Netflix Value Chain Analysis
Value chain analysis is an analytical tool that can be used to find business activities that can create value and competitive advantage to the on-demand media provider. Figure below illustrates the essence of Netflix value chain analysis.
Netflix Value Chain Analysis
Netflix Primary Activities
Netflix Inbound logistics
Inbound logistics involves the processes associated with receiving and storing raw materials to create output. For a streaming service such as Netflix content is the raw material. Establishing strategic relationship with content producers and intellectual property holders such as Warner Brothers, Dream Works and Sony Pictures are the main sources of inbound logistics value creation for a streaming business. Netflix is utilizing these sources extensively.
Currently, Netflix is increasing investments to produce its own, original content such as Squid Game, BoJack Horseman and Stranger Things as a differentiator amid intensifying competition. This shift has certain implications on inbound logistics aspect of the business. Specifically, focus on original content requires greater involvement in inbound logistics for the largest streaming service in the world.
Netflix Operations
Operations are the stage where inbound logistics are transformed into outbound logistics. For Netflix, operational efficiency and cost advantage are the main sources of value creation at this stage. The on-demand media provider has to maintain its video streaming platform effectively in terms of ease of access, quick search, stability, and security of the server.
Netflix Outbound Logistics
Outbound logistics refer to the distribution of products and services to customers. Usual sources of value creation in outbound logistics include Delivering to consumers directly without intermediaries, Cooperation with other businesses to share distribution costs and extensive integration of information and communication technologies.
Considering that Netflix delivers digital media through streaming and downloads, the relevance of outbound logistics aspect of value chain analysis for the largest streaming service in the world is minimal. Smartphone, tablet or TV, as well as, internet connection is sufficient for customers to access Netflix media with no additional cost for the on-demand media provider to deliver the service.
Netflix Marketing and Sales
Netflix revenues consist of monthly membership fees for services related to streaming content to its members. The entertainment services provider uses value pricing and geographic pricing strategies. The marketing budget of the streaming service totalled to USD 2,53 billion or 8% of total revenues in 2022[1].
Ability to create an online buzz through creative and sometimes provocative marketing campaigns is a major source of value creation in marketing for the on-demand media provider. Specifically, marketing campaigns such as a hand crawling by itself in the streets of New York to promote Wednesday show, “Strange Mode” car sharing ride with Lyft and installing doll from Squid Game show in Sydney Harbor were widely discussed in social media with positive effects on Netflix brand image.
Netflix Service
Netflix offers high quality post-sale customer services. Customers with a wide range of issues related to their account or payment can find help in company’s website or talk to a customer support team member 24/7. Customer support is provided in many languages. The largest streaming service in the world is proactive in terms of maintaining communication with customers through systematically emailing customers new titles they might be interested in on the basis of content they viewed in the past.
Netflix Inc. Report contains a full version of Netflix value chain analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Ansoff Matrix and McKinsey 7S Model on Netflix. Moreover, the report contains analyses of Netflix leadership, business strategy, organizational structure and organizational culture. The report also comprises discussions of Netflix marketing strategy, ecosystem and addresses issues of corporate social responsibility.
[1] Annual Report (2022) Netflix Inc.