Answer to Question #274695 in Management for jai

Question

3. Apply Porter’s competitive forces model to analyse the strategic position of Netflix in its industry.

Answer 1

Netflix, Inc. is one of the most well-known companies in the CATV Systems industry. Netflix, Inc. has revolutionized the way people do business in the Services’ industry over the years. Netflix, Inc. is a publicly traded company on the New York Stock Exchange (NYSE) with a market capitalization of 65.41 billion dollars. The Porter Five Forces model is a holistic strategy paradigm that decouples strategic decision-making from a simple analysis of the current competition. The Porter Five Forces analysis looks at how Netflix, Inc. can gain a long-term competitive advantage in the CATV Systems market. Managers at Netflix, Inc. can use Porter Five Forces not only to create a strategic position in the CATV Systems market, but also to investigate profitable opportunities across the whole Services sector.

New entrants in the CATV Systems market provide innovation and new ways of doing things, putting pressure on Netflix, Inc. to lower prices, cut expenses, and provide new value propositions to customers. Netflix, Inc. must deal with all of these issues and put in place effective barriers in order to maintain its competitive advantage. Netflix, Inc. can combat new entrant threats by developing new products and services. New items not only attract new customers, but they also provide existing customers an incentive to continue purchasing Netflix, Inc.'s products. By achieving economies of scale, lowering the fixed cost per unit, increasing capacity, and investing in research & development. Newcomers are less inclined to enter a dynamic market where established companies, such as Netflix, Inc., are constantly setting the bar. It drastically reduces the window of spectacular earnings for new businesses, discouraging them from starting out.

Almost every company in the CATV Systems business obtains its raw materials from a variety of sources. Suppliers with a strong position in the market can reduce Netflix, Inc.'s market margins. Suppliers with clout in the Services sector utilize their clout to extort higher rates from CATV Systems companies. Higher supplier bargaining power has the overall effect of reducing CATV Systems' total profitability. Netflix, Inc. can deal with supplier bargaining power by establishing an efficient supply chain with several suppliers and experimenting with product designs utilizing various materials so that if one raw material's price rises, the company can switch to another.

Buyers can be a demanding bunch. They aim to get the greatest deal possible by paying the least amount of money feasible. In the long run, this put a strain on Netflix, Inc.'s profitability. The smaller and stronger Netflix, Inc.'s client base is, the greater the customers' bargaining strength and capacity to seek growing discounts and offers. By amassing a big client base, Netflix, Inc. may combat Buyer Bargaining Power. This is beneficial in two ways. It will lower buyers' bargaining power and provide the company the opportunity to streamline its sales and production processes. By developing new items at a rapid pace. Customers frequently seek discounts and special offers on well-known products, so if Netflix, Inc. continues to introduce new products, it may reduce purchasers' negotiating power.

Industry profitability decreases when a new product or service meets comparable client wants in different ways. Services like Dropbox and Google Drive, for example, can be used to replace storage hardware drives. If a substitute product or service offers a value proposition that is significantly different from the industry's current offerings, it poses a significant threat. Netflix, Inc. can combat the Treat of Substitute Products / Services by focusing on service rather than product and knowing the customer's underlying need rather than what they are purchasing.

If there is fierce competition among current participants in a sector, prices will fall and the industry's overall profitability will suffer. Netflix, Inc. competes in the CATV Systems industry, which is very competitive. This competition has a negative impact on the organization's overall long-term profitability. Intense Rivalry Among Existing Competitors in the CATV Systems Industry can be addressed by Netflix, Inc. by establishing a durable distinction and gaining scale in order to compete more effectively.

Netflix, Inc. strategists can acquire a thorough picture of what effects the organization's profitability in the CATV Systems business by examining all five competitive forces. They have the ability to spot game-changing trends early on and move quickly to seize the opportunity. Managers at Netflix, Inc. may modify the Porter Five Forces in their favor by thoroughly understanding them.