1. IntroductionNetflix, founded in 1997, is a young company which has capitalised on the ever-increasing appetite for on-demand entertainment. With $8.8bn in revenues for 2016, y-o-y growth of 30%, and over 109 million members globally, it is the market leader for in its field. (Netflix, 2017) Their product mix includes licenced content and original production offering a mix suitable to all subscribers. 2. Corporate StrategyNetflix is aglobal internet TV network offering movies and TV series commercial-free, withunlimited viewing on any internet-connected screen for an affordable,no-commitment monthly fee. (Long Term View, 2017)3. Scope of the Firm:3.1 Internet providersNetflix, from its outset, utilised theinternet as a medium to reach its subscribers. From its initial catalogue ofcontent which was then dispatched through the postal service, to the currentstreamed content. (See Appendix 1) The dependence on Internet Service Providers(ISP’s) has impacted the delivery of its content in the past, now controlledunder the Net Neutrality order. (See Appendix 2) However, Netflix and otherservice providers remain at the mercy of ISP’s if the order were to be removedthrough deregulation.This downstream vertical boundary is likelyto remain. The task of delivering internet service across a global network fallson a core group of providers. These have economies of scale, the ability todeliver all internet based services through one connection. They furtherdiversify by delivering multiple other resources such as telephone andtraditional TV services. The incentive simply does not exist to design, buildand implement a solitary Netflix delivery system, a cost ineffectiveintegration.  3.2 Creating original contentSince Netflix’s infancy, their greatest expense has always involved the procurement of the latest material from studios. This vertical boundary left Netflix at the mercy of studios, continuously being subjected to increased licence costs, as a direct result of their success and growth. (See appendix 3) Further, some now see Netflix as a direct competitor, removing their right to their content, Disney integrating with ESPN and its streaming service. (Castillo, 2017) Netflix saw a movement higher in the vertical chain as a key to protecting their long-run success. Content is the key to both attracting, andcrucially, retaining subscribers. Utilising their deep funding pool, Netflixbegan developing original material in a bid to secure a greater control overthe sources of its content. The payoffs are twofold: the shows can be licencedto create an additional revenue stream, and it will make Netflix a servicewhich people feel they have a subscription with. If the original content is theonly place to find shows such as House ofCards and other future projects, they retain subscribers.“Ted Sarandos wants “to become HBO faster than HBO can become Netflix”(Salmon, 2013)This is a statement of intent by Sarandos, tosurvive they must adjust. As highlighted by the fallout between Disney andNetflix, the competition is increasing in the on-demand entertainment providersand Netflix. Competitors see the decline in traditional TV, seeing the futurein the flexible viewing available through on-demand entertainment.3.3 Analysis of their M&A history The acquisition of Millarword, is the firstin Netflix’s history. Millarworld will complement their strategic move intooriginal content, with much of their work restricted to comics. Netflix seesthis as an opportunity, like an untapped oil well, to transform the comics intoTV Show and movie phenomenon’s. (See appendix 4) Mark Millar – “[Netflix] would help us take Millarworld’s characters and turn them into global powerhouses”(Wile, 2017)Their vision is to mimic the success ofpast comic related productions andthe significant returns associated. Marvel, an original creator of the likes ofSpiderman and X-Men but had licenced these off, has returned over $12bn at boxoffice in the last decade off its other characters. (Cain, 2017)Netflix hope to follow this success of developing the lesser known charactersthrough to franchise behemoths.4. Competitive advantageNetflix genericstrategy – “grow our streaming membership business globally within theparameters of our profit margin targets” – (Appendix 5)The key to a competitive advantage issustainability. Through Kay’s distinct capabilities, Netflix’s strengths andweaknesses become apparent. (See Appendix 6) Netflix’s reputation and theconsistent delivery of high-quality, current content and the relative dominanceover competitors, gives a competitive advantage at present. Is it sustainablehowever? As mentioned previously, competitors areentering the market and investing heavily in content, some removing theircontent from Netflix to promote its service. (Castillo, 2017) The generic strategy of growth willonly last while new markets are available. As shown in appendix 1, only Chinais remains unexploited. The US market is almost fully saturated, this is a signof the long-term future of the global market. Netflix is relying on growth tocover the increasing content costs. (See appendix 3). Once saturated thisstrategy will become an inefficient at protecting market position and margins. Theywill either need to cut costs or increase the monthly subscription.Weaknesses above and below on the verticalchain could also diminish their advantage. They are at the mercy of theseproviders; Netflix’s success only encourages increases in procurement costsfrom these third parties and pressure from ISP’s. Further deterioration inrelationships could cause difficulties in the medium to long run. 5. ConclusionNetflix has a defined corporate strategy,one which has the potential to guide the company to success over the long term.The decisions made to date have resulted in strong financial and subscribergrowth. As highlighted within the report however, it faces increasingchallenges with an ever-increasing number of competitors entering the market. Furtheracquisitions and development of original content can protect their advantageand make Netflix a must have in households throughout the world.6. ReferencesCain, R. (2017, 07 10). The Marvel Cinematic Universe Just Topped $12 Billion In Worlwide Box Office. Retrieved from Forbes.com: https://www.forbes.com/sites/robcain/2017/07/10/the-marvel-cinematic-universe-has-now-topped-12-billion-in-total-worldwide-gross/#51476f077759Castillo, M. (2017, 11 01). Disney will pull its movies from Netflix. Retrieved from CNBC.com: https://www.cnbc.com/2017/08/08/disney-will-pull-its-movies-from-netflix-and-start-its-own-streaming-services.htmlDunn, J. (2017, 04 12). Net Nutrality. Retrieved from businessinsider.com: http://uk.businessinsider.com/fcc-ajit-pai-net-neutrality-internet-association-google-facebook-netflix-2017-4?r=US&IR=TLong Term View. (2017, 10 25). Retrieved from Netflix.com: https://ir.netflix.com/long-term-view.cfmLovett, J. (2017, 10 25). Millarworld-Netflix. Retrieved from comicbook.com: http://comicbook.com/comics/2017/08/07/millarworld-netflix/Molla, S. O. (2016, 10 18). Netflix risky expedition. Retrieved from bloomberg.com: https://www.bloomberg.com/gadfly/articles/2016-10-18/netflix-gambles-u-s-profits-on-pricey-global-ambitionNetflix. (2015). Netflix Annual Report 2014. Los Gatos, California: Netflix.Netflix. (2017). Netflix Annual Report 2016. Los Gatos, California: Netflix Inc.Netflix Acquires Millarworld. (2017, 08 07). Retrieved from ir.netflix.com: https://media.netflix.com/en/press-releases/netflix-acquires-millarworld-1Netflix, I. (2017, 01 18). Long term view. Retrieved from ir.netflix.com: https://ir.netflix.com/long-term-view.cfmSalmon, F. (2013, 06 13). Why Netflix is producing original content. Retrieved from reuters.com: http://blogs.reuters.com/felix-salmon/2013/06/13/why-netflix-is-producing-original-content/Wile, R. (2017, 08 07). Netflix buys Millarworld. Retrieved from time.com: http://time.com/money/4889565/netflix-buys-millarworld-mark-millar-kickass-kingsman/Zappe, F. (2017, 01 10). Diffusion of Netflix. Retrieved from SlideShare.com: https://www.slideshare.net/FelixZappe/the-diffusion-of-netflix7. Appendices Appendix 1Source: (Zappe, 2017) Source: (Molla, 2016)Appendix 2The conflict arose through the high demandplaced on the broadband infrastructure as Netflix increased in popularity. Theperceived disproportional usage by Netflix subscribers relative to overalldemands on traffic caused the ISP’s to slow the speed of Netflix relatedcontent. This directly impacted the quality of product delivered and the fightover Net Neutrality began. The current Net Neutrality order, introduced by theUS government, states “your internet provider cannot slow down a Netflix,YouTube, or any other service and give other websites and apps preferentialtreatment, nor can it charge internet companies for faster access.” (Dunn, 2017) Appendix 3Source: (Netflix, 2017) (Netflix, 2015)Appendix 4Source: (Netflix Acquires Millarworld, 2017)Appendix 5Source: (Netflix, 2017)Appendix 6Kay’s Distinct CapabilitiesReputationNetflix, through consistent advertising andmarketing, has maintained its reputation of high-quality content. The use of anintroductory offer, one free month’s subscription, gives subscribers theopportunity to experience what Netflix has to offer. Further, the professionalaccreditation received for the quality original content gives support to claimsof a superior service.InnovationNetflix’s original competitive advantagethrough providing a streaming service has unfortunately been eroded throughimitation. Amazon, Hulu and others have entered the market. There key advantageto retain subscribers is the recommendation algorithm which tailors the contentsuggestions based on past viewing history and associated content.ArchitectureNetflix has a distinct advantage over itsrivals through the strong relationship with current subscribers. In maturemarkets as the US, Netflix has saturated the market. Crucially, it is notlosing subscribers to competitors. Once Netflix maintains customersatisfaction, subscribers will be less willing to pay for two on-demandsubscriptions restricting the growth of competitors.The relationship with those above and belowon the vertical chain and is an area of weakness. They are under the mercy ofthe creators and the prices they set for their content. They have no realbargaining power to try and gain the best price possible. Further, they arereliant on ISP’s to deliver the content and the Net Neutrality Order to keepthe quality to Netflix’s desired standard.  Get Help With Your AssignmentIf you need assistance with writing your assignment, our professional assignment writing service is here to help!Find out more