Question

Netflix Complete a SWOT analysis from a global perspective, if applicable, using the SWOT analysis worksheet. Complete a 2- to 3-page summary of your findings addressing the questions in the Analysis section of the worksheet.   

Answer 1

SWOT analysis of Netflix

Netflix’s Resource Strengths and Competitive Assets.

• Competitive capabilities and strengths of Netflix's tools.
• Netflix is now the world's leading video movie service and is a rising user base. Netflix is the first boss in the online DVD rental industry.
• This strategy appears to work and provides acceptable strategic and financial performance.
• A increasing brand name recognition and market power — Netflix and its service raise customer awareness and draw more subscribers and free trials.
• The proprietary program for film recommendations makes the identification and collection of films that customers want easy and convenient (due to over 3 billion customer film raters) and simplifies considerably the task of ordering their next film round.
• 120,000 titles (more constantly added) to choose from.
• The ability to play films to viewers on a range of Netflix-compatible devices, such as Blu-ray players that can use Netflix, an the number of Netflix-ready, TiVo DVR, Nintendo's Wii, Microsoft's Xbox 360 and Sony's PlayStation 3 and special Netflix players made by Roku and many other electronics manufacturers. The Netflix DVR is available to users.
• Fifty regional distribution centres, 50 shipping points which allowed 95% of US subscribers to be supplied for one business day.
• New subscribers are becoming more and more expensive.
• Cash flows from growing operations, increasing profitability and the balance sheet.
• Reed Hastings, an apparently able top managing team, manages growing companies and has managed Netflix as a market leader. He's done a very good job.

Netflix’s Resource Weaknesses and Competitive Liabilities

• The service of Netflix is not attractive to households which rent movie DVDs from time to time; it only appeals to those who want to watch movies at home regularly and find the monthly fee a nice deal.
• Netflix has minimal resources and comparatively little income (2009 just $116 million), making it susceptible for film studios' likely-to-build bargaining leverage to draw higher rates from Netflix in return for granting Netflix rights to download titles from their film libraries.
• Subscriber cancellations are substantial and rising — from 3,1 m in 2006 to 4,2 m in 2008 to 4,9 m in 2008 to 6,4 m in 2009; Netflix needs to draw millions of new subscribers every year to expand its subscriber base.
• Although the brand awareness is definitely improving, Netflix is still not the same as Blockbuster as a household name.
• Netflix has no retail presence, but this weakness has become less significant because the brick & mortar segment are vulnerable to the VOD / streaming of films (in which Netflix holds a strong position). The DVD-rental sector is currently the biggest but shrinking retailer.
• The organization does not have a presence outside the US geographically.

Netflix’s External Market Opportunities

• Conduct the digital delivery of rented films
• Millions of new subscribers are attracted - Online film rental is still in the the stages of the industrial life cycle (as shown by the increase in Netflix' new subscribers)
• Expansion to foreign markets (whereas foreign expansion to mail delivering segments involves a significantly lower cost barrier for entry into the Internet supply channel for adding distribution center capacity and for adding DVD inventory)

External Threats to Netflix’s Future Profitability

• Film studios are increasingly able to negotiate with Netflix in exchange for granting Netflix the right to play and/or to buy DVDs for lease.
• The price of movie DVDs is lower for movie studios and DVD stores, and it's more convenient for some customers to buy movie DVDs than to lease them.
• Movie rental rivals that have name recognition, market strength, and money to get their subscribers away from Netflix in the new VOD and digital distribution segment.
• Consumers, for any of several reasons, become less interested in watching movies at home