International Strategies - Netflix

The most obvious economy of scope that urges companies to develop an international strategy is the potential new customers for the company's current products or services that this strategy may bring. In 2010, Netflix launched in Canada. In 2011, Netflix expanded to the Latin American and Caribbean markets. In 2012, Netflix acquired the United Kington, Ireland, and the Nordics markets. This international expansion into new markets has lead to an increase in Netflix's revenue. 

Here is an article on Netflix's current international strategy. 

Merger and Acquisition Strategies - Netflix

Companies seek merger and acquisition strategies for many reasons including: the desire to ensure firm survival, the existence of free cash flow, agency problems between bidding form managers an equity holders, managerial hubris, and the possibility that some bidding firms might earn economic profits. 

Netflix has undergone a market extension merger in that the firm has gained access to complementary markets through an acquisition. Netflix began as a online DVD by mail service, expanded to stream videos live on many technological devices using the internet, and now produces their own television shows. This primary objective here is to gain access to new geographic markets. In 2010, Netflix launched in Canada. In 2011, Netflix expanded to the Latin American and Caribbean markets. In 2012, Netflix acquired the United Kington, Ireland, and the Nordics markets. 

Here is an article about why AMC and Netflix would be a good merger. 

Strategic Alliances - Netflix

A strategic alliance exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services. Strategic alliances have 3 categories: nonequity alliances, equity alliances, and joint ventures. 

Netflix seems to be exploiting economies of scale by partnering with various technological device companies such as Apple, XBox, PlayStation, Wii, etc. that can stream Netflix's movies and television shows. The cost here is extremely low, and the partnership allows for marketing leverage for each company. Here is an article about a potential strategic alliance for Netflix.  

Implementing Corporate Diversification - Netflix

When a firm begins to implement a corporate diversification strategy, they must organize in a way that allows for the strategy to be carried out efficiently because the firm risks losing economic profit or only earning an average profit. Organizing issues such as agency costs, organizational structure, management control systems, and compensation policies can aid in carrying out a diversification strategy. 

Netflix's Senior Executive is Reed Hastings. He is the founder and CEO of Netflix. His bio can be found here. It is the senior executive's has two main responsibilities: strategy formulation and strategy implementation. Hastings has diversified his company from its origin of DVDs by mail to include video streaming via the internet using a multitude of technological devices. His most recent diversification strategy was to create Netflix's own television show House of Cards. 

Here is a recent article on how Reed Hastings thinks Netflix will win the video subscription war. This sums up his opinion:

Netflix's Diversification Strategies

A corporate diversification strategy is implemented when a firm has brought multiple businesses within its boundaries. I believe that Netflix has a limited corporate diversification in that all or most of their business activities fall within a single industry - movies and television. In 1999, Netflix launched their DVD rental service which allowed consumers to order DVDs by mail. In 2007, Netflix diversified to allow consumers to stream movies and television shows on their computers using the internet. As technology advanced, Netflix kept up by partnering with consumer electronic companies that allowed for streaming on any electronic with internet capabilities. In 2010, Netflix diversified by expanding to Canada. In 2011, Latin America and the Caribbean gained access to Netflix. In 2012, the UK, Ireland, and the Nordics were added to Netflix's markets. Most recently, Netflix diversified by producing their own television shows. What will Netflix do next to keep up with the movie/television rental and streaming industry?

Vertical Integration - Netflix

Vertical integration level of a firm is defined by the number of stages in a product's or service's value chain in which a particular firm engages. Netflix is engaging in forward vertical integration, which means they are increasing the numbers of value chain stages in which they engage. These new stages bring them closer to direct interaction with a product's or service's ultimate customer. Netflix is partaking in forward vertical integration through their introduction of their own television shows. This allows them to enter the television production market in addition to their existing place in the distribution market. Despite its progress to vertical integration, Netflix does outsource. For example, they use Amazon's Web Services (AWS) for online video streaming.

No Integration Raw Materials Intermediate Manufacturing Assembly Distribution End Customer

Backward Integration Raw Materials Intermediate Manufacturing Assembly Distribution End Customer

Forward Integration Raw Materials Intermediate Manufacturing Assembly Distribution End Customer

Netflix's Flexibility: Real Options Analysis Under Risk and Uncertainty

Uncertainty about a firm's actions can have an effect on a firm's competitive strategies. Flexibility is an important factor of any strategy in states of high uncertainty. Flexibility is the ability to change direction quickly and at a low cost, given unanticipated changes in the competitive situation of a firm. Netflix has gained its flexibility in terms of the option to expand meaning the firm has made choices that enhance their ability to abandon a certain strategy. When Netflix first entered the movie rental market, they offered movie rentals through the mail. Netflix expanded its options by offering online movie streaming through many different devices.