International business expansion is all about a planned phase by which company starts its business activities in several countries. It is not only about making investment in nations that are outside the home country of company but also about maintaining actual business presence in those nations. Due to this aspect, the present report has made an attempt to expand the business presence of Netflix from United States to Malaysia. Further, the report will also give a justification about the chosen target market by analysing the strategic issues faced by firm at the time of conducting business expansion. After that, focus will be given on analysing the strengths and weaknesses of Netflix so as to assess that whether it is going to support or challenge the business expansion (Netflix, 2014). Report will further try to focus on evaluating different types of entry modes that are available for the company such as Netflix.
1. Rationale For Malaysia
In order to select the best country for business expansion, cited firm should aim to understand the economic stability. With this respect, economic condition of Malaysia is very favourable. In addition to this, Netflix provides streaming of movies and TV series. According to this, use of internet is also increasing drastically which will be very helpful for Netflix. This will enable to attract more and more customers. In addition to this, Malaysian people are fond of movies. Thus, there is a great scope for Netflix if they make their business expansion.
In order to understand the country’s stability, PESTLE analysis can be used as it covers all the important areas which help in determining the stability of country. PESTLE analysis done for Malaysia is as follows...
This has a great impact over the business. It is essential to have balance between free market and system of control (Wild, Wild and Han, 2014). In addition to this, ruling party, Barisan National Party has power for over 25 years.
Further, there is no corruption in the country and from the above given diagram, it can be stated that the rate of corruption is falling down (Malaysia corruption rank, 2014). Malaysia stands at 50th rank around the world for least corrupted countries. When ruling party changes, then policies are also changed. But in Malaysia, there is stable government and there is no corruption so cited firm such as Netflix will be able to expand its business effectively here.
In the past 10 years, average rate of increase in economic growth is 7% per year. From the below given diagram, it can be stated that the country is going on very well as the GDP rate is increasing at a fast pace. This has increased the income of customers and as a result, buying power of them has also been increased. Further, Malaysia is an idle place for international trade. Seeing the present economic condition, it can be critically evaluated that economic factor is favourable for Netflix to make the business expansion. When compared with the GDP of South Africa and Turkey, GDP of Malaysia is constant as well as it is rising.
On 1957, the total population of Malaysia was 6.3 Million and now, it is 29.72 million as per the data of 2014 which can be seen in diagram as given below and this will be very much favourable for Netflix as they have growing potential customers (Malaysian population, 2014). All people in the country are potential customers as there are no age barriers and services provided by cited firm can be used by all age groups. Further, rate of internet users is increasing rapidly and people in Malaysia are fond of movies.
Moreover, there are three main age groups which are Malay (50%), Chinese 22%), Indians (7%) and remaining population is 0.70 in 2010. According to the pie chart, it can be forecasted that the population will go high till 2040 (Malaysian population, 2014). Thus, services which are provided by the cited firm will be able to attract all different groups as Netflix serves all types of movies with different languages which are preferred by the people of different countries. According to the geographical areas, South Africa is the largest and so as Turkey. In spite of this, geographical area is less and still the population is high.
There has been seen a huge increase in the use of smart phones and this has enabled people to use internet. There are many businesses and organizations which have been introduced in Malaysia (Dunning, 2012). This has helped the country to make use of new technology and provide better services.
Since 25 years, Barisan Nasional party has been ruling in Malaysia. In this period, lots of changes have been made in the law. Legislation related to business expansion is favourable as government of the country supports organization which wants to make business expansion here.
There has huge development in Malaysia and this has enabled the country to grow (Doh, McGuire and Ozaki, 2015). Thus, this factor is also favourable for Netflix.
From the above conducted research, it can be stated that Malaysia is one of the best markets in which business expansion will be more favourable as compared to other countries.
2. Key Strategic Issues Faced By Netflix In The Expansion Of Business At Malaysia
According to Boykin, Schutze and Cameron, 2014, through determining opportunities and threats, organization will be able to make improvements in the areas with the help of which it will also be able to grow its business” (Boykin, Schutze and Cameron, 2014). However, as per Aketarawong, Isasawin and Thanaphum, 2014, firm has to spend highly on identifying these factors so that they can make changes accordingly (Aketarawong, Isasawin and Thanaphum, 2014). Opportunities are provided to the firm with appropriate ways through which they can grow their business. On the other hand, threats are the barriers which put adverse impacts on the path through which they desire to achieve their goals and objectives. Following are the opportunities...
In this modern world, use of internet is increasing drastically and it is a type of opportunity which Netfilx has in Malaysia (Bohari, Cheng and Fuad, 2013). Services provided by cited firm will be highly benefited as internet users are increasing rapidly. People prefer to make use of their mobile phones in order to entertain themselves and this is done by listening songs, watching movies, T.V. series, etc. (Hee, Wee and Tan, 2015) With this respect, Netflix is one of the best streaming companies which provides better services as compared to any other similar organization. According to a survey, it was found that rate of internet users have raised up to 23% which is approximately 18 million.
There is almost 5 cellular communication service provider at Malaysia and with the help of these services, Netflix can be operated effectively. In this context, customers will be able to make use of services provided by cited firm from all the networks which are available at Malaysia. In other countries, there are communication networks by which people cannot make use of services provided by Netflix. Further, there is a stable market in Malaysia and changes which take place are not frequent and this will enable to the organization to expand their business effectively. In addition to this, growth of GDP is 7% per year and this means that market in Malaysia provides better opportunity to conduct business efficiently so that customers can make use of services in an effective manner. Further, because of improvement in GDP, average income of people is also high so they are able to spend highly on the services provided by different organizations.
Netflix provides movies of mostly all the region and language. In this context, there are about 29.72 million people in Malaysia. More specifically about 60% people are Malay, 30% are Chinese and 10% are Indians. With this respect, the organization provides all the three types of movies from these different cultures. As a result, firm will be able to make effective business as all the people in Malaysia will be able to enjoy the services provided by Netflix.
The use of technology is increasing rapidly. People of Malaysia are makeup of the latest technology which is made available to them (Hin, Bohari and Pu, 2013). In this context, Netflix will be highly benefited as they will be able make their services easily available to target audience.
According to Krosch, Schutze and Clarke, 2013, threats are the barriers which organization faces while operating their business operations (Krosch, Schutze and Clarke, 2013). However, as per Ghazali, Zain and Yaakop, 2014, firm has to make of different strategies with the help of which organization could understand the areas in which they need improvement (Ghazali, Zain and Yaakop, 2014). In this context, following are the threats which cited organization faces at Malaysia...
Wild, Wild and Han, 2014 stated that “organizations around the world aim at determining the areas in which they can earn maximum profit” (Wild, Wild and Han, 2014). In this context, according to Cavusgil, Knight and Rose, 2014 “firm aim at understand their customers’ needs and requirements and accordingly they make use of different strategies which enable them to gain maxim profit". Organization makes use of different strategies with the help of which they focus on attaining competitive advantages. There are firms which provide their customers with similar services and the company which make change in their services according to their customer’s requirement can only attain or compete in the business environment effectively. In accordance with the case, Netflix has many competitors like HBO GO, Amazon Prime and Vudu. In addition to this, there are local social sites which prove similar services to customers. In this context, firm is facing barriers from these organizations.
The content provided by cited firm is not licences. They are spending highly on proving their customers with original content. But the threat arises when customers fail to watch their desired context at low quality and this has huge negative impact over the firm. Customers preferred to get services at high quality and it is possible only when Netflix make necessary steps with the help of which they will be able to provide their service users with satisfying services.
Strength and Weakness
According to Boykin, Schutze and Cameron, 2014, “for an organization, strengths are the areas through which firm get highly benefited” (Boykin, Schutze and Cameron, 2014). However, Aketarawong, Isasawin and Thanaphum, 2014 stated that “all the areas can be developed or improved when they make of strategies which will enable the firm to overcome their issues”. With this respect, following are the strengths of Netflix...
The first month is absolutely free
This is one of the best services which are been provided by Netflix. Among all its competitors, they provide their customers to make use of the services provided by them for free and this done for one month. In this context, it enables the user to try which all types of services are provided by Netflix. In order to make use of other services provided by other organization, customers have to play subscription only then they can make use of the services.
In the world, frequently new shows are developed and people are found to watch movies or series. In this context, Netflix continuously update their services so that more and more customers could be attracted. Service users prefer to watch that content which are new and which they would have been waiting for long to watch. With this respect, it is the strength that cited firm do not make their customers wait long for the latest movies or T.V. shows. This is very helpful in attracting service users and in satisfying them.
As it was stated above, the use of internet is increasing and this enable them to make their services reach customers effectively. As long as internet connection is there craving of Netflix can be satisfied. People with Smart TV can use of the services provided by cited firm with the help of internet. The buffering is quick and fast and enables the viewer to enjoy their services effectively and efficiently.
No fast internet, still it works
The internet connection does not need to have high speed. The minimum speed to buffer the services is just 0.5 megabits per second. Certainly faster connection will improve the quality of the video and people prefer to watch videos in high quality. However, even with minimum speed customers will able to enjoy the services provided by Netflix.
Not just English
Around the world there be only very few countries which do make movies or TV series. With this respect, in Netflix there are almost more than 17 forms of languages which are been provided by cited firm. In this context, it enables the customers around the world to get attracted to the services which are provided by them. Further, it helps the customers to enjoy the movies in their own preferred language.
Member starts with RM33
The subscription starts from one month that is RM33. According to yearly basis, subscription pay is RM400 (Hin, Bohari and Pu, 2013). In addition to this, the pay will be deducted according to the number of times the services has been used.
Weaknesses can be determined the areas in which improvements are required. Following are the weaknesses of Netflix...
Company provides DVD by mail rental operations and these services have fallen down. There has been huge decrease in these services. In other words, it can be stated that the membership of DVD subscription has fallen.
In all the business expansion done by Netflix is not profitable. The revenue which the organization gets for business expansion is not profitable. This has led to high losses and the growth of the firm has also affected negatively. However, it is very important for Netflix to make necessary research so that they get to know the areas in which they can make improvement and improve their condition. In addition to this, organization should be very careful in selecting the most suitable market in which they could expand their business, in this context, they should conduct market research with the help of which they will be able make gain profit.
3. Various Modes Of Entry Available For The Firm
There are many ways with the help of which organization can expand their business. Business expansion will be affective only when firm make research so that they could select the best market (Boykin, Schutze and Cameron, 2014). When the market is selected, then they should choose the best way through which enters the selected market. Currently Netflix is been used at Malaysia with the help of Hola Unblocker (Netflix is available in Malaysia, 2015). This is a type of software which people of Malaysia are using in order to make use of the services provided by Netflix. In order to develop cited firms infrastructure following are the different types of ways through which Netflix can enter into Malaysia:
This is types of method in which organization provides right to other firm to sell their services. In this context, Netflix has to find out any organization which focuses on multi media. With this respect, Star Media Group in company to which cited firm can provide licensing and star Media Group will be able to provide the services of Netflix. Slowly, people will get to know about company through Star Media Group. Meanwhile, cited firm can establish their business in Malaysia.
It is form of market entry strategy in which organization will work together to achieve their goals and objectives. These are very helpful for the firm to enter into the market as the other organization will put on the same efforts which it use to put for its services (Hee, Wee and Tan, 2015). All the methods will be adopted by concerning all the member of both the companies. Issues arise when different opinions come from parties. In such situations it becomes very difficult to make a combined situation (GümüÅŸ and Ergün, 2015). However, through this method firm will be able to this to make its business expand their effectively.
According this market entry strategy, firm will make new company by combining with similar company (Mastoi, Azura and Ibrahim, 2014). All the resources which the one organization will be use, will also be used by other. Both the organization will work together a single unit. The name of the companies will be changes and there are also changes that the employees may also be changed. This type of strategy is adopted when firm are in need of some kind of resources or material which the other company can help them to achieve it (Shabanova, Ismagilova and Akhmadeev, 2015).
According to the analysis done it was found that among the three countries the best market is Malaysia. Comparing all the three countries the stability which is required for expansion of business is at Malaysia (Wild, Wild and Han, 2014). In addition to this, the PESTLE analysis done for Malaysia, it was found that the organization will be able to make their expansion effectively. Further, the cited country has three types of groups which lives on Malaysia which are Malay people, Chinese and Indian. Cited firm provides all types of movies of their culture and in their own languages. This is very helpful in attracting customers as they will be able to satisfy their service user’s requirements. Moreover, in order to make the business expansion possible, Netflix should make use of licensing method as the way to enter the new market. According to this strategy organization will provide the right to other company which in this case is Star Media Group. This will enable to expand its business effectively and efficiently. As compared with other strategies, licensing is better because in partnership and joint venture, collaboration will take place. Star Media Group is doing well and it does not require any kind of joint venture of partnership.
From this report, it can be articulated that for any organization to make business expansion, it is very essential to make market research so that they could understand the selected market and have a proper plan with the help of which they will be able to expand their business effectively. Further, research should be conduct in order to know the customer needs and requirements as this will help them to make changes in their services accordingly.
- Aketarawong, N., Isasawin, S. and Thanaphum, S., 2014. Evidence of weak genetic structure and recent gene flow between Bactrocera dorsalis ss and B. papayae, across Southern Thailand and West Malaysia, supporting a single target pest for SIT applications. BMC genetics.
- Beamish, P., 2013. Multinational Joint Ventures in Developing Countries (RLE International Business). Routledge.
- Bohari, A. M., Cheng, W. H. and Fuad, N., 2013. An analysis on the competitiveness of halal food industry in Malaysia: an approach of SWOT and ICT strategy. Geografia: Malaysian Journal of Society and Space.
- Boykin, L. M., Schutze, M. K. and Cameron, S. L., 2014. Multiâ€gene phylogenetic analysis of southâ€east Asian pest members of the Bactrocera dorsalis species complex (Diptera: Tephritidae) does not support current taxonomy. Journal of Applied Entomology.
- Cavusgil, S. T., Knight, G. and Rose, E. L., 2014. International business. Pearson Australia.