Instructions
Module Code: PM 303
Module Title: Strategic Management
Programme BSc (Honours)
Level: Level 6
Awarding Body:
Module Leader John Threlfall
Format: Strategic Report. Group format (no more than 4 per group)
2,500 words (with 10% plus or minus leeway) plus Appendices
50% of overall mark for the module.
Any special requirements:
The Report should be submitted on the Student Portal
Along with a Turnitin Report.
Deadline date for submission: Week 10 Friday 11th December
Learning outcomes to be examined in this assessment 1. Critically examine the relationship and the need for compatibility between corporate strategic and functional management policies.
2. Analyse the internal and external influences on corporate objectives and strategy.
Percentage of marks awarded for module: 50% of the total marks for the module
Assessment criteria Explanatory comments on the assessment criteria Maximum marks for each section
Content, style, relevance, originality Clear demonstration of rigorous research from recognised authoritative sources.
Relevance of Content to the task at hand
Originality of Content
40%
Format, referencing, bibliography Harvard 10 %
Constructive critical analysis, introduction, conclusion Demonstration of a clear understanding of the issues facing the organisation.
Effective application of academic models to the selected firm
Evaluation of key factors highlighted 50%
Candidates must clearly label their ID Number on additional separate reference, formula or answer sheets.
Assignment Brief
One of the most recent leading developments in the business world has been the rise of new types of business models which completely revolutionize the workings of industries sometimes decades, if not centuries old. This level of change has impacted on a wide range of industries ranging from retail, banking and books to now even revolutionizing previously untouched business areas such as transport, hotels, education and music.
This assignment requires students to conduct a strategic analysis of both the internal and external environment relating to one of the following leading technology and online companies:
Spotify
Netflix
Expedia
TripAdvisor
Opentable
Students are required to examine the strategic choices facing this organization and evaluate these choices as to their suitability, acceptability and feasibility. You should also provide a critique of contemporary strategic management research and practice within your report.
All group members are required to participate
Assignment Task: 50% of the overall mark for the Module
Strategic Report to Board of Directors
To: Board of Directors
From:
Date: tbc
Subject: Strategic Review
Contents:
Please Note: Each of the following eight sections must be addressed.
1. 1. Executive Summary
Provide a concise summary of the key issues identified within the report
1. 2. Corporate Objectives
Note the corporate objectives for your selected company for the coming year. Include both financial and strategic objectives.
3 External Analysis
Conduct both of the following tasks
3.1 Macroeconomic Analysis. Conduct a PESTLE analysis for the chosen firm.
3.2 Competitive Analysis. Utilise Porter’s Competitive Forces for your analysis
4 Internal Analysis: Strategic Capabilities
Conduct both of the following tasks
4.1 Resource Audit, distinguishing between Basic and Unique Resources
4.2 Analysis of Functions of the business and Core Competencies
5 Basis of Competitive Strategy
5.1 Analysis of Bowman’s Strategy Clock. In your answer identify which of the available positions does the firm take and
– Identify Key Market Segment(s) targeted within chosen business area e.g by age, income, lifestyle etc.
– Briefly analyse the various practices the firm adopts to sustain their competitive advantage and meet customer needs.
6 Strategic Choice
In the light of the preceding sections, examine the key directions for future growth for the selected company. Using Ansoff’s Matrix, examine each of the 4 options available, detailing what each choice would possibly entail
– Market Penetration
– New Product Development
– New Market Development
– Diversification
7. Strategy Evaluation
Choosing one of the options of Ansoff’s matrix assess the level of
– Suitability
– Acceptability
– Feasibility
Facts & figures, academic opinion and commentary from industry experts may all be utilised to aid evaluation and justify selection. Please consult class notes and key texts such as Johnson, Scholes et al. (2015) regarding these strategic concepts.
8. Conclusion and recommendations
Conduct an overall summary of the strategic issues facing the selected company Examines how the selected company can
• Make the most of their strengths?
• Circumvent weaknesses?
• Capitalize on opportunities?
• Manage their threats?
A SWOT analysis with bullet points is not required here, instead focus on key issues raised in the report.
Total marks for Report: 100
Coursework Paper
Module Title: Strategic Management
Executive summary
The Netflix intends to increase the market shared internationally. Due to the expenses incurred in the huge advertisements, the company needs to have only a sustainable profit. The major threat to the company is the illegal downloads that can be controlled by the implementation of the legal measures. Moreover, the suppliers pose a huge threat but the company has invested in the creation of its original media content. Nevertheless, the development should be done intelligently. The suppliers of the company may consider the company as a competitor rather than a partner. Notably CEO and the Engineer John are important resources of the company. On the Bowman’s model, the firms take the position fourth (differentiation) position in the Bowman’s Strategy Clock. In consideration of the options available on the Ansoff’s matrix, the company should adopt the market penetration strategy. More so, the company should concentrate on the creation of its original media content as a way of getting more customers from the competitors as well maintain the existing customers.
Corporate Objectives
Netflix has already come up with the financial and the strategic objectives for the 2016 year. First, the company wants to ensure that the viewers have the access to quality 19th and 20th documentaries on the cycling. The company had noticed that the viewers have highly liked the 20th documentaries on bicycling. Instead, of diverging the efforts towards increasing the number of the documentaries, it will ensure the customers view the best on each category.
Second, Netflix wants to create original contents exclusively owned by the Netflix. The company managers believe that on each original content offered, there is a probability of learning more about customers. The learning would necessitate the company to provide a variety of the products to them (Netflix, 2015, p.01).
Third, the company expects to expand internationally faster while remaining slightly profitable. During the year 2015 and 2016, the company will assist most of the people in the world to join the Netflix. In 2016, the company does not expect to gain huge profits since it will spend huge money in the global expansions. In China, moderate actions of the company would be maintained, and the company would be exploring the potential capabilities of the market. From the year 2017, the company would focus greatly on increasing the global profits since it would be involved in the expansion activities (Netflix, 2015, p.01).
External Analysis
PESTEL
Political
The political environment has a huge impact on the implementation of the law in major countries whose Netflix has invested. The increased illegal downloads are a big threat to Netflix. The control of the illegal downloads activities would favour the development of the Netflix business. The control of the illegal downloads is dependent on the political willingness.
Economic
Netflix operates in a very competitive environment; the company has to price the products offered competitively. The competitors include the Amazon.com, Inc. and the Time Warner Inc. Moreover, the demand for the Netflix, Inc. products is affected by the consumer income since it is not a basic need. In times of the economic crisis, the consumer would shift their expenditure to basic goods affecting the sales of the Netflix (Markowitz, 2015, p.01).
Social
The target market of the Netflix considers the attractive value of the movie. The aging of the population is a determinant on the assessment of the value in a movie. The attractive value of the movie decreases as the age of the customers increase.
Technology
The operations of the Netflix, Inc. are dependent on the internet developments taking place. The users of the internet have increased. Nonetheless, there are no barriers to the entry of the market. There is increased entry in the market. The firm should continuously update its technological developments in the business model.
Environment
The company should ensure the preservation of the environment. The action can be implemented by constructing a building that save the energy. The company can also take the preservation of the environment as a social activity.
Legal
Netflix business involves the subscription to the video and the movie series that are in high demand under the program of subscription known as video-on-demand (SVOD). The Netflix, Inc. offers other people and companies copyright videos and movies. In case the Copyright law is amended, it would have a huge impact on the business of the Netflix that is highly dependent on the copyrighted movies and the televisions shows. Moreover, the Company has to adhere to the current laws on the copyright.
Porter’s five forces
Competitive Rivalry
Netflix has improved in its focus from renting the DVDs to providing the streaming of the media content on the internet. Although the Companies such as Amazon Prime, Warmer, Inc. and the Hulu Plus are the major competitors of the Netflix, Inc., they do not offer completely similar lines of the products. Recently, Netflix, Inc. made efforts to increase provisions of the contents originally owned by the Netflix. The internet market is increasingly growing, and the companies have the capability to develop despite the increased competition.
New entry threat
There is increased entry into the market. All the same, the small firms entering the market do not pose a great threat to Netflix. The firms require huge capital investments, establish distributions networks as well as provide a variety of quality videos to gain the capability to compete with the Netflix. Google and the Apple companies are a big threat to the Netflix since they have expressed their interests to enter into the market.
Substitute’s threats
The physical DVDs do offer a big threat to the Netflix compared to the illegal pirating. There are websites that allow the consumers to download media contents although they have no legal authority. It is possible for Netflix to lobby the government to ensure the adequate implementation of the anti-pirating laws.
Supplier’s bargaining power
The threat of the suppliers bargaining power is high to the Netflix. The company media content offered is obtained from few providers. Meeting the needs of the customers fully requires the company should offer quality and a variety of the media content continuously. Netflix success is highly dependent on the positive relationships with suppliers. For instance, the company recently lost Viacom International, the single supplier of the children’s TV content, to its major competitor Amazon Instant Prime.
Consumers bargaining power
The consumers in the internet market have a high bargaining power. The consumers incur very low costs when they are switching from one service provider to another. The $7.99 charged by the Netflix is highly affordable to many people. Even so, the consumers are not bound by long-term contracts, and they can switch from one company to another. Netflix has limited the power of the buyers by offering original products that are not available from other distributors. The company also has the huge financial resources that are current being used in the expansion of the company services to the whole world. In the year 2014, the company realised revenue of $ 5, 504, 656 and a net income of $266, 799 despite the increased expenditure on the market activities and the expansion activities to major countries.
Internal Analysis
Resource Audit
The CEO Reed Hastings and the Engineer John are some of the unique resources of the Netflix Inc. Reed Hastings founded the company and helped it to make developments in the internet marketing. Engineer John is one of the engineers of the company who helped in the development of the company after other engineers were laid off after the economic problems experienced after the September 11 attack (McCord, 2014, p.72). That time, he had to work very long hours to manage the work that previously managed by three engineers.
The company also has other important resources that help to increase its competitive advantage. The major employers include the Kelly Bennett, Tawni Cranz, Jonathan Friedland, Neil Hunt, David Hyman and the Greg Peter, who are the chief officers of the company. Moreover, the Netflix website is suited for better browsing tools that allow the users to filter TV shows and movies, specific genres as well as the tools narrow down to specific dates of the videos. The viewers have the capability to identify new movies and the TV Show and those that would be leaving the site soon (Newman, 2015, P.124-126).
Functions analysis and core competencies
The function of the Netflix is to provide the consumers who have the internet connections with unlimited TV series and movies at a fee payable monthly (Marzec, 2014, p.10). The function was developed after Reed Hastings, the CEO of the company realised that the consumers greatly love the content provided by the television stations. Nevertheless, the method in which the content was provided allowed for limited views. The services of the company are customer focused. The company provide customers with the flexible schemes, and they are free to make a decision on whether to subscribe to the services of the Netflix or not. The company provides the most recent contents of the customer’s desire (Netflix. 2015, p. 01).
The core competence of the Netflix, Inc. is the delivery of the content needed by the consumers in their homes conveniently. The company improved its core competence by investing in its original content. The action would reduce the impact of the suppliers’ powers and increase the loyalty of the consumers to the company.
Basis of competitive strategy
From the Bowman’s model, three differentiation strategies can be identified show from the figure (1a). First, in the hybrid strategies the firm uses the low-cost methods of the production and charge a low price. The generated profit is used in the differentiation of the products. Second, in the differentiation strategies the customer can relate the products with an added value of the design, functionality and the innovation in the product. Third, in the focused differentiation, the customers associate the product with a benefit, and they are ready to pay a higher price than the one charged by the customers.
Figure (1a) Bowman’s Strategy Clock (Thomson, 2009, p.185)
There are other options considered highly prone to failure. First, the high price/low-value strategy can only function well in the monopolistic environment. Second, the high price/standard value strategy will result in high-profit margins if the competitors do not react, but the firm may be at risk of losing the market share. Third, the standard price/low-value strategy would make the firm lose the market share (Thomson, 2009, p.185). The last option of the strategy is marked as low price strategy and is divided into no-frills and the low price strategy (Thomson, 2009, p.184).
The firms takes the position four (differentiation) in the Bowman’s Strategy Clock. The Netflix has made an effort to differentiate its activities from other firms by offering movies and TV series services only. Moreover, a standard monthly charge is applied to customers for the unlimited view. The introduction of the original products by the Netflix has also increased the company’s competitive advantage. The young people within childbearing age are the big target of the Netflix Inc. By the end of June 2013, 36.7 million people within the age range of 18-59 years had subscribed to the services of the Netflix. The subscribers are in the age are seeking entertainment and leisure after work. They are frequent visitors of the internet, and they can easily access the services of the Netflix.
Strategic Choice
The Ansoff’s matrix is important in the identification of the direction that the Netflix should adopt in the growth strategies. The market penetration strategy is in the first quadrant. Under this option, the firm seeks to increase its market share in the already existing markets. In the effort to increase the market share, the company can use the tactics of product proliferation, products improvement and product-line stretching. The second quadrant adopts the products development strategy (Bachmeier, 2013, p.03). The option involves the offering of new products to the markets that already exist. If the company have a good goodwill, new products would be introduced in the market easily and at a low cost. The third strategy involves the company employing the market development strategy. The company sells the existing products to the new markets. The last strategy involves diversification. The diversification is known to be the riskiest method since it involves the introduction of the new products in the new market. The method is the best when there is a probability of the high returns from the investments (Waters, 2006, p. 274-275).
Strategy Evaluation
The market penetration is the most suitable, acceptable and feasible strategy that can be adopted by the Netflix. The company should focus on the provisions of high-quality services and at an affordable price. Bachmeier (2013, p.04) noted that the use of the product improvement would be an important tactic in the market penetration. The company has the probability of increasing the market share of the existing markets by investing in the innovation and the advanced technology. More so, the company should concentrate on the creation of its original media content as a way of getting more customers from the competitors as well maintain the existing customers.
The new original Netflix media content has already gained customer acceptance thus it is both feasible and suitable. The company should also form partnerships with other firms that would facilitate the development in the software and the hardware used in the services of the Netflix. Lastly, pricing should be considered to be last option in the market penetration strategy. The TV series and the movies offered by the Netflix are not basic goods, and the price would be the last the customer would give consideration. The customer is the most recent and entertaining products. Netflix quality is not questionable, and it has the capability to build on the already developed strategies (Rice, 2010).
Conclusions and Recommendations
There are several ways the company can achieve the best through the application of its strengths. The Netflix business model is largely growing, and many customers have liked it (Allen, Feils & Disbrow, 2014, p.136). In the line of its products, Netflix is said to be the market leader with the unlimited subscription of $7.99 in a month. The company should increase the quality and the convenience of using its products to preserve the existing customers as well as get new customers from the competitors. The company has a large financial base that can be used in the exploitation of the new opportunities. The strong cash flow of the company gives the company the capability to continue with the innovations and experiment with the new products.
The huge weakness of the Netflix is that the content offered to its customers is sourced from the external producers. That means the capability of the company and the needs of the consumers are always under the control of the major suppliers. The company has taken a great move to produce its original media content, which has gained high customers experience. Nevertheless, the company should implement the plan diligently since the distributors may start viewing the company as a competitor rather than a partner.
The company can highly capitalise on the opportunities available. The company can maximise the number of its subscribers by understanding the new markets adequately. For instance, the huge company advertisements in the Latin America increased the number of the subscribers. However, the company does not have adequate knowledge of the market. The company can capitalise on the vertical integration. For instance, the creation of its original media contents would facilitate the company to control the supply and offer more products that would increase the customers.
The company can also take measures that would ensure threats controlled. First, the company should work closely with the authorities to make certain the termination of the illegal downloads. Second, plan on how it would mitigate the risks posed by new countries political structures. Largely, the company should avoid investing in the high-risk countries.
Bibliography
Marzec, M 2014, ‘The Netflix effect’, Smart Business Northern California, 7, 12, p. 10, Business Source Complete, EBSCOhost, viewed 21 November 2015.
Allen, G, Feils, D, & Disbrow, H 2014, ‘THE RISE AND FALL OF NETFLIX: WHAT HAPPENED AND WHERE WILL IT GO FROM HERE?’, Journal Of The International Academy For Case Studies, 20, 1, pp. 135-143, Business Source Complete, EBSCOhost, viewed 21 November 2015.
Bachmeier, K. 2013. Analysis of marketing strategies used by pepsico based on ansoff’s theory. [S.l.], Grin Verlag.
Markowitz, D.2015. Who Are Netflix’s Main Competitors? (NFLX). Retrieved from, http://www.investopedia.com/articles/markets/051215/who-are-netflixs-main-competitors-nflx.asp
McCord, P 2014, ‘How Netflix Reinvented HR. (cover story)’, Harvard Business Review, 92, 1/2, pp. 70-76, Business Source Complete, EBSCOhost, viewed 21 November 2015.
Netflix. 2015. Netflix’s View: Internet TV is replacing linear TV. Retrieved from, http://ir.netflix.com/long-term-view.cfm
Newman, J 2015, ‘The Best Netflix Tools’, PC World, 33, 2, p. 120, MasterFILE Premier, EBSCOhost, viewed 21 November 2015.
Rice, C. 2010. Understanding customers. Routledge.
Thomson, N. 2009. Strategy in Context. Oxford, Wiley-Blackwell.
Waters, C. D. J. 2006. Operations Strategy. London, Thomson Learning.
