The intensity of competitive rivalry in the online streaming industry has grown stronger in recent years. A s olid competitive strategy should be built on a deeper understanding of the evolution of systems; not only in the streaming category but at the intersection of entertainment, tech, distribution, policy, and consumer culture. The platform offers a vast set of originals, including movies and TV shows, top-rated among millennial users. Being a competitor in the corporate world requires constant monitoring of your situation and the events that are taking place around you. Moreover, people have grown used to digital lifestyles and using digital channels to obtain products and services. Moreover, there is also the increase of streaming services because of such companies as Disney, CBS, HBO, Amazon and others that mainly offer their own movies and shows (Heritage, 2019). This is the case of Sling TV, a successful blend of cable TV (with “lean” packages) and a streaming network. It is serving an audience of around 195 million from 190 countries. Profits may decline, which will require managers in the industry to have theoretical knowledge, analytical skills, and good decision-making abilities. ?Harvard Business Review, Vol. Content costs are fixed costs, and an enormous audience size guarantees enormous returns. In 2019, the company spent around $1.7 billion on research and development compared to $1.2 billion in 2018. For example, all users do not access all kinds of content on the platform during a month. During the pandemic, while the sales of the entry-level smartphones were severely hurt, premium brands experienced impressive sales. Apart from this, new firms can affect the access to resources for the firms that have already been long established in the industry. Focus on innovation has helped the firm build a source of sustainable competitive advantage. However, the company has selected to reinvest most of its revenues and profits back into creating more original content and building a competitive advantage that does not erode easily with time. While Michael Porter’s vision used to help managers understand their competitive landscape in the 1980s and 1990s, nowadays companies can build their strategies in a much more complex way. The company has continued to improve its platform through higher focus and investment in research and development. In the midst of the great transformations that are taking place in countless markets, some key sectors can end up being consolidated to the point of becoming monopolies, which leads to reduced competition and the loss of incentives for innovation commonly brought by healthy competition between companies. Achetez et téléchargez ebook How NETFLIX Built Its Sustainable Competitive Advantage? All these strategies make them different from their competitors and help them increase their revenues and market share each year. While Netflix has already accumulated a vast library of great quality content, it has also continued to improve the user experienced through the use of algorithms. The resources and capabilities of a company are its drivers of competitive advantage. Its popularity surged faster during the pandemic when people stayed indoors following lockdowns in several leading markets, and Netflix was their main source of entertainment. It offers Netflix a strong competitive advantage in the global market. It can be observed that the use of typologies, such as Porter’s, reduces the wide range of combinations that a manager would have to consider. Still, several more laws address data collection practices in specific areas like the Children’s Online Privacy Protection Act, The Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act. Original content draws subscribers in larger numbers and increases profitability. The global online streaming platform added 10 million members during the second quarter of 2020. While there are more brands in the market, that are serving the entertainment needs of millennial users, Netflix has proved itself more dynamic and customer oriented in terms of understanding their expectations. Netflix has invested a lot in the content on the platform. Its EPS (diluted) rose to $4.13 in 2019 from $2.68 in 2018. bennymarty - stock.adobe.comNetflix HQ in Los Gatos, California Given its current status as an established unicorn, the origins of Netflix now seem somewhat quaint. Produce, acquire and license Netflix’s original content to expand its video library. Apart from creating its own content, Netflix also buys content from other suppliers. Achieving economies of scale and growing their profitability becomes difficult for new players trying to enter the industry because of the several major expenses involved. In this work, he emphasizes the importance of the industry as a whole – that is, the external environment – in choosing the company’s strategy. Several of its competitors have offered more competitive plans and pricing to grow their sales. Its penetration of markets across Europe, Latin America, and in the Asia Pacific region has also grown stronger. First, it strives to reduce its production and sales costs maintaining high quality. 8. pages. So, the pandemic has affected industries, regions, and classes of people to varying degrees. Netflix enjoys stronger publicity and word of mouth driven by stronger brand equity. Overall, in the longer term, Netflix will be less vulnerable to competitive pressure and to pricing changes or competitive marketing by its rivals. Its popularity overseas has grown driven by several factors including the quality of its content, differentiated and superior viewing experience, and an improved user interface. The global expansion of the brand has also helped it overcome the competitive pressure from the rival brands. 16. More people were buying online since prolonged lockdowns forced them to remain indoors while restaurants, pubs, and cinema halls stayed closed. This fusion may be one of the paths for the future of the media industry, and managers and future managers need to look closely at it. There are few rivals in the market streaming globally. One Federal law with broad jurisdiction in this area is the FTC Act. The level of resonance that Netflix gained among its users will be difficult for its rivals to imitate. Sociocultural factors are also a key consideration in the area of international business, and firms that operate globally have to consider the impact of these factors on sales and profitability. With time, as it continues to add more good quality and original content, the brand equity of Netflix keeps growing stronger. When the core competency arising from a combination of resources and capabilities satisfies the four requirements, the competitive advantage thus generated will be sustainable. In order to do this, it applies three competitive strategies mentioned in the book. Till now, the company has been reinvesting most of its revenue and profits in its content which has been adding to its operating expenses. The company also invests in renewable energy projects in several of the US states. The leading competitors of Netflix are Amazon Prime, Hulu, YouTube, and Disney Hotstar. Develop its pricing strategy and subscription model to ensure affordability and new customer acquisition. It also shows that Netflix enjoys the highest popularity of all the players in the online streaming industry. While good quality content is essential to attract a large audience, the entire user experience matters. However, to drive user retention and engagement level high, the company has to focus on continuous innovation to have the best-in-class experience. Its subscriber base in the US grew fast last year, rising from 95 million in December 2018. VRIO is an acronym for Valuable, Rare, Inimitable, and Organized. Share. It has positioned itself as a modern brand that aims to fulfill the entertainment needs of millennial users. During the pandemic, the number of subscribers of Netflix grew sharply. From around 4% in 2016, the company’s operating margins grew to 13% in 2019 and can rise to 16% in 2020. Its investment has successfully drawn subscribers. In any case, the knowledge of Porter’s strategies – as well as the criticisms and adjustments to his works is essential for managers to be able to improve their performance. Its recommendation system is the best of all the streaming content providers and has helped the company grow its user retention. How Competitive Forces Shape Strategy. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers. Apart from its services’ competitive pricing, Amazon has also added a large number of original videos to its collection that makes it stand out, including several shows in local languages targeted at its ever-growing audience in the emerging markets. Netflix's Business Model and Strategy in Renting Movies and TV Episodes Netflix has a simple strategy, but it works. From the case it is obvious that Netflix has been growing continually year upon year. Its profitability is expected to grow faster in the future. The company’s key reason for creating its own content is that it will eventually help it lower its content costs in the longer term. This video presentes Porter’s 5 Forces, described in the book “Competitive Strategy”, by Prof. Michael Porter. 137-145. The company has a heavy debt load and if in the future its subscription growth rate falls, the company would need to diversify its business in order to service its debt. This audience is highly diverse, and from France to India and the US, Netflix has to worry about the taste of people from all regions and cultures. Netflix attracts new subscribers in larger numbers compared to the other providers of online streaming content. However, legal challenges still exist and some of Netflix shows came under fire because of their content. The main reason was that while the pandemic had a really strong impact on the lower end of the market, it had a relatively lower or no impact on the higher end which was evident from the sales of premium smartphones. Them grow their competitive advantage stronger platform on the environment, they may still take time... 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