How does one conduct a SWOT analysis of a company like Apple, Google, Redbox, or Netflix? What steps has the company taken in the strategy-making process? At which level was each decision made?
Though Netflix experienced dramatic increases in stock value in September 2014, stock since then has fallen because increase in customer base has slowed. A slow increase in customer base can be attributed to higher subscription fees and competitors in the online streaming business such as Amazon. Netflix's recent declines in stock make business analysts start to wonder how successful Netflix will be in the future, and Netflix's future rate of success might be predicted through a SWOT analysis (Ingram, M., "Netflix Flies Too Close to the Sun, Stock Prices Melt," Fortune).
A SWOT analysis is a means of identifying the Strengths, Weaknesses, Opportunities, and Threats of a business in order to develop business strategies and make decisions. A SWOT analysis can help a business see possible "solutions to problems," determine what if any "change is possible," and develop new plans ("SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats," Community Tool Box, University of Kansas).
Most of the company's growth is dependent on its streaming market as opposed to the DVD rental system via mail developed in 1999. In his article titled "Netflix: A Short SWOT Analysis," researcher Michael Napoli informs us that one area of strength is that the company has put in a great deal of effort into making streaming convenient, including making streaming available on multiple devices connected to the internet such as computers, smart phones, androids, and smart televisions. The company is also continually increasing the amount of streaming content available and even beginning to produce its own TV series and films. The company is confident its streaming customer base will continue to grow.
Napoli further informs us that one weakness concerns the membership losses for its "DVD-by-mail rental operation" ("Netflix"). When the company launched its streaming business in 2007, DVD rentals and streaming were offered in combined subscription packages. Starting in 2011, Netflix separated the streaming and DVD rental membership plans, making subscribers pay for two separate plans if they wanted both. As a result, DVD rental membership declined drastically and is expected to continue to decline. While the company's streaming membership rates are still high enough to compensate for losses in DVD rental membership, the company could suffer losses if DVD membership continues to fall "at a faster rate than previously expected" (Napoli). A second weakness is that expanding internationally is causing some problems, especially because new higher European taxes are causing profit loss (Napoli). Netflix reported its greatest contribution profit loss came from the oversees steaming market, with a total loss of 17.1%, as opposed to 32.9% a gain in profit in the domestic streaming market (Netflix, "Financial Statements").
Despite higher taxes in Europe, Napoli informs us that Netflix is still pursuing growth oversees through its streaming market ("Netflix"). Expansion oversees still looks like the greatest opportunity for growth. As of 2016, Netflix reported gaining 30,024 international streaming memberships by the end of December 2015, resulting in a total of $1,953,435 earned (Netflix, "Financial Statements"). In addition, producing original content continues to be a great opportunity for growth (Napoli).
Netflix's greatest threat is competitors in the streaming market such as Amazon Prime being offered by Amazon (Napoli). Netflix further reports that their competitors are "liner networks, pay-per-view content, DVD wtching, video gaming, web browsing, magazine reading, video piracy, and much more" (Netflix, "Netflix's View: Internet TV is replacing linear TV"). Netflix expects all of these avenues of entertainment to improve over the years, creating greater competition.