Netflix’s SWOT Analysis and Competitive Strategy

Posted: August 25th, 2021

Netflix’s SWOT Analysis and Competitive Strategy

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Netflix’s SWOT Analysis and Competitive Strategy

            Netflix faces a stiff competition from movie rental and streaming companies which are competing to win over the same customers. Over the years, Netflix has been on the path of transformation from a purely DVD-rental firm to an online streaming service provider. Even asit has differentiated its products by offering easy accessibility, one-month free subscription, and eight unlimited subscription plans, cutthroat competition is still an imminent threat. The fluid market has provided the customers with multiple movie-watching providerssuch as Red Box, Blockbuster, Amazon, and HBO, just to mention a few. Formulating a strategy to stay ahead of the competition is in the best interests of Netflix. Doing so requires a comprehensive understanding of the company’s current strategy.

SWOT Analysis

            Conducting a strengths, weaknesses, opportunities, and threats(SWOT) analysis is the best way to identify what Netflix does best and in which areas it needsto improve. Furthermore, this tool will throw light onthe opportunities the firm has and threats it is faced with.

Strengths

            Netflix taps into outstanding personalization technology. The algorithm it uses to recommend films and shows to individual subscribers is unparalleled. It gathers data and leads that help it figure out a user’s preferences (Burgess, 2018). This technological advantage offersits subscribers convenience as they do not have to conduct an intensive search to find their favorite films. Netflix also enjoys the first-mover advantage as it was the first company to venture into the online movie streaming market segment. In addition, the provider has established itself as a renowned brand in North America and beyond. This easily recognizable branding gives Netflix a competitive edge over its rivals. Lastly, the fact that Netflix continues to invest in original content has lured many loyal customers into its fold (Spangler, 2019).

Weaknesses

            Firstly, customer resistance to raise in subscription prices is one of Netflix’s major weaknesses. The video streaming company has built its reputation on a foundation of low subscription fees. Therefore, attempts to raise prices have met a hostile clientele (Snider, 2019). Secondly, although Netflix’s original content has helped it rise above HBO, Amazon, and Hulu, it has proved costly. Efforts to expand to international markets have been slow thanks to increasing licensing prices and new taxes. Thirdly, the subscription sharing feature creates a pathway for users to use Netflix’s services without paying. Finally, the firm loses out with regards to important screen time as it has to wait before screening content. Some of the in-house films and series take years to create. The fact that its competitors can air films days after premiering makes Netflix quite irrelevant.

Threats

            Rapid technological advancements pose a threat to Netflix as competitors and pirates can replicate its content. Legal restrictions and programming requirements also threaten Netflix’s business model. For instance, the European Union (EU) demands that streaming services in the region should produce at least 30% of the local content (Market Mad House, 2019). Future policies may require the firm to add educational programs, children’s content, and news, all of which cost a lot of money. Lastly, stiff competition from rival streaming companies continues to threaten Netflix. Hulu, Amazon, and other smaller subscriptions services are all battling to take a share of its customer base.

Opportunities

            Technological advancements present Netflix with an opportunity to grow. Improvements in technology enable Netflix to accommodate more subscribers. Moreover, illegal streaming is more challenging thanks to better technologies. In the long run, frustrated users are likely touselegitimate Netflix subscriptions. In addition, streaming continues to interest various players in the filmmaking industry. For instance, Netflix established strong ties with Disney and it enabled the former to stream the latter’s content (Whitten, 2019). What is more, streaming is the current trend. Television and cable services are slowly getting out of fashion. Young film fanatics who would love to enjoy more viewing privileges have to join the streaming wave.

Available Competitive Strategies

            Having understood the current situation, Netflix can adapt to counter the forces of competition.

Recommendation 1

            A generic competitive strategyis that Netflix can incorporate ratings to films. Mr. Hastings should know that having shut down its user review platform in 2018, film fanatics are spoilt for choice. They hesitate to watch particular movies solely based on the appearance of their title screens. While availing a wide range of films is a good strategy for Netflix, it is not likely to work if the subscribers are not guided by film ratings and reviews. Collaborating with Rotten Tomatoes and IMDb that provide ratings to avail film ratings can convince many targeted customers to subscribe to Netflix’s platforms for top-rated original movies.

Recommendation 2

            While Netflix has done a commendable job in availing entertaining shows and films to the people across the world, it is yet to customize its content to suit the diverse regions. Since every region wants to consume content that is skewed towards their culture, language, and ethnicity, tapping into new geographic regions should be the number one strategy that Mr. Hastings should implement. Partnering with local providers to create films that resonate with different locations is the best way for Netflix to gain more subscribers and outshine its competitors. This strategy is likely to build a sense of pride around Netflix as a brand in the international market andnot just North America. Besides, the in-home entertainment industry is ripe for harvesting in every corner of the earth. Creating custom movies that showcase what different people would love to watch is the best competitive approach for Netflix.

References

Burgess, M. (2018, August 18). This is how Netflix’s secret recommendation system works. Wired. Retrieved June 18, 2019, from https://www.wired.co.uk/article/netflix-data-personalisation-watching

Market Mad House. (2019, January 30). Threats to Netflix (NFLX). Medium. Retrieved June 18, 2019, from https://medium.com/datadriveninvestor/threats-to-netflix-nflx-7095cff45ec7

Snider, M. (2019, January 17). Netflix price increases could cause some subscribers to downgrade, cancel streaming service. USA Today. Retrieved June 18, 2019, from https://www.usatoday.com/story/tech/talkingtech/2019/01/17/netflix-price-increase-may-lead-subscribers-downgrade-cancel/2602458002/

Spangler, T. (2019, February 21). Netflix original content outscores HBO, Hulu, Amazon on customer-satisfaction survey. Variety. Retrieved June 18, 2019, from https://variety.com/2019/digital/news/netflix-original-content-consumer-survey-ratings-acsi-1203144795/

Whitten, S. (2019, February 8). Disney expects to take a $150 million hit as it cuts ties with Netflix – and that’s OK. CNBC. Retrieved June 18, 2019, from https://www.cnbc.com/2019/02/05/disney-expects-to-take-a-150-million-hit-as-it-cuts-ties-with-netflix.html