What Winning Looks Like: A Case Study of Netflix

The most innovative companies are not necessarily the biggest spenders. What matters most is the ability of a company to align its innovation capacity to the strategy. It is a process that requires a company to have a clear understanding of its aspirations. It acts as a framework that guides the business in understanding why it exists, what it wants to be, and what to expect from a win scenario. Well-known industry leaders are associated with innovative strategies that set themselves apart from the rest. They use winning aspirations to define their mission statements, leading to the first question in the strategic choice cascade: “What is the winning aspiration?” The next step is focusing on a winning strategy instead of just competing. Various companies have business models that illustrate winning aspirations, for example, Netflix. This paper aims to describe Netflix’s winning aspiration, its commitment towards its achievements, and its competitive position amongst direct and indirect rivals.

Part I: Winning Aspiration

Netflix’s Strategy and Winning Aspirations

Netflix’s winning aspiration is identifiable in the mission statement; to become a stellar service to the customers, sustained profitable growth, and impact towards employees and customers. Netflix states that its objective is to entertain the world by focusing on customers’ tastes and preferences, no matter their geographical location (Netflix, n.d.). It offers its members control over what they watch in one subscription, priding itself as the brand with the world’s biggest fans of entertainment. Its strategy began with two distinct models; DVDs by mail and online streaming. Through diversification, the company eventually expanded its market share in the U.S. that initiated the process of international expansion. By offering original content, Netflix was able to attract and retain customers in an increasingly growing marketplace.

Netflix relies on data from algorithms and digital-streaming innovations to guide its innovation strategies. Netflix has data on the viewing habits of its 125 million subscribers, including information on the type of views they like to watch and their viewing patterns (Taylor, 2018). With such data, the company can create a social system that influences viewing behavior based on where they live and the shows they have liked in the past, etc. Netflix gives customers a platform to expand their tastes, using a compelling strategy to dominate the industry as it does in the modern entertainment world.

Netflix’s commitment to its strategy implies that companies with a compelling value proposition have a competitive edge over their rivals. Braun et al. (2019) explain why winning companies need both a strategy and business models. Braun et al. use the example of a once known movie streaming giant, Blockbuster. During Netflix’s early days in the market, Blockbuster was well known and had a competitive edge over Netflix. However, its lack of innovation led to the demise of the brand. With competition from giants, such as Amazon, that offer similar products, lack alignment between aspirations and strategy leads to a decline in brand equity, diminishing its competitive strength.

Initiatives that Illustrate Netflix’s Commitment to the Aspirations

Customers associate Netflix with a distinctive strategy that coincides with its selection of corporate social responsibility initiatives. Netflix is committed to reducing greenhouse gas emissions with its Net Zero + Nature plan (Netflix, 2021). Climate change is a global issue that a significant percentage of customers consider critical. The environmental initiative increases Netflix’s brand awareness and has a positive impact on its stakeholders. Consumers know that Netflix uses massive energy to create content. Unfortunately, most of that energy results in pollution that contributes to climate change. Engaging in such initiatives serves to build brand image and make customers associate the company with sustainability. The company’s focus on environmental protection signifies it is vital in its competitive position in the market. It serves as a complement to other strategies, such as original content and partnerships.

Offering customers original content supports the sustainable growth of a brand. For instance, customers can rarely get frustrated by the lack of content options on the platform (Kumar et al., 2020). This decision also falls under the backward vertical acquisition strategy that increases Netflix’s control by being a retailer and a supplier at the same time. For a positive impact on its employees, it utilizes executive bonuses and compensation plans for top executives. Compensation and benefits contribute towards employee job satisfaction (Mabaso & Dlamini, 2017). Consequently, it leads to employee loyalty and commitment to the company. Despite the expense of these strategies to the brand, they are a crucial source of competitive advantage.

Part II: Competitor Analysis

Both direct and indirect competitors pose a threat to Netflix as a brand. Direct competitors usually have similar products and revenue goals. Examples of direct competitors include Amazon Prime Video, HULU, YouTube, DirecTV, Sony PlayStation Vue, and HBO Now. Indirect competitors sell the same product but not in the same market or same revenue goal and include television channels, cinemas, and piracy. To outshine the rivals competitively, Netflix uses innovative strategies while focusing on the customers by leveraging market gaps. This model has been the main drive towards creating and maintaining winning aspirations.

Netflix has a competitive edge over its competitors because of its massive global market share, superior market strategy, and innovativeness. By 2000, Netflix controlled around 85% of all online video rentals (Voigt et al., 2016). This market share was way above that of its closest opponent at the time, Blockbuster. With the demise of Blockbuster, numerous competitors have risen to similar levels but not enough to cause a significant impact on Netflix’s market share. In 2017, the company launched an online video streaming service while offering its customers a range of TV shows to watch. As Voigt et al. describe further, Netflix focuses on the customer instead of the product. For instance, the company’s strategic segments include the customers that enjoy free home DVD delivery and the bargain hunters. It tries to create lock-in effects, such as using the service on different devices and offers that force customers to remain hooked to the streaming service for months.

Although the industry has several brands, their market share remains insignificant to that of Netflix. Unsurprisingly, these brands are less known in most parts of the world because they are yet to engage in internalization, and when they do, most of them do not invest in understanding local markets as Netflix does. Many might argue that Netflix has significant financial capabilities than most brands hence more effective and well-thought strategies. Nonetheless, it will require an intense period of marketing and innovation for the brands to pose a competitive threat t Netflix anytime soon.

Conclusion

Netflix is a model whose aspirations have influenced its competitiveness in the video streaming industry. Aspirations such as a sustainable brand have soared the company beyond its rivals’ reach. The company has invested so much into these winning aspirations through environmental initiatives, original content, and leveraging data to offer specific videos to different customers. Despite stiff competition from direct rivals, such as YouTube and Amazon Prime Video, the company has remained dedicated to its strategy by focusing on what the customers want instead of what the competitors have. It may retain its dominance for a while longer as long as it keeps innovating and developing new strategies. Netflix’s business model is a perfect example of why companies must use commanding and evocative aspirations and play to win rather than getting overwhelmed by the urge to compete.

References

Braun, M., Latham, S., & Cannatelli, B. (2019). Strategy and business models: Why winning companies need both. Journal of Business Strategy40(5), 39-45. https://doi.org/10.1108/jbs-01-2019-0005

Kumar, J., Gupta, A., & Dixit, S. (2020). Netflix: SVoD entertainment of next Gen. Emerald Emerging Markets Case Studies10(3), 1-36. https://doi.org/10.1108/eemcs-04-2020-0108

Mabaso, C. M., & Dlamini, B. I. (2017). Impact of compensation and benefits on job satisfaction. Research Journal of Business Management11(2), 80-90. https://doi.org/10.3923/rjbm.2017.80.90

Netflix. (2021). Net-zero + nature: Our commitment to the environment. About Netflix. https://about.netflix.com/en/news/net-zero-nature-our-climate-commitment

Netflix. (n.d.). About Netflix – Homepage. About Netflix. https://about.netflix.com/en

Taylor, B. (2018, July 18). Everything I know about business I learned from Netflix. Harvard Business Review. https://hbr.org/2018/07/to-see-the-future-of-competition-look-at-netflix

Voigt, K., Buliga, O., & Michl, K. (2016). Entertainment on demand: The case of Netflix. Management for Professionals, 127-141. https://doi.org/10.1007/978-3-319-38845-8_11