Question

1. If Netflix were to diversify into the telecommunications industry, would it create value for its shareholders? Utilize the appropriate measures found in Chapter 7 that can be applied for Netflix to make up its mind and to justify your answer.

Appropriate measures: economies of scope, transaction costs, costs of corporate complexity, diversification, vertical integration and strategic manoeuvring

Answer 1

Netflix is considered to be a perfect example of transformation for future technology. The company focuses on logistics and analytics. Not just a TV series, it offers movies, documentaries, and feature films with various genres and languages. These video contents include television series, films, animations, and documentaries produced in the United States, as well as other countries such as the United Kingdom, France, Germany, India, Japan, and Korea, among others

If Netflix were to diversify into the telecommunications industry , it would definetly create value for its shareholders. Some of the very famous shareholders of netlifx are BlackRock Fund Advisors, JP Morgan, Baillie Gifford. YouTube, Fidelity Management & Research Co etc.

With the ever increasing demand for more online content, Netflix has collaborated with electronics companies to make their content available on Internet connected devices. The use of mobile devices (phones, tablets, eReaders, laptops, etc.) has grown dramatically in the past decade.

Utilization of appropriate measure that can be applied for Netflix are as follows :

• economies of scope : With such a huge current subscriber base, Netflix can tap into many other countries and expand its services and subscribers. They can start to target the countries where it is not available.

• Transaction costs : Netflix offers cost advantages to Television consumers by using low-cost cloud infrastructure. Television over public Internet reuses existing fixed and mobile Internet infrastructure and enables immediate service deployment in new markets without upgrading the network.

• costs of corporate complexity : Netflix can partner up with various telecom providers and offer bundle packages in different countries. Alliances and partnerships will prove to be beneficial for Netflix.

• Diversification : Having the capacity to produce or co-produce its own contents enables Netflix to promote exclusivity of its online streaming service, thus allowing it further to compete against studios or production companies and television network that also provide streaming services such as Fox Studios and HBO. The exclusive and original contents also allow the company to attract and retain subscribers.

• vertical integration : Netflix adapted to various technologies instantly by providing streaming on all internet-connected devices like personal computers, iPads, mobile devices, and televisions. Due to this, their business grew immensely over the years.

• strategic manoeuvring : Netflix should try connecting with IMDB, Rotten Tomatoes, and other internet services to provide a variety of ratings and other information for their users.

If Netflix want to survive and earn profit from the trend, they should start designing new, high bandwidth networks fight away.