External Analysis of Netflix Using Porter’s Five Forces Model

The Porter’s Five Forces model is one of the most commonly used theoretical frameworks for analyzing the external forces in an industry. It is used in identifying the key factors present in the industry which can have a strong impact on the business operations of a firm. In this article, we have used Porter’s Five Forces model to identify how Netflix is affected by the external factors present in the subscription-based content streaming industry. 

Bargaining Power of Buyers:

The bargaining power of buyers is determined by the switching cost. In case of the content streaming industry, there are several well-established market players such as Netflix, Hulu, Amazon Prime, Disney Plus, Apple TV Plus, etc. This as a result, offers a lot of options for the consumers to choose from, thus making it easier for them to switch from one brand to another. As mentioned by a good and affordable paper writer, Netflix offers a massive collection of its own exclusive content, which are not available with anyone else in the market. The presence of exclusive content therefore increases the switching cost of the customers. Thus, the bargaining power of buyers is assessed to be moderate.

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Bargaining Power of Suppliers:

The market players in the content streaming industry are largely dependent on the production companies, for procuring the streaming license of the movies and series titles. These production houses hold exclusive rights to specific contents, which cannot be procured from any other company. This as a result increases the switching cost for Netflix to shift from one supplier to another. The bargaining power of supplier can be nullified by adopting vertical integration approach, where the company achieves higher control over the supply chain by acquiring its own source of procurement. In case of Netflix, the company has already adopted vertical integration by producing its own exclusive content. The company is constantly bringing new exclusive content on its platform, so that it does not have to be dependent on its suppliers. Thus, the bargaining power of suppliers is assessed to be moderate.

Threat of New Entrants:

The threat of new entrant can be determined by the barrier to entry in an industry. In case of the content streaming sector, it is quite difficult for a new start up enter and create a strong foothold, primarily due to the high set up cost of business. According to a professional paper writer, procuring the streaming license of popular content can be quite cost intensive, which may be affordable for a new company with a tight budget. Moreover, the industry already has a lot of well-established brands, which can make it even more challenging for a new company to create a strong brand awareness among the customers. For Netflix, which is currently the biggest subscription-based content streaming platform, the threat of new entrant is assessed to be low.

Threat of Substitute:

The direct substitute for streaming content, can be watching television, renting or buying DVDs, or purchasing digital content. However, traditional modes of entertainment such as television cannot provide the convenience of providing any content on demand. Moreover, buying or renting DVDs can be more cost intensive as compared to the subscription-based model of Netflix. Another threat of substitute comes form illegal downloading of content using P2P sharing or torrent. This is one of the most concerning threat to companies like Netflix and even the production companies. The easy availability of free content, can make customers hesitant to spend money on subscriptions. Thus, the threat of substitute is assessed to be high.

Rivalry Among Firms:

The subscription-based content streaming industry is characterized by the presence of many popular brands. Each of them seeks to create a strong brand image and add differentiation to their value proposition. The key differentiation mostly lies in terms of pricing and offering exclusive content. The customers are more likely to be attracted to the brand which offers the best value for money. Moreover, these companies are also quite aggressive in their marketing campaign, which further increases the competitiveness of the industry. Heavy investments into digital and traditional media marketing allows the companies to create a strong brand presence in the market and top of the mind recall for the customers. Thus, the rivalry among firms is assessed to be high.      

The Porter’s Five Forces model used in this article can be used as a reference for your own assignment. Whenever, you need paper writing service, simply go ahead and refer to this article as an example. It will show you how you can use the Five Forces model to analyze any industry of your choice. However, you need to keep in mind that the Industry forces can have different impact on different organizations, based on their financial position, brand image and value propositions.   

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