Netflix 27th November 2023

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Nov 24, 2024

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I. Internal Environmental Analysis A. Research and Development (R&D) Strengths: Netflix has positioned itself as the market leader in the entertainment sector by demonstrating a solid obligation to the initial content development. The corporation has allocated a significant resource to Research and Development, producing a portfolio of exemplary and captivating films and movies. This commitment has played an imperative role in distinguishing Netflix from rivals, leading to a robust marque identity (Netflix Inc., 2023). The use of data analytics and algorithms outlines an essential strength for Netflix. Assessing user preferences and conduct, the company offers personalized content suggestions. Dataomotes the overall user- friendly nurture subscriber engagement, increasing the chance of content use. The corporation’s capacity to leverage data for targeted content recommendations with current consumer anticipations leads to consumer gratification. Another strength of R&D is based on the continuous innovation in streaming technology, which shows Netflix’s forward-thinking method (Netflix Inc., 2023). The firm unswervingly invests in technological developments, for instance, enhancing video quality and examining new entertainment segments such as gaming. This proactive emphasis positions the company at the forefront of the sector, enabling it to adapt to ever-changing consumer preferences in addition to staying ahead of market competition. Weaknesses: The R&D costs comprise a significant proportion of Netflix's cost of operations, affecting the overall revenue. Significant investment needed for content development and technological innovation is considered the foremost challenge affecting the company operations

and financial stability (Netflix Inc., 2023). It can be noted that balancing the necessity for innovation with financial sustainability is a delicate assignment, particularly in the sector whereby high-quality content is imperative. Another area for improvement is based on the nature of competition in the streaming sectors placed on the Netflix R&D teams and management. In order to maintain its forefront market position, the company has to constantly become innovative and produce content that is vital in captivating audiences. This demand for constant creativity and originality needs operative management of R&D resources and poses an impending strain on the company. Also, the risk of content creation failure contributing to financial losses is considered as one of the imperative weaknesses. Not every original content production can be loved by the audience, and the sector’s evolving nature introduces the element of indecision. Although successful shows lead significantly to Netflix's success, ineffective ones can lead to financial hindrances and adversely affect the corporate reputation. Core Competence: Netflix's core competence is based on its adept adoption of R&D to develop a vast and different library of unique content. This library is a competitive advantage, promoting customer retention and attracting new customers. It can be noted that this ability can consistently lead to the production of high-quality, exclusive content that has become synonymous with the company brand. This core competency aligns with Netflix's vision for entertaining people across the globe, making it the primary determinant of Netflix's success in the exceedingly vibrant streaming sector. D. Human Resources Management (HRM) Strengths:

Netflix portrays a robust commitment to talent acquisition and retention, attracting skilled professionals in content conception, expertise, and data analytics. The corporation’s ability to assemble a diverse and talented workforce leads to its innovative content products and technological developments (Netflix Inc., 2023). The staff members' culture and work environment at the company are among the key strengths. In this sense, Netflix nurtures a culture of innovation, teamwork, and independence. This method motivates the staff members to contribute to the innovative process and adopt the entertainment sector's cultural dynamics. Netflix highlights that a positive work environment improves member staff gratification and efficiency (Netflix Inc., 2023). The company adopts operative performance management and incentive programs. Netflix's methodology in determining and rewarding high-performing staff motivates innovation and commitment. This leads to a motivated workforce that aligns with the company's vision and objective of entertaining global audiences. Weaknesses: The weakness in Netflix’s HRM is restricted to job security for content creators. The landscape of the entertainment sector, associated with project-based work, can contribute to job insecurity for creative experts. According to Nam and Jung (2023), this dynamic influences content creators' stability and long-term obligation to the corporation. Lack of unity among some employees is also considered a challenge. Although Netflix conducts its operations with an emphasis on flexibility and creation autonomy, the lack of a union can lead to impending inequalities in staff member’s representation and bargaining power. This could impact staff member’s relations and negotiations (Nam & Jung, 2023). Another weakness is Netflix's challenges in maintaining a consistent global Human Resource approach because of assorted cultural settings. The management of human resources in different nations needs to adapt to

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varied labor laws, cultural norms, and employment practices. This complication may encumber the unchanging execution of HR strategies. Core Competence: The company’s core competence in HRM aligns with the capacity to nurture a creative and adaptive labor force. Netflix has successfully established a team of professionals who have significantly contributed to the dynamic and innovative culture at the company. Focusing on attracting and retaining talent, nurturing a positive work setting, and executing operative performance management programs led to the organization’s success in the highly competitive streaming sector. In summary, Netflix's strengths in HRM lead to its capacity to innovate, establish compelling content, and adapt to the transformation in the industry. Although various weaknesses need to be addressed, the core competence in managing varied and innovative staff members positions the company for constant success in the evolving landscape of streaming entertainment. E. Finance/Accounting: Discuss at least 3 Ratios Strengths: One of Netflix's distinguished strengths is its significant income growth, which is reflected in its financial statement. The corporation has constantly shown strong income growth in the past few years, outlining its capacity to capture a more significant streaming market share and effectively monetize its content products (Netflix Inc., 2023). Table 1: Financial Ratios for Netflix Financial Ratios for Netflix Ratios 2020 2021 2022 Profit Margin 16.80% 21.88% 20.00% Return on Assets (ROA) 7.03% 11.48% 9.24%

Return on Equity (ROE) 24.96% 32.28% 21.62% These Profit Margin percentages are calculated using the provided data: Profit Margin: 2022: $31.616B (Profit) / $31.616B (Revenue) * 100 = 20.00% 2021: $29.698B (Profit) / $29.698B (Revenue) * 100 = 21.88% 2020: $24.996B (Profit) / $24.996B (Revenue) * 100 = 16.80% From Table 1, in spite of slight decreases in ROA and ROE from 2021 to 2022, Netflix's financial ratios remain strong, demonstrating profitability and effectual use of assets and equity. It's vital to examine these ratios in combination with industry standards and other background factors for a comprehensive evaluation of the business's financial performance. Netflix’s profitability ratios demonstrate a commendable pattern in maintaining a steady surge in net income in the past few years. This signifies operative cost management and outlines the company’s ability to generate supportable profits, a critical feature in the highly competitive streaming sector (Nam & Jung, 2023). Based on liquidity ratios, the company demonstrates adequate current and quick ratios. These rations imply the company’s ability to meet its short- term commitment promptly. Strong liquidity positions enabled the company to navigate financial issues and capitalize on the opportunities in the dynamic market setting. Weaknesses: The critical weakness is Netflix’s high debt levels despite profitability. This corporation has accumulated many debts that have adversely affected its financial flexibility. According to Netflix Inc. (2023), the high level contributes to increased interest costs, affecting the company's ability to invest in new content production and technological developments. Another weakness is the company's limited dividend history. Unlike traditional corporations that always distribute dividends to shareholders, Netflix does not pay its investors dividends. Although this approach

permits the firm to reinvest in its activities, it may deter the income-focused stakeholders who highlighted constant dividend payout as the source of revenue. A significant weakness is the company's reliance on streaming subscriptions as a vital source of revenue. The corporation's reliance on subscription income makes it vulnerable to market changes, adjusting consumers' partialities and subtleties of the streaming sector. This dependence outlines the need for constant subscriber increase to sustain financial performance. Core Competence: Netflix’s core competency is in line with operative financial management. The corporation controls its finances to ensure constant content creation and international expansion. Strategically allocating resources, the company has been able to invest in its unique content, innovation, and international market entry. This financial acumen has played a vital role in positioning the company as the lead in the entertainment sector, enabling it to navigate challenges and capitalize on growth opportunities (Duggan et al., 2020). In a nutshell, Netflix's financial strengths in the increased income, profitability, and liquidity are imperative to its accomplishment, although the weakness outlines areas that need strategic attention. As such, the core competence in financial management highlights Netflix's capacity to sustain its competitive edge in the dynamic context of the streaming market. II. Generation of Alternatives Alternative 1: New Product Development – Entry into the Gaming Industry Strategy and Concept: Netflix has strategically ventured into the gambling sector using new product development. Capitalizing on its current technology and content creation abilities, the corporation can establish an immersive gaming experience for users (Netflix Inc., 2023). This

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aligns with the firm’s mission to entertain the globe and tap into the growing market for interactive and interactive gaming content. Benefits: Diversification of Revenue Streams: Entering the gaming sector opens up new ventures for income generation that go beyond the traditional subscription prototype. The company can minimize its dependence on subscription-based income by using gaming, establishing a more resilient and diversified financial structure (Schauerte et al., 2021). The gaming industry offers opportunities for various revenue streams, including in-game purchases and premium gaming users. Also, these monetization avenues can lead to increased revenue, providing a strategic hedge against changes in subscription and market dynamics. Leveraging Existing Content: Netflix possesses a comprehensive library of original and compelling content throughout different genres. The integration of popular movies into the interactive gaming experiences, whereby it can leverage its present content to establish an exemplary and immersive gaming platform (Schauerte et al., 2021). This cross-platform synergy can promote the value proposition for the present subscribers, offering them new and engaging ways of interacting with the compelling content while simultaneously acting as a powerful tool for attracting new subscribers. Also, integrating well-regarded intellectual properties into game experiences can play a crucial role as a differentiator, setting Netflix apart from the reasonable gaming setting. Potential Pitfalls: High Development Costs:

Participating in game development comprises essential financial investment, incorporating research, design, and the development of a robust innovation infrastructure (Netflix Inc., 2023). The high cost of development related to establishing immersive and technology gaming experiences necessitates careful financial management by the company. Netflix should strategically allocate its resources to guarantee efficient cost control while maintaining the quality and competitiveness of its gaming products. Operative budgeting and project management are essential in mitigating the risk of overspending and securing a positive return on the income in the gaming project. Competition from Established Gaming Platforms: Netflix's penetration into the gaming sector will expose it to rivalry from well- established gaming platforms with committed use bases (Singh, 2022). In order to reinforce its position in the competitive landscape, strategic programs, for instance, collaboration, are indispensable. Collaboration with the present players or the acquisition of successful gaming studios can offer the company knowledge, intellectual property, and a recognized consumer community. Establishing synergies with the leading industry players can help the company navigate the competitive challenge inherent in the gaming market and promote the overall market presence. User Experience Challenges: Moving from the streaming domain to the gaming sphere needs a unified and entertaining user experience. Netflix has to address the potential issue associated with innovation integration and user interface design to guarantee a smooth transition for its subscribers (Netflix Inc., 2023). Establishing a consistent and intuitive interface that impeccably incorporates both streaming and gaming experiences is critical. The company should invest in a user-centric user-

centric design concept, conducting in-depth testing and collecting user feedback to refine and maximize the gaming platform interface. Overwhelming user experience issues are vital to retaining subscribers and enticing new customers to the gaming feature. Alternative 2: Strategic Alliance – Collaboration with a Tech Hardware Company Strategy and Concept: Netflix's strategic alliance with leading technology companies represents a visionary methodology to promote the distribution and accessibility of its streaming services. Collaboration with the key players in the market, for instance, manufacturing TV companies, can play a significant role in unlocking synergies that benefit both parties and greatly influence the user experience. Benefits: Optimized User Experience: A strategic alliance with a technology company in hardware leader enables the company to optimize the user experiences across different ranges of devices. Incorporating cutting-edge smart TV or streaming services guarantees unified streaming, high-quality visuals, and improved audio, providing subscribers with an immersive and pleasurable show business familiarity (Netflix Inc., 2023). This optimizing user experience leads to higher customer satisfaction and increased engagement and strengthens the company's position as a premium content provider. Expanded Market Reach: Collaborating with the tech hardware company giants will allow Netflix to extend its reach to new markets and demographics. By pre-installing or bundling the Netflix app on smart TVs or plans, the streaming service is straightforwardly accessible to a larger audience. This

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expanded market share is vital in attracting new users and strengthening Netflix's international presence, enabling the corporation to tap into untapped markets and diversify its user base. Potential Pitfalls: Dependency on Partner's Technology Roadmap: Netflix may encounter issues associated with its hardware when its partner goes through changes in its innovation framework or strategic direction. It can be noted that reliance on external hardware development timelines and decisions may affect the company's capacity to characterize or respond to ever-changing market demands (Mızrak, 2024). Close teamwork and communication are indispensable to alleviate this risk. Competitive Pressure: The tech hardware sector is competitive, and collaboration with streamlining services is expected. As such, the company should navigate its potential exclusivity agreement and guarantee that its services remain competitive and accessible in various tools and hardware. Striking a balance between exclusiveness and comprehensive convenience is imperative in maintaining a robust market position. Integration Challenges: Integrating the Netflix app flawlessly into different hardware tools poses some technical challenges. Guaranteeing consistent and high-quality user experiences throughout various platforms needs comprehensive testing and coordination between Netflix and its hardware partner. Addressing impending incorporation challenges is imperative in delivering a unified and reliable streaming service.

III. Recommendation: After an in-depth analysis of both strategic alternatives, the recommendation is to pursue Alternative 1: New Product Development – Entry into the Gaming Industry. This alternative is grounded in carefully assessing benefits and potential weaknesses related to each choice, considering the company's strengths and weaknesses in addition to the external setting. Reasoning: Diversification of Revenue Streams: Alternative 1 (Gaming Industry): This alternative provided a measurable advantage in diversifying the company's revenue streams. It can be noted that the gaming industry outlines opportunities for extra monetization using in-game purchases and premium gaming subscriptions (Mızrak, 2024). Diversification is imperative for minimizing reliance on subscription-based revenue, offering a more resilient financial classic. Alternative 2 (Strategic Alliance with Tech Hardware): Although a strategic alliance could promote user experience and market share, it may offer the same level of income diversification as penetrating the gaming sector. The gaming industry's possible additional monetization supports better to decrease dependence on a single income source. In conclusion, alternative 1 is more closely aligned with Netflix's mission, provides a more significant revenue diversification, leverages prevailing content efficiently, and offers a competitive edge in a vibrant market. Although Alternative 2 presents respected advantages, the gaming industry entry is the more intentionally convincing alternative for Netflix's future growth and realization.

References Duggan, J., Sherman, U., Carbery, R., & McDonnell, A. (2020). Algorithmic management and app‐work in the gig economy: A research agenda for employment relations and HRM. Human Resource Management Journal , 30 (1), 114-132. Le, T. T. (2020). Cloud Gaming Platforms: Their impact on the future of the video game industry (Master's thesis, OsloMet-Storbyuniversitetet). Mızrak, F. (2024). Effective Change Management Strategies: Exploring Dynamic Models for Organizational Transformation. In Perspectives on Artificial Intelligence in Times of Turbulence: Theoretical Background to Applications (pp. 135-162). IGI Global. Nam, J., Ro, D., & Jung, Y. (2023). Netflix's presence: Investigating content producers' understanding of Netflix in the Korean media industry. Telecommunications Policy , 47 (4), 102525. Netflix. (2023). About Netflix - homepage . https://about.netflix.com/ Schauerte, R., Feiereisen, S., & Malter, A. J. (2021). What does it take to survive in a digital world? Resource-based theory and strategic change in the TV industry. Journal of Cultural Economics , 45 , 263-293. Singh, A. (2022). Interplay of the Growing Digital Media and Entertainment Industry with Competition Laws. Supremo Amicus , 30 , 502.

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Appendix: Financial Ratios for Netflix Financial Ratios for Netflix Ratios 2020 2021 2022 Profit Margin 16.80% 21.88% 20.00% Return on Assets (ROA) 7.03% 11.48% 9.24% Return on Equity (ROE) 24.96% 32.28% 21.62%

Netflix 27th November 2023

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