Essential of Strategic Management: The Quest for Competitive Advantage, Seventh Edition<\/p>\n
Case 6 – Netflix in 2019\u2014Striving to Solidify its Position as the Global Leader<\/p>\n
McGraw-Hill Higher Education\u00a0\u00a9 2021<\/p>\n
Case 6:\u00a0Netflix in 2019\u2014Striving to Solidify its Position as the Global Leader<\/p>\n
Arthur A. Thompson,
The University of Alabama<\/p>\n
Overview<\/p>\n
Throughout 2018 and the first three months of 2019, Netflix was on a roll. Movie and TV show enthusiasts across the world were flocking to become Netflix subscribers in unprecedented numbers, and shareholders were exceptionally pleased with Netflix\u2019s fast-rising stock price. Over the past eight years, the company had successfully transformed its business model from one where subscribers paid a monthly fee to receive an unlimited number of DVDs each month (delivered and returned by mail with one title out at a time) to a model where subscribers paid a monthly fee to watch an unlimited number of movies and TV episodes streamed over the Internet. In April 2019, Netflix was the world\u2019s leading Internet television network with 149 million paid streaming memberships in over 190 countries enjoying more than 165 million hours of TV shows and movies per day, including original series, documentaries, and feature films. Netflix members not only could watch as much streamed content as they wanted\u2014anytime, anywhere, on nearly any Internet-connected screen\u2014but could also play, pause, and resume watching, all without commercials. In the United States, Netflix still had nearly 2.5 million members in May 2019 who, because of limited Internet service or just personal preference, continued to receive DVDs solely by mail (but the numbers of mail-only subscribers were declining monthly).<\/p>\n
Netflix\u2019s swift growth to 60 million paid subscribers in the United States and its promising potential for rapidly growing its base of international subscribers past 90 million pushed the company\u2019s stock price to $360 per share in mid-May 2019 (and an all-time high of $423 in July 2018). Already solidly entrenched as the world\u2019s biggest and best-known Internet subscription service for watching TV shows and movies, the only two questions for Netflix in 2019 seemed to be how big Netflix\u2019s service might one day become in the world market for on-demand streaming of movies and TV episodes and whether the company had the competitive and financial strength to combat the efforts of larger, resource-rich rivals looking to steal subscribers away from Netflix.<\/p>\n
Financial statement data for Netflix for 2005 through 2018 are shown in\u00a0Exhibits 1\u00a0and\u00a02. Netflix had never paid a dividend to its shareholders and the company had declared it had no present intention of paying any cash dividends in the foreseeable future.<\/p>\n
Exhibit 1:\u00a0Netflix\u2019s Consolidated Statements of Operations, 2005\u20132018 (in millions of $, except per share data)<\/p>\n
Note 1: Some totals may not add due to rounding.<\/p>\n
Note 2: The company\u2019s board of directors declared a seven-for-one split of its common stock in the form of a stock dividend that was paid in July 2015. Outstanding share and per-share amounts disclosed for all periods prior to 2015 have been retroactively adjusted to reflect the effects of the stock split.<\/p>\n
Source: Netflix, Inc., 2006, 2010, and 2018 Annual Report, accessed August 5, 2019.<\/p>\n
What is the background of the case?<\/p>\n
What problems does the company have to address?<\/p>\n
What are some potential solutions you’d recommend to solve the problems?<\/p>\n
Which solution would you choose and how would you implement it?<\/p>\n
Click to access the\u00a0Assignment Template.<\/p>\n","protected":false},"excerpt":{"rendered":"
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