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Netflix Case Analysis
Netflix Case Analysis
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Netflix Case Analysis
I’m providing key aspects of the broader macro and industry environment that Netflix might need to understand better, given its current strategic position based on the case research done by Kemerer and Dunn (2017).
Strategic Positioning
Variety-Based Positioning
Netflix service is divided into two: Traditional DVD mail delivery (control production costs and reduce investment) (p.1) and online streaming, e.g., home-made drama, e.g., House of Cards, won three Emmy Awards (p.5). By April 2017, it had 99 million subscribers worldwide, and by March 2017, it had 50.9 million subscribers in the United States (Exhibit 3 p.9). Netflix is investing heavily in streaming content creation. In 2017 it spent $6 billion, which resulted in a $3.4 billion long-term debt (p.5).
Macro Environment-PESTEL
Political Factors
The uncertainty of government regulatory principle that ISPs should enable access to all content and applicants regardless of the source without favoring or blocking particular products or websites is posing a risk to any decision-making in the digital delivery market (p.7). Additionally, due to political restrictions, Netflix cannot offer content from or to all countries.
Economic Factors
There are more robust streaming services in the industry offered by different competing companies, which may reduce the company’s profitability (p.5). Netflix’s traditional DVD mail delivery is experiencing additional costs due to an increase in mailing rates (p.6). The industry has competitive prices in TV services, which may affect Netflix’s subscriber base (Exhibit 3, p.9).
Social Factors
The company has an increase in online streaming popularity among young people since they are using smartphones (rather than TV) most of the time, along with the rapid pace of modern life, which may kill the traditional DVD mail delivery business (p.5).
Technological Factors
A specific system to save data and lower-resolution versions of streaming files allows subscribers to stream the content; this may kill the traditional DVD mail delivery business (p.3). Additionally, high-speed broadband services that have enabled network access and improved accessibility of streaming services may kill the traditional DVD mail delivery business (p.6).
Legal Factors
“Netflix tax” would possibly hamper the growth of streaming service companies, including Netflix (p.7).
Industry Environment- Porter’s Five Forces, KSF
Threat of New Entrants
It is hard to renew licensing as the content owner dictates the terms leaving Netflix with less inventory (p.4). Also, the industry requires massive capital investment for streaming content, and acquisition of new shows is expensive, and in 2017 Netflix had a budget of $6 billion (p.5). Additionally, some supplier contracts are exclusive, which made Netflix not to get sufficient returns (p.5).
Bargaining Power of Buyer
The variety of choices is available, which may reduce Netflix’s subscriber base (Exhibit 3, p.9). Also, sales and revenue depend on the subscribers; this may result in revenue fluctuations (p.4, Exhibit 1 p.8 & Exhibit 2 p.8). Moreover, there is low switching cost; hence subscribers can cancel the subscription anytime (Exhibit 3, p.9).
Bargaining Power of Supplier
Netflix is obtaining a license to distribute the content from fellow competitor affiliates, which may affect the company’s competitiveness, e.g., acquire new show, licensed content from Hulu (p. 4). Also, online distributors face a higher degree of influence from suppliers compared with traditional broadcasting, e.g., rely on PlayStation to carry Netflix app and rely on cable companies (p. 5).
Threat of Substitutes
Traditional media content providers (e.g., VCR) and other products can provide similar rental DVD services and online streaming (p. 2). Also, Netflix has to update its content library by adding TV shows and movies, which may lead to an increase in long-term debts (p. 5).
Rivalry among Existing Firms
Competing firms are offering affordable prices proving difficult for Netflix to retain customers (p.5 & Exhibit 3, p. 9).
Conclusion
Netflix should better understand its macro and industry environment to have a competitive advantage, make informed investment decisions, and boost profitability.
Recommendations
Netflix has to reduce its rising prices to gain back its competitive advantage. Also, it has to diversify its user base by focusing on traditional DVD mail delivery apart from online streaming to accommodate the older generation. Additionally, it should offer bundled discounts to subscribers who are seeking both streaming availability and DVD rentals to increase subscriber base. Lastly, it should create its content to avoid additional costs of buying new shows from content suppliers.
References
Kemerer, C. F., & Dunn B. K. (2017). NETFLIX INC.: THE DISTRIBUTOR FACES DISRUPTION. Ivy Publishing. Ontario, Canada.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
Yüksel, I. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52.
Darwin-and-Darwinism2
Darwin and Darwinism
Darwin, despite being well known for his theory of evolution, was not the first one to have taken a step in this direction. It is also well known now that he was not the first naturalist to have proposed the concept of evolution or that species change over time. Before Darwin, Buffon and other naturalists had started introducing ideas related to evolution. However, it was Lamarck who took the first major step in this direction and made a systematic presentation of evolution in 1809. Lamarck is therefore sometimes said to be the forerunner of Darwin.Lamarck’s and Darwin’s theories are considered to be the earliest in history and all the theories that followed are said to be based or to have derived from these two fundamental theories. However wrong Lamarck may believed to be, still his theory is important as it attempts to account for transformation. Therefore, the Lamarckian theory has to be taken seriously and contrasted with the Darwinian theory.The first remarkable difference between the two theories is that Darwin’s theory was a theory of evolution by natural selection , whereas the Lamarck’s theory was based on the “inheritance of acquired characteristics”. However, Lamarck could not present any strong scientific evidence to prove his theory and therefore, it was discarded scientifically.It was Charles Darwin who gave the next significant idea in this field. Lamarck in 1809, gave the theory that the characteristics that a species acquires during its life time can be passed to the next generation. However, it was nearly fifty years later that Darwin brought a significant change with the publication of his theory of evolution. Darwin’s theory of natural selection proved to be a pivotal link in the history of biological evolution. However, there was a missing link in Darwin’s theory and it was the mechanism of inheritance and also he did not give any explanation on the generation of new species. Lamarck’s theory states that environmental changes give rise to new needs which further determines the use or disuse of some organs. Such organs depending on the need develop or diminish and also that the acquired characteristics are hereditary.The voyage of the Beagle was especially important for Darwin. It was a five-year long expedition to South America and the South Pacific. During the voyage Darwin read a book written by Charles Lyell titled Principles of Geology. It was due to this book that Darwin’s interest in the study of land forms rose up. Besides Geology ,Darwin’s theory was also influenced by other allied disciplines. Lyell’s theory of Uniformitarianism had greatly impressed Darwin and along the Beagle voyage, he examined fossils with Lyell’s theory in mind. As Darwin himself mentions in his memoir, about the publication of an abstract of the notes taken onboard the Beagle “ Sir C. Lyell and Dr. Hooker, who both knew of my work –the latter having read the sketch of 1844- honored me by thinking it advisable to publish, with Mr Wallace’s excellent memoir, some brief extracts from my manuscripts.” (Darwin, p. 02) Darwin wrote several notes during the voyage which were later praised by the scientific community on his return to England. Thus, we can see that Beagle voyage proved remarkable due to multiple reasons and the most because it served as a background on which the fundamental ideas formed that later evolved into his famous theory.Darwin’s theory received support from that of Alfred Wallace. As Jacob Bronowski notes’ “ The theory of natural selection was put forward in the 1850s independently by two men. One was Charles Darwin; the other was Alfred Russel Wallace. ” ( Bronowski, p. 219)Besides Charles Lyell and Alfred Wallace, Darwin was also influenced by few other people and their innovations , which gave a new dimension to the thoughts of Darwin . The most notable among them was Thomas Malthus, who was not a scientist but an economist. Darwin was fascinated by his idea especially the one regarding human population and that it was growing faster than food production to sustain. Malthus’s ideas supported the studies done by Darwin. It is said that Darwin came up with the idea of the survival of the fittest after applying Malthus’ ideas.Darwin’s and Wallace’s ideas are considered as the extension of the theory of Uniformitarian . which is one of the most important concepts in Geosciences developed in 18th century by James Hutton and further popularized by Charles Lyell . According to these ideas , catastrophic processes had nothing to do with the landforms left on the surface. These ideas had originated with a Scottish geologist, James Hutton in 1785, who argued that Earth had a long history but it could also be observed and interpreted in the terms of current processes. His ideas did not get much support until Sir Charles Lyell presented evidence which would prove Hutton’s ideas and reject the theory of catastrophism. The theory of evolution is mainly based on the idea that the diversity found on Earth in its species can be explained by the uniform modification of genetic traits over time. Due to this the theory of evolution is also considered an extension of Uniformitarianism .However, the theory propounded by Darwin got several criticism on the ground that the theory of heredity is not viable. The next point of criticism was the age of the Earth, which according to Lord Kelvin was only approximately a hundred million years old , but the processes which Darwin had envisioned were quite slow and therefore the time was insufficient for the process to have happened. However, this problem got solved later in the late nineteenth century with the discovery of radioactivity. The most difficult or rather problematic fact with Darwin’s theory was that Darwin had no direct proof which could explain evolutionary processes that had taken place over very long periods of time, and had not been detected easily in fossil records. Finally, the first proof in this direction was provided in the 1920s in peppered moth which showed a rapid shift in allele frequencies due to strong selection pressure. Soon other examples also followed which genetically explained the Darwin’s theory.Significant criticism of Darwin’s theory has also come from religious sources. Darwin’s theory clashed with religious and philosophical views. The debate between evolutionism and creationism had started with the publishing of Darwin’s “Origin of Species”. Michael Behe – an American Biochemist and Author of several books , in response to Darwin’s theory has said that the cell was a black box to Darwin and its inner workings a mystery. There are a number of similarities between YEC ( Young Earth creationism) and ID ( Intelligent Design), however a significant distinction between them is that YEC does not attempt to identify the intelligent cause responsible for the design in nature. Dawkins, in his book, The Blind Watchmaker, raises a criticism by what he calls the fallacy of “the argument from personal incredulity”. To quote Dawkins-Never say, and never take seriously anybody who says, “I cannot believe that so-and-so could have evolved by gradual selection.”Despite all the debates, Darwin’s theory was revolutionary in itself as was proved in subsequent years. Before his theory, the species were not linked into a single family tree. His theory changed the course of society and science in a revolutionary way.References:
Honeywill, R. (2008). Lamarck’s Evolution: Two Centuries of Genius and Jealousy. New South Wales, Australia: Murdoch Books. Retrieved April 6, 2013
Darwin, C. (1866). On the Origin of Species by Means of Natural Selection: Or The Preservation of Favoured Races in the Struggle for Life. London: John Murray. Retrieved April 4, 2013
Darwin’s Theory of Evolution. (n.d.). In Bioweb. Retrieved April 5, 2013, from HYPERLINK “http://bioweb.cs.earlham.edu/9-12/evolution/HTML/theory.htm”http://bioweb.cs.earlham.edu/9-12/evolution/HTML/theory.htm
HYPERLINK “http://www.allaboutcreation.org/catastrophism-versus-uniformitarianism-faq.htm”http://www.allaboutcreation.org/catastrophism-versus-uniformitarianism-faq.htm
Bronowski, J. (2011). The Ascent Of Man (pp. 219-222). New York: Random House. Retrieved April 5, 2013HYPERLINK “http://faculty.education.illinois.edu/g-cziko/twd/pdf/twd08.pdf”http://faculty.education.illinois.edu/g-cziko/twd/pdf/twd08.pdf
Bedsole, J. (n.d.). The Blind Watchmaker. In Roadrunner. Retrieved April 1, 2013, from http://home.roadrunner.com/~bedsole/personal/rantz/Watchmaker.html
Nets Next Phase Will Weave Through Your Life
Net’s Next Phase Will Weave Through Your Life
I chose my article from the March 2nd edition of the USA Today. It is entitled “Net’s Next Phase Will Weave Through Your Life.” This article discusses the changes in the near future of the Internet. Since its invention less than a decade ago, the Internet has become part of our everyday life. Businesses and consumers alike have used it for different several reasons to accomplish many different tasks.
But some believe that the growth in the usefulness of the Internet is coming to a halt. Many people consider the Internet a bit worn-out. Investors have seemed to abandon it. Analysts worry that nothing is coming to it. To many users, what was radical just years ago may be becoming monotonous.
But the computer industry is looking to change all that. On the horizon, there’s a new wave of the Internet beginning to break. For most users, the Internet experience will change dramatically over the next year or two. The hope for these changes is that the developments will reunite the industry.
Up to this point, the Net has been almost entirely about viewing content or buying products over the Web through a browser and a personal computer. In the next wave, the browser will no longer be a solo act. It will be part of a much larger system that combines hardware and software together to produce much more than was ever before possible. Craig Mundie, the executive vice president of Microsoft, quotes: “Browsing isn’t bad, and it won’t go away. But the browser will become part of a larger context.”
The Internet will be less about going to big sites like Yahoo and Amazon.com and more about using specialized pieces of software that connect to the Net. Current examples of these types of software include Real Player, Napster, and the Miller Lite Beer Pager. Once one of these programs is loaded onto your PC, they work independently of the browser to do their task very well.
Web sites themselves will also work harder and together. For example, a travel site will coordinate your plans online on your computer and then automatically trigger the e-mail software on your PC to notify friends and family of the upcoming trip. More complex software will also work together with web sites to bring services that go far beyond our current shopping, electronic calendars, or travel arrangements. Such sites will help run companies, home office, and personal finance.
Information on the Web, which is becoming much more accessible by cell phones and handhelds, will be available anywhere and everywhere. In order to contact you, Web sites will now call your phone or page you. You will be able to use your cell phone as a remote control to access your PC. For instance, while you are away from home, you will be able to listen to your own music stored on your home PC on another computer. The Net’s connections will no longer go from just PC’s to servers, but every which way. The resulting possibilities from these types of connections are endless.
The next wave of the Net will also cost more. All the things we’ve been getting for free won’t be that way for much longer. As the Net gets bigger, Internet companies will look at the early days of the television as a business model. TV started out free. Once cable and satellite TV services came around, the model evolved into several layers. Free TV still exists, but now you can pay to get a bigger selection of channels, or you can pay more to get special packages such as HBO or pay-per-view sporting events.
As MP3 services become increasingly popular, many believe that they will carve out layers like the TV industry has done. Possibly they will create a free layer where you can get free music from lesser-known artists, up to a premium layer for immediate releases from superstars. It might get disorderly for a while as companies test how much people are willing to pay. But nearly everyone in the industry agrees that it will create a healthier Internet and business experience.
Also, lots of companies will jump on to the trend to make better computer products. Computer-game maker Electronic Arts is the first company to test the capabilities of the new connectivity. Its new game, Majestic, is tagged “the game that plays you.” Instead of being something that you play on the PC, this mystery game leaves clues and sucks you into situations by contacting you every which way – e-mail, instant message, faxes and even phone calls. Every communication device becomes part of the game. Says Electronic Arts’ Joe Keene, “It will invade your life.” Much as the Internet soon will.
I chose this article because of the economic significance the Internet will have on the future of the world’s economy. The Internet was a large reason for the boost of the United States’ economy in the last decade, and there is no reason to think that an improvement in the Internet won’t help the economy grow on an even larger scale.
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