Netflix Case Study Analysis

Submitted by:
Full Name: Mohamed Magdy El Tedawy

Registration Number: 24125107

Course Title: Management Role of the Information Professional_7085

Instructor: Prof. Dr. Riham Adel

Date of Submission: 15th Jan 2025

Introduction

Netflix's pioneering business strategy has changed the entertainment sector by employing change
management principles and responding to changing customer demands. The company began as a
DVD rental service, with memberships and a focus on providing excellent customer service. It
then switched to digital streaming, which provided quick access to content—a shift that radically
altered how people consume media.

Netflix solidified its market leadership by creating original content, starting with the
groundbreaking series House of Cards. This marked the beginning of a continuous journey of
innovation in the entertainment sector.

The company’s growth is built on its core competencies, strategies for expanding in the US
market, and ambitious plans for international growth. Under the leadership of Reed Hastings,
Netflix's unique corporate culture and high-performance standards have played a pivotal role in
its success. Moreover, the company’s ability to adapt to technological advancements and shifting
consumer behavior has enabled it to maintain its position as a leader in the ever-evolving
entertainment industry.

1.1 How Netflix business model disrupted the entertainment industry?

Describe Netflix’s innovation strategy and discuss how it changed over time.

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Netflix changed the concept of the entertainment industry over time with a clear focus on the
MOC ( Management of change ) concept and the customer's resistance to change this
subscription model emphasizes on-demand streaming instead of cable and DVD rentals that the
direct competitors offer The innovation strategy started with renting the DVD but they used the
fast mail services to enhance the service then they began to make monthly offers that would get
more customers. Over time Netflix inserted digitalization into this business model making it easy
for customers to create queues that allow them customers to select their interests for later
viewing.

Netflix’s innovation strategy transitioned through several stages:

1. DVD To Mail (1997): The first disruption occurred when Netflix, a DVD rental
business, entered the market and used a mail-based distribution mechanism to compete
with physical retailers like Blockbuster. By doing away with late penalties and in-store
visits, this approach allowed customers to conveniently order DVDs online and have
them delivered to their homes.

By offering clients unlimited rentals for a month, monthly plans reduced customer
friction and produced predictable income streams.

2. Streaming Services (2007): Digital Shift: Netflix invented on-demand streaming,

allowing the customers immediate access to films and TV series after realizing the
potential of broadband internet. This change successfully phased out the necessity for
physical rentals by catering to consumer expectations for flexibility and immediacy.

By enabling a queuing system through digitalization, Netflix has improved user

satisfaction and engagement by allowing users to customize their watchlists according to
their interests.

3. Original Content (2013): by creating exclusive shows and movies by Netflix, like
"House of Cards" and others marking its entry into content production. This phase helped
Netflix retain subscribers while attracting new audiences. This phase is the most difficult

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phase that Netflix already gained the customers, but they need to keep themselves the
best to keep those customers.

Long-Term Impact

Netflix's business model and innovation strategy changed the entertainment concept by

Shifting consumers from physical rentals to digital streaming.

Creating a niche market, original content.

Opening the way for global content accessibility.

This agile approach ensured that Netflix not only disrupted the industry but also remained a
market leader in the face of changing consumer preferences and technological advancements.

1.2 What are Netflix’s core competencies? How can they help Netflix to
sustain its competitive advantage? Discuss how its core competencies be
improved or modified?

Netflix’s strengths lie in three key areas:

1. Data Analytics and Personalization: With a highly advanced recommendation

system, Netflix provides a tailored viewing experience that keeps users engaged by
suggesting content based on their preferences and watch history.

2. Scalable Digital Infrastructure: Netflix's powerful cloud-based platform allows

seamless streaming for millions of users worldwide without interruptions.

3. Original Content Production: By producing critically acclaimed series and films,

Netflix continues to position itself as a top player in the entertainment industry.

These strengths allow Netflix to:

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• Build strong customer loyalty through personalized experiences.

• Stay ahead as a pioneer in the streaming space.

• Stand out in a crowded market by offering exclusive, high-quality content.

Netflix can focus on the following areas:

1. Enhance AI Capabilities: By leveraging AI for real-time analytics, Netflix can

deliver even more personalized user experiences. This approach allows for precise
targeting and predictive content recommendations, increasing customer satisfaction and
engagement.

2. Expand Partnerships: Building collaborations with international production houses

will enable Netflix to create diverse and localized content. This strategy ensures global
audiences connect with stories that resonate culturally, further enhancing the platform’s
global appeal.

3. Focus on Sustainability: Netflix can adopt eco-friendly practices by investing in

renewable energy for its data centers and implementing sustainable production methods.
Reducing its carbon footprint not only aligns with global environmental goals but also
positions Netflix as a responsible brand, appealing to eco-conscious consumers.

1.3 Netflix growth in the US market seems to be maturing. How could Netflix
increase demand for its services US and what other services could Netflix offer
to drive future growth in US market?

As the US market matures, Netflix faces challenges that require innovative strategies to ensure
its continued success and excellence in a highly competitive market. The company can take
several steps to increase demand for its services and drive growth:

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1. Investing in Interactive Content

Netflix can create more interactive content like Bandersnatch, allowing viewers to influence the
outcome by making decisions.
This type of content encourages personal interaction with the platform and provides a distinct
viewing experience that sets Netflix apart from competitors.
Interactive educational programs or programs geared toward children can also be created to
increase engagement among various age groups.

2. Increasing Related Services.

Netflix may make a significant entry into the digital gaming business by developing games based
on the tales and events in the company's original content, resulting in an integrated ecosystem
that boosts user loyalty.

Virtual Reality (VR) and Augmented Reality (AR): Investing in VR technologies to deliver
immersive cinematic experiences or new educational and entertainment content can attract a new
generation of users looking for innovation.
E-commerce: Offering products inspired by its series and movies (such as clothing, gifts, and
accessories) can open a new revenue channel and boost customer loyalty.

3. Provide flexible and different pricing strategies.

Economy plans with advertising: These plans can be an excellent choice for middle-income
families because they give high-quality material at a lesser cost with minimal advertising.
Premium Plans: Premium subscription plans can be offered with additional privileges such as
early access to new movies, exclusive content, or ad-free streaming.

Family and educational plans:

Offering subscriptions tailored to families that provide safe content for children and useful
educational programs can attract a larger segment of users.

4. Focus on personalization and improving the user experience

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Using artificial intelligence technologies to analyze viewing behaviors in a deeper way and
provide more accurate recommendations, which enhances the viewing experience.
Improving the user interface to be more intuitive and smoother, with features such as
personalized playlists or custom viewing modes.

5. Promoting local and regional production

Investing in producing local and regional content that reflects different cultures, which helps
attract diverse audiences in the United States, especially with the growing demand for stories that
reflect ethnic and cultural diversity.
Supporting independent production and collaborating with local talent can enhance Netflix’s
reputation as a supportive platform for creativity and emerging talent.

6. Sustainability and Social Responsibility

Netflix can lead environmental initiatives in the entertainment business by using sustainable
production methods including using renewable energy to power data centers and lowering carbon
emissions while filming.

Promoting the brand’s image as a socially responsible entity can attract a new segment of
sustainability-conscious customers.

7. Launching events and field experiences

Organizing festivals and exclusive screenings in the United States that offer live experiences for
Netflix series and movies fans, such as meeting their favorite stars or watching the first of new
shows.
Creating Netflix Live experience spaces that allow viewers to enter the worlds of their favorite
content, enhancing emotional engagement with the platform.

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1.4 The international expansion beyond the US market appears to be a major

growth opportunity for Netflix. What can Netflix do to address the challenges
encountered when going internationally? And which international markets
should Netflix focus on, and why?

1- International Expansion:

A Fantastic Chance for Netflix's Development.

International markets have emerged as a fantastic chance for Netflix to accelerate its growth,
given the slowdown in the US market. However, there are obstacles to overcome when going
worldwide, and successful expansion calls for well-defined and deliberate plans.

How can Netflix overcome international challenges?

1- Customizing content for local audiences

Netflix needs to produce content that suits the preferences and cultures of each region.
This can be achieved by focusing on local issues and topics that interest the audience in each
country, in addition to providing high-quality translations and dubbing that suit the culture and
language.

2- Partnership with local producers

Cooperating with local production companies and filmmakers ensures content that reflects the
cultural values and traditions of each region.
This cooperation not only enhances Netflix’s popularity, but also makes it part of the local
cultural landscape.

3- Investing in technology and infrastructure

Improving video streaming technologies to suit areas with poor internet connectivity.

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Providing flexible options such as downloading content for offline viewing, or offering
affordable subscriptions that suit local income.
4- Targeted Marketing for Each Region
Designing customized marketing campaigns that suit the local audience using marketing teams
that understand the nature and needs of each market.
Enhancing engagement with audiences through local social media and events that touch people’s
daily lives.
Top Markets to Focus on and Why?

1- India
Large Market Size: With over a billion people, India is a huge market full of opportunities.
Increasing Internet Usage: The proliferation of affordable smartphones and the expansion
of Internet services make digital content more accessible.

Audience Diversity: India is a diversified market with many cultures and languages,
allowing Netflix to create content for any group.

2- Brazil
Economic Growth: Brazil's middle class is expanding rapidly, resulting in increased demand
for digital entertainment.
Popularity of Digital Streaming: As people increasingly rely on the internet for entertainment,
Netflix is an excellent choice.
Local Culture: By focusing on Brazilian tales and collaborating with local content creators,
Netflix strengthens its position in the market.

3- Additional promising markets:

Southeast Asia: Countries such as Indonesia and Malaysia are seeing rapid Internet adoption
and increased demand for entertainment.

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Middle East and North Africa: A region characterized by cultural diversity and increasing
reliance on digital entertainment.
Sub-Saharan Africa: Despite technical challenges, the region’s ever-improving internet
infrastructure makes it a promising region.

Why these markets?

Increasing internet and smartphone penetration.
Young demographics that represent a large audience for digital streaming services.
Strong demand for digital content that remains unsatisfied in many of these markets.

1.5 Discuss Reed Hastings leadership approach and how it affected Netflix
culture, and performance?

Reed Hastings' Leadership Strategy and Impact on Netflix

Reed Hastings' leadership approach was critical in defining Netflix's culture, fostering
innovation, and maintaining market dominance. His emphasis on transparency, employee
empowerment, and innovation resulted in a work climate that encouraged creativity and
accountability, establishing Netflix as a benchmark in the entertainment sector.

1. Leadership Approach:

1.1. Transparency
Hastings took a straightforward approach, giving staff the knowledge they needed to
make educated judgments.

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This method built confidence among employees and allowed Netflix to respond rapidly
to market developments.
1.2. Employee Empowerment
Hastings thought that giving employees liberty would allow them to be more innovative
and accountable, which was consistent with the "Management Y" philosophy.
By giving employees the freedom to make decisions, he encouraged innovation and
creative problem-solving.
1.3. Focus on Innovation
Hastings led Netflix’s transformation from a DVD rental company to a leading
streaming platform, revolutionizing the entertainment industry.
His acceptance of experimentation and failure as a learning tool motivated employees to
think outside the box and explore new ideas.
Leadership's Impact on Netflix Culture

1.4. High Performance Standards

Hastings developed the "keep the best" test, in which managers were asked to determine
if they would fight to maintain a certain employee.
This method resulted in the retention of the most successful and contributing employees,
creating a high-performance culture.

1.5. Freedom and Accountability

He introduced policies such as unlimited vacations and the elimination of traditional
performance reviews, reflecting his trust in employees’ ability to organize themselves.
This freedom gave employees a sense of ownership and accountability, which
encouraged greater innovation.

1.6. Learning and adapting

Netflix's capacity to adapt to change, such as the transition to digital streaming and the

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creation of original content, exemplified how a good leadership style can assure a
company's resilience and survival.

2. Performance Results:
2.1. Changing the Market
Hastings was able to guide Netflix's transformation from traditional movie rentals to
digital streaming, propelling it to the status of a worldwide entertainment powerhouse.

2.2. Sustainable Growth

A culture of innovation and independence contributed to continuous development, from
producing original content to developing advanced algorithms to provide personalized
recommendations to users.
2.3. Employee Satisfaction
Transparency and employee empowerment have improved morale and increased
employee retention rates, which have had a positive impact on productivity and
innovation within the company.
Conclusion
Reed Hastings' leadership style exemplifies how to develop a long-term, successful
corporation. By combining high performance standards, trust, and innovation, he has
transformed Netflix into a worldwide powerhouse, establishing a new benchmark for
modern leadership.

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References
1. Adel, R. (2024). Management Role of the Information Professional. Advanced Topics in
Strategic Management - Lectures.
2. Schermerhorn, J.R. (2013). Management: Twelfth Edition. John Wiley & Sons. Chapters
10–12 on strategy, organizational culture, and change management.
3. Hastings, R. (2013). No Rules Rules: Netflix and the Culture of Reinvention. Netflix case
study and leadership approach.
4. Porter, M.E. (1985). Competitive Advantage: Creating and Sustaining Superior
Performance. Analysis of competitive strategy.
5. Netflix Inc. (2024). Investor Relations and Annual Reports. Retrieved from Netflix
Corporate Website for financial and strategic insights.
6. Digital Journal. (2023). Streaming Wars: How Netflix Continues to Lead the Market.
Case study analysis of Netflix's innovation strategy.
7. Kotter, J.P. (2012). Leading Change. Discussion on change management frameworks
applied to international market expansion.

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