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International Business & Strategy on Netflix

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Introduction

International business expansion is all about a planned phase by which a company starts its business activities in several countries. It is not only about making investments in nations that are outside the home country of the company but also about maintaining an 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 the United States to Malaysia. Further, the report will also give a justification for the chosen target market by analysing the strategic issues faced by the firm at the time of conducting business expansion. After that, the focus will be given to analysing the strengths and weaknesses of Netflix so as to assess whether it is going to support or challenge the business expansion (Netflix, 2014). The 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, the cited firm should aim to understand the economic stability. With this respect, the economic condition of Malaysia is very favourable. In addition to this, Netflix provides streaming of movies and TV series. According to this, the use of the internet is also increasing drastically which will be very helpful for Netflix. This will enable us 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 the country. PESTLE analysis done for Malaysia is as follows...

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Political Factor

This has a great impact on the business. It is essential to have a balance between the free market and the system of control (Wild, Wild and Han, 2014). In addition to this, the ruling party, the Barisan National Party has had power for over 25 years.

Further, there is no corruption in the country and from the above 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 the ruling party changes, then policies are also changed. But in Malaysia, there is a stable government and there is no corruption so cited firms such as Netflix will be able to expand their business effectively here.

Economic Factor

In the past 10 years, the average rate of increase in economic growth is 7% per year. From the 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, their buying power has also increased. Further, Malaysia is an idle place for international trade. Seeing the present economic condition, it can be critically evaluated that economic factors are favourable for Netflix to make the business expansion. When compared with the GDP of South Africa and Turkey, the GDP of Malaysia is constant as well as it is rising.

Social Factors

In 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 the diagram given below this will be very 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, the 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 the remaining population is 0.70 in 2010. According to the pie chart, it can be forecasted that the population will go high by 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 in different languages which are preferred by people of different countries. According to the geographical areas, South Africa is the largest and so is Turkey. In spite of this, geographical area is less and still, the population is high.

Technological Factor

There has been a huge increase in the use of smartphones 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.

Legal Factors

For 25 years, the 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 the government of the country supports organization which wants to make business expansion here.

Environmental Factors

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 In Malaysia

According to Boykin, Schutze and Cameron, 2014, through determining opportunities and threats, the 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, the 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...

Netflix

In this modern world, the use of the internet is increasing drastically and it is a type of opportunity which Netflix has in Malaysia (Bohari, Cheng and Fuad, 2013). Services provided by the cited firm will be highly beneficial 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 to 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 the rate of internet users has risen up to 23% which is approximately 18 million.

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There are almost 5 cellular communication service providers in 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 firms from all the networks which are available in 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 the organization to expand its business effectively. In addition to this, the growth of GDP is 7% per year and this means that the market in Malaysia provides a better opportunity to conduct business efficiently so that customers can make use of services in an effective manner. Further, because of the improvement in GDP, the average income of people is also high so they are able to spend highly on the services provided by different organizations.

Netflix provides movies in almost all regions and languages. 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 three types of movies from these different cultures. As a result, the firm will be able to do 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 made up 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 to make their services easily available to the 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, a firm has to make different strategies with the help of which the organization could understand the areas in which they need improvement (Ghazali, Zain and Yaakop, 2014). In this context, the following are the threats which the cited organization faces in 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 “firms aim to understand their customers’ needs and requirements and accordingly they make use of different strategies which enable them to gain maximum profit". The 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 changes in their services according to their customer’s requirements 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 provide similar services to customers. In this context, the firm is facing barriers from these organizations.

The content provided by the cited firm is not licenced. They are spending highly on providing their customers with original content. But the threat arises when customers fail to watch their desired context at low quality and this has a huge negative impact on the firm. Customers prefer to get services of high quality and it is possible only when Netflix make the 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 the firm gets 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, the 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 allow their customers to make use of the services provided by them for free and this is done for one month. In this context, it enables the user to try all types of services provided by Netflix. In order to make use of other services provided by other organizations, customers have to pay subscriptions only then they can make use of the services.

More shows

In the world, frequently new shows are developed and people are found to watch movies or series. In this context, Netflix continuously updates their services so that more and more customers can be attracted. Service users prefer to watch that content is new and that they would have been waiting for long to watch. With this respect, it is the strength that cited firms 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.

Through internet

As it was stated above, the use of the Internet is increasing and this enables them to make their services reach customers effectively. As long as an internet connection is there craving for Netflix can be satisfied. People with Smart TVs can use the services provided by the cited firm with the help of the 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 are only very few countries that make movies or TV series. With this respect, in Netflix, there are almost more than 17 forms of languages which are been provided by the cited firms. 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 which is RM33. On 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 have been used.

Weaknesses can be determined by the areas in which improvements are required. The following are the weaknesses of Netflix...

The company provides DVD-by-mail rental operations and these services have fallen down. There has been a huge decrease in these services. In other words, it can be stated that the membership of DVD subscriptions 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 been affected negatively. However, it is very important for Netflix to make the necessary research so that they get to know the areas in which they can make improvements and improve their condition. In addition to this, organizations 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 to make a profit.

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3. Various Modes Of Entry Available For The Firm

There are many ways with the help of which organizations can expand their business. Business expansion will be effective only when firms do research so that they can select the best market (Boykin, Schutze and Cameron, 2014). When the market is selected, then they should choose the best way through which to enter the selected market. Currently, Netflix is been used in 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 the cited firm's infrastructure following are the different types of ways through which Netflix can enter Malaysia:

Licensing

This is a type of method in which an organization provides the right to another firm to sell their services. In this context, Netflix has to find out an organization which focuses on multi-media. With this respect, Star Media Group is the company to which the 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 the company through Star Media Group. Meanwhile, the cited firm can establish its business in Malaysia.

Partnership

It is a form of market entry strategy in which organizations will work together to achieve their goals and objectives. These are very helpful for the firm to enter the market as the other organization will put on the same efforts which it used to put into its services (Hee, Wee and Tan, 2015). All the methods will be adopted by all the members of both companies. Issues arise when different opinions come from different 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 make its business expand effectively.

Joint venture

According to this market entry strategy, the firm will make a new company by combining it with a similar company (Mastoi, Azura and Ibrahim, 2014). All the resources which the one organization will use will also be used by others. Both organizations will work together as a single unit. The name of the companies will be changed and there are also changes that the employees may also be changed. This type of strategy is adopted when firms are in need of some kind of resources or material which the other company can help them to achieve (Shabanova, Ismagilova and Akhmadeev, 2015).

Recommendations

According to the analysis done it was found that among the three countries, the best market is Malaysia. Comparing all three countries the stability which is required for the expansion of business is in 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 its expansion effectively. Further, the cited country has three types of groups which live in Malaysia which are Malay people, Chinese and Indians. The 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 the licensing method as a way to enter the new market. According to this strategy organization will provide the right to another company which in this case is Star Media Group. This will enable it 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 or partnership.

Conclusion

From this report, it can be articulated that for any organization to make business expansion, it is very essential to do market research so that they can 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 conducted in order to know the customer needs and requirements as this will help them to make changes in their services accordingly.

References

  • 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. Multigene phylogenetic analysis of Southeast 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.
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