MBA-FPX5006_RockholdAmy_Assessment2-Attempt2

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1 Netflix’s Business Strategy Amy Rockhold MBA-FPX5006: Business Strategy Professor Brewer September 23, 2023

2 Table of Contents Introduction ................................................................................................................................................. 3 Netflix Generic Business Strategy ................................................................................................................ 3 Netflix Business Strategy ............................................................................................................................. 3 Netflix Business Model ................................................................................................................................ 4 Netflix Corporate Strategy ........................................................................................................................... 4 Netflix Corporate Structure and Management Systems .............................................................................. 5 Netflix Strategic Fit ...................................................................................................................................... 5 Conclusion ................................................................................................................................................... 5 References ................................................................................................................................................... 6

3 Introduction Netflix, Inc. (Netflix) is a media entertainment company primarily known for its worldwide subscription streaming services. Netflix offers various content, such as movies, documentaries, and television series in multiple genres (horror, comedy, thriller, sci-fi, romance, etc.) (Netflix, Inc., 2022). Strategic planning analyses have been prepared and examined in prior reporting, and this document will continue with further analysis of Netflix’s business strategy. The relationship between the company’s business model and the execution of its strategy will be evaluated, as well as the corporate structure and critical management systems. The “big picture” corporate strategy and supporting business strategy will be outlined to assess its strategic fit. Netflix Generic Business Strategy Michael Porter has written several well-known books about competitive advantage and business strategy. He developed two generic business strategies that Netflix uses – the focused cost leadership strategy and the focused differentiation strategy. Cost leadership is the primary generic business strategy Netflix uses despite not being the lowest-cost streaming platform on the market. Unlike many streaming service providers, Netflix has a global reach and acquires more subscribers internationally than competitors. Netflix keeps costs low by keeping most of its processes and production logistics in-house. Netflix also produces original content, keeping that process in-house as much as possible, from talent acquisition to production, which saves the company money and helps maintain its competitive advantage. While Netflix is not the lowest- priced streaming service, it is differentiated by the original content it creates and offers to all subscribers, regardless of their subscription pricing level. Netflix’s differentiation strategy focuses on its original content; without original content, Netflix would not be able to maintain a competitive advantage due to its lack of other unique content offerings. Netflix Business Strategy Netflix uses a customer-centric business strategy that focuses on creating a unique customer experience while retaining the company’s competitive advantage. According to the company’s website, Netflix is passionate about connecting people with stories from around the world. To meet that goal, it devotes many resources to acquiring and creating content that users will truly enjoy and find value in a unique and diverse content library (Netflix, 2023). Netflix’s Value Chain Analysis showed that its operations revolve around customer experience. The company must profit, and it has processes focused on that, but many of the processes center around creating content that allows for a unique experience for every viewer. Netflix uses personalization intelligence software to gather data about subscribers’ preferences and plan use to make viewers feel like they are being offered customized movies and shows. The company uses its unique customer-focused outlook to gain subscribers worldwide. It is working on expanding content for people of all cultures and languages, which will enhance its market presence and reach. Since Netflix does not offer live television options, and many broadcasting networks have teamed up with other streaming service providers to allow access to broadcast television shows/series, Netflix had to find a way to keep itself at an advantage over other streaming services. Netflix creates original content that appeals to subscribers and keeps them tuning in to Netflix’s original offerings. The company also uses algorithms to analyze historical

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4 data to assess how well the current personalization algorithms fit previous customer engagement (Souza & Romero, 2021). Netflix Business Model A company’s business model is its roadmap to forming and maintaining a thriving organization that can withstand economic, social, and political changes. Netflix uses a hybrid business model due to its operations involving its core products, which are on-demand video streaming and original content production (Moore, 2019). Netflix has a subscription-based business model that also focuses on cutting out the middleman, as well as platform (cloud services) and pipeline (production of content) models (Moore, 2019). Every service Netflix offers is subscription- based, which is its primary revenue source. Even the mail-based DVD rental option, which is being phased out due to people no longer using those viewing devices, requires a subscription. In-house production of its original content allows Netflix to cut out the middleman, which cuts down on costs and potential legal issues related to third-party contracts. Netflix’s customer value proposition, or the products and services that keep customers coming to and staying with it, is based on all the things that come to mind when thinking about Netflix – 24-hour streaming access, binge-watching shows, original content, the availability to watch on any internet enabled device, personalized suggestions, and the ability to create a unique profile for all household members. Both Netflix’s business strategy and business model are built around customer- centricity, which means its model and strategy are in line, and one supports the other effectively. Netflix Corporate Strategy Corporate strategy is made up of the decisions leadership makes and the goal-oriented actions the business will take to maintain competitive advantage in several industries and markets (Rothaermel, 2020). Netflix’s corporate strategy is centered around people and aims to make customers’ experiences as unique and fulfilling as possible. When Netflix was founded by American entrepreneurs Marc Randolph and Reed Hastings, its e-model was designed to disrupt the video rental industry (Fleischman et al., 2021). The company started a mail-order DVD rental service to begin working on that goal. Time and technological advances have pushed Netflix through several changes during its 25+ years in business. The company has changed from DVD mail rentals to Blu-ray rentals to streaming services. Netflix has changed and expanded its way of providing entertainment to its customers but has not lost its focus on customer satisfaction. Geographically, Netflix is trying to expand operations in as many countries and locations as possible with the goal of having operations all over the world. To achieve this goal, the company is creating content in several languages to appeal to more audiences who do not speak English, Spanish, or other “popular” languages. Netflix’s vertical operations are focused on keeping production and original content creation in-house as much as possible. The company strives to keep original content as its primary source of customer appeal. As mentioned before, Netflix does not stream content from popular television networks, so the original content it creates is a large part of its originality and the unique offerings that are only available on Netflix.

5 Netflix Corporate Structure and Management Systems Netflix’s corporate structure is a hierarchical structure that is comprised of top-down management that is modified to allow flexibility to all business lines due to the constantly changing environment of online entertainment. Netflix’s mission is to entertain the world, meaning it must employ a diverse workforce from many backgrounds and cultures. Netflix’s careers website states it looks to create a dream team of employees who can display the values the company looks for; some of those qualities are sound judgment, excellent communication, passion, integrity, and so on (Netflix, N.D.). Netflix’s key management systems comprise several core departments: executive leadership, the legal department, talent (employees), finance, product, and content production and communication (Anderson, 2019). Vertical integration is part of the company’s structure, as they source talent for original content and keep the production of original content in-house as much as possible. A technology-based company like Netflix must remain constantly aware, proactive, and reactive to technological changes related to all aspects of electronic entertainment streaming. The company has global alliances with large technology companies such as Sony, LG, and Samsung, which work with Netflix to keep moving streaming technology forward to give subscribers the best viewing experience. Netflix Strategic Fit From DVD rentals to streaming over the internet on a multitude of device options, Netflix has remained successful in its industry for over 25 years. This is largely due to the strategic fit between the business and corporate strategies of the company. The business and corporate strategies are centered around the heart of the company’s success – people. The business strategy has the customers in mind because it focuses on technology and original content that keeps existing subscribers and attracts new ones. The corporate strategy is based on all the necessary operations and processes that keep the business running and moving forward in the technology and electronic entertainment industry. It also focuses on its employees and allows them the freedom of creativity and innovation to keep the company at the top of its game. The executive management recognizes that the diversity of its employees enables it to provide unique and exciting entertainment options to almost the entire world. Conclusion Netflix has been in the electronic entertainment industry for more than 25 years. Netflix runs its business very well by focusing on the strategies that will keep a company successful in a constantly changing and evolving industry. Using generic strategies focused on cost leadership and focused differentiation, the company has recognized the need for its unique offerings, which it provides in original content. Knowing that people are the center of its success, Netflix has a customer-centric business strategy and is passionate about connecting people and stories from all over the world. Its business model focuses on saving money by cutting out the middleman by producing original content in-house, while the corporate strategy focuses on the company’s goals. Netflix’s top-down corporate management structure is set up to keep moving the company forward technologically, globally, and in as many ways as necessary to move forward with ever-changing times.

6 References Anderson, D. (2019, November 10). Netflix Inc.’s Organizational Structure & Its Strategic Implications . Rancord Society. https://www.rancord.org/netflix-organizational-structure- design-organizational-chart-characteristics Fleischman, B., Ondracek, J., Saeed, M., & Bertsch, A. (2021). Netflix: Strategizing Corporate Resources and Capabilities: A Quarterly Peer Reviewed Multi-Disciplinary International Journal . Splint International Journal of Professionals, 8(4), 363-375. http://library.capella.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly- journals%2Fnetflix-strategizing-corporate-resources%2Fdocview%2F2728523647%2Fse- 2%3Faccountid%3D27965 Moore, A. (2019, November 10). Netflix’s generic strategy, Business Model & Intensive Growth Strategies . Rancord Society. https://www.rancord.org/netflix-business-model-generic- strategy-intensive-growth-strategies-competitive-advantage Netflix. (2023). Marketing & Growth . Netflix Research. https://research.netflix.com/business- area/marketing-and-growth Netflix. (n.d.). Netflix Culture — Seeking Excellence . Netflix jobs. https://jobs.netflix.com/culture Porter, M. E. (1996, December). What is Strategy? Harvard Business Review (pp.61-78). Retrieved July 17, 2023 Rothaermel, F. (2020). Strategic Management (5th ed.) (pp.192–207, pp. 280–283). McGraw-Hill Higher Education (US). https://bookshelf.vitalsource.com/books/9781264103713 Souza, I., & Romero, F. (2021). Strategic Innovation Management at Netflix: A Case Study . Academic Conferences International Limited. https://doi.org/10.34190/EIE.21.206

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