Bargaining power of the supplier
Like buyers, suppliers also have the vulnerability of choices, and this abundance of players in the industry encourages the suppliers to look at the best affordable price. The industry suppliers are mostly film makers or original content developers who are reluctant to save cost. This benefit is provided to them from the immense of competition in the industry, thus providing the supplier the power to bargain.
Threat of new entrant
The market is highly attractive with low cost of entry and the barriers to entry are minimal. These conditions favor the new players to enter the market and grab the amount of market share they deserve. The market share gained by the new entrants is at the cost of the market share lost by the existing players. This is a threat that is very important to understand and address. The company needs to differentiate from the competition in order to avoid this threat.
Threat of substitute
Threats poses by substitutes are immense and are hard to ignore. Online video games and other online content are a substitute for the existing industry. On the other hand, the industry is based on original content distribution and piracy is a growing threat for the industry. Piracy provides a substitute to the consumer at very cheap prices. The threat is very alarming not just for Netflix, but for the entire industry.
Rivalry
Rivalry is high and intense in the industry due to the presence of highly competitive players in the market. The competition is direct and also indirect for Netflix. In the DVD industry blockbuster, Redbox, etc. are the major competitors while apple and amazon are strongest competitors in online streaming.
Strategic Recommendations
- At the business level, the company should adopt a strategy of cost leadership by lowering the cost of the subscription and a fee of rent. Using this strategy will help the company in attracting new subscribers and broadening its consumer base
- At the corporate level, the company seeks diversification and explained in terms of markets to the markets like china and India that are highly attractive in terms of movies.
- At the competitive level, the company can use strategic alliances to keep a hold on the market and sustain the image of market leader. This strategy further states on leveraging the first mover advantage and the economies of scale to increase the entry barriers for new entrants.
Recommendations
- The first recommendation for the CEO of Netflix would be to increase the budget and invest more in technology especially in IT and R&D. These investments will give fruitful results as the company will use the R&D in developing innovative products and also in searching new platforms for generating revenue. Using the technology factor,the company will use market penetration strategy to enter new markets and also diversification strategy by developing new products by leveraging the same resources.
- The company has the advantage of being the first mover in the industry and also the market leader. The core reason of these accolades is their customer service and satisfaction approach. Using these values, the company should focus on increasing the consumer base. The company should search new markets and new audiences and by serving them with better and original content along with customer service they can increase their customer base.
- Another option for the CEO of the company is to seek strategic partnerships and don’t lose the focus on developing original content. These partnerships will offer exclusivity to the company, and they can turn this exclusivity in developing and offering products that can be differentiated from the competitors. Through this exclusivity, the company can strengthen its viewership and increase the consumer base.
- The offering of the company should be attractive. The services should be provided with the same subscription fee with a decrease in the monthly subscription, but can charge a premium price for the first time or one-time users.
- Deliver and provide recommendations to the consumer while selecting the movie on the basis of the ratings. These suggestions should be based on the views and opinions of the viewers that creates the ratings for movies.
- Using their ability of data analytics and mining techniques can enter into the data management industry and serve as a solution provider to the big data management companies.
- The best option for Netflix is the international expansion. This strategy will provide three benefits to Netflix. The first benefit that the company will gain is the increase numbers of viewers or increase consumer base.
- The second advantage will be an increase in the revenues. The third and the most important benefit will be to attract investors to help the company grow in the long run...................................
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