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Strategic Process and Analysis

Lesley Pinzon

Capella University

MBA-FPX 5006: Business Strategy

William Reed

July 15th, 2023

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Executive Summary

Strategic Analysis, according to the website QuestionPro.com, is necessary for a company to

develop strategic planning for decision-making and a positive work atmosphere. Businesses have
to execute strategic analyses on a regular basis to evaluate which areas are performing effectively
and which require modification. In order to gain a competitive edge over other organizations, the
VRIO framework, PESTLE Analysis, and Five Forces Analysis are all utilized to examine a
company's internal and external aspects.

According to Anthony Rivera of The Rancord Society, Netflix Inc's fundamental qualities
sustain corporate viability regardless of competition growing. These competences indicate the
organization's assets and abilities, which contribute to long-term superiority (Rivera, 2019). We
can assess if Netflix has a legitimate competitive edge by analyzing internal and external aspects
using the VRIO, PESTLE, and Five Forces Analyses. We may also assess what adjustments
must be done and what elements must be kept in place with the goal of maintaining that
advantage.
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Table of Contents

Executive Summary……………………………………………………………………………….2

AFI Framework…………………………………………………………....……………………....4

Leadership in the Strategic Planning Process……………………………………………………..4

Internal Environment of Netflix…….……………………………………………………………..4

External Environment of Netflix………………………………………………………………….5

Recommended Course of Action………………………………………………………………….8

References…………………………………………………………………………………………9

Appendix A - VRIO/Value Chain Analysis……………………………………………………...10

Appendix B - PESTLE Analysis…………………………………………………………………11

Appendix C - Five Forces Model………………………………………………………………...12

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AFI Framework

The AFI strategy model is a good template for adhering to for strategic planning. This approach
concentrates on achieving and preserving a competitive edge, demonstrates that the method is an
ongoing endeavor, and distinguishes between initial and internal/external analysis (Jurevicius,
2013). If a corporation does not completely comprehend the AFI Framework, it will find it
challenging to develop and execute policy and strategic processes (Rothaermel, 2019). This
framework's phases are Analysis, Formulation, and Implementation. Initial analysis, in addition
to internal and external examination, are all part of the analysis process. Throughout formulation,
we develop commercial, corporate, and global strategies. Implementation is the process through
which we put a plan into action while maintaining balance and discipline (Jurevicius, 2013). In
the event the AFI Framework is not employed, a leader would be unable to design a plan since
they will be unable to consider how to execute it (Rothaermel, 2019). Leadership is an essential
component of strategy development. A strategic plan will fail if there is not an effective leader.
Now we'll talk about the function of leadership throughout the strategic planning method.

Leadership in the Strategic Planning Process

Fuller and Green (2005) identify five stages of the strategic planning process and investigate
what a corporate leader performs in each of them. A person in leadership has to initially establish
a strategic vision and purpose. The vision of a company outlines where it is going, while the
mission explains why the company operates. Following that, a successful leader must establish
goals and objectives. They must ensure that the goals are quantifiable or else they are
meaningless. The third stage involves developing a plan. Not only must we decide what to do,
we must additionally decide what not to do. Next, the execution and management of such plan
takes effect. Leaders must make difficult decisions. A competent leader has a moral obligation to
encourage success not solely for themselves, but also for the organization in its entirety. The
final step, reviewing performance, requires leaders to acknowledge that tactics must be updated,
changed, or reformulated over time. In order to accomplish this, leaders must ensure that there
are a multitude of various approach options accessible for when they are required (Fuller and
Green, 2005).

Internal Environment

The VRIO Framework is utilized to assess if an organization's internal assets and competencies
may be an indicator of long-term competitive edge (Jurevicius, 2013). The VRIO Framework
states that an entity may obtain and maintain an edge over its competitors if it has assets that
meet all of the VRIO requirements (Rothaermel, 2019). The VRIO Framework supplements
other approaches of strategic analysis. It ought to be implemented after the creation of a vision
statement but prior to the process of strategic planning (Clearpointstrategy.com). The VRIO
Framework is made up of four parts. Those parts consist of Value, Rarity, Inimitability, and
Organization. In regard to value, do you provide anything of value to your clients? When it
pertains to rarity, do you possess goods that are difficult to acquire yet in high demand?
Likewise, for inimitability, is it tough to obtain a comparable substitute? Lastly, for organization,
does your company have well-organized management systems, procedures, frameworks, and a
culture that allows it to leverage on its assets and capabilities? If a corporation can identify all
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four components and respond with a "Yes" to all of those inquiries, they will have gained a
sustainable competitive advantage. It is critical to examine our architecture on a regular basis as
capacities evolve and rivals adjust. A dedication to the VRIO method and improving your
assessment continuously can help you maintain your long-term competitive edge
(Clearpointstrategy.com).

Netflix is a worldwide media streaming service offering movies, television series, and original
content for an inexpensive monthly subscription fee. Netflix is expected to expand to
approximately 60 and 90 million users in the United States based on its current trend (Netflix
Investors, n.d.). The corporation maintains a structure of fundamental values, beliefs, company
philosophy, and practices that drive individual workers to promote new concepts for expanding
an online industry (Anderson, 2019). A VRIO examination of the company can give a valuable
perspective on existing operational circumstances and its future trajectory. This study provides a
resource-based perspective on the company and highlights the key assets and competencies for
competitive edge in the long run (Rivera, 2019).

The primary findings of this VRIO research are that Netflix's high brand equity, vast network of
content creators and users, and outstanding potential for original content development are
fundamental capabilities that enable long-term competitive edge over rivals (Rivera, 2019).
Netflix's structure of operations and managerial design of systems contribute to the business's
long-term success and consistency. The foundation and leadership system uphold an order of
essential morals, principles, company ideology, and behaviors that encourage creative thinking
and corporate success. The ease of interaction throughout the organization enables for novel
concepts to develop, which will contribute to the company thriving (Anderson, 2019). Netflix
has proven successful in executing its company's strategy by capitalizing on their assets.
Continuing to offer a low-cost streaming alternative while also offering original material as well
as various notable TV shows and movies from across the world will help Netflix maintain its
position as the industry leader.

External Environment

The PESTLE analysis, according to Ovidijus Jurevicius of Strategic Management Insight, is a

simple and effective method for identifying the important external influences that could impact a
business. It may both generate possibilities and risks for a company (Jurevicius, 2013). The end
result is a grasp of the company's entire image. To obtain the greatest results, the procedure
should involve as many leaders as feasible (Jurevicius, 2013). PESTLE is an abbreviation that
refers to Political, Economic, Social, Technological, Legal, and Environmental. Let's take a
deeper look at each stage. The political aspect decides how much a government can impact the
financial sector. Tax regulations, fiscal policies, and tariffs for trade are among examples
(Pestleanalysis.com). Next is the economic component, which in general is macroeconomic.
Leaders must analyze how various elements: growth rates, levels of employment, interest rates,
cost stability, and currency rates of exchange may influence strategy (Rothaermel, 2019). When
it comes to the social aspect, we must capture the traditions, norms, and values of a society.
Since these determinants transform and differ between groups of people, leaders must regularly
track patterns and assess the ramifications (Rothaermel, 2019). Management must assess factors
such as trends in culture, demography, and community analytics (Frue, 2018). Likewise, the
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technological component refers to technological advancements that may have a positive or

negative impact on the business and market operations (Pestleanalysis.com). Additionally, legal
results comprise laws, regulations, guidelines, and judicial judgements (Rothaermel, 2019).
Lastly, the environmental and ethical factors consist of all those that are influenced or impacted
by their surroundings, such as climate, weather conditions, and geography. Specific businesses,
that include travel, food production, and crops, rely heavily on this factor (Rothaermel, 2019).

As noted by Fernfortuniversity.com, there are several aspects to consider while doing a PESTLE
Analysis of Netflix. Before we go into the PESTLE Analysis, let's go through the crucial aspects
to examine. This PESTLE research investigates Netflix's political, economic, social,
technological, legal, and environmental/ethical elements. Leaders can utilize these elements,
upon which they possess no control, to develop a strategy to mitigate the potential negative
consequences of these variables.

The political aspects regarding Netflix include taxation, stability in politics, the significance of
CATV networks, Anti-trust laws as they apply to such systems, price restrictions, wage laws,
worker benefits, marketing, among other CATV regulations
(Fernfortuniversity.com). Developments are limited by material restrictions, they are not
accessible in all countries, and cannot offer material from all nations. The US government places
restrictions on establishing companies in specific nations. In addition, censorship and permits in
other countries apply as it is impossible to broadcast in China owing to their censorship rules
(Pestleanalysis.com).

Following that, economic properties consist of the type of economic system in the country of
operation, the caliber of facilities in the CATV systems sector, the expertise of the workforce in
the CATV structures industry, the extent of education in the marketplace, rate of economic
growth, unemployment rate, rates of interest, and the rates of inflation (Fernfortuniversity.com).
Critics argue that Netflix is transforming into a cable provider by raising monthly memberships
gradually over time. Competing streaming services are vying for Netflix's material. Consumers
are being forced to pay for several memberships to larger name streaming providers such as
Disney. Quality television and film options are dwindling (Pestleanalysis.com). Netflix should
charge varying monthly prices depending on the state of the economy and the series available
within that country (Tapalaga, 2019).

Social facets include demographics and population ability level, economic status, authority
framework of society, gender roles, social standards, and recreational pursuits
(Fernfortuniversity.com). The entire population is an enthusiast of Netflix. They consist of an
excellent work atmosphere with employees thriving here since they are well-treated, there is a
casual dress code, and each employee receives a certain amount of vacation days each year. They
also grant student scholarships and assist organizations in providing financial aid to students with
limited incomes. As well, they are led by a considerate CEO that contributes personal cash to
charities (Pestleanalysis.com). Lastly, as television became outdated to younger viewers, Netflix
evaluated and predicted the future market (Tapalaga, 2019).

Technological developments by rivals, the influence of technology on product offerings, the

impact on cost structure in the CATV systems sector, and the pace of technological diffusion
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(Fernfortuniversity.com). As well, it reduces your monthly data cost: Netflix employs a

proprietary technology to compress videos without compromising quality, reducing the quantity
of data required to watch content. However, consumers are disappointed with the switch from a
star rating system to a thumbs up or down system. Customers believe that suggestions do not
always coincide with their interests, as they used to (Pestleanalysis.com). Lastly, any computer
or smartphone connected to the internet can visit the website/app (Tapalaga, 2019).

Legalities pertain to antitrust laws in the CATV systems sector, discriminatory legislation,
copyright trademarks, protecting customers, health and safety law, and data security
(Fernfortuniversity.com). Netflix must ensure that regional limitations on specific shows/films
are followed (Tapalaga, 2019).

The environmental components consist of weather, pollution regulations, reuse, managing waste,
views on "green" items, and endangered animals (Fernfortuniversity.com). Netflix does not
squander natural resources because it does not manufacture items. They do still emit CO2 when
they use power. As such, they constructed wind turbines and solar panels in 2019 to transition to
a 50% renewable energy consumption and they plan to have 100% sustainable energy by
2025 (Tapalaga, 2019).

The primary conclusions of this PESTLE research reveal what Netflix is doing well and where
modifications should be done to preserve its competitive edge. First, consider what Netflix is
currently performing well. Employees say Netflix is an excellent place to be employed, and the
chief executive officer is very kind. They presently use 50% renewable energy for power and
intend to use 100% clean energy by the next five years. Overall, Netflix's video compression
techniques can help users save money when it comes to their monthly data usage.

According to Rothaermel (2019), Porter's Five Forces model is an approach that analyzes five
forces that influence an industry's profit potential and establish the competitive approach of a
business. This approach is a valuable tool for determining prospective profitability and assessing
the marketability of a company environment (Tapalaga, 2019). Based on the Five factors Model,
the competitive atmosphere is comprised of five factors that can degrade profitability. Once your
study has concluded, it is time to put the plan into action in order to increase the competitiveness
of your business.

The following are the five forces:

Competitive Rivalry examines the quantity and intensity of rivals. Both vendors and consumers
in competitive marketplaces may look elsewhere if they believe they are not receiving a decent
value. A corporation will have incredible power and excellent earnings when competitive
competition is minimized (Mindtools.com).

Supplier power is what assesses a company's supplier's influence and authority over their
capacity to increase costs, therefore lowering revenue (Martin, 2019). The greater number of
suppliers an organization has, the simpler it is to transition to a less expensive option. However,
the more limited their alternatives, greater the providers' position and capacity for charging
higher costs (Mindtools.com).
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Buyer power explores consumer power and its impact on pricing as well as quality (Martin,
2019). The broader your consumer base, the greater your influence is (Mindtools.com).

New Entrant Threat examines how tough or simple it is for rivals to enter the industry. The
simpler it is, the higher the chance that a company's market share would be diminished (Martin,
2019).

Threat of substitution pertains to the possibility that consumers will find a new way to
accomplish what you provide. A simple and inexpensive substitute could jeopardize revenue
(Mindtools.com).

Netflix may utilize Porter's Five Forces Analysis to better comprehend the way competitive
factors affect revenue and to devise a plan for increasing its competitive edge and long-term
profitability in the CATV structures market (Fernfortuniversity.com). Netflix has the capability
to recognize patterns early on and react fast to opportunities by employing the Five Forces
Model. Netflix Inc leadership could manipulate the five factors in their advantage through
comprehension of them (Fernfortuniversity.com).

Recommended Course of Action

Individuals who refrain from viewing a lot of television spend fewer dollars than individuals who
do. Netflix should also reconsider their rating method. People have claimed that the recently
introduced rating system does not correlate with their areas of interests in the same way the prior
ranking system had. They formerly employed a 5-star rating system instead of the thumbs
up/ down approach they now use. Which is not quite as realistic since a person might enjoy a
show or not on a ranging scale of satisfaction and the recent evaluation system makes no
distinction. If Netflix can make a few simple improvements, it will remain dominant in
this market.

Considering the completion of the above analyses regarding Netflix, it is concluded that the
VOD sector is extremely competitive. To compete with other similar organizations, Netflix is
obliged to produce fresh and unique material. Netflix could also profit from lowering their costs
in order to stay competitive with new services offered by other businesses. While Netflix is an
extremely profitable business, there will always be other businesses that offer comparable
services at lower costs or with greater features. Netflix must continue to innovate in order to
expand and achieve long-term sustainable profits.
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References

Anderson, David. Rancord Society. (November 18, 2019). Netflix Inc.’s Organizational Culture
& Its Strategic Implications. https://www.rancord.org

Clearpointstrategy.com. Explaining the VRIO Framework (with a Real-Life Example).

https://www.clearpointstrategy.com/vrio-framework/amp/

Fernfortuniversity.com. Netflix, Inc. PESTLE & Environment Analysis.

http://fernfortuniversity.com

Fernfortuniversity.com. Netflix, Inc. Porter Five Forces Analysis. http://fernfortuniversity.com

Frue, Kiesha. (November 14, 2018). PEST Analysis of Netflix: How Politics and the Economy
Impact the Media Provider. https://pestelanalysis.com

Jurevicius, Ovidijus. (February 13, 2013). VRIO Framework PEST & PESTLE Analysis.
https://www.strategicmanagementinsight.com

Martin, Marci. (December 3, 2019). Business News Daily. How Porter’s Five Forces Can Help
Small Businesses Analyze the Competition. https://www.businessnewsdaily.com

Mindtools.com. Porter’s Five Forces. Understanding Competitive Forces to Maximize

Profitability https://www.mindtools.com

Netflix Investors. https://www.netflixinvestor.com

Pestleanalysis.com. What is PESTLE Analysis? A Tool for Business Analysis.

https://pestleanalysis.com

QuestionPro.com. What is Strategic Analysis? https://questionpro.com/blog/strategic-analysis/

Rivera, Anthony. Rancord Society. (November 10, 2019). Netflix SWOT Analysis (Internal &
External Strategic Factors). https://www.rancord.org

Rivera, Anthony. Rancord Society. (November 18, 2019). Netflix VRIO/VRIN Analysis &
Value Chain Analysis (Resource-Based View). https://www.rancord.org.

Rothaermel, F. (2019) Strategic Management Concepts (4th Ed). New York, NY: McGraw-Hill.

Tapalaga, Andrei. (October 20, 2019). A Pestle Analysis of Netflix to Show You Its Value in
Marketing Research. https://medium.com/better-marketing/

Toughnickel.com. (February 17, 2020). Porter’s Five Forces Analysis of Netflix, Inc.
https://toughnickel.com
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Appendix A

Valuable (V) Rare (R) Inimitable (I) Organization (O)

YES YES YES YES

Innovative Support and licensing Scale along with access operating margin is
Brand equity is high from creators of to a huge subscriber primarily determined
Large system of content entertainment material base are difficult to from the top down
creators and customers and copyright holders emulate. To support growth, the
Unique creation of (Rivera, 2019) Other rivals may be company uses its
content Streaming and DVD able to create material, corporate culture to
Support and licensing Rentals but not on the size and create resilience amid
from creators of Accessible practically regularity that Netlfix its employees.
entertainment material anywhere in the world produces. Facilitates
and copyright holders High brand equity High brand equity communication to
(Rivera, 2019) Large system of content Large system of content increase the circulation
creators and customers creators and customers of fresh ideas within
Unique creation of Unique creation of the company
content(Rivera, 2019) content(Rivera, 2019) (Anderson, 2019).
High brand equity
Large system of content
creators and customers
Unique creation of
content(Rivera, 2019)
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Appendix B

Economic
-Critics argue that Netflix is
transforming into a cable provider by
raising monthly memberships gradually
over time.
-Competing streaming services are vying
for Netflix's material.
-Consumers are being forced to pay for
several memberships to larger name
streaming providers.
Political Social
-Quality television and film options are -The entire population is an enthusiast
-Developments are limited by dwindling (Pestleanalysis.com).
of Netflix.
material restrictions, they are -Netflix should charge varying monthly
-They consist of an excellent work
not accessible in all countries, prices depending on the state of the
atmosphere with employees thriving
and cannot offer material from economy and the series available within
here
all nations. that country (Tapalaga, 2019).
-They also grant student scholarships
- US government places and assist organizations in providing
restrictions on establishing financial aid
companies in specific nations -they are led by a considerate CEO that
-censorship and permits in other contributes to charities
(Pestleanalysis.com).
countries apply as it is
impossible to broadcast in China -As television became outdated to
younger viewers, Netflix evaluated and
owing to their censorship rules
(Pestleanalysis.com) Netflix predicted the future market (Tapalaga,
2019).

PESTLE
Environmental Analysis Technological
-Netflix does not squander -reduces your monthly data cost: Netflix
natural resources because it employs a proprietary technology to
does not manufacture items. compress videos without compromising
quality
-They do still emit CO2 when
they use power. -consumers are disappointed with the
switch from a star rating system to a
-they constructed wind turbines thumbs up or down system.
and solar panels in 2019 to -Customers believe that suggestions do
transition to a 50% renewable not always coincide with their interests,
energy consumption. as they used to (Pestleanalysis.com).
-They plan to have 100% -any computer or smartphone
sustainable energy by 2025 connected to the internet can visit the
(Tapalaga, 2019). website/app (Tapalaga, 2019).
Legal
-Netflix must ensure that
regional limitations on specific
shows/films are followed
(Tapalaga, 2019).
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Appendix C

Suppliers
Substitutes
Can reduce Netflix's market margin
With conventional TV on the revenues. Significant vendors can
wane as consumers, particularly utilize their bargaining strength to
young folks, turn to get greater pricing from CATV
subscription services, the risk of companies.
a Netflix alternative product is As more production firms develop
minimal (toughnickel.com). their own VOD platforms, certain
elements of Netflix's content will
begin to fade (toughnickel.com).

Buyers
Potential New Entry
Since purchasers prefer to pay
New competitors offer new
the lowest price feasible,
methods to accomplish things,
Netflix's profitability suffers. putting Netflix under pressure to
Buyer power will always be Competitive Rivalry decrease rates and maintain its
strong due to the ease with -Netflix works in a highly competitive advantage.
which memberships can be competitive CATV systems With the emergence of a growing
joined and cancelled business, which has a number of new VOD providers
(toughnickel.com) negative impact on long- (toughnickel.com), Netflix faces a
term profitability. severe problem.
-Competitors such as
Amazon might provide
more services in exchange
for subscription fees
(toughnickel.com).