SWOT Analysis Of Netflixs Cmpany

Strengths

Beginning with strengths, Netflixs’ first biggest strength is their first mover advantage. They have set themselves apart as an industry leader in streaming entertainment services. By being the first significantly competitive company to provide streaming movie services, they have significantly leveraged their first mover advantage in this market segment.

Next would be the implementation of Optimize Content Suggestion. By optimizing the system for making recommendations to the consumer, Netflix has grown their library viewership up to 85% of the titles per quarter. This increase in title rental provides greater value of their library and could be perceived as a value added benefit by the consumer, giving the company a competitive advantage.

A third strength of theirs is their Revenue Sharing Agreement, Netflix made agreements with certain content providers that allowed them to participate in profit sharing or for Netflix to pay-per usage for content. This allowed Netflix to keep a lower overhead on content, providing more financial stability and flexibility.

Last strength and more recent would be Netflix-Ready Devices. Netflix has been very successful in arranging deals with device manufactures to ensure their devices will have an integrated Netflix app. Many device manufactures will now even include Netflix buttons on their device remote that automatically launches Netflix on the device. Not only does this provide ease-of-use to the consumer but, it also reinforces branding efforts since manufactures place the Netflix logo on the button.

Weaknesses

Bargaining Power of Suppliers – Since most popular films that consumers would consider valuable are produced by only a handful of larger studios, there is little competition among large suppliers. This lack of competition stifles competitive pricing and increases supplier’s control of licensing agreements and associated costs. There is also uncertainty in content cost because content suppliers can extort millions in contract renegotiations and extensions. One example of this is, in 2011 Starz increased their renewal from $30m to $300m. An increase in cost of this magnitude could have serious effects to overhead and the company’s bottom line.

Management Missteps have been one weakness netflix sees. Poor public relations and communications with consumers concerning price and company restructuring has carried a negative sentiment with their consumers. Not only did Netflix lose customers from this situation but they also experience a sharp decline in stock values demonstrating a lack of faith in the management decisions that led to a loss in the customer base. Netflix uses Amazon AWS cloud computing services to store content and stream content to customers. With Amazon entering the Pay-Per-View and Streaming Video market, the growing competition between Netflix and Amazon could create a conflict of interest concerning a core function of their business. Amazon prime has been a huge threat for netflix, especially with streamers now like HBO GO which if users pay for hbo already they can have access anywhere on the “go”.

Opportunities

Opportunities for Netflix could be in Increasing Infrastructure Capacity. Many ISPs such as Time Warner have committed to lowering prices on current bandwidth packages and have announced that they will provide new competitively priced Internet packages. This is most-likely a response to Google announcing their Google Fiber service that will provide Gigabit Internet connections to consumers in select geographic locations. With the Global Internet traffic expected to increase at such a high rate, increasing ISP’s capacity is vital for supporting the customer demand for Internet services such as streaming video content.

Growth in Mobile Internet Segment with mobile data traffic expected to grow, expect an increasing number of users to access streaming video content through mobile devices. With this growth, companies should anticipate an increasing number of mobile device models to become available. There is always the opportunity for International Growth. While the United States is the primary geographic market segment for Netflix, the U. S. is not have the top broadband speed according to Ookla searches. With high-speed Internet access readily available in many countries, international expansion is an attractive strategy for streaming content providers such as Netflix.

Lastly there is the opportunity for growth of Independent Studios. With the growth of independent film studios, streaming content providers such as Netfix can deal directly with the smaller studio to make exclusive content. By avoiding the major motion picture company streaming content providers have better negotiating power, decreasing the bargaining power of supplier and reducing overhead.

Threats

Netflix will always have the threat of Rising Competition. New players in the market such as Amazon, Hulu, Apple TV, and streamer apps like HBO GO has created more competition for Netflix. This will drive price competition and could significantly impact profit margins. Also, since the FCC has chosen not to expand Net Neutrality regulations, ISPs are free to charge certain content providers such as Netflix a toll or fee to stream content to their customers. This fee is justified by the ISP because they claim that services such as Netflix create extreme demands on the ISP servers & infrastructure. And lastly, the increase in internet fraud. With online fraud on the rise, some customers may be reluctant to provide their sensitive payment and personal information on content provider websites due to scammers fraud and how easily it can happen.