Porter Five Forces Analysis of Netflix Expanding in South American Countries Assessment

Porter Five Forces Analysis of Netflix Expanding in South American Countries

With the objective of deciding on the expansion plan of Netflix in South American countries, this study aims at conducting a Porter Five Forces Model to determine whether Netflix takes the relevance of the analysis and its applicability when strategists contemplate innovation and change into consideration or not. This essay is based on research from scholarly sources of books, journals, and company websites. It will begin with the company introduction. It will further give a brief and significance of the Porter Five Forces Model. Next, it will analyse the case based on different aspects of models. At last, it will recommend the expansion plan as per the outcomes. The study will conclude with the accomplishment of its objective.

Reed Hastings and Marc Randolph founded Netflix in 1997 as a DVD rental service by mail. The company was initially called "Kibble" but later changed to Netflix. Initially, the company offered a monthly flat fee with no due dates, late fees, shipping or handling fees, or per-title charges (Lusted, 2012). Netflix's early growth was fueled by the advent of the DVD, which allowed for the wide distribution of the company's extensive library of movies and TV shows. Finally, the Netflix streaming service was launched in 2007 and allowed its customers to watch movies and TV shows online with a computer or Netflix-enabled device. This move was a significant shift for the company as it transitioned from a primarily DVD-by-mail service to a streaming service (Shah, 2018). Over the next few years, Netflix expanded its streaming content library by licensing TV shows and movies from other studios and production companies. In 2013, Netflix began producing its own original programming, such as the critically acclaimed series "House of Cards" and "Stranger Things." Since then, Netflix has continued to expand its initial content offerings and now produces a wide variety of TV shows, movies, and documentaries. The company has also expanded its global reach, launching in over 190 countries worldwide. As of 2021, Netflix had over 208 million subscribers worldwide. In addition to its streaming service, Netflix has also ventured into other areas, such as merchandising and film production. Netflix has also been instrumental in popularising the concept of "binge-watching", which refers to watching multiple TV show episodes in one sitting (Wenzel, 2022).

Currently, Netflix is considering expanding in Guyana, Suriname, and French Guiana, the countries in South America, as these countries have relatively small populations and may not be considered priority markets for Netflix. However, it is a global company, and it is continuously expanding to new markets so that it could be available in these countries as well (Michaux, 2015). However, it ultimately depends on the company's strategy and priorities and the availability of local partners. Additionally, they want to influence the world gradually to use more of their service, to increase their revenue and profitability, to diversify the risk, to gain a competitive advantage and lock in new talent and resources in their system permanently.

A corporation's structure should be able to deal with threats and opportunities in the external environment, according to Porter's five-force framework. It contains the factors on which the business gets analysed and decides if the outcome is favourable for them or not, which are (a) bargaining power of buyers, (b) bargaining power of suppliers, (c) threat of new entrants, (d) rivalry among existing competitors, and (e) threat of substitute products or services (Bruijl, D. and Gerard, H.T. 2018). According to Porter, the objective of the strategist, in this case, Netflix being a streaming giant is constantly looking for ways to expand its reach and grow its subscriber base. Also, expanding into new markets, including South American countries, can provide the company with new revenue streams and help it to diversify its customer base. Moreover, Netflix may also see an opportunity to acquire new content and partners in these markets. By partnering with local content providers, it can offer a more comprehensive selection of movies and TV shows tailored to South American audiences' tastes and preferences.

The five-force model is a powerful and straightforward method for using an outside-in approach to discover unique strengths within a specific corporate setting. The interconnections of these five variables create industry rivalry and constantly threaten an organisation's success (Morris, 2022). The following is a detailed rundown of Porter's Five Forces on Netflix when it's thinking of its expansion in South American countries:

Bargaining Power of Buyers

The bargaining power of buyers in the South American streaming market is moderate to high. Consumers have a variety of streaming options available, and Netflix will need to offer a compelling service and value proposition to attract and retain customers.

Bargaining Power of Suppliers

The bargaining power of suppliers in the South American streaming market is moderate. To offer a diverse selection of movies and TV shows, Netflix will need to negotiate licences and partnerships with local content providers and studios. However, the company's scale and resources will give it some leverage in these negotiations.

Threat of New Entrants

The threat of new entrants in the South American streaming market is relatively low. Netflix has a strong brand and established market position, and it would take more work for new players to enter the market and compete with the company's scale and resources.

Rivalry among Existing Competitors

South American streaming markets are moderately competitive. Netflix has a strong brand, strong market position, and significant resources to compete with other streaming services, such as Amazon Prime, Disney+Hotstar and others.

Threat of Substitute Product or Services

The threat of substitute products or services in the South American streaming market is moderate to high. Netflix will compete with other streaming services and traditional TV and cable providers.

In recommendation, expanding into South American countries presents some challenges for Netflix, such as negotiating licences and partnerships with local content providers, adapting its service to the local market, and competing with existing streaming services (A et al., 2016). The market in these countries may be less developed than in North America, and Netflix may have to invest in building infrastructure and developing local content to appeal to customers. Additionally, there may be high competition in these markets from local providers.

With the objective of deciding on the expansion plan of Netflix in South American countries, this study aimed at conducting a Porter Five Forces Model, whether the company takes the relevance of the analysis and its applicability when strategists contemplate innovation and change into consideration or not. It is concluded that Netflix faces a challenging but potentially rewarding opportunity to expand to South American countries. Thus, Netflix could gain a foothold in a large and growing market with a high growth potential and can think of expansion in remaining South American countries as the company's established brand, market position, and resources give it a solid competitive advantage in the market, and this ultimately will help in the achieving the expansion without any hindrance.

References

1. A, A. et al. (2016) Porter's five forces analysis, Porter Five Forces. Open Library. Available at: https://ecampusontario.pressbooks.pub/bio16610w18/chapter/porters-five-forces/
2. Bruijl, D. and Gerard, H.T. (2018). The relevance of Porter's five forces in today's innovative and changing business environment. Available at SSRN 3192207
3. Michaux, S. (2015). Porter’s Five Forces: Understand competitive forces and stay ahead of the competition. 50Minutes.com – Management & Marketing.
4. Morris, K.L. (2022). Netflix Strategic Business Analysis. Available at: https://scholarworks.umt.edu/cgi/viewcontent.cgi?article=1425&context=utpp
5. Lusted, M.A. (2012) Netflix: The Company and Its Founders: The Company and Its Founders. ABDO.
6. Shah, H. (2018) How Netflix became a $100 billion company in 20 Years; Netflix became a $100 billion company in 20 Years. Product Habits. Available at: www.shorturl.at/ctuW3
7. Wenzel, M. (2022). Concluding remarks: Meet the future—with International Business Administration and Entrepreneurship. Available at: http://fox.leuphana.de/portal/files/21602419/foume_1st_ed.pdf

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