Case 11: Netflix case study analysis questions

1.     How strong are the competitive forces in the rapidly evolving global market for streamed video content? Do a five-forces analysis to support your answer.

·       Competition from rival sellers

·       Extreme competition within rival sellers has companies spending millions in content and original programming and exclusive rights to shows and movies.

·       Competition from potential new entrants

·       New players can easily create content through the usual platforms like Youtube or can setup their own streaming services. However, the established brand like Netflix, Amazon Prime, Binge, Disney plus, etc. makes it challenging to enter the streaming services business.

·       Competition from producers of substitute products

·       Cable and satellite TV can be considered substitutes. However, the convenience of streamed services reduced the immediate threat of substitutes.

·       Supplier bargaining power

·       The demand for quality streaming services has become an ongoing war between providers to get exclusive rights to content providers to attract and retain their subscribers thus leading to a high subscription cost.

·       Customer bargaining power

·       With the influx of streaming services available, customers can easily switch subscription platforms if they are dissatisfied with the content.

2.     What forces are driving change in this market for streamed entertainment? Are the combined impacts of these driving forces likely to be favorable or unfavorable in term of their effects on competitive intensity and future industry profitability?

·       Technological advancement: A favourable effect to both customers and suppliers. Improved streaming technology and a faster 5G internet speed enable higher-quality streaming and can attract more subscribers.

·       Competition: The competition amongst streaming platforms has driven up the costs of the content which is an unfavorable effect to both customers and suppliers.

·       Globalisation: A favourable effects to many streaming platforms as new market means more subscribers and more profits.

·       Content: Quality-themed content means a favourable welcome to customers.

3.     What does your strategic group map of this industry look like? How attractively is Netflix positioned on the map? Why?

CONTENT	High
	Moderate
	Low
	PRICE

 LEGEND:

-       NETFLIX 

-       DISNEY Plus 

-       HBO Max 

-       APPLE TV

         ·           NETFLIX is positioned as a company with a strong focus on original content and premium pricing. NETFLIX's original content focus is a benchmark for all streaming services.                             NETFLIX's global reach has become the company’s competitive advantage. NETFLIX is the                    most recognized streaming platform worldwide.

4.     What key factors will determine a streaming company’s success in this industry in the next 3–5 years?

·       Content Quality and Library: Offering vast and diverse content quality and library of shows will determine the success of any streaming platform in the next 3 to 5 years.

·       Pricing: With more competition in the streaming platform business, a streaming platform company should be balanced. Companies should offer bundled services to lure more customers and subscribers.

·       Partnerships: A streaming platform company should consider partnering exclusively to content creators or studios or probably other streaming platform companies for better content and a much quality-driven content to attract more subscribers.

·       Innovation: In the world of streaming services, technological innovation is a game-changer. Any streaming platform company should strive to develop innovation to attract more subscribers.

5.     What is Netflix’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fits the competitive approach that Netflix is taking? What type of competitive advantage is Netflix trying to achieve?

·       Differentiation Strategy: Netflix produces high-quality original series, films, and documentaries across various genres, catering to a wide range of audiences worldwide. This put Netflix as a gold standard in terms of streaming services.

6.     What does a SWOT analysis of Netflix reveal about the overall attractiveness of its situation in mid-2020?

STRENGTH	WEAKNESSES	OPPORTUNITIES	THREATS
·       Extensive library content ·       Global reach ·       Original content	·       Increasing competition ·       High content costs	·       Global expansion ·       Strategic re-branding ·       Partnerships and collaborations	·       rising operational costs ·       Password sharing

 

7.     What is your appraisal of Netflix’s operating and financial performance based on the data in case Exhibits 1, 2, 5, 6, and 7? What positives and negatives do you see in Netflix’s performance? Use the financial ratios in Table 4.1 of Chapter 4 as a guide in doing the calculations needed to arrive at an analysis-based answer to your assessment of Netflix’s recent financial performance.

·       Positive: Judging from Exhibit 1, the revenues of Netflix have grown significantly since 2015.

·       Negative: Exhibit 6 suggests a drop in paid net additions in the UCAN (US and Canada streaming) area. This translates into a drop in subscribers second quarter of 2019.

·       It seems like Netflix’s net profit margin and ROA are both increasing from 2015 and a steady debt-to-equity ratio, suggesting that the company’s stability is promising.

8.     How well is Apple positioned to compete in the global streaming market as of mid-2020?  What do you see as Apple’s chief competitive weakness, and what can Apple do to correct this weakness?

·       Apple was positioned to compete in the global streaming market but faced strengths and weaknesses in its efforts to establish itself to the market.

Strength ·       Brand recognition ·       Financial resources ·       Original content

Weakness ·       Limited content library ·       Pricing

 

9.     How does Netflix’s competitive strength compare against that of 2–3 streaming rivals you deem most likely to challenge Netflix’s current leadership position as of mid-2020? Do a weighted competitive strength assessment using the methodology presented in Table 4.4 in Chapter 4 to support your answer. Based on your assessment and calculations, does Netflix have a net competitive advantage over some/all of these rivals?

Key success factor	Importance Weight	NETFLIX		DISNEY PLUS		HBO Max
Content Quality	0.30	9	2.7	5	1.5	7	2.1
Content Library	0.25	9	2.25	6	1.5	5	1.25
Original Series content	0.25	7	1.75	6	1.5	5	1.25
Pricing	0.20	8	1.6	5	1	3	0.6
Sum of importance weights	1
Overall Weighted strength			8.3		5.5		5.2

 

·       NETFLIX holds the most competitive net advantage of all other streaming platforms as of mid-2020’s era.

  10.  What 2–3 top priority issues do Netflix management need to address?

·       Content Expansion

·       International growth

·       Subscriber retention

11.  What recommendations would you make to Netflix CEO Reed Hastings?  At a minimum, your recommendations should cover what to do about each of the top priority issues identified in question 10.

·       Content Expansion: Continue investing in original content to maintain and attract more subscriber. Keep your subscribers intrigue and interested in your original story content.

·       International growth: Continue to expand into new international markets. Expanding will increase subscribers and revenue streams.

·       Subscriber retention: Regularly evaluate pricing strategies and consider adjusting bundle options to suit subscribers needs.

 

Thompson, A et al (2022) Crafting and Executing Strategy: The Quest for Competitive Advantage, Case Teaching Note pp, 505 -519.

 

 

Case 1 Airbnb in 2020 Case study analysis questions

 

 1.     How would you illustrate and compare the business models for Airbnb, large hotel chains such as Marriott and Hilton, and bed & breakfast operators? Use the example chart in the textbook for business models as a guide (Concepts & Connections 1.1)

ASPECT	AIRBNB	LARGE HOTELS	Bed & Breakfast
Value Proposition	Online platform Unique experience	Reliable and consistent Wide range of services	Cozy and homely atmosphere
Customer	More affordable	Diverse customer	Intimate experience
Key activities	Host acquisition, property listing	Reservation systems, property management and customer service	Provides breakfast
Key resources	Online platform and mobile app, social media	Global network	Personal touch, local knowledge and guest reviews
Regulatory considerations	Subject to local regulations	Compliance with hospitality standards and local regulations	Compliance with local zoning and licensing

 

2.     What was Airbnb’s response to the COVID-19 pandemic? Does it appear that the company’s business model is more resilient than that of its hotel chain rivals?

·       Refund and cancellations: Adjusted refunds for reservation policy from March 14 to end of June 2020

·       Cleaning Protocols: Establish cleaning and safety protocols and guidelines for its hosts.

·       Virtual Experience: Virtual guided tours of cities were offered for patrons to book and experience from their own home.

·       Long-term stays: Offers long-term stays targeting remote workers and digital nomads.

·       Superhost Relief fund: Airbnb established a 17-million-dollar Superhost Relief Fund to provide grants to eligible Superhosts who experienced financial difficulties due to COVID related cancellations. Superhosts are hosts who meet criteria and provide exceptional hospitality.

      As to whether Airbnb’s business model is more resilient than that of its hotel chain rivals, the COVID pandemic has impacted the travel and hospitality industries and has affected both businesses. Airbnb’s business model demonstrated some reliance due to its flexibility and ability to adapt to changing travellers’ preferences. Airbnb’s Diverse Inventory caters to different types of travellers, including those seeking secluded or remote properties during the pandemic. Airbnb’s flexible cancellation policies adjustment during the pandemic helped reassure travellers and thus encourage bookings.

3.     What are the general strengths and weaknesses of a) large, hotel chains such as Marriott and Hilton, b) bed & breakfasts, and c) Airbnb? Explain how you would compare and contrast those businesses.

	Strengths	Weaknesses
Large Hotel	·       Consistent ·       Global presence ·       Brand recognition ·       Amenities ·       Loyalty programs	·       Higher cost
Bed & Breakfast	·       Personalized service ·       Unique atmosphere ·       Local knowledge	·       Limited ·       Lack of consistency
Air BNB	·       Diverse Inventory ·       Flexible	·       Quality and consistency ·       Regulatory issues (in some countries) ·       Safety concerns ·       Cancellation policies

 

4.     In what ways has the lodging consumer changed, and how does Airbnb’s customer value proposition meet this change?

a.)   Uniqueness: Travelers seek unique experiences in their travels. Airbnb offers a wide range of locally hosted properties, including treehouses, houseboats, and historic homes.

b.)   Flexibility: Travelers seek personalized booking that tailors their holiday. Airbnb has a filter section on its website that targets specific criteria like location, price, property type, and amenities. Guests can also communicate directly with hosts and ask their questions now to the host.

c.)   Reviews and Recommendations: Most travellers based their bookings on peer reviews and recommendations before booking. Airbnb features user reviews and ratings for both hosts and properties. These reviews help travellers make informed choices.

d.)   Budget concerns: Economic uncertainty has made many travellers stingier in choosing their accommodations. Airbnb offers a wide range of price points, from budget-friendly to luxury accommodations.

e.)   Safety and Hygiene: Travelers are more conscious of safety and hygiene through the pandemic. Airbnb introduced enhanced cleaning protocols and COVID safety guidelines for hosts.

5.     What key factors may determine the success or failure of Airbnb?

a.)   Supply and Demand

b.)   Trust and Safety

c.)   User Experience

d.)   Competition

e.)   Regulatory Environment

6.     What recommendations would you make to Airbnb to improve its competitiveness in the accommodation market while mitigating any current and future risks?

·       Travel Packages: Airbnb should explore partnering with airlines and local tourist operators to offer bundled travel packages.

·       Environmental Responsibility: Encourage hosts to adopt an eco-friendly practice.

·       Innovation: Utilize Artificial Intelligence to enhance personalization, recommendation, and user interface, making it easier for guests to find the perfect accommodations.

·       Virtual Reality: Provide VR technology to allow users to explore the property before booking.

·       Loyalty Programs: Improve the loyalty program, offering more incentives, discounts, and benefits for frequent users.

 

Thompson, A. et al (2022) Crafting and Executing Strategy: The Quest for Competitive Advantage, Case Teaching Note pp, 307-317.