Netflix is an American company that started with DVD rentals and transformed into one of the most uses movie databases in the world. Nowadays, it is popular far behind the US border because of several features distinguishing it from similar companies in the market. The company adjusts itself to the needs in the market and analyses political, social, cultural, and economic factors in the decision-making process. Financial records prove that every year, it wins new customers. That is why the deepness of the market understanding and following of the global trends ensure the competitive advantage of Netflix.
Netflix concentrates on the needs of time and cares about the actuality of its services. From the DVD retailing store, it transformed into an online resource renting movies and different kinds of other TV programs to its customers. Besides, the company has expanded from the US market to the international while constantly investing in a variety of improvements. That is why it has a high potential for future growth.
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Government regulation in the retailing sphere is relatively low; thus, the company has specific freedom in decision-making. It can establish conditions of rent and download by itself that became its competitive advantage. Besides, the membership on the website is considered as a form of a supplier agreement. The company either produces its content and sells it or buys licensed products for further retailing. Consequently, from the legal side, the activity of Netflix does not belong to the sphere of cybersecurity that puts many online resources under threat.
From the social view, the company analyses its target audience and strives for its expansion with the help of available content. The online retailing market is competitive because of a variety of businesses who offer similar services and the limitation in resources. As a result, apart from the licensed content, the company should produce its own pieces to differentiate itself from similar businesses and attract more customers. In addition, the target audience increases with the flow of time because of the population; thus, the company has more people to serve. Moreover, moving from a national to the international market is also beneficial as far as it opened new horizons. That is why Netflix managed to ensure its position through great attention to customers’ needs.
The company also contributes to the establishment of the retailing culture. As far as the legal regulations prohibit screening the content without a license, the number of websites which show pirate movies decreased with the flow of time. As a result, retailing helps people to have access to TV programs without breaking the law. Customers return because new products are added to the service. The company does not limit their ability to watch the content leaving much freedom to adjust the experience to personal needs. Consequently, the service provides access while individuals can decide how to use it.
Talking about the economic benefits, the company remains in a favorable position due to the price-quality relation. Customers pay for movies that they wish to watch while they remain accessible without a time limit. Besides, they can download pieces for a higher price. As a result, people return to the website adding new choices. Constant updates incline customers to spend more money on the website while Netflix possessed pieces that are not available in other retailing stores. Therefore, people move to the company due to the variety and uniqueness of the content available for rental.
The financial picture of the company also demonstrates success in the market. During the past several years, the situation in Netflix improved through the increase of memberships. “Consolidated revenues for the year ended December 31, 2017, increased 32%, including an increase of 21% in the Domestic streaming and 58% in International streaming segments” (賴俞含). As a result, the increase in income followed due to international expansion. The domestic market is stable and grows steadily; consequently, the company focuses on its customers from outside of the USA and their satisfaction with the services.
In the international arena, Netflix competes with other companies; nevertheless, the market is blue because of retailing services developed in the USA earlier than in other countries. As a result, the retailing culture there is weaker. Therefore, it is easier for the company to attract people because local services cannot compete with Netflix. “International revenues as of the end of December 31, 2017, accounted for 44% of consolidated revenue for the year ended December 31, 2017, as compared to 36% of consolidated revenues for the year ended December 31, 2016” (賴俞含). The situation demonstrates that the company is interested in turning the global one; that is why it invests in the international market.
However, the problem for Netflix is that demands on the domestic and international markets differ. Individuals have dissimilar interests; thus, the content should include various audiences. Such requirement shifts the investment of Netflix: “In the detail of adjustment to net income, we can see Netflix spent 9,805,763,000 on Additions to streaming content assets, which proved they use most of their cash on creating original content” (賴俞含). That is why high numbers demonstrate that the service is interested in the competitive advantage in the future.
The only problem of Netflix is that source of money. “Another thing that can be seen from the Balance sheet is that Netflix’s main source of funding is mostly through long-term debt, which increased by 3,135,121,000 in 2016 to 2017” (賴俞含). Long-term debt is a risky strategy because the company is not sure whether its customers will continue their spending. Consequently, the recommendation is to reduce spending and start reducing the debt. Cut in investment will decelerate the speed of development in the international market even though the position in the domestic market is secured. That is why such a recommendation will help to increase the net income while security stability in the market.
The strategy of Netflix should be based on its production and conditions. At the moment, it secured a necessary number of customers to survive the decrease of the content flow. The company can postpone some of its products for some time while adding new licenses. Therefore, the expenses will fall, and Netflix will not increase its debts while stakes and income may partially cover the existing amount. Such a strategy should be established from a minimum of three years while austerity measures should be regulated because they will have a negative effect on the position of the company in the market. As a result, it should hold a competitive advantage. That is why the success of Netflix follows from its current strategy; however, the managers should reduce possible risks by establishing the equality between income and expenses.
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