I brief analysis of Netflix's business strategy. I have covered here SOWT, environment, and industry analysis. The financial analysis is also a crucial part here.

1. Netflix’s Strategy in 2018-A Case Analysis

2. Company overview
Competitive advantage analysis
Financial health analysis
Strategy analysis
Key Questions and Recommendation
Strategic implementation
AGENDA
Competition

3. COMPANY OVERVIEW
Rent DVDs 1997
Monthly
subscription
1999
Flat-fee unlimited
offer
2000
World of
streaming
2007
Diversification
of Business
Founded by Reed Hastings
Rend DVD via email
Monthly subscription
World leading Internet
television network 2018
190 countries
117 million streaming
member

4. NETFLIX BUSINESS DIVERSIFICATION
• Compatibility of technologies and products
• Resources and capabilities used as valuable
competitive
• Costs is reduced
• Transferring strong brand name
Rent DVDs Stream Videos
Attractive
industry
Low cost of
entry
Better-off

5. MARKET OPPORTUNITIES AND CHALLENGES FOR DIVERSIFICATION
OPPORTUNITIES
1. Access to high speed internet
2. The variety of devices
3. On line video platforms and
4. Downloadable Apps
5. Global reach
6. Changing customer preferences
CHALLENGES
1. Licensing issues
2. Regulatory issues
3. Political issues
4. Cultural differences
5. Legal issues
FIRST MOVER’S ADVANTAGE

6. Rivalry among
existing
competitors - High
Suppliers bargaining
power - High
Buyers bargaining
power - High
Threats of new entrants-
High
Threats from substitutes-
High
FIVE FORCES MODEL ANALYSIS
HBO, Hulu, Amazon
Local Competitors
Low cost to switch
brand
Substitute:
Available
Dynamic media
industry
Capital- Technology,
infrastructure, Content
Industry Network-
Licensing(China),
original content
Government Rules
(China)

7. COMPETITOR’S PRICE ANALYSIS

8. SUBSCRIPTION BASED BUSINESS MODEL OF NETFLIX
Basic plan - $ 7.99 per month
Standard plan - $ 10.99 per month
Premium plan - $ 13.99 per month
Revenue 2017 2016 2015
Domestic Streaming
Segment $6,153.00 $5,077.30 $4,180.30
International
Streaming Segment $5,089.20 $3,211.10 $1,953.40
Domestic DVD
Segment $450.50 $542.30 $645.70
Domestic Streaming
Segment
International Streaming
Segment
Domestic DVD Segment
2017
Plans

9. FINANCIAL HEALTH ANALYSIS
Year 2000 2005 2010 2015 2016 2017
Revenue $35.9 $682.20 $2,162.60 $6,779.50 $8,830.70 $11,692.70
Net Income ($58.50) $42 $160.80 $122.60 $186.70 $558.90
Gross Profit 0.8 216.4 805.3 2,188.00 2,800.80 4,033.00
Profit Margin -163% 6% 7% 2% 2% 5%
Marketing expenditure $25.70 $142.00 $298.80 $991.10$1.278.0
TV Advertising $714.30 $842.40 $1,091.10
Principal Amount at Par Issue Date
$1.9 billion Apr-18
$1.6 billion Oct-17
$1.561 billion May-17
$1.0 billion Oct-16
$700 million Feb-15
$800 million Feb-15
Long Term Debt: 2005 -$ 200.0, 2010 -$ 2,371.4- 2015 $, $ 3,364.3 - 2016, $ 6,499.4 - 2017
Interest: ($ 15.9) ($163.9) ($ 119.3) ($ 591.5)

10. 1 2 3 4 5 6
Year 2000 2005 2010 2015 2016 2017
Revenue $35.90 $682.20 $2,162.60 $6,779.50 $8,830.70 $11,692.70
Gross Profit $0.80 $216.40 $805.30 2,188.00 2,800.80 4,033.00
-2000
0
2000
4000
6000
8000
10000
12000
14000
$
in
millions
Year
Revenue and Gross Profit
Year Revenue Gross Profit
REVENUE AND GROSS PROFIT

11. Year 2000 2005 2010 2015 2016 2017
Cash Flow ($22.70) $157.50 $276.40 ($749.40) ($1,474.00) ($1,785.90)
NEGATIVE CASH FLOWS
Heavy investment in content developments
$ 6 billion in 2017
$ 8 billion in 2018
Financial Strain
Debt Accumulation
Delayed Payments
Reduced Investment and Growth Opportunities
Risk of Bankruptcy
Limited Access to Credit
Impact on Stock Prices
Difficulty in Business Expansion

12. FINANIAL RATIO ANALYSIS
Net Income $558.90
Total Assets 19,012.70
ROA 3%
Decision to use great deal of
debt
EBIT $838.70
Total Assets $19,012.70
BEP Ratio 4%
Low raw earing power of assets
2017 11692.7
2016 8830.7
Growth Rate 32%
Significant growth rate
Net income per
share: 2016 2017
Basic $0.44 $1.29
Diluted $0.43 $1.25

13. NETFLIX’S STRATEGY
Netflix’s strategy in 2018 was focused squarely on:
• Growing streaming subscribers.
• Enhancing the appeal of its library of streaming content, with an increasing
emphasis on exclusive original movies and TV series produced in-house.
• Spending aggressively on marketing and advertising
• Expanding the number of titles that members could download for offline
viewing.
• Continuously enhancing its user interface.

14. Competitors Netflix Amazon HBO GO
Key Success Factor Weight Rating Score Weight Rating Score Weight Rating Score
Membership 0.4 10 4 0.4 6 2.4 0.4 4 1.6
Original Content 0.3 10 3 0.3 6 1.8 0.3 4 1.2
Pricing Model 0.3 6 1.8 0.3 8 2.4 0.3 7 2.1
TOTAL 8.8 6.6 4.9
WEIGHTED COMPETITIVE STRENGTH

15. THE FIVE GENERIC COMPETITIVE STRATEGIES
Low-Cost Provider
Broad
Differentiation
Focused
Low-Cost
Focused
Differentiation
Best-Cost Provider
Lower overall costs than rivals to broad spectrum of buyers.
Differentiating with attributes that appeal to a broad
spectrum of buyers.
Narrow price-sensitive buyer segment and on costs to offer
a lower-priced product
Narrow buyer segment by meeting specific
tastes and requirements of niche members
Upscale product attributes at a lower cost
than rivals

16. BCG MATRIX ANALYSIS
Stars
International
streaming segment
Cash Cows
DVD segment
Question Marks
None
Dogs
None
International
streaming
segment None
DVD segment None

17. KEY QUESTION
Can Netflix maintain its current growth rate and market share?
Negative cash flow NOT sufficient financial strength
Increasing competition NO sustainable competitive strength
Recommendation
1. Increase revenue streams
2. Cost optimization
3. Monetizing Assets
4. New product development
5. Innovative pricing model
6. Partnerships and Co-Productions
7. Acquisition and merger