Question

What is Netflix's external environment based on the Pestel and Porter's Framework?

Answer 1

Netflix external environment is based on the Pestel analysis and Pestel analysis is a strategic tool used to analyze the macro Environment in the organization.PESTEL stands for

• Political
• Economical
• Social
• Technology
• Environmental
• Legal

There are the significant factor that comprise the Political,Economical,Social,Technology, Environmental and Legal factors and help the Netflix in there growth and strategic decision.

1) Political factor - Some of the external political factor of Netflix are :

• Netflix is not present in all the populated countries like china.because of restrictions and barriers.
• Need to more work on the content restrictions.so, that the same content are available in all the countries.
• Taxation and tax rates in the different countries.
• Level of corruption specially in the service sector will impact the Netflix.

2) Economical factor -Some of the external Economical factor of Netflix are :

• Fluctuation in the exchange rate will also impact on the total revenue of the Netflix.
• Netflix Domestic streaming cost and marketing expenses is increased.which need to be control.
• Government intervention in the free market and the related services.
• Increased in the workforce also increased the personnel related cost.Apart from the third party expenses facility related cost contributed in the overall expenses.
• Unemployment and inflation rate also impact the Netflix.

3) Social factor -Some of the external Social factor of Netflix are :

• The most important Social factor of Netflix is that it have a big brand reputation in the world that complying to ethical business standard and morality.
• Netflix is also know for the charity like give scholarship to the students and the help the financially challenged students.
• The CEO of the Netflix give his large sum of personal funds in the charity will help to increase the brand value of the Netflix.

4) Technology factor - Some of the external Technology factor of Netflix are :

• Use the advance technology to improve the overall streaming quality.
• Netflix use the various technology to Decrease the net consumption of there customers.
• More focus on the payment and delivery process will help to give security to the user payment service.
• By giving the Thumps up/down will help the Netflix to analyze what user want by using the technology.
• Same technology uses by the competitors will increase the competition.

5) Environmental factor - Some of the external Environmental factor of Netflix are :

• To reduce the carbon footprints Netflix use the Wind power to offset its energy for the cloud storage.
• Laws regulating the environment factor in different country will impact the Netflix.

6) Legal Factor - Some of the external Legal Factor of Netflix are :

• Need to fight the battle against the copyright breach.
• piracy of the video is also one of the factor of the loss.
• Streaming on the multiple devices as user want to reduce the cable bill.

Porter's Framework is used to analyze the industry and understand the profitability in the sector.Netflix use the Porters 5 models to understand how competitive forces influence the profitability

1. Threats of the new enterence - In the service market competition is always hig.Netflix always innovate there product and services to beat the competition.The new products help the Netflix to attract the new customers as well as retain the old customers.Also, Netflix spend there money in research and development.which will help them in there innovation and also help them to reduce the cost.
2. Bargaining the power of suppliers - Because the Netflix is the big brand in the service market.They have lots of suppliers.Building the efficient supplychain with the multiple suppliers help the Netflix to bargain with the suppliers.
3. Bargaining power of buyers - By building the large scale of user base will help the Netflix to decrease the chance of bargaining as well as provide the opportunity to the Netflix to streamline its sales and Production process.
4. Threats of substitute products and services - To tackle this threat Netflix is always not just depend on the product but also focus on there services.By understanding the core of the customer needs.
5. Rivalry among the competitors - There are lots of competitors of Netflix are present in the different country.Netflix always always drive down there prices to attract the new customer base and differentiate them self with the competitors will help the Netflix to increase there market size.