Netflix Corporate and Business Strategy Analysis
This paper examines the business-level and corporate-level strategies that define Netflix's competitive position in the global streaming video market. At the business level, Netflix pursues a broad differentiation strategy built on core competencies in streaming technology, original content production, massive subscriber scale, and brand strength. At the corporate level, the company maintains low diversification, opting instead for vertical integration through in-house content production and geographic expansion into international markets. The paper also assesses the competitive environment, characterizing the industry as an emerging duopoly between Netflix and Amazon Prime operating in a fast-cycle market, where first-mover advantages in content relationships and international presence are critical but difficult to sustain long term.
- Introduction: Overview of Netflix's business model and paper scope
- Business-Level Strategy: Netflix's differentiation strategy and core competencies
- Corporate-Level Strategy: Low diversification, vertical integration, and international expansion
- Competitive Environment: Netflix vs. Amazon Prime duopoly and fast-cycle rivalry
- References: APA citations for all sources used
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What makes this paper effective
- Anchors analysis in established strategic frameworks — Porter's five forces, cost leadership vs. differentiation typology, and fast-cycle vs. slow-cycle market theory — while applying them concretely to Netflix's actual decisions.
- Uses specific, current data points (subscriber counts, brand valuation, market share percentages) to substantiate strategic claims rather than relying on vague generalizations.
- Moves logically from firm-level strategy (business and corporate) to industry-level dynamics (competitive environment), giving the paper a coherent layered structure.
Key academic technique demonstrated
The paper consistently applies the "so what?" test after introducing each strategic concept. For example, after identifying differentiation as Netflix's business-level strategy, it explains why that strategy is both necessary and effective given the industry's high capital barriers and mass-market requirements. This habit of linking framework to rationale is essential in strategic management writing.
Structure breakdown
The paper opens with a brief company overview, then proceeds through three analytical sections. The Business-Level Strategy section identifies Netflix's core competencies and argues for differentiation. The Corporate-Level Strategy section addresses diversification decisions, particularly vertical integration and geographic expansion. The Competitive Environment section applies rivalry and market-cycle analysis to the Netflix–Amazon duopoly. A references list closes the paper in APA format.
Introduction
Netflix is a media distribution company. It started with DVD distribution via mail but has evolved substantially over the course of its existence. Today, Netflix is focused on streaming video. Some of its content is licensed, and some is produced in-house. Netflix originally focused on movies, but television shows have become the more common format. Netflix operates on a subscription model, where users receive unlimited access to content for a monthly fee. This paper analyzes the corporate and business-level strategies behind Netflix as the company exists today, as well as the state of the competitive market in which it operates.
Business-Level Strategy
According to the textbook, business-level strategy is the approach a company uses to exploit core competencies in order to gain a competitive advantage. There are several types of business-level strategies a company can adopt: cost leadership, differentiation, focused cost leadership, and focused differentiation. Netflix utilizes the differentiation strategy because it targets the broad market and does so with a distinctive offering.
The current business-level strategy that Netflix employs resulted from several strategic choices the company has made in recent years. The company started by using mail to deliver DVDs, but as streaming video technology improved and allowed the mass market to adopt video streaming, Netflix became an early mover into that space (SeekingAlpha, 2014). It has since developed core competencies in two areas: its ability to deliver streams to customers reliably, and its large installed base of subscribers. According to the company's recent announcements, it had approximately 130.1 million paid subscribers, including 85 million in international markets, which grew at 40% year over year (Trefis, 2018).
There are two additional core competencies that Netflix is leveraging. The company began producing its own content around 2014, and this has become a significant source of strength. Its competitors also produce original content, but Netflix produces more of it and does so around the world, which has become a core part of its international expansion strategy (Hartung, 2016).
The third core competency is marketing. Netflix has successfully become one of the world's leading brands, with its brand value now estimated at $8.1 billion — ranking it 66th among the most valuable brands in the world according to Interbrand (2018). The strength of the brand reflects the quality of its marketing efforts, and Netflix shows have become household names. Actors have had their careers launched by Netflix programming, and cultural phrases like "Netflix and chill" demonstrate how deeply the company and its products have entered daily discourse. Against that backdrop, it is striking that Netflix has only around 45 million subscribers in America.
This business-level strategy has been highly effective for Netflix. There is an inherent logic to it: the company operates in a streaming technology space where Porter's five forces model identifies high up-front costs as a significant barrier to entry. Netflix does not own all of the physical infrastructure required to deliver content, yet it needs entire buildings filled with servers, storage, switches, and routers — and it needs them around the world. Beyond infrastructure, there is the substantial up-front cost of producing content, where each title is created to contribute to an overall content library rather than to be individually profitable. Major companies like Amazon find it difficult to compete with Netflix at scale, making it nearly impossible for a start-up to enter this market. These high costs can only be sustained by a massive subscriber base, which is why Netflix must serve the mass market rather than operate as a niche provider.
Netflix's core competencies also support its differentiated positioning. It is differentiated by being global and multilingual, by the sheer volume of content in its library, and by its ability to stream that content with minimal buffering or lag. The latter may be a prerequisite for competing in the business, but Netflix was the first to do it at scale — a challenge for competitors to replicate. Ultimately, it is the breadth of Netflix's content library, especially its original programming that no other service carries, that converts into a durable competitive advantage through differentiation. When the company produces a major hit like Stranger Things, that success augments the brand's differentiation considerably.
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