Question

**question requires through details about Netflix international expansion strategy in 2010 and how it has evolved through today. I will rate answer appropriately based on the quality. The question is on international strategy then & now. Below are the specific answers I am looking for to highlight the initial strategy & how it has evolved. Thank you!**

What international business strategy did Netflix use for its international expansion in 2010 (name it as it is called in the textbook) & explain.

What are the pros and cons of this strategy on international market? List all that you can think of.

What challenges did they have when implementing this strategy & do they still have them today? Explain. Use 5 Forces model to answer. Cite sources/references.

Who are the most dangerous current rivals of Netflix internationally? Name 3-4, provide explanation and links to the cited sources.

What international business strategy are they pursuing now? Explain.

What international business strategy would you have recommended them to use in 2010 and now? Why? Explain.

Answer 1

Q.1 What international business strategy did Netflix use for its international expansion in 2010 (name it as it is called in the textbook) & explain.

ANSWER- ( Netflix’s globalization strategy ) IN 2010

Netflix’s globalization strategy, and many of the challenges it’s had to overcome, are unique. Netflix must secure content deals region by region, and sometimes country by country. It also must face a diverse set of national regulatory restrictions, such as those that limit what content can be made available in local markets. International subscribers, many of whom are not fluent in English, often prefer local-language programming. And many potential subscribers, accustomed to free content, remain hesitant to pay for streaming services at all.

Q.2 What are the pros and cons of this strategy on international market? List all that you can think of ?

ANSWER- Pros and cons of international market -

Pros of Global Marketing -

• You Can Reach a Broader Target Market

Almost anywhere in the world, you might be able to find someone who wants to buy your product. From a sheer numbers perspective, the more people you can reach, the more likely you’ll find customers who have a need for what you sell.

• Your Small Brand Goes Global

It’s not just about sales (although it is mostly about sales). It’s also about what your brand stands for. When you take a global marketing approach, your brand can bask in the glow of a global reach. Even if you don’t sell in Spain, your brand could become known there. The internet and global marketing gives you incredible reach and opportunity.

• Beat Your Competitors

Let’s say you sell these really amazing coconut-infused double-chocolate cookies. But the bakery down the street offers almost the same kind of decadent dessert. If you’re global and he’s not, you’re going to sell more cookies – not to mention a whole lot of other ship-overnight baked goods that your customers might love.

• Build Some Global Relationships

In addition to a network for your products and services, a global marketing strategy gives you and your company some global networking opportunities. And you never know how one connection could lead to another. What would a global partnership look like?

Cons of Global Marketing -

• Global Means It’s as Big as the Globe

While it can be great to think really, really big, some products and services just don’t translate well on a global scale. For example, if you work in interior design and offer one-on-one service, how exactly are you going to market and service a client in China?

• There May Not Be a Market for What You Sell

Cultural, economic and governmental barriers may mean even your most amazing products might not be well received in other countries. You may know your U.S. market, even state-by-state, but navigating a global market can be much more challenging.

• A Greater Financial Risk

If you only scale your marketing upward to reach a global audience, you could go broke before you see any return on your investment. You will need to be very strategic to get results, which may mean a lot of time, energy, research and allocation of resources on the front end. If you don't plan well, you could lose money fast.

Q.3 What challenges did they have when implementing this strategy & do they still have them today? Explain. Use 5 Forces model to answer. Cite sources/references ?

ANSWER- Strategic Issues -

Netflix has the potential to dominate the next phase of entertainment distribution, but they must certainly overcome obstacles to do so. Historically, one can observe that new phenomena created opportunities for the success of new companies; as broadcasting replaced radio, or cable replaced broadcasting decades later, companies that didn’t continually innovate lost out and became illegitimate. Today, cable providers are losing millions of subscribers to streaming services like Netflix, and only those who have built strong economies of scale remain. This is something that Netflix managers must consider. Though they have capabilities and intangible assets that are impressive, their physical infrastructure is still dwarfed by large cable and TV companies across the world who can leverage these capabilities and their brand name recognition to stay relevant.

Five Forces for Netflix -

In continuing with an analysis of Netflix’s external environment, the five forces model bears tremendous significance to Netflix’s strategy formulation. While the PESTEL analysis allows one to evaluate the external environment and identify subsequent opportunities and threats, this framework helps determine profit potential and to derive the implications that these forces have upon Netflix. For example, a report issued by Nielsen illustrates that while 90% of US households with streaming subscriptions elect Netflix as their provider of choice, 33% of these subscribe to more than one service; this speaks to the high power of Netflix’s buyers. Other key takeaways from a five forces analysis of Netflix (included below):

• The cost of switching for Netflix’s consumers is minimal; there is no annual contract, and the recurring fees are negligible. o Most streaming services offer a free trial, making it easy for customers to frequently switch between providers

• Netflix must keep user preferences in mind

o They have to stream tailored content and add compatibility to accommodate viewing preferences like closed captioning and foreign languages.

• As video streaming has become more popular, the number of new entrants has increased.

o Many of these players are taking on genres, as opposed to competing directly with Netflix (i.e. focusing on foreign movies, documentaries etc.)

▪ This necessitates the continual evaluation of whether competition in these niche spaces makes sense.

• Netflix must refine its brand to appeal to a broad range of consumers

o New competitors are often considered to be trendy for specific demographics.

o Netflix should ensure that the technology behind its streaming service works well, and that viewers can relate to the brand in other ways, such as through how they search.

      

Implications of the Five Forces for Netflix -

Q.4 Who are the most dangerous current rivals of Netflix internationally? Name 3-4, provide explanation and links to the cited sources.

ANSWER-

competitors -

• AAmazon ( Fictitious name)

The biggest competitive threat to Netflix is probably Amazon (AMZN). As of the fourth quarter of 2019, AAmazon Prime Video had about 150 million subscribers—a number that's been growing at a fast pace over the past two years as the company has increased production of its original content.

• Hulu

The big news for Hulu came in May 2019 with the announcement of a deal between Comcast and Disney which had Disney purchasing Comcast's stake in Hulu for a reported $5.8 billion. This puts Disney in full control of Hulu and consolidates the competition as Disney makes a big push into the streaming services field.

Hulu's numbers are much less than those who subscribe to Netflix and Amazon. Hulu hit 30.4 million subscribers by the end of 2019.

• Disney+

There's been a lot of hype around the streaming service offered by Walt Disney. Disney+ is an on-demand, commercial-free service which houses the entire library of Disney movies along with original Disney TV series. Included in the library are titles from Pixar, Marvel, features from the Star Wars enterprise, as well as National Geographic options. If that's not enough, the service also includes every season of The Simpsons and 21st Century Fox films. Subscribers get unlimited downloads to watch wherever and whenever they choose.

Q.5 What international business strategy are they pursuing now? Explain. ?

ANSWER-

Competitive & Corporate Strategy :

Netflix’s differentiated competitive strategy is focused on three primary components: spending, content, and user experience. The company invests a tremendous amount of resources into new content development annually, especially now geared towards its original shows and movies, moving away from their previous strategy of focusing on licensing content under ownership by other studios. This competitive strategy is rooted in their desire to build a content portfolio of lasting value, which comes with large upfront costs, but which also will likely drive growth for years to come (Bylund, 2018). Netflix’s focus on content is not one where quality is compromised by quantity. The billions of dollars that are invested towards content-production are largely spent on attracting industry-best directors, writers and actors whom are given a tremendous amount of autonomy, enabling them to do their jobs well. As a result, Netflix’s content portfolio received a leading 112 nominations at the 2018 Emmy Awards (Bylund, 2018). This strategy has led them to become a high-quality entertainment platform, where exclusive content keeps subscribers coming back for more.

The third most noteworthy component of Netflix’s competitive strategy is that of the user experience, which the company has prioritized (Sonenshine,2018). The interface is simple and consistent across all devices; it is easy to navigate, and Netflix doesn’t try to blend advertising content into its streams like Hulu or Amazon who try to steer viewers towards downloads not included in their service (Bylund, 2018). Netflix has realized that additional advertising revenue ultimately isn’t worth the detraction that results from viewer dissatisfaction; anything that takes away from viewers’ focus on content is removed from the platform (Bylund, 2018).

Global Strategy :

Netflix is very much a global enterprise. As of 2017, it had operations in over 190 countries, and more than half of its 130 million subscribers lived outside of the US (Netflix, 2018). In Q2 2018, international streaming revenues for the company exceeded domestic revenues for the first time, a fact that is impressive given how rapidly they expanded internationally (Brennan, 2018). Netflix’s global strategy is unique in that it must secure content deals on a regional basis. The company faces many regulatory restrictions, and customers in new markets often prefer local-language tailored content. Furthermore, many subscribers in new geographic areas are accustomed to free content and hesitate to pay for streaming services (Brennan, 2018). Netflix’s global strategy is important in that there already exists strong competition in many foreign countries, where leaders offer localized content that mitigates any opportunity for a first-mover advantage.

Growth Strategies :

Netflix recently missed its global subscriber targets by over a million and added the same number of subscribers that they did in the same quarter last year; this indicates that they are nearing the saturation point for subscriber growth (Southern, 2018). It is therefore evident that Netflix must implement a new strategic approach where they are not as susceptible to fluctuations inherent to this saturated industry. To continue growing, Netflix has several options to consider:

1. Continue focusing on original content development, allocating less and less funding towards licensing content

2. Maintain presence in current markets, domestically and internationally, focusing only on customer retention and competitive customer acquisition

3. Focus on international markets to continue growing

4. Diversify the current platform to include different types of content, becoming a more

Q.6 What international business strategy would you have recommended them to use in 2010 and now? Why? Explain.

ANSWER-

I think the 2010 strategy was the best for Netflix.

NOW ( IN PRESENT )

Strategic Recommendations

Netflix is currently in the business of buying and making content. While they have experienced tremendous success with this business model, they are fighting a battle over content acquisition and creation that is only becoming more competitive and expensive as new entrants appear. Furthermore, many of their competitors, such as Amazon and Disney, have deeper pockets and more resources. To best leverage their existing position, I recommend Netflix take several actions, each of which are proposed in consideration of the following key decision criteria:

a. I recommend that Netflix consider a strategy akin to YouTube, adding capabilities to their existing platform that allow third party content providers to sell directly to subscribers, but with prices controlled by Netflix.

b. This is both feasible and attractive when one considers Netflix’s primary strengths: they possess an impressive and virtually unparalleled infrastructure for content creation and delivery, tremendous brand name recognition, an unrivaled subscriber base, and are attractive for many third parties (Hagiu, 2018). These parties are not limited to video content providers, as the platform also appeals to marketers and game developers.

c. Allowing third parties to sell products within the service but outside of the subscription, Netflix could add a substantial revenue source to their business that fulfills the growing needs of their subscriber base.

d. Expanding their offering to become a more holistic destination for online entertainment, Netflix can tap into an entirely different growth dimension; this is competitively necessary.

e. This added breadth to their offerings can augment customer retention, as Netflix can become a one-stop-shop for online content. This aligns with the key decision criteria, enabling many more content creators to reach global audiences, and making Netflix’s platform a more holistic entertainment destination.