NETFIX PRESENTATION

TABLE OF CONTENTS
1- Introduction
2- current situation
3- Strategic posture
4-Corporate Governance
5- Tows Matrix
6- Alternative Strategy

INTRODUCTION
Netflix, Inc. The company was founded in 1997 and is
headquartered in Los Gatos, California.
Netflix operates as an Internet television network, is
engaged in the Internet delivery of TV shows and movies
directly on TVs, computers, and mobile devices in the
United States and internationally. The company operates
in three segments: Domestic Streaming, International
Streaming, and Domestic DVD. The company also
provides DVDs-by-mail membership services

STRATEGIC POSTURE
Mission
To deliver excellent service and the latest technology to consumers worldwide.
At the same time valuing honesty, integrity, empowerment and openness. By consistently aiming for
breakthrough excellence in technology development, we believe we will stay close to our consumers and
communities.
Vision
To become an established global force in the home entertainment industry with a strong and loyal
customer base, enabling it to invest in a robust, innovative marketing plan which will keep it top of mind
within all its target markets
Objectives
To continue develop new products quickly giving us a crucial competitive advantage
Well spend in 2014 over $600M in marketing to attract people around the world to try Netflix, and to
reinforce with our members why Netflix is worthy.
Well invest in 2014 over $400M on technology development to continue to improve our service and our
app on the very broad range of platforms we support.
Strategy
Our strategy is to expand as quickly as possible while staying profitable on a global basis, as long as
there are compelling markets to expand into, and we are continuing to see growth in our current
markets.

STRATEGIC MANAGERS
Key Executives

Mr. Reed Hastings, 53

Founder, Chairman, Chief Exec. Officer, Pres and Member
of Stock Option Committee
Mr. David Wells, 43
Chief Financial Officer and Chief Accounting Officer
Mr. David Hyman, 48
Gen. Counsel and Sec.
Mr. Neil Hunt, 52
Chief Product Officer
Mr. Theodore A. Sarandos, 49
Chief Content Officer and VP of Content

CORPORATE GOVERNANCE
Structure and Members
Board Size
Netflix board is made up of seven members:

Reed Hastings, Netflix, CEO

Richard Barton, Zillow Inc., CEO
George Battle, Investor

Charles H. Giancarlo , Managing Director

Timothy Haley, Managing Director
Jay Hoag, General Partner
Ann Mather,, Director

Audit Committee
Members: Giancarlo, Haley, and Mather
Chair: Mather
Board Independence
Six of the members are designated as Independent as in they have no part in the day-to-day
operation of the company. The Dependent member of the board is the CEO. The board totals
seven members. The chair person is also the CEO.

CURRENT PERFORMANCE
Period Ending

30-Sep-14

30-Jun-14

31-Mar-14

31-Dec-13

1,409,432.00

1,340,407.00

1,270,089.00

1,175,230.00

Cost of sales

954,394.00

914,848.00

869,186.00

786,730.00

Research Development

120,953.00

115,182.00

110,310.00

98,128.00

Selling General and Administrative

223,678.00

180,777.00

192,998.00

208,084.00

Operating Income or Loss

110,407.00

129,600.00

97,595.00

82,288.00

616.00

1,100.00

1,401.00

(846.00)

111,023.00

130,700.00

98,996.00

81,442.00

Interest Expense

13,486.00

13,328.00

10,052.00

7,438.00

Income Before Tax

97,537.00

117,372.00

88,944.00

74,004.00

Income Tax Expense

38,242.00

46,354.00

35,829.00

25,583.00

Total Revenue

OIE
Total Other Income/Expenses Net
Earnings Before Interest And Taxes

Minority Interest
Net Income

Share price:

59,295.00

71,018.00

53,115.00

48,421.00

Year

DecNovDec-10 Dec-11 Dec-12 Dec-13

09
14

Closin
g
$175.7
$368.1 $346.5
$55.09
$69.29 $92.59
Share
0
7
9
7
Price

EFAS ANALYSIS
Opportunity

Weight

rate

Weighted
rate

Comments

Grow internet users

0.05

4 0.20

targeting middle age customers 18-34 years

0.06

5 0.30

targeting International market

0.05

3 0.15

Netflix ,major market share related age

between 18:34
Netflix Suceed to target Canada ,UK, Latin,
America,Asia

24.4 million subscribers

0.09

5 0.45

current customers

entertainment now a growing market

increase world population to 6.1 in 2000 to
7.2 billion in 2014

0.09

5 0.45

0.10

4 0.40

0.07

3 0.21

Customers are price sensitive

0.09

3 0.27

one of main thread to Netfix

Slow internet speed in Latin America

0.03

2 0.06

Technology is ever changing

0.10

4 0.40

continue change in R&D have a high cost

impact

new application for X box , Wii , PS3

0.05

4 0.20

changes in US copyrights law

0.09

4 0.36

Change in customer buying behavior

0.04

2 0.08

renew license agreement

0.09

4 0.36

increase mobile internet

Thread

IFAS ANALYSIS
Weig
hted
rate

Strength

Weig
ht
rate

Netflix still claim its top position due to strong Brand

0.15

4 0.60

Enable customer rating the movies

0.05

3 0.15

Easy access to online movies selection

0.10

4 0.40

Low cost product

0.06

5 0.30

Resources and capabilities serve as a source of competitive advantage

0.12

4 0.48

lead to customer satisfactoin

low cost represent competeive advatage to
Netflix
competent resources represent competeive
advatage to Netflix

Weakness

Centralized decision by CFO Reed Hasting

Misunderstand customer needs in Sep.2011 by create new website that
confused customers

0.12

4 0.48

Reed Hasting cause customer confusion when

he change the web

0.12

5 0.60

Lost and defective DVD cost

0.11

4 0.44

cost of inventory disposal is too high

Takes time to add movies and movies and TV shows

0.10

2 0.20

Lack of Streaming Content

0.07

2 0.14

Total

1.00

3.79

Comments
strong brand name
good approch to measure customer
satisfaction

between average and above average

NETFLIX 5 PORTER FORCE

Threat of entry , is low due to high capital requirement to
obtain film library plus high cost of advertising
Rivalry : high due to availability of many competitors
Threat of substitute :high represent online free TV ,
physical attend the movies , watching TV
Threat of Buyer: low thread of buyer due to availability of
others competitors provide the same services
Power of supplier : is high due the existence of few
suppliers (like Walt Disney & Sony corporation , Discovery ,
CW network ) , also in spite Netflix obtains independent
films which are not picked up by large film companies

10

NETFLIX SWOT
Strengths

1- Strong Market Leader

2- Significant increase in gross profit
3- Positive free cash flow.
4- Netflix are market leader for R&D.

Weaknesses

1-High Shipping Expense

2-Weak access to older demographics
3-Centralized decision by CFO Reed Hasting
4-Misunderstand customer needs in Sep.2011 by
create new website that confused customers

5- Flexibility: usage of internet, pre-paid postage envelopes,

5-Legal tangles impact brand image and
combined with no due dates, provide superior value proposition . financial position
6- Low Fixed Costs

7-Fastest DVD Delivery Among Competitors

Opportunities

Thread

1-Growth in online spending will strengthen Netflixs core market 1-changes in US copyrights law .
2-Smart TV sales are increasing and eventually every TV will have
2-Customers are price sensitive.
Wi-Fi and apps;
3-Smart TV adapters are getting better and cheaper;
4-Tablet and smartphone viewing is increasing;

3-Rising competition (e.g. Walmart, Amazon,

HULU)
4-Rising Stamp costs

5-Internet TV apps get frequent improvement updates;

5-Netflixs brand could be damaged by the

actions of third parties (electronics
manufacturers or DVD suppliers)

6-Growing demand for online video streaming has already

increased viewership

6-Video on Demand Competition Streaming like

Google , YouTube , Redbox, now streaming and
DVD

7-TV Everywhere provides an economic transition for existing

networks.

8-Netflix are innovating rapidly and driving improvements

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TOWS MATRIX
RECOMMENDED STRATEGIES
SO strategies
1-Market penetration strategy s1,s5,o1,2,3,4,5,6
2-Product development strategy s4, s5,o7,o8
3-Vertical integration (market development s1,s2,o2,o 8,o7
WO strategies
1-Marketing awareness plan by using smart phone applications w4,o4
2-Strategic alliance with shipping companies like Aramex or DHL w1,o8
3-Market penetration to old demographics w2, o6
ST strategies
1-Decreasing prices T3,T4,O1,2,3,6
2- increasing Marketing activities O1,2,3,T3
WT strategies
1-Offers, promotions and discounts T2,T3 ,T4, W1,W4,W5.

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GROWTH STRATEGY (INTEGRATION)

Integration CNTD(Horizontal )
Expanding operations into other geographic locations
and increasing range of products / services through joint
ventures and acquisitions
Netflix can expand in Canada ; UK ; Latin America ;
Ireland and Asia.
Advantages : Increase in market share; increase in
revenues ; Europe also offers Netflix more regulatory
certainty than the United States and growth in US begin to
slow ; huge market and low barrier of entries in Asia

13

GROWTH STRATEGY (INTEGRATION)

CNTD
Disadvantages
exclusive rights to some of the programming that Netflixs
service typically carries (France)
Expected price wars
Fierce competition (giant sky in Britain, Canal plus in France
and Deutsche Telekom in Germany )
The competition for the best programming
French laws require a delay in the online release of films until
at least three years after they are shown in movie theaters
Latin America have low per capita income
Asia : depends on local content in entertainment , different
culture
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STABILITY STRATEGY (NO CHANGE)

III . Stability strategy (No
Change )

Netflix is a strong
market leader, it has
more than 20 million
subscribers by the end
of 2010, has captured
around 61% of the US
online DVD rental
market share

15

STABILITY STRATEGY (NO CHANGE)

CNTD
No Change
Netflix has been ranked
as no.1 in online retail
customer satisfaction
There is little product
differentiation and so to
attract customers
through affordable
membership fees
Risk : intense
competition / Threat to
existing market share
16

GROWTH STRATEGY (DIVERSIFICATION)

RECOMMENDED
II . Growth through Related Diversification
stream music in addition to movies
It could include sound-tracks for the movies it streams
along with the mainstream music
video games (add more market segments and add niche
market.)
Creating mobile apps for video streaming
Many tablets offer an ability to wireless stream video
content from the tablet to a larger TV
Advantages : market share; revenues; market
leader, high barrier of entry
Disadvantages: cost of R&D
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BUSINESS STRATEGY
Netflix is recommended to pursue a competitive strategy
through differentiation and product development through
the introduction of: video gaming / music streaming / mobile
apps.
if Netflix seeks to position itself as a leader in streaming
digital content; they must invest in research and
development
Netflix should acquire a smaller tech firm that focuses on
developing higher quality online video streaming
Netflix should utilize Technology developed internally in
house- to manage the newly developed applications

18

FUNCTIONAL STRATEGIES
Marketing strategy:
Netflix is an on-demand internet streaming media and DVD
rentals.
Product development diversification strategy will be the base of
Netflix marketing strategy: streaming music & sound-tracks; video
games ; and cell phones applications
Netflix can use pull strategy to create awareness, it should initiate
promotions for the new products (ex. Free trials; free download of
applications, advertise through cell phones)
Pricing: communicate the price stability and the one free month.
Use pricing as a last resort measure to increase margin
Use penetration pricing with the new products to hasten market
development gain market share with low price and dominate
industry.
Accommodate different internet speed and more medium for
payments
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FUNCTIONAL STRATEGIES
MARKETING CNTD
Netflix marketing mix
Product:

Add more recent movies & soundtracks

Sports instant streaming
expanding the library collection
Accommodate different internet speed
More medium of payments

Process :
simple self-service
easy to access the new application

Promotion:
Sponsor film and music festivals
TV commercials, social media and internet ads to emphasis on
free month trail
20

FUNCTIONAL STRATEGIES CNTD

Research and development (R&D)
Netflix as a technological leader to be in strategic alliance
with ISP providers
Netflix should utilize in-house technology in developing cell
phone applications; major activities cannot be outsourced
Netflix needs to develop both product R&D related to
innovation and process (Engineering) R& D related to low
cost as well.
Focus on creating its own content to maintain competitive
advantage
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HUMAN RESOURCES
HR department in Netflix is called talent
management
Offers training in customer service and operations
360 performance management
Netflix needs headhunting cloud services people from
elite companies like Amazon, eBay, Google, and
Facebook.
Training
for
the
in-house
newly
developed
product(mobile applications ; new streaming)
Monetary compensation along with Non-monetary
rewards to motivate employees & attract talents
22

FINANCIAL STRATEGY
ability to raise capital to support business strategy
Incremental raise in prices to fund the new content
1 US dollar for new subscribers can add roughly $500 million
in annual incremental revenues in the U.S. alone by 2017 with
this move from the other side Netflix still maintain its caution
to price increase as customer very sensitive to price

Increase its R & D budget next year and continue to

do so
Choose to stream content only, milk its mailing
DVDs within the next five years (declining product)

23

IMPLEMENTATION PLAN
Human
Resources

1 - Construct staffing
plan for the R&D ,
customer support
(Human resources

Finance

Marketing

Research &
Development

1- Start promotions
for the new
products (music
1- Construct R&D
streaming / mobile
teams
applications
2- Start Strategic
- One Month free
alliance with ISP
1- Raise Capital
- Free Download for
providers who can
through
the mobile
support the mobile
incremental raise application
application and
in prices
- Easy access for
internet streaming
the application
3- Develop Mobile
- Simple self
application
service
- Wide range of
varieties (movies /
sound tracks )
24

IMPLEMENTATION PLAN CNTD

Human
Resources
2- Headhunt R&D team for
the newly in-house
developed application
(mobile application) from
Elite companies

Finance

Marketing

Research &
Development

2- TV commercials /
social Media /SMS's
3- Sponsor Film
festivals / Music
festivals

4- Coordinate with the

Marketing department
to initiate the
promotion campaign
before the launch of
the product

3- Follow up and
analyze change in
3- structure Training for the revenue in financial
current employees
statements after the
introduction of mobile
applications &
streaming music

4- Accommodate
different payment
categories for price
sensitive customers

5- Launch the product

4- Structure compensation
plan (Monetary
compensation along with
Non-monetary rewards to
motivate employees &
attract talents )

6 - Receive
5 - Follow customers'
customers' feedback
review and feedback
through marketing
through CRM databases department and
after new products
update / amend
launch
product in accordance
25
to customers' review

2- Raise capital for

R&D

EVALUATION & CONTROL

Determine what to
measure

Increased market share

Increased customer
satisfaction

Revenue Increase

Establish Key performance

indicator
KPI's

Measure performance

Increase in monthly subscription

measure increase in
within the new segments targeted monthly subscriptions
(young age targeting video games
and investigate age
and frequent users of mobile
groups newly
applications
subscribing
investigate monthly
reviews , Develop CRM
databases for
collecting retailer,
positive review of the new
consumer feedback
application & the new products
and insights into future
needs, wants, industry
trends, (market
intelligence
investigate income
statements and
analyze the
Increase in revenue resulting from
incremental change in
new products
revenue since the
launch of the new
products 26

EVALUATION & CONTROL

CNTD
Determine what to
measure

Churn

Subscriber
Acquisition Cost

Establish Key performance

indicator KPI's
Churn is a monthly measure
defined as customer
cancellations in the quarter
divided by the sum of
beginning subscribers and
gross subscriber additions,
then divided by three months
total marketing expense
divided by total gross
subscriber additions.

Measure performance

Review churn metric to evaluate

whether Netflix retaining its
existing subscribers in
accordance with the business
plans.
evaluate how effective the
marketing programs are in
acquiring new subscribers on an
economical basis

27

REFERNCES
Sources :
http://www.wikiwealth.com/swot-analysis:nflx
http://finance.yahoo.com/q/is?s=NFLX
http://www.academia.edu/6830574/Netflix_Case_Study
http://www.teachingtolearning.com/wpcontent/uploads/2012/07/Hoffman_C_Governance_and_
Stewardship_v1_r1.pdf
Yahoo finance
28

Thank you

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