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charge on aggressive regulations for Comcast, Verizon and other broadband companies.” This apparent contradiction has not generated positive publicity for the firm. It should also be noted that, regardless of the political position of the organization, the federal government’s attempt to enforce net neutrality rules is a threat to any corporation that does business on the internet (Dorfman, 2014).Analysis of Netflix’s Boston Consulting Group (BCG) Growth-Share MatrixNetflix’s BCG growth-share matrix is based upon the firm’s 2013 annual report. The firm separates its segments into three categories: domestic streaming, international streaming, and domestic DVD (Netflix, 2013). Its domestic streaming segment is clearly 10
BUSI 690-D06: Group Case Study 1: Netflixthe most profitable of the three categories. In the BCG matrix, it is identified as the “star.” In 2013, this segment experienced revenues totaling $2,751,375,000 and a contribution profit of $622,767,000 (Netflix, 2013). However, the firm’s international streaming segment was far less profitable that year. In this segment, revenues totaled $712,390,000 while the firm incurred a contribution loss of -$274,332,000 (Netflix, 2013). This disparity is due to the fact that the firm incurred a cost of revenue total of $774,753,000 (Netflix, 2013). This challenged segment would easily qualify as the “dog” in the BCG matrix. Netflix’s domestic DVD segment was not as problematic for the organization as its international streaming segment. This third and final segment experienced revenues of $910,797,000 and a contribution profit of $438,982,000 (Netflix,2013).The Product Life CycleAt this point in Netflix’s history, it is clear that their domestic streaming segment is in its maturity phase. Rothaermel writes (2013), “The winners in this increasingly competitive environment are generally firms that stake a strong position as cost leaders” (p. 178). During this phase, “product features and performance requirements are now well established” (Rothaermel, 2013, p. 179). Netflix’s domestic streaming segment certainly meets these criteria and it is evident that the firm’s leaders are striving to ensure that the organization remains a cost leader in the industry. However, it is apparent that the international streaming segment is struggling. Although some firms with segments that are struggling in a similar fashion find themselves in the decline stage and would consider the option of pursuing a harvest strategy, this is not true for Netflix or this particular segment. The company is clearly striving to gain and maintain a strong 11
BUSI 690-D06: Group Case Study 1: Netflixinternational presence. It is evident that Netflix’s managers view this segment as an area with potential for growth despite its present struggles. The domestic DVD segment, however, has been experiencing a decline as a result of the emergence of services such as Redbox. Less and less consumers are taking advantage of DVD-by-mail subscriptions.