to further
assess and measure the internal and external factors of the organization. Descriptive method is the
methodology used in this study with the help of existing similar studies, online journals, articles and other
secondary sources that contains accurate information. Strategic tools such as SWOT Analysis, IFE
Matrix, EFE Matrix and CPM were utilized to determine whether Netflix’ has a strong strength, weakness,
threats and opportunities. While CPM is used to conclude how Netflix is responding to its competitors.
Overall, this study has revealed that Netflix has a strong company strategy that responds to its internal
and external environment and that it is the leading entertainment company in the marketplace.

INTRODUCTION

These days the popularity of platforms over broadcast media, such as Netflix, have increased
considerably. It is seeing tremendous usage because the coronavirus outbreak is keeping so many
people at home. It's reasonable to think all sorts of streaming entertainment would be benefiting in similar
ways.

Netflix was founded by Reed Hastings, a former software engineer in 1997 for a new way to watch and
rent movies. It continuously employs a subscription-based business model. Originally, the company was
only a DVD-by-mail service in which customer pays for a certain level of membership.

Today, it is known as the largest, and most well-known internet subscription streaming service across
the world. With industry trends in home viewing of movies consistently grows, Netflix had a solid
entrenchment within the market and holding a majority of the subscribers. In 2010, Netflix began offering
its streaming services to Canada and in 2011, initiated services in 43 countries worldwide including
Philippines. Netflix was a pioneer in changing not just streaming, but even the entertainment industry in
which they compete. With 167 million subscribers from around the world, Netflix has grown tremendously
over the years. It is one of the leading internet entertainment services in the world with paid memberships
in over 190 countries.

Since the beginning, the CEO had a focus on aiming technological superiority by continuing to enter each
new technology market as made available. Hastings had gain new content to make it available to
subscribers. He also negotiated with various studios and networks for direct acquisition.

The company keeps an aggressive marketing strategy. They offered free trials to all new customers for
a free one-month access to services. Netflix main strategy is to increase profit for corporation was through
international expansion.

In this study, the researchers will analyze the internal and external environment strategies executed by
Netflix with the help of Internal Factor Evaluation (IFE) Matrix, External Factor Evaluation (EFE) Matrix,
and Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis. Using these strategic
analyzing tools, the researchers will be able to evaluate the effectiveness of the Netflix’ management
strategies. This will prove the expanding brand of Netflix in the market.

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The following strategic analyzing tools are used in the study:

• Internal Factor Evaluation (IFE) Matrix – A strategy tool used to evaluate firm’s internal
environment and to reveal its strengths and weaknesses.
• External Factor Evaluation (EFE) Matrix – A strategic tool used to evaluate firm’s external
environment related to Opportunities and Threats.
• Strength, Weaknesses, Opportunities and Threats (SWOT) Analysis – A strategic planning
technique used to help a person or organization to identify SWOT related to business competition
or project planning.

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 RESULT AND DISCUSSION

This chapter will elaborate the results gathered by the researchers and the discussion of the findings in
line with its objective to determine the external and internal factors, and to analyze the Strength,
Weaknesses, Opportunities and Threats of Netflix. This will contain Internal Factor Evaluation (IFE)
Matrix, External Factor Evaluation (EFE) Matrix, Competitive Profile Matrix (CPM), and Strength,
Weaknesses, Opportunities and Threats (SWOT) Analysis.

1. RESULT

TABLE 1.1 SWOT ANALYSIS

Strengths Opportunities
Brand Reputation Growing demand for online video streaming
Range and quality of content Product line expansion e.g., video games
Original content creation Growth in portable media play
Award-winning shows Exploiting new market segments
Zero ads More low-cost plans
Adaptability Local content for emerging markets
Large platform of content producers and
Expand global customer base
consumers
International Customer Base Support black educational institutions
Global Presence Era of mobile platforms
Advertisement Cross promotion program
Weaknesses Threats
Limited copyrights Competitive pressure
Rigid pricing Piracy
Lack of Green initiatives Market Saturation
Support shortages Account Hacking
Price increase Carbon Emission
Dependence on Internet providers Government pressure due to capacity issues
Limits on bandwidth usage from internet
Costly content
providers
Huge investment and operating costs Changing government policies and regulations
Increase in debt Price elasticity
Taste and preferences may vary in each
Over dependence on the US market
country

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TABLE 1.2 IFE MATRIX

Weighted
Strengths Weight Rating
Score
Brand Reputation 0.10 4 0.40

Range and quality of content 0.05 3 0.15

Original content creation 0.05 4 0.20

Award-winning shows 0.04 3 0.12

Zero ads 0.05 4 0.20

Adaptability 0.04 4 0.16

Large platform of content producers and consumers 0.03 4 0.12

International Customer Base 0.08 4 0.32

Global Presence 0.05 4 0.20

Advertisement 0.08 3 0.24

Weighted
Weaknesses Weight Rating
Score
Limited copyrights 0.05 4 0.20

Rigid pricing 0.05 3 0.15

Lack of Green initiatives 0.03 3 0.09

Support shortages 0.04 3 0.12

Price increase 0.05 3 0.15

Dependence on Internet providers 0.05 4 0.20

Costly content 0.03 3 0.09

Huge investment and operating costs 0.05 4 0.20

Increase in debt 0.03 3 0.09

Over dependence on the US market 0.05 4 0.20

TOTAL IFE Score 1.00 3.60

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TABLE 1.3 EFE MATRIX

Weighted
Opportunities Weight Rating
Score
Growing demand for online video streaming 0.05 4 0.2

Product line expansion e.g., video games 0.06 4 0.24

Growth in portable media play 0.05 3 0.15

Exploiting new market segments 0.05 3 0.15

More low-cost plans 0.04 2 0.08

Local content for emerging markets 0.08 3 0.24

Expand global customer base 0.05 3 0.15

Support black educational institutions 0.04 3 0.12

Era of mobile platforms 0.03 4 0.12

Cross promotion program 0.03 3 0.09

Weighted
Threats Weight Rating
Score
Competitive pressure 0.05 3 0.15

Piracy 0.06 3 0.18

Market Saturation 0.07 3 0.21

Account Hacking 0.08 3 0.24

Carbon Emission 0.07 4 0.28

Government pressure due to capacity issues 0.04 2 0.08

Limits on bandwidth usage from internet providers 0.05 3 0.15

Changing government policies and regulations 0.03 3 0.09

Price elasticity 0.03 2 0.06

Taste and preferences may vary in each country 0.04 2 0.08

Total EFE Score 1.00 3.06

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TABLE 1.4 CPM MATRIX

Netflix YouTube Amazon Prime

Ratin Ratin Ratin

Critical Success Factors Weight Score Score Score
g g g
Advertising 0.08 3 0.24 3 0.24 4 0.32
Market Penetration 0.06 4 0.24 3 0.18 3 0.18
Customer Service 0.08 2 0.16 3 0.24 2 0.16
Store Locations 0.08 3 0.24 4 0.32 3 0.24
R&D 0.09 4 0.36 2 0.18 3 0.27
Employee Dedication 0.10 3 0.30 3 0.30 2 0.20
Financial Profit 0.07 3 0.21 3 0.21 3 0.21
Customer Loyalty 0.08 3 0.24 2 0.16 4 0.32
Market Share 0.08 2 0.16 3 0.24 3 0.24
Product Quality 0.10 4 0.40 3 0.30 3 0.30
Top Management 0.08 4 0.32 3 0.24 3 0.24
Price Competitiveness 0.10 4 0.40 2 0.20 4 0.40
Totals 1.00 3.27 2.81 3.08

2. DISCUSSION

2.1 SWOT Analysis

Netflix’ SWOT Analysis contributes a recognized accomplishment to the organization. This methodology
helps the organization fabricate an essential intend to meet the company objectives, improve activities
and keep the business. The previously mentioned factors are seen by subscribers of Netflix, wherein
they sincerely shared some issues that the company is having. Explicit qualities, shortcoming, openings
and dangers were recognized to fill in as a premise to make the Internal Factor Evaluation and External
Factor Evaluation Matrix. After a time of conversation, the researchers got an absolute weighted score
of 3.6 in IFE and 3.06 in EFE. The score earned is path higher than the normal score of 2.5, this
essentially implies that Netflix is successfully reacting to its internal and external toughness. Through the
help of SWOT Analysis, it is seen that Netflix can efficiently maximize its strengths by using it as an
advantage to improve and manage opportunities.

2.2 IFE Matrix

The IFE results shows that Netflix has a solid internal association where it boosts an effective and serious
factor that the firm can use as a tool for assessing and uncovering its qualities and shortcomings. The
evaluations regarding how the firm viably reacts to its shortcomings just as how it uses its qualities. The
most significant weighted strength in the SWOT analysis is item fame earning a weighted score of 0.40,
Netflix, being one of the most popular streaming application worldwide. Ads and accepting advancement
likewise took a section to make Netflix become the most popular streaming application around the world.
Netflix has been using socials and improving mobiles for the advancement of its administration for its
service conveyance to additional lift their notoriety.

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2.3 EFE Matrix

According to the result of the EFE Matrix, it shows that Netflix is on the correct way with respect to their
administration in the external environment. Their techniques enhance the chances and at a similar time
they handle the dangers that will perhaps influence the organization. The two most elevated weighted
chances are piece of the pie and the majority of the individuals are effectively utilizing on the web deals.
This implies that Netflix is vigorously impacted by the percent of absolute deals in the business. Since
their solidarity is online deals, the pandemic has given them a wide client in and on the web. As per the
insights, COVID-19 episode influences the client's conduct bringing about the best move to internet
shopping. As opposed to that, the most reduced weighted chance is the capacity to pull in clients utilizing
inside plans.

2.4 CPM Matrix

An apparent rivalry emerges in the streaming industry making Netflix encourage and to strive more and
keep up its situation on the lookout. The Competitive Profile Matrix shows essential business contenders
and the critical components of analysis among them. Youtube, Amazon Prime are the essential
contenders of Netflix. Furthermore, as per the result, Netflix supposedly has the best force in
overwhelming its rivals. Results are separately: Netflix 3.27, Youtube 2.81, and Amazon Prime which is
3.08. This outcome was based on the assembled achievement elements of the researchers. In the last
mentioned, Youtube and Amazon Prime may need different parts of key turn of events.

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 CONCLUSION

This part shows the opinion by the researchers after seeing the results of the information. The analysis
expects to know the adequacy of the administration strategies of Netflix. With that, four (4) objectives
were formed which are to introduce the SWOT Analysis, IFE Matrix, EFE Matrix, and finally, to supervise
CPM Matrix to its contenders, to all the more likely comprehend inside and outside surroundings, and the
exceptional developing rivalry in an industry.

Based on the results presented above, the researchers concluded that:

• The IFE Matrix implies that Netflix’ has a numerous strength that helps to thrive in the industry.
These strengths do not only protect but also contributes to penetrating new markets.
• The EFE Matrix reveals how effectively the company’s current strategy responds to external
opportunities and threats.
• The CPM Matrix shows that Netflix is a world beater in the entertainment industry. It has a
strong competitive advantage supported by differentiated customer experience and a large
collection of original contents.

REFERENCES

Bowen, R., Diagle, R., Dion, T., & Valentine, S. (2014). Netflix Case Study. Retrieved from
http://robertdaigle.com/wp-content/uploads/2014/01/BowenDaigleDionValentine_NetflixCaseStudy.pdf.

Brynjolfsson, E., & Kahin, B. (2002). Understanding the digital economy: data, tools and research.
United States of America: MIT Press.

Lin, S. (2015). Netflix original content strategy: risks and rewards. Retrieved from
http://wallstreetnews.today/index.php/item/440-netflix-original-content-strategy-risks-and-rewards

Munarriz, R. A. (2014) Netflix and the 'Network Effect': It's Now Too Big to Beat. Retrieved from
http://www.dailyfinance.com/on/netflix-and-the-network-effect-its-now-too-big-to-beat/

Smith, C. (2015). By the numbers: 50 amazing Netflix statistics and facts. Retrieved from
http://expandedramblings.com/index.php/netflix_statistics-facts/

Soper, T. (2015). Netflix still king of streaming video, but Amazon gaining market share. Retrieved from
http://www.geekwire.com/2015/netflix-still-king-of-streaming-video-but-amazon-gaining-market-share/

Statista. (2015). Netflix hits 65 million subscribers. Retreived from

http://www.statista.com/chart/3153/netflix-subscribers/

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 EVIDENCES

January 27, 2021 at 8:45 AM

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