Current Market Positioning of NetFlix Company - Essay Example

Based on an analysis of Netflix’s internal and external analysis, Netflix’s current mission of becoming the best global entertainment distribution service needs to be reformulated in the sense that it did not make any mention of its concern for its market. It states the company’s geographic domain, i.e., to become a global entertainment distribution service.

The mission also states its partnership with filmmakers and content creators. The technology and product service that they offer is also included in their mission statement. All other aspects of a good mission were mentioned except for its concern for the customers which is very essential in a mission statement. Another reason why the mission statement of Netflix should be reformulated is that its company philosophy does not appear in the statement. The company’s basic beliefs, values and aspirations are not reflected in its mission statement. What is clear in their statement is where their strategies are directed and what they want to be in the future.

The firm’s strategy of increasing its streaming subscription globally is the appropriate strategy for the company. Over time, it is expected that their domestic DVD-by-mail service to decline significantly shortly thus, their strategy to focus on their streaming service is a good move for the company. Netflix has decreased its budget for their DVD business to allocate more to its global streaming business (Netflix Inc., 8). One can say that this strategy of Netflix has produced the desired results because as of the first quarter of 2012, there was an additional three million streaming subscribers; therefore, reaching a total of 26 million global subscribers (Netflix, 1). This strategy further strengthened its position as the world’s leading internet TV network (Netflix 1). The domestic streaming service alone contributed $67 million to the company’s profit, which is a 13% contribution margin (Netflix 1). Indeed, the firm’s strategy is providing them with a relevant competitive advantage and is working well for them.

Another strategy implemented by Netflix that is to its advantage is its continuous move to increase the quantity and quality of its TV shows and movies. Their approach is to sign licensing agreements with TV and movie outfits and major film distributors and producers to reinforce their content offerings and have a steady flow of new titles (Netflix, 2-3). This is a competitive advantage which they enjoy over their competitors. As noted in the First Quarter 2012 Letter to Shareholders, Netflix considers it an advantage to have an extensive user viewing history and ratings data which allows them to understand their audience (9). Moreover, their size and international scale provide them with exclusive and original content which their regional competitors cannot offer.

In terms of cost leadership, Netflix is priced much lower than cable television subscriptions. However, in 2011, they committed the grave mistake of increasing its price by almost 60% (Sandoval, par1). This wrong move enraged its customers resulting in a loss of 800,000 subscribers and a drop in the company’s stock prices (Sandoval, par 3).  However, compared to its competitors, Apple, Google or Amazon, it is still reasonably priced considering the content it offers. But Netflix should not rest on its laurels, because its competitors are also going into online streaming services and may eventually be able to offer it at a lower price to capture Netflix’s market. What Netflix should do is focus on its competitive advantage which is its offering of original content.

Netflix possesses the skills and resources needed to meet the requirements of the fast-paced industry they belong to. They have the organizational set-up which can respond rapidly to any changes in the market. Their execution track record will help them to respond to the highly competitive market they are in.