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These all stream from its highly flexible business model. Rather than create brick-and-mortar rental locations, as most other rental businesses do, Netflix has an extensive distribution system to deliver media directly…
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Netflix - SWOT analysis and managemetn characteristics
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Prof’s Netflix SWOT Analysis and Management Characteristics Strengths A flexible, low cost business model Future-proofed
High scalability
Netflix has numerous strengths as a media rental business. These all stream from its highly flexible business model. Rather than create brick-and-mortar rental locations, as most other rental businesses do, Netflix has an extensive distribution system to deliver media directly to subscribers doors. This drives down overhead drastically, while providing added convenience for subscribers. This content delivery model is also highly scalable: it is easier to reach out to new markets through mail delivery than it would be through brick-and-mortar outlets, which require leasing of new space, building infrastructure and so forth. Finally, the Netflix model is future-proofed, because the streaming business that originally augmented dvd rentals can grow with the demand for streaming content.
Weaknesses
Barriers to entry
Netflix has relatively few weaknesses, but those that exist revolve around the novelty of its business model. People who are not comfortable with the internet (such as aging or rural people) will be resistant to this radical change in rental – furthermore, the subscription service is a barrier to entry to occasional renters or those that rent movies only occasionally.
Opportunities
Distribution Network
Online distribution of media
There are extensive opportunities for Netflix. Its robust distribution network, able to get items to consumers in one business day, could be used to distribute other content or products should Netflix decide to expand. Video games or related media spring to mind as an especially viable option, but perhaps Netflix could also expand to book rentals, music rentals and so forth. Netflix is currently also a leader in online streaming video distribution. The obvious growth opportunity here is the development of original material for Netflix online, giving consumers a reason to stick with Netflix rather than go to the numerous copy-cats that exist and have sprung up after Netflix’s success.
Threats
Self cannibalization
Upstart competition
Netflix, though robust, is not immune from outside threats. One of the biggest threats is the threat to the rental industry in general: the future of media delivery is streaming, but Netflix still relies heavily on dvd rentals for its profit margins. There is danger that Netflix could hurt its own dvd business by building a more robust streaming business, and vice versa. Classic wisdom indicates that people will choose to watch content on one of those two ways, not both. Furthermore, now that Netflix’s model has proven profitable, they will face major competition from upstart companies that might have less pressure to make a profit and lower initial costs.
Management Characteristics
Netflix has a business philosophy that embraces change. It emerged through the understanding that consumers’ demands were quickly shifting, and Netflix has proven agile in keeping up online content while also respecting traditional needs of dvd renters. It will likely prove willing to shift business models quickly should the market demand it – for instance, recalibrating to push its online streaming in a more aggressive way. Read More
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