Netflix is an American company
founded by Reed Hastings and Marc Randolph on August 29, 1997. It provides
streaming media/video-on-demand online and DVD by mail. It is into film, television
production and online distribution. It has its own content production of series
and films (Netflix Original). The headquarter is in Los Gatos, California. (En.wikipedia.org,
2017). It entered India on January 6, 2016. The competitors are Hotstar, Eros
Now, Hooq, Spuul, Google Movies etc. (Indiatoday.intoday.in,
2. SWOT Analysis
Netflix is new to India and SWOT
is the first stage of analyzing the new business venture which will identify
the internal and external factors that can impact to become successful in
achieving the objectives.
United with Phantom films for original series
and with ShahRukh Khan’s production house for films. ([email protected], 2017).
The strategy will promote Netflix and help in penetrating the market.
Aligned with Bharti Airtel and Videocon to be
available on the mobile and direct-to-home platforms. ([email protected], 2017).
This will increase the viewers gradually.
Partnered with Vodafone ([email protected],
2017). This will enhance customer service by making payments convenient.
Premium pricing targeting the high end
customer as it isn’t a first mover in India.
The target audience from tier 1 cities has small
bundle of population.
Original content will be
sustainable and differentiator. ([email protected], 2017) Competitors are
working well with originals and Netflix can win over them by doing more
creative and quality originals.
Reliance Jio has lowered data
prices. This will help Netflix to resolve its issue of internet.
Lower returns in the short term.
Piracy is rampant.
3. PESTEL Scrutiny in
terms of globalization and Critical Success Factors
PESTEL will help to scan the environment to find out the
external influences on Netflix business in India.
Political: “I dream of a digital India where access to information
knows no barrier”- PM Narendra Modi. (The Economic Times, 2014)Netflix is going
to reap the benefits as there is a huge political support to make internet a
common utility for the people.
Economical: The economy is growing and people are becoming tech
savvy. The living standards have improved. For E.g- Smartphone used to be a
luxury ten years back and now it is a normal device even in middle class
Socio-cultural: The new generation of people including, the
children have become fond of smartphones. Watching movies has become a routine
whereas Fridays are for socialization/recreation. Netflix is taking the
advantage of this mega change.
Technological: India has over
300 million people having access to the internet and is the second most
connected nation in the world due to influx of low cost smart phones/laptops. (Techinasia.com,
2015). There is a market who love to work online and prefer online
4. Resource Based View and Value Chain Analysis:
The differentiation advantage for
Netflix in India is the international brand name which is big in the US which
is the leader of the economy of the world. It is known best for Hollywood
movies and using the same strategy to attract the upper middle class and above
customers in India. Their global pricing also matches the customer segment in
this way. The brand equity which is an intangible resource has allowed Netflix
to add value in customer value chain and grow in India to achieve sustainable
competitive advantage. The brand value cannot be easily transferred or
purchased and at the same time is difficult to be imitated by the competitors.
The core competency of Netflix is
their original content. Netflix became a hit once they started their own series
like ‘Sacred Games’, ‘Selection Day’, ‘Again’, etc. (Netflix Media Center, 2017).
It would also be relevant on global scenario. Netflix is teaming with Red
Chillies Entertainment to produce eight- episode political series ‘Bard of
blood’. It is targeting 5-6 originals in a year with world class talent. Indian
audience and particularly housewives in India have huge interest in television
series and if such local content in Netflix increases the fanfare is likely to
increase. Netflix wanted to compete with Amazon Prime who planned to come out
with dozen series. Netflix is also planning to target children in 2018 with its
first kids original series- ‘Chhota Bheem’ which will be an animated series to
attract the young people of India. (SN, 2017). Netflix is planning to set up
studio facilities for production and development of shows. It has 104 million
subscribers globally out of which a large number are from outside of US. This
proves to have the company’s strategy in developing original content including
in India which has a scope and a huge market. (Laghate, 2017).
The other core competence of
Netflix is technology which is explained in the value chain below.
Vendor relationship is a
capability of Netlflix in India where they are majorly partnering with
production houses, television channels and movie distributors. In terms of
relationships the major achievement has been with Shah Rukh Khan for Red
Chillies Entertainment and Phantom as well.
Netflix is adding value to its
brand through two of the primary activities of value chain as below:
Service: Reed Hastings who
is the CEO of Netflix visited India in March 2017 to understand the market more
and promote the company. He even took a bike ride in Old Delhi to understand
the pulse of customers and understand the economy. He tied up with Vodafone to
for easy payment of Netflix subscriptions. (Rediff, 2017) For the new customers, it can be observed
that the internet is filled with all the service details including contact
details and their website is self explanatory.
Marketing and Sales: When Reed Hastings was in India in 2017, he
also partnered with Airtel DTH and Videocon D2H
to widen Netflix’s reach. He met their rivals and bollywood stars to
know more on Indian entertainment ecosystem. (Rediff, 2017).
The support activities are also
adding value as explained below:
Technology Development: Though data costs are high and internet
speed is slow in India, Netflix is using its “Open Connect” program to tackle
these issues. The “Open Connect” feature will provide high quality videos by
partnering with Internet Service Providers(ISPs) to localize substantial
amounts of traffic with Open Connect Appliance embedded deployments with open
peering policy at the interconnection locations. This will make internet usage faster
without network congestion. Netflix is also working hard on video formats where
the viewers can stream videos any any bit rate which can allow for less data
using up. This will be a major innovation from Netflix in India to resolve the
issues of high cost of data. (Forbes.com, 2017)
6. VRIO Framework
From the above literature in RBV we can deduce the VRIO
model as below:
Valuable- Netflix’s capability to partner with vendors within a
short span of time in India is an achievement. It shows that they are ever ready to build
relationships, improve networking and gain confidence to become a trusted
online entertainment service provider. They have demonstrated the behavior of
willingness to learn the market, collaborate and portray themselves as a
professional. Such kind of strategy and signing up big celebrity like Saif Ali
Khan for one of their original series is a huge triumph to excel in India. They
are building their brand value and gaining customer’s confidence. NetFlix’s original content is the most
valuable resource in India. Original content is the backbone which can garner
interest of the customers. Indian viewers are fond of series and soaps on TV
with channels like Zee, Sony etc and Netflix are aware of it. They want to
create better content and it will to make Netflix’s unique selling point. (Avari,
2016). Their strong global presence is also a capability and has provided them
an advantage over competitors to increase their sales and market share.
Rare- Netflix’s technological capability is rare in India. The
technology capability of Netflix on video formats and Open Connect Program has
neutralized the threat of broadband issues in India. It has a strong IT human
resource that has been successful in implementing easy user interface which has
made it successful and increase the value for customer. It is an innovation
which Netflix has adopted to increase the viewers and grow in India. Netflix
could resolve what was bothering them to grow and they have adopted to
internally resolve the issue when they saw that the government of India to
improve the internet service will be taking a longer period of time. This is
the new competitive advantage for Netflix which is becoming their strength when
competing with Amazon and Hotstar. At the same time, their app is more user
friendly and seamless in terms of usage than its competitors like Amazon and
Hotstar. (Gangwar, 2017). This will provide high visibility to Netflix and a good
brand image amongst the users. Customers can be regularly updated and notified
on the products and offers. The best part is that the on-go customers can be
attracted which will eventually increase the customer base.
Costly to imitate- Netflix is a US company with large capital and
investments. They want to make it big in India because of the market
potential. Their financial resource and
vision to grow in India is a costly affair. The relationship built with famous
production houses and personally understanding customer in the market is
something which Netflix has unique feature in terms of building potential
market in India. The brand of the company is also difficult to imitate as the
perception of the customer about Netflix revolves around quality and service.
Organized To Capture Value: The management system seem to be robust
in Netflix. Everyone is into increasing the market share in India in the
upcoming years. Hastings personally visited India to understand the market and
teamed up with bollywood members, mobile network owners, television services
etc. They are very strategic when it comes to even capturing young market of
India when they decided to start animated series of ‘Chhota Bheem’. The management practice particularly human
resource practice is one of the best and they are going to follow the same in
the big Indian market. (Peoplematters.in, 2017). Another important aspect is
the culture of the organization. Human capital is highly motivated to work
there as their core philosophy is people over process. Their real values of the organization where
they follow religiously are specific behaviors and skills are cared the most. Netflix
wants to build the similar culture as that of USA where work is fun, challenging
and flexible. A good working environment and corporate culture attracts
talented human resources and the attrition level tends to be low which in turn
the employees can become the real assets of the organization with high level of
productivity like in Netflix India. (Jobs.netflix.com, 2018)
7. BCG Matrix:
Netflix in India
Netflix originals are taking its
pace in India and are stars in the matrix. Netflix is likely to invest $300
million in India to focus on local content. This is higher than Amazon’s $75
million investment. Their strategy from
English content to local content is going to produce sustainable competitive
advantage in the Indian market. Netflix is soon launching India-specific comedy
too. Forbes.com. (2017). The growth rate is high in this segment of
Netflix and can soon become a cash cow to generate future revenue in the long
term. The movies are not much in good
quantity in terms of local language in India and therefore it is still a
question mark with more investment needed to grow. Amazon Prime- the major
competitor of Netflix is doing better in the local movies segment. (Gangwar,
2017). The case is similar with TV shows
in Netflix which is lesser in terms of number and popularity than its
competitors and they need to improve on this segment.
8. Porter’s Five
Porter’s Five Forces will help Netflix analyze the
competition in the market.
Threat of New Entrants: High-Amazon Prime-online video streaming
entered India within a year of Netflix’s entry and is doing good business. The
switching cost for viewers is less and government of India is welcoming to
Threat of substitutes: High-For E.g. Youtube is a major substitute
for movies and TV series which is for free of cost.
Bargaining power of
Buyers: High-The competitors of Netflix have lower prices.
Industry Rivalry: High- Hotstar, Voot and Amazon Video are some of
the competitors of Netflix. Level of advertising and competitive pricing
strategy has given Netflix a tough time to sustain.
10. Key Issues of
Netflix and Recommendation
The summary of major issues are:
Price- Expensive for Indian market in comparison
to the competitors like Amazon Prime and Hotstar.
Piracy- Piracy rampant and free sites are plenty
which will decrease the revenue generation.
Pricing should be reconsidered looking at the
middle class population and competitors.
More options of payment can be made to attract
Need more original series with more local
Try to cover even the middle class people and
tier 2 and tier 3 cities of India.