Factor Endowments
The factor endowment attribute in Porter’s diamond model analyses if an organization has a competitive advantage in terms of basic production factors such as location, human resources, and advanced factors such as skilled labor, infrastructure, and technological expertise. Netflix possesses a competitive advantage in terms of its factor endowments since it has an expansive global reach and huge capital outlay. Netflix has achieved tremendous growth in terms of its global reach. Netflix started its operations in the US. Over the years, the company has grown globally to operate in more than 190 countries (Brennan, 2018). Its wide scale of operations comes with a massive customer base, estimated at 130 million subscribers, enabling the company to distribute both its original and licensed content to an extensive network (Brennan, 2018). Netflix’s massive geographic reach is synonymous with the classic endowment of land.
Netflix also has a huge capital outlay that allows it to produce original content and acquire license for non-Netflix produced content. Netflix registered revenues amounting to $20 billion in the fiscal year 2019 (Netflix, 2019). The 2019 revenues were a 31% increase from the previous year’s earnings. The availability of capital enables the company to keep supplying its subscribers with frequent and diversified content.
Delegate your assignment to our experts and they will do the rest.
Demand Conditions
Sophisticated and demanding customers push organizations to offer high-quality and innovative products or services. The provision of high quality and innovative goods or services enables organizations to remain competitive. When compared to other firms in the media streaming industry, Netflix is way ahead of its competitors. Netflix were the innovators of the streaming of digital content. As such, they enjoy the first movers’ advantage of possessing an extensive library of content and consumer data which is essential in establishing consumer preferences (Christian & Spooner, 2017). Netflix enjoys notable brand recognition. The entry of Netflix into the digital streaming market was quickly followed by competitors such as Hulu (Christian & Spooner, 2017). In its competition with Hulu, Netflix had the competitive advantage of offering both originally produced content and licensed content, unlike Hulu, which depended only on licensed content.
In the present day, Netflix continues to face increased competition with several content creators and studios joining the media streaming industry. Some of the notable players in this industry include Hulu, Amazon Prime Video, Facebook Watch, and Youtube TV. The last year saw more content creators such as Apple, Disney, WarnerMedia, and NBC launch and grow their media streaming services (Molla, 2020). Some of the platforms launched in the last year include Disney+, Apple Tv+, Peacock, and HBO Max (Molla, 2020). The launch of some new streaming services means that Netflix can no longer acquire licensed content from studios such as Disney. Consequently, its content library is expected to decrease. However, Netflix had planned for the increased competition by focusing its resources on producing its original content.
Related and Supporting Industries
Thriving related and supporting industries are associated with the consequent success of the other industries. Although Netflix has not made direct investments into any particular supporting industry, it has struck partnerships with television manufacturers, a move that has enabled it to further its global reach. Smart technology has been adopted in the manufacture of televisions. Netflix has partnered with television manufacturers such as LG and Visio, to have the Netflix application preinstalled in their smart TVs (Fowler, 2019). In the traditional sense, supporting industries should be located in close proximity. The installation of Netflix application into the smart televisions makes the two industries, digital streaming, and television manufacture, to be close in terms of industrial relations. The partnership has enabled Netflix to acquire a competitive advantage and expand its global reach.
Strategy, Structure, and Rivalry
The strategy, structure, and rivalry attribute refer to the conditions regulating how an organization is operated, organized, and managed. The attribute also refers to the nature of the rivalry in the particular industry. Vigorous rivalry in an industry is associated with the development and persistence of competitive advantage. Netflix’s competitive strategy has been based on producing original content (Christian & Spooner, 2017). The company’s growth has also been aided by licensing and distributing old TV shows and movies (Molla, 2020). However, the original content strategy has proved to be the most successful, especially in the wake of increased competition from content creators joining the digital streaming industry (Molla, 2020). Netflix’s strategy has given it a competitive advantage over its rivals in terms of content size and availability. The ever-growing pool of original content has propelled the company to success. In 2019, the company received the most nominations, 24, in the Oscar Awards (Molla, 2020). The nominations are essential as they increase its brand visibility, which translates to increased growth, further enhancing its competitive advantages.
Government and Chance
Government policies and regulations influence Netflix’s services through trademarks and regulations for entry into particular markets. Netflix holds the trademark to its popular and user-friendly interface that gives it some competitive advantage over its rivals (Penamatsa, 2018). Netflix’s original programs are also protected by the copyright laws that enable the company to protect its content from copycat programming, thus maintaining its original content competitive advantage over its rivals.
The growth in smart technology, which was mainly due to chance, has allowed Netflix to increase its availability as its services can be accessed from mobile phones, tablets, smart televisions amongst other devices. Advancements in mobile technology and higher internet speeds are the other developments based on chance that have favored the growth of Netflix since consumers can easily use the internet to stream their favorite content (Christian & Spooner, 2017). The combination of the government and chance factors has catalyzed Netflix’s growth.
References
Brennan, L. (2017). How Netflix expanded to 190 countries in 7 Years . Harvard Business Review. Retrieved 3 January 2021, from https://hbr.org/2018/10/how-netflix-expanded-to-190-countries-in-7-years.
Christian, R., & Spooner, W. (2017). Netflix Inc. Tippie.uiowa.edu. Retrieved 3 January 2021, from https://tippie.uiowa.edu/sites/tippie.uiowa.edu/files/documents/krause/f17_nflx.pdf.
Fowler, G. (2019). You watch TV. Your TV watches back. Retrieved 3 January 2021, from https://www.washingtonpost.com/technology/2019/09/18/you-watch-tv-your-tv-watches-back/.
Molla, R. (2020). How Netflix is winning more with less content . Vox. Retrieved 3 January 2021, from https://www.vox.com/recode/2020/1/27/21083551/netflix-library-titles-decline-awards.
Netflix. (2019). Netflix Annual Report . Sec.gov. Retrieved 3 January 2021, from https://www.sec.gov/ix?doc=/Archives/edgar/data/1065280/000106528020000040/form10kq419.htm.
Penamatsa, V. (2018). Netflix Inc.: A strategic analysis [Ebook]. Retrieved 3 January 2021, from https://static1.squarespace.com/static/5bb796f2f4755a60eed59e31/t/5cea1f574785d31a375eeeb7/1558847328948/Netflix+Strategy+Analysis+.pdf.
