This SWOT analysis of Netflix examines the internal and external factors that influence the competitive advantages of the entertainment and content streaming business. The company’s operations depend on information technology for its streaming infrastructure, as well as consumer electronics and Internet services available to target customers. These factors in the internal and external environments of the business are considered in this SWOT analysis of Netflix, relating to the company’s comparative performance and competitive advantages relative to other firms in the international market. Netflix’s growth and expansion and current potential for further business growth and profitability are positive indicators considered in this SWOT analysis.
This SWOT analysis includes an internal analysis of Netflix’s strengths and weaknesses, which determine core competencies and business capabilities for competitive advantages. This SWOT analysis also shows an external analysis of Netflix’s opportunities and the threats to its business. These strengths, weaknesses, opportunities, and threats (SWOT) represent the company’s status and position as a competitor in the entertainment content production and streaming market.
Netflix’s Strengths
Internal factors that make the video streaming business competitive are evaluated in this part of the SWOT analysis. The following competitive advantages are Netflix’s strengths:
- International market reach
- Economies of scale
- Content production capabilities
Netflix’s international market reach equates to a large user base, a large market share, and commensurate revenues from streaming services. This multinational user base also supports the company’s economies of scale, which ensures adequate funds for business operations, such as the production of original movies and series. Considering the internal business environment evaluated in this SWOT analysis of Netflix, these internal factors are competitive advantages that allow for large-scale operations and profitability in streaming services. The company also maintains competitive pricing for streaming services with support from these business strengths. Moreover, Netflix’s content production capabilities are relevant to this SWOT analysis. This strength is a competitive advantage that empowers the business to retain subscribers despite competitors and alternatives for Netflix’s streaming services. This part of the SWOT analysis shows the competitive advantages for achieving the entertainment goals and strategic objectives established through Netflix’s mission and vision, which aim to provide entertainment for the global market.
Netflix’s Weaknesses
Internal factors that prevent maximum business performance are considered in this part of the SWOT analysis. The following business conditions are Netflix’s weaknesses:
- Lack of own data center
- Low control over mobile app availability and accessibility
- Low control over internet connection speeds
- Limited content production
Netflix streams movies and series from cloud computing infrastructure using Amazon Web Services (AWS). Also, Netflix’s app availability and accessibility are subject to the requirements and limits of app stores, such as Apple’s App Store and Google Play Store. Moreover, internet service providers (ISPs) determine connection speeds and throttling policies for streaming videos. In this SWOT analysis of Netflix, these weaknesses are internal factors that indicate limited or low control over some critical factors that affect the company’s online services and competitive advantages. Furthermore, the limited extent of the company’s content production is a weakness in this SWOT analysis, considering some competitors’ large-scale entertainment production and distribution capabilities. The strategies and tactics involved in Netflix’s marketing mix (4P) depend on how these weaknesses affect business operations. For example, this SWOT analysis shows limited content production, which affects the product mix, as well as lack of control on app availability and accessibility, which influences Netflix’s distribution strategy.
Opportunities for Netflix
External factors that can improve business performance are evaluated in this part of the SWOT analysis. The following are Netflix’s opportunities:
- Development of novel digital products/services for subscribers
- Diversification for business growth outside content streaming
- Development of the company’s own data center
The opportunity to provide new products capitalizes on Netflix’s strength of its international market reach. For example, the company can develop and offer additional or new mobile games on top of its core movies and series. Another of Netflix’s opportunities is diversification, which can include consumer electronics that create a service ecosystem involving movies, series, and video games. In this SWOT analysis, developing new products and diversifying the online business can create new revenue-generation channels. Netflix can also consider building a data center as its operations grow, considering dependence on AWS, which is a weakness considered in this SWOT analysis. However, the company continues to indicate that the benefits of using AWS outweigh its disadvantages. For the opportunities in this part of the SWOT analysis, Netflix’s competitive strategy and growth strategies include competitive advantages for product development and diversification.
Threats to Netflix
External factors that limit or decrease business performance are considered in this part of the SWOT analysis. The following industry and market factors are the threats to Netflix:
- Competition
- Content piracy
- Changes in Amazon’s rules and policies for AWS
The aggressive and high-pressure competition described in the Five Forces analysis of Netflix is a major threat relevant to this SWOT analysis of the business. The company competes with the movie and series production and distribution businesses of Disney, Sony, and NBCUniversal, as well as the content production and streaming services of Apple TV Plus, Google’s (Alphabet’s) YouTube, Facebook (Meta), Amazon Prime Video, and Microsoft Movies & TV (Films & TV). Netflix also states that content piracy in some countries or regional markets is an external factor that threatens the business. In this SWOT analysis, piracy can reduce or limit membership and corresponding subscription revenues. Nonetheless, Netflix’s competitive and affordable pricing can encourage customers to pay for the company’s service instead of consuming pirated entertainment content. Considering this competitive landscape, changes in AWS policies and strategies can threaten the stability of Netflix’s cloud computing infrastructure and online services. The threats in this SWOT analysis are beyond the company’s control, although strengthening competitive advantages can protect the integrity and profitability of the online business.
Netflix SWOT Analysis – Recommendations
The internal and external factors in this SWOT analysis of Netflix indicate a business situation where the company can grow with cautious strategic implementation. While the company’s competitive advantages can promote further growth, strategic prioritization for content production, product development, and business diversification can address the weaknesses, opportunities, and threats considered in this SWOT analysis. Netflix’s strengths and competitive advantages can support this strategic prioritization and corresponding adjustments in its operations.
References
- Jang, M., Kim, D., & Baek, H. (2023). How do global audiences of TV shows take shape? Evidence from Netflix. Applied Economics Letters, 30(3), 285-291.
- Netflix, Inc. – Form 10-K.
- Netflix, Inc. – Long-Term View.
- Netflix, Inc. – Top Investor Questions.
- Taherdoost, H., & Madanchian, M. (2021). Determination of business strategies using SWOT analysis; Planning and managing the organizational resources to enhance growth and profitability. Macro Management & Public Policies, 3(1), 19-22.
- U.S. Department of Commerce – International Trade Administration – Media and Entertainment Industry.
- van Es, K. (2023). Netflix & big data: The strategic ambivalence of an entertainment company. Television & New Media, 24(6), 656-672.