most content selection. (Investopedia.com) Netflix has the largest selection of original content. Complementary ProductsThe most important complement product of Netflix is technology itself. Technology including high bandwidth needed for the quality of their content as well as all of the devices used to watch Netflix on. Without a high bandwidth, Netflix services would not be of high quality, which would most likely decrease brand loyalty and more importantly, the number of
Netflix: SMP Analysis 13 subscribers. Another complementary product to Netflix would be the various devices that have access to their services. A few of these devices would be the Nintendo Wii, PS3, Xbox, Apple products, etc. For consumers who already own one of these devices, subscribing to Netflix is easy and convenient. Without these devices, Netflix wouldn’t stand where they do today as the leading streaming service. ImplicationsFrom these 5 forces we can conclude that this industry is highly competitive due to lack of differentiation. There is little difference between the services provided by the market leaders (Netflix, Hulu, Amazon Prime). There is a growing threat of substitutes which include, live streaming and the ever present illegal streaming websites. These will probably affect the future business endeavors of Netflix. Bargaining power of suppliers could become stronger in the future if Netflix’s competitors gain more of the market. Suppliers can threaten to leave Netflix for another online streaming service if Netflix does not pay a higher price. There is a threat of new entrants but, it will be hard to compete with Netflix’s financial powers and long-standing contracts without entering into a joint venture or through acquisition by a larger company. Lastly, we can conclude that the buyer's shape the content that Netflix’s provides. There is no switching costs with Netflix since there is no annual contract. To keep its customer base, Netflix will have to maintain a high quality of provided content to remain competitive or they can start enforcing annual contracts.
Netflix: SMP Analysis 14 Strategic GroupsThe streaming industry is organized into different strategic groups. Netflix, Hulu, and HBO GO all have subscription based pricing, while Youtube provides free content with advertisements as a downside. While the companies with subscription based pricing get payments monthly, Youtube gets paid from the advertisements that are played before a video. Although, now Youtube has brought Youtube Red to the market, which is also a subscription based pricing model without any advertisements. From having heavy competition mainly in the same strategic group, it would make it extremely difficult for any companies trying to enter the industry. If new companies did enter the industry, they would have to find a huge way to differentiate themselves compared to their competition.