Marketing analysis for Netflix

A Marketing Management Analysis
Aarhus BSS – Department of Economics and Business Economics
Class: HO2 Group Number: 01
Name: Student ID:
Jiahui Tan 201606401
Shahelika de Costa 201606754
Cam Tu Ngoova 201607245
Alexander Bjerre Simonsen 201610672
30, 936 characters excl. space + 4 x 800 character figures
= 34,136 characters in Total

Acknowledgement
We would like to thank the lecturers for Marketing Management course – spring
2018, Ms. Karen Brunsø and Ms. Jessica Aschemann Witzel who dedicated their
time in adding valuable knowledge about the curriculum at Aarhus BSS. We would
also like to thank our tutor for MM for the spring 2018, Mr. Catalin Stancu for adding
valuable ideas through guiding us during the final presentation and for supporting
this study towards a success.
Finally, we would acknowledge the support of the AU library in giving access to
retrieve data, articles, e-books, journal articles and all the valuable information
needed for our study.
Thank you.
Jiahui Tan
Shahelika de Costa
Cam Tu Ngoova
Alexander Bjerre Simonsen
NETFLIX
A Marketing Management Analysis

Netflix – Group Assignment Spring 2018
2Marketing Management – Class HO2 | Group 01
Table of Contents
1. Introduction.....................................................................................................................3
2. Case Description............................................................................................................4
3. Questions and Answers...............................................................................................9
3.1 Question 1 .................................................................................................................9
3.2 Question 2 ...............................................................................................................13
3.3 Question 3 ...............................................................................................................17
4. Conclusion ....................................................................................................................21
5. Further Developments and Questions...................................................................22
References............................................................................................................................23
List of Figures
Figure 1 Netflix Timeline, A brief history of the company that revolutionized
watching of movies and TV shows
Figure 2 Number of Netflix streaming subscribers in the US from 3rd quarter
2011 to 4th quarter 2017
Figure 3 Perception of steaming services among current subscribers (as of Q3
2016)
Figure 4 Percentage frequency of use of Video-On-Demand Service in US, Q4
2014

1. Introduction
Netflix is the world’s leading Internet entertainment service with 125 million
subscribers in over 190 countries, enjoying more than 140 hours of TV shows and
movies per day, including original series, documentaries, and featured films.
Members can watch as much as they want, anytime, anywhere, on nearly any
internet-connected device or screen.
The company’s core strategy is to grow its streaming subscription business
domestically and internationally. Therefore, in the question 3.1 the focus more were
to describe their marketing strategies and their unique product features. The
question 3.2 addresses Netflix’s target group characteristics and consumer buying
behavior. More focus were given on their demographics and psychographic
characteristics. The market for online entertainment and streaming services is
affecting by the rapid technological change and increasing competitive rivalry, thus in
question 3.3 the focus is on changes in Netflix’s micro-macro environmental and its
effects on their business.

2. Case Description
Netflix is an American company, founded by two American entrepreneurs Marc
Randolph and Reed Hastings on August 29, 1997. Their vision was to provide home
movie service that would meet customer’s satisfaction better than traditional retail
DVD rental model. Netflix started originally as a web-based catalog service that
rented movies in DVD format and was delivered by mail at a traditional pay-per-
rental rate.
Timeline
Year
1998
• Netflix launches the first DVD rental and sales site, netflix.com
Year
1999
• Netflix debuts a subscription service, offering unlimited DVD rentals for one low monthly
price.
Year
2000
• Netflix introduces a personalized movie recommendatin system
Year
2005
• Number of Netflix members rise to 4.2 million
Year
2007
• Netflix introduces movie streaming services
Year
2010
• Netflix is available on the Apple iPad, iPhone and iPod Touch, the Nintendo Wii, and
other Internet connected devices. Netflix launches its service in Canada.
Year
2011
• Netflix launches throughout Latin America and the Caribbean
Year
2012
• Netflix becomes available in Europe including UK, Ireland and in the Nordic countries
Year
2015
• Netflix launches in Austrailia, New Zealand and Japan, with continued expansions
across Europe. (Italy, Spain, Portugal
• The first Netflix Original feature film "Beasts of No Nation" is released
Year
2016
• Netflix is available world wide
Figure 1: Netflix Timeline, A brief history of the company that revolutionized watching of
movies and TV shows. Source: https://media.netflix.com/en/about-netflix

Netflix’s aim of introducing subscription service was to build its reputation on flat-fee,
unlimited rentals with no due dates and no shipping and handling fees and after
introducing the “personalized movie recommendation system”, Netflix was able to
use their member’s ratings to predict accurately, choices for all Netflix members.
After originally being a DVD-shipping company for approximately 9 years, beginning
of 2007 inspired by the success of YouTube, Netflix ventured into Video-On-Demand
services, originally named Watch Now. Today, Netflix is one of the world’s largest
streaming service for movies, TV shows worldwide.
Consumer Market, Product and Financial data
Netflix operates through two segments: domestic (US) and international. It began
international operations in 2010 by offering an unlimited streaming plan (No DVD) in
Canada. Netflix generates a vast majority of its revenues from the US. The domestic
segment derives revenue from monthly subscriptions consisting of streaming content
and DVD by mail. The international segment derives revenue from monthly
subscriptions solely of streaming content.
Netflix obtained content from various studios and content providers through fixed-fee
licenses, revenue sharing agreements, and direct purchases. Netflix markets through
various channels, including online advertising, mass media, and various
partnerships. In the beginning, the users needed to have access to a computer to
enjoy live streaming videos. Later Netflix started using other platforms to deliver
movies and TV shows. In 2008, it added streaming video via Xbox 360, TV set-top
boxes and Blu-Ray players. It was available from Internet enabled smart TVs, PS3
and other Internet-enabled gadgets in 2009.
Netflix has grown towards becoming the first global TV network, available for 190
countries. Netflix was available in every country around the world except for Crimea,
North Korea, Syria, and China.

Figure 2: Number of Netflix streaming subscribers in the US from 3rd quarter 2011
to 4th quarter 2017. Source: www.statista.com
These worldwide expansions are very costly. In July 2011, Netflix announced a price
increase in an attempt to persuade people to subscribe to its streamed Internet
videos. However, failed to create the demand it was hoping, with many customers
unwilling to give up the company's DVD delivery service with its signature red
envelopes. This outrage on the Internet, with thousands of subscribers complaining
to cancel their subscriptions on Netflix’s official blog. After a difficult 2011 (which
Netflix lost about 800,000 subscribers), in year 2012 it expanded into UK and Irish
markets, offering unlimited online streaming after a one-month free trial. Netflix is
also facing language barriers (creating translated subtitles for a variety of markets)
and challenges regarding licensing in regions around the world.
For Netflix, customers are the priority. Netflix was able to reach the needs of most of
their consumers by identifying needs and eliminating inconveniences. It has 30 day
free trial membership and offers 3 types of packages with flat monthly fee; Basic for
$13, Standard for $17 and Premium for $21. The prices of these packages differ
based on picture quality and number of screens customers can watch on at the
same time. (netflix.com). Today Netflix is more than just a streaming video service or
a mail order video rental service. It has become a TV network taking viewership
away from traditional platforms through:
0
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2011Q3
2011Q4
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#ofsubscribersinmillions Number of Netflix streaming subscribers

 Access to unlimited content anytime, anywhere, on any device/platform along
24/7.
 Almost an infinite library with original content
 Ad-free environment, which is user-friendly
 Affordable price with personalized experience
Netflix dominates the market by creating original content, which resulted in some of
the best TV shows being available only on Netflix, and therefore available only to
Netflix subscribers. With the use of their customer data and gaining knowledge of
customer desires, they determine what original content should be created. Today,
after the launch of the streaming platform, giving subscribers unlimited access in
new VOD-services, Netflix marks the true beginning of the streaming-era. This
change came about because of increased competition on the VOD-market from
competitors like Hulu, Amazon, HBO, and many others.
Netflix’s important statistics
A. Customer satisfaction survey on internet Streaming services results in year 2016
Figure 3: Perception of steaming services among current subscribers (as of Q3
2016). Source: https://www.statista.com | Netflix beats competition in customer
satisfaction.
72%
60%
60%
58%
54%
49%
36%
48%
63%
57%
41%
52%
E A S Y T O W A T C H ON T V E A S Y T O US E ON A LL
DE VI C E S
I NT E RE S T I NG ORI GI NA L
C ONT E NT
RE LI A BLE S E RVI C E
PERCEPTION OF STEAMING SERVICES AMONG CURRENT
SUBSCRIBERS (AS OF Q3 2016)
Netflix Amazon Hulu

B. Frequency of use of Video-On-Demand services in US in year 2014
Figure 4: Percentage frequency of use of Video-On-Demand Service in US, Q4
2014. (Approximation and Rounded-off). Source: CIRP, www.geekwire.com
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
More than 5 times a week 2-5 times a week once a week Once in a few weeks
Frequency of use of VOD Service in US, Q4 2014
Netflix Amazon Prime

3. Questions and Answers
3.1 Question 1
Describe the company's overarching marketing strategy in comparison to the
competition, it´s main product´s unique selling point and point of difference, and the
customer value that the product or service creates. Why do you think the company
chose this specific strategy, and what would have been alternatives to this choice?
“Porter's Generic Strategies” defines a company’s overall business strategy in 3
strategic perspectives; cost leadership, differentiation, and focus strategies.
According to this framework, Netflix’s strategy is differentiation, where the company
tries to create uniquely desirable products and services. In this case, Netflix targets a
broad affluent segment through their quality content and unique original shows with
an affordable price.
In order to achieve its overall corporate strategy as mentioned above, Netflix must
also design their marketing strategy that supports the business strategy. Based on
the number of subscribers and countries they operate in, Netflix appears to be a
market leader, which enables Netflix to approach three following market leader
strategies that align with the Ansoff matrix: expanding total market demand,
protecting and increasing market share. According to this theory, Netflix can expand
market demand through market development. Due to the internet explosion in the
early twenties, Netflix saw a great opportunity of providing online streaming service,
which allows members to watch instantly television shows/movies on their personal
computers with monthly subscriptions. To benefit from this opportunity, Netflix
changed its target market of DVD rental to online streaming. This strategy has
helped Netflix to expand its market share dramatically as subscribers increased to 20
million in the US in 2010. After successfully moving into online streaming in the US,
Netflix started expanding internationally in 2010. This is also Netflix’s market
development, because it expand into different geographical markets with its existing
online streaming product.
Additionally, to expand total market demand even more, Netflix also provides a new
product to its current online streaming with aim of increasing consumption. This

strategy aligns with product development strategy in Ansoff matrix. By 2014, Netflix
not only offers a large online library of film and TV shows worldwide, even started
offering original content in the form of serialized drama and comedy.
In order to protect its market share and position, Netflix has also pursued market
penetration strategy by encouraging its current customers to use more Netflix
services. In order to maintain its international customers, Netflix offers 20% of its
content in local language. Moreover, Netflix has also created a personalized
multichannel experience for their customers and has provided personalized service
like sending emails, notifications, and recommendations about new series. As a part
of their market penetration strategy, Netflix have attracted more customers and have
encouraged non-users to use their services.
Approaching these strategies make Netflix outperform its competitors. With over 110
million subscribers worldwide, Amazon Video Prime becomes the market challenger.
(Moskowitz, 2018). As the market challenger, Amazon Video Prime has tried to
attack Netflix in various ways in order to gain more market share. For instance,
Amazon Prime Video offers a large library of TV shows and movies and instant
streaming on Amazon products, major game consoles, set-top boxes, and devices
supporting the Amazon app. Moreover, they have also started producing their own
original content including the award-winning 'Mozart in the Jungle' and 'Transparent'.
By using this frontal strategy, Amazon can match Netflix’s products and marketing
mix to attract more customers. Another streaming service company that has a large
market share is Hulu. In contrast to Netflix, Hulu business model is structured to
source revenue from monthly subscribers and on-screen advertisements.
Additionally, Hulu launched a digital pay-tv style platform (Nath, 2016). Therefore, it
is assumed that Hulu’s business model is to collaborate with cable TVs and become
their supplements rather than replacing it. Thus, the main strategy of Hulu can be
position as a market follower, is an imitator by copying some part of Netflix and
Amazon business platform, but still remains differentiated.
As it can be seen, Netflix’s competitors approach different strategies and all of them
are trying to gain competitive advantages that cannot be substituted by competitors.

Aiming in expanding the customer base and enhancing customer loyalty, Netflix has
identified its unique selling points (USP) that can affect their sales. USP is defined as
“the factors or benefits make the product different from (and better than) other
equivalent products on the market, and those that gives customers a logical reason
why prefer the company rather than the others” (Connick, 2017). Netflix engages and
attracts more customers by offering original content and understanding their
audience’s behaviour by creating customized recommendation section.
Similarly, point of differences refers to the factors that makes its products stand out
among competitors. Referring to some external reports, according to Forrester
survey among U.S. video streaming subscribers, Netflix scores well (and better than
its competitors do) in every relevant aspect of its business. (Richter, 2017). However
as stated in the case description we could argue that its product’s point of
differences are as follows:
 A huge movie library including Netflix’s original content
 Watch instantly without ads: Access to content anytime, anywhere, on any
device/platform working 24/7 also offline
 Affordable price – No late fee, No hassle
These points indicate Netflix delivers products/services that are valuable for the
customers and different from competitors. “Value” is the benefit a customer believes
a product/service has which will ultimately lead towards consumer satisfaction.
Netflix mainly creates value for the customers by approaching the service dominant
logic - the value relies on the use of service Netflix provides. As shown in figure 3,
the most valued characteristics of Netflix’s services by their consumers is that, it is
easy to watch on TV, easy to use on all devices, interesting original content, and
reliable service.
Netflix adopted market development, product development, and market penetration
strategies where it developed programs for different audience interests. Netflix is
able to focus on these strategies because the company have pursued some of
advantages in online streaming market. Netflix's biggest strength is its massive trove
of user data. As it knows what its millions of users watch, and when they watch it,

Netflix is better at predicting whether new content will be successful. This enabled
them to obtain a differentiation strategy. Another key competitive advantage is
Netflix's massive scale, both in U.S. and globally. The marginal cost of distributing
video content to more users, is fairly negligible. Netflix's growth allows it to spread its
content costs over an ever-larger audience enabling them to enter new markets with
existing products. This also has allowed Netflix to provide their Original Content as a
new product to their existing market.
As the market leader, Netflix can practice many alternative strategies. For example,
Netflix can move into the music industry through strategic alliances (for example)
with Spotify, exploring the diversification strategy according to Ansoff matrix. This will
allow Netflix to expand the market share as Netflix have technological and marketing
synergies with existing product line of online streaming industry. Strong revenue
growth, strong business model, worldwide renowned brand, and effective marketing
are some of the strengths Netflix has in order to move into diversification of its
business, as this is a very risky strategy. Finally, entering to new businesses with no
relationship to its current technology, products, and markets, Netflix can adopt a
conglomerate strategy.

3.2 Question 2
Describe the main target group characteristics and the target group´s buying
behaviour. What do you think is the role of customer relationship management for
attracting and keeping the target group, and the importance that branding may or
may not have for building a relationship to the target group?
Netflix is operating in two market segments, which is US (their domestic market) and
the international market. Netflix’s market is very dynamic and constantly changing in
response to changes in technology and consumer behaviour. None of Netflix’s target
groups will be totally homogeneous within the domestic market and heterogeneous
across the world, based on their interests and watching preferences. But according
to STP theory, we can comment on the 3 main target market characteristics for
Netflix.
Demographic characteristics
Netflix offers a wide range of content in terms of movies and TV series. Netflix
content is for all of the consumers ranges from age 5 to 65 with Internet connection,
regardless consumer’s gender and life status. Netflix targets consumers ranging
from middle to over-middle income with their 3 streaming packages with flat monthly
fee; Basic for $13, Standard for $17 and Premium for $21.
Psychographic characteristics
This includes, psychological/personality traits, lifestyle and values of consumers.
Maslow’s theory explains why people are driven by particular needs at particular
times. He believed that human needs are hierarchical, divided from the most to least
pressing: physiological need, safety need, social need, esteem need, and self-
actualization need.
Having a TV or an internet-enabled device has become moreover a physiological
need today. Netflix caters social needs; being a nowadays “want” by creating a
service that a consumer would desire to have, yet having other substitutes like cable
TV and YouTube. Netflix’s consumer would fall under the love/belonging in Maslow’s

hierarchy of needs, because the customer would feel that they belong to a certain
socialized group when you are aware of what is happening in the society, have
something to talk in common with peers, and embracing the feeling of “trendiness”.
Being the most discussed and known online streaming service, will make a person
wanting to get Netflix so they could “fit in” and feel like they are “accepted” in the
society.
Netflix's consumer's lifestyle can range all over every category and be cultural-
oriented, sport-oriented, adventurous and many others. Shalom Schwartz introduces
ten broad values; power, achievement, hedonism (self-enhancement values),
stimulation, self-direction (Openness to change values), universalism, benevolence
(Self-transcendence values), security, conformity and tradition (conservative values).
Netflix provides its services in a way that consumers have synergy of choosing
whatever they want and whenever they want to see. Netflix consumers has the
freedom to self-manage their preferences, where they fall under the category of self-
direction, which Schwartz explains as independent thought and action - choosing,
creating, exploring.
Behavioral characteristics
This divide consumers based on their knowledge, attitude, use, and response toward
the product. This aspect is more consumption related and differs according to one’s
perception. The total benefit that a customer values through image, personal, service
and product benefit, finally leads towards higher customer satisfaction and increases
the probability of customer loyalty. According to Keller “Loyalty” is defined as “a
deeply held commitment to rebuy or repatronize a preferred product or service in the
future (...)”. According to figure 4, we could see that Netflix was used more than 5
times a week and was the most frequently used VOD service in US. The high
frequency usage of Netflix may also indicate a high customer loyalty. Also referring
to the figure 3. We could see that Netflix consumers were highly satisfied with their
different service features. High customer satisfaction also can be an indicator of
customer loyalty.

Netflix consumer’s buying behavior is influenced by cultural, social, and personal
factors. Culture is the fundamental determinant of a person’s behaviour differs
massively for Netflix according to different geographical locations and demographic
aspects. Consumer perceptions on Netflix differ based on preferences depending on
the lifestyle, occupation, personality, values and economic circumstances. Different
reference groups such as family, peers, social roles, and statuses influence the
buying behaviour of Netflix customers. As mentioned before, this social aspect will
make a person wanting to get Netflix to “fit in” and be “accepted” in these groups and
will directly influence the decision to purchase Netflix’s services.
To understand the consumer’s actual buying decisions, it is necessary to apply the
five-stage model. The buying process starts when the customers recognizes a
problem or need. As identified above, the need of Netflix is social need, can be
understood as the need of entertainment in leisure time. After identified the need, the
consumers can start with information searching, in this case, they may search for all
the entertainment possibilities such as go to Tivoli, read a book or watch a movie on
TV or online streaming. Since Netflix relies heavily on word of mouth, personal
information source is important in this stage. After searching information, the
consumers are now going to evaluate all the alternatives based on their expectation.
Through experience and learning, consumers often acquire beliefs and attitudes,
which in turn influence buying behavior. Since Netflix has a strong brand equity, it
will ultimately come as first choice in the mind of consumers. Thus, when making the
decision, Netflix consumers often approach system 1: simple decision making,
because it is a fast, emotional decision. After the purchase decision, consumers will
compare their total benefit with total cost. If total benefits are larger, the consumers
are satisfied and vice versa. This feeling makes a difference in whether the
consumer choose this brand again and talk favorably and unfavorably about it.
In an intense competitive market where customer loyalty is crucial to survive,
companies should focus on customer relationship management (CRM) because it
helps to understand the needs and behaviors of the customers. Data mining as a
part of CRM helps Netflix to gather information about their customers’ preferences in
order to create their original contents that matches the customers’ wants. Moreover,
Netflix can improve their personalized services that can ultimately help to attract and

maintain their target group. Providing customers with what they desire to watch,
Netflix ensures greater customer experience and increased satisfaction. This
enhances consumer loyalty and boost Netflix’s reputation.
The Brand “NETFLIX”
Building a brand can also help the company to build a long-term relationship with
customers.To examine how Netflix has built up its brand, brand resonance pyramid
model can be used. The first level of the pyramid is establishing the identity of the
brand, which Netflix maintain through simplicity of their logo, synthetic name that
easily transferable to other languages. The brand is associated with social need that
was enhanced by their campaign called “Netflix and Chill”. (BusinessInsider.com,
2015) Second level of the pyramid is brand performance and brand imaginary where
they aimed to be perceived as convenient service that provides a wide range of
movies and TV shows for relatively cheap price. The next level includes judgements
and feelings, which are about individual opinion of the brand. Netflix is associated
with quality time with friends and family that creates a positive feeling in the mind of
consumers. The final level deals with the relationship of the customers with the
brand. As mentioned before, there is a trend that was created by the society where
people need to be part of Netflix community to “fit in” and this can also become an
important part of their identity. When consumers evaluate the identical services
provided by the competitors in the VOD market, Netflix becomes the first choice in
customer’s mind because of the brand. In this way, branding is positively associated
in building a relationship with the target group. (investopedia.com, 2016)
Branding increased customer loyalty that may eventually leading towards
sustainability in the industry. Hence, branding is more important in leading towards
improved customer relationship within Netflix.

3.3 Question 3
Describe which change in the micro- or macro-environment poses a particular threat,
and / or which change holds a particular opportunity for the company. How would
you imagine the company ought to react and deal with this in the future?
Netflix’s market is very dynamic and constantly changing in response to changes in
technology and consumer behaviour.
Netflix’s Microenvironment
To analyze Netflix’s changes in the microenvironment and its potential threats/
opportunities, Porter’s Five Forces becomes the ideal framework.
Threat of new entrants:
Nowadays Internet enabled entertainment services can be provided fairly easy.
Thus, Netflix having intellectual assets does not impose any barriers for newcomers.
Also, product differentiation in the entertainment industry is very limited. However, to
obtain differentiation, Netflix had first-mover advantages and therefore secured
exclusive licensing deals with most of the major studios. Therefore, these rights are
very difficult to obtain for a newcomer in the market today making it less easy for
new entries to market. However, with the first-mover advantages diminishing and
entry barriers consequently shrinking slightly, Netflix will have to pursue
differentiation elsewhere. Therefore, Netflix needs to obtain and/or create the best
content. Fewer barriers to entry in the streaming business means high threat of new
entrants.
Threat of substitutes:
Instead of watching Netflix, people may prefer to read books or listen to music and
this can be seen as substitutes for spare time engagement. However, we believe all
these activities can coexist and does therefore not threaten the existence of Netflix.
What might pose a threat is old-fashioned flow-TV, being a direct substitute to TV-
watching. However, every point of entertainment is in the direction of streaming
today. The sheer convenience associated with Netflix is enough, but the increasing
quality of content will help truly set streaming services apart.

Bargaining power of buyers:
With switching costs being next to nothing and all the major players in the industry
being evenly priced, the users of streaming services possess some power. This
means Netflix as constantly forced to achieve high levels of customer satisfaction, as
well as working hard to attain new customers. Furthermore, Netflix will have to
differentiate themselves further to keep customers loyal and wanting more.
Bargaining power of suppliers:
One of the biggest threats to Netflix is the power of the suppliers. The suppliers in
Netflix’ case are primarily the major studios and other producers, who have full
control over to who and when to sell their productions. Netflix have created some
profit-sharing agreements with the studios, effectively diminishing their power, but
the true answer again lies in the original content created by Netflix. This transfers all
the supplier power to Netflix, and allows them to control every part of the process.
Industry competitive rivalry:
There is much competition in the streaming service industry. Several new players
have entered the market recently, and even some of the previous suppliers of
content have chosen to make their own attempt at distribution.
This forces Netflix to differentiate themselves as much as possible. Most aspects of
its services are non-differentiable and are perceived almost the same for everyone.
Leaving only quality and quantity of content as possibility for differentiation. With the
amount of competition, content quality links to Netflix’s original content, and this is
where they should focus mostly.
Netflix’s Macroenvironment
To determine threats and operating challenges that Netflix will face in the prevalent
macro-environment, it is necessary to apply PESTEL analysis with mainly focusing
on the US market.

Political factors significantly affect long-term profitability and reduce certain
competitive advantages. In US markets, traditional cable TV users rapidly shift away
towards on-demand streaming services. Due to the increasing VOD subscribers, US
telecom giants have lost many cable TV customers and therefore have approached
the Federal Communications Commission to insist on Internet usage regulations. If
this will pass through the congress, so called “Net neutrality” will be rescinded and
Internet providers will be entitled to decide what people can see online or can even
charge more for certain websites. If the Internet providers will decide to charge extra
fee for using Netflix’s service, this will lead to a big threat for Netflix’s business.
Economic Factors: Netflix has globally expanded, being available in 190 countries
worldwide. The company aim to set a united price of its services in US markets and
overseas. Nevertheless, the price per month of Netflix’s streaming service in
international markets ranges from $6 to $19, whereas in United States, the price is at
an average of $10 per month. This is a consequence of foreign exchange rate
fluctuations and higher VAT (value added tax) in overseas countries, which could
affect Netflix’s revenues in its international streaming segment.
Technological advancements are moving fast and it is disrupting various
industries. Therefore, it is very important for Netflix to analyze and predict the
movement of the market. As 4K ultra HD technology in TVs is becoming a
replacement of Full HD TVs, a number of studies have predicted that by year 2020,
almost half of the homes in the US will own a 4K Ultra HD TC of some kind. Netflix is
very successful in keeping up with a moving market as Netflix aimed to create new-
patented technology that would offer better compression for the 4K Ultra HD signal.
This innovation will give Netflix a huge competitive advantage.
Legal Factors: Due to increasing demands from televisions and film studios over
copyright access to content, Netflix faces challenges in technological workarounds
known as VPN, which allows many users abroad to access the same content as
American audience by misguiding their location. Therefore, Netflix introduced
blocking these workarounds to users who access content from other countries to
meet copyright law standards with content providers and show respect to its regional
licensing agreement.

Overall opportunity and threat
Netflix’s macro and microenvironment continue to change quickly and there are
many opportunities unveiling despite all the treats it may faces. We will use SWOT to
summarize overall threats and opportunities to find possible solution for Netflix to
deal with them in the future.
Some of their threats may include instability in exchange rates and increasing
competition. To minimize these threats, Netflix can pursue cost leadership strategy
with aim of lowering its costs in order to maintain the fixed monthly subscription
around the world and maintain their high market share. Moreover, to overcome huge
bargaining power of suppliers, Netflix can approach vertical backward integration by
acquiring film producers, in this way; the company is not depending on external film
producers.
The main opportunity for Netflix is technological innovation. Since Netflix has the
ability to adapt to developing market, it can benefit this opportunity by expanding its
subscription packages from three to four, they could offer a subscription package of
4K Ultra HD resolution content to the customers who own a 4K Ultra HD television
and are willing to pay a premium price for the Netflix subscription.

4. Conclusion
Netflix is considered as the leader in Online Video Streaming services today. The
company always focuses on customer satisfaction and dedicate their service
excellence. Netflix is the best example in using internet and technological
advancements in completely reinventing their market domestically and
internationally.
Here in this report, we have focused on their different marketing strategies,
company’s strengths and weaknesses, the threats that they are about to face in their
industry and the opportunities may rise through them and their decisions when it
comes in gaining competitive advantage. Many statistics we have used in our
discussion have stated that Netflix have become the consumers’ choice. The true
understanding of what their consumers prefer, their needs and wants in socio-
cultural aspects, and understanding their behavioral aspects have secured Netflix’s
competitive edge in the online video streaming market. Finally, we have highlighted
all the macro and micro environmental changes that may affect Netflix and the focus
was more toward their domestic market.
In analyzing this company, it became apparent that Netflix being a service provider
rather than a company selling a physical product, it was difficult for us to identify/
apply some of product based marketing theories to the company.

5. Further Developments and Questions
We have concluded that with global expansion, not only should Netflix produce more
of original content in local languages, but also include local actors, possibly well-
known actors which might increase popularity of the original content.
It is obvious that Netflix faces an intense competition in both the domestic market
and international market. In order to maintain their market share, the company can
consider expanding in to the Chinese market. Due to the large population in China
and its growing economy, it will open-up a massive opportunity for Netflix. However,
one of the main threat is Chinese government’s legislation regarding protectionism of
the domestic producers.
To conclude the above; Netflix has already a strong global brand. To maintain this
brand equity through empowerment, they could engage in CSR (corporate social
responsibility) as a corporate strategy, sharing a proportion of their profits in
charitable activities, which will enhance and enrich its brand image.

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