Answer 1) the reason why Europe and France are considered such important markets for Netflix is because they represent a large proportion of the population that has access to broadband services. Compared to the United States, which only has 88 million families that have access to broadband services, Western Europe has a total of 134 million broadband houses. Secondly, the US market has become highly saturated while the market in Europe for online video streaming services is still in the growing phase. Therefore in order to cover its rising expenditures, it is important for Netflix to be able to increase its subscriber base which it cannot do at home because the market there has already reached its maximum saturation point (Brustein 7).
Answer 2) Netflix decision to expand its services to the UK in 2012 prove to be an extremely challenging decision. This is because the company was relying on being able to attract new customers quickly by providing the highest quality of service at relatively cheap costs. Accessing a large subscriber base is considered to be essential for Netflix’s operations to be profitable in the UK. In the same year, Netflix also expanded to Canada, where it currently has approximately 1.3 million households as its customers. The Canadian expansion is considered to be a success because a 10 percent market penetration was achieved within a span of only one a half years. When Netflix started in the US, it took a much longer time for the company to achieve similar penetration levels (Hook 3).
Answer 3) the chief executive of Netflix Reed Hastings has organized meetings with several government ministers in France in order to smooth out the company’s launch there. The level of competition in the French market is extremely high because there are several online video streaming services already operational there that have a similar pattern to the service that Netflix offers. What poses a greater challenge is the fact that the market sentiment in France with regards to a Netflix launch is extremely negative. Firstly, its competitors are trying to prevent Netflix from gaining entry into the French market. France’s largest TV operator Canal+ is actively trying to delay and prevent the entry of Netflix in France and has announced new partnerships as well as promises of new original French content to attract more French subscribers. Yet another challenge the company faces is the requirement that at least 40 percent of all content on radio, TV and movies has to be French. This will require Netflix to specifically create more local content which will add to its costs. French regulations that will require Netflix to pay a 2 percent tax on total revenues of more than 10 million euros as well as not being allowed to stream movies that are less than three years old, both create significant entry and operational challenges for the company. Thirdly, the reason why there has been local opposition to Netflix coming to France is because there are rejections that this will take subscribers away from Canal+. Currently, there is a legal requirement that all television channels invest in French movies depending on the size of their subscriber base. If Canal+ loses its customers base and subscribers, it will directly translate into reduced support for the domestic cinema. Last but not least, the fact that the Council of State in France has strongly advised that there must be increased government supervision in the algorithm used by Netflix to determine the TV shows and feature films that it offers to customers will mean that the company will have less control over the content it offers (Brustein 8).
Answer 4) in order to successfully expand its business, Netflix must invest in generating local content in every market that it decides to enter. This is an important requirement because customers today have very specific viewing requirements in terms of the content they choose to consume. Simply taking American TV shows and movies to new markets is not going to be a successful long term strategy, regardless of the level of popularity that these programs may enjoy back home. Furthermore, one avenue to explore is establishing collaborative partnerships with local Television operators in the countries that Netflix is targeting. This will go a long way in reducing competition as well as increasing the level of acceptability and welcome for Netflix in foreign markets (Hook 4).
Answer 5) in order to penetrate the Indian market, Netflix is relying on a strategy of extremely exclusive targeting of the Indian audience. This is primarily because India has a very low percentage of total broadband users. Out of a total 1.3 billion people, there are only 18 million houses with broadband access. Therefore, Netflix is aware that there is a very small proportion of their total market size that will actually be able to use the service the company has to offer. The pricing strategy is also following a similar pattern. The monthly charges that Indian users will need to pay for Netflix range between 5-800 Indian rupees, which is substantially higher than what competing service providers are charging. The consumer segment that is being particularly targeted are the iPhone users in India who have the kind of buying power that is required to be able to afford Netflix every month (Brustein 8).
Answer 6) compared to Netflix, Amazon is charging only 80-90 rupees every month, and is going for a mass market approach by keeping its charges very low. Amazon’s chief executive Roy Price believes that in order to be successful Amazon has to keep its fee very low and offer local content if it is to succeed and connect with the Indian audience (Hook 5).
Answer 7) in my view, Amazon’s strategy is more likely to generate a higher market share and revenues because more Indians will be subscribing to it given the low cost advantage. The strategy of Netflix to use premium pricing will obviously result in greater total revenues because it is charging a higher fee per customer. This will also mean that profit margins for Netflix will be more because it is spending less on creating or buying exclusively Indian content.
Answer 8) in my opinion, Amazon’s strategy will be more successful in the long run because the majority of the Indian population has a very limited income and any sustainable business strategy will have to rely on providing services at low costs (Brustein 9).
Works Cited
Brustein, Joshua. "Netflix's Utopian Plan to Conquer the World." Bloomberg 8 January 2016: 7-11. Print.
Hook, Leslie. "Amazon's Prime Challenge is International Growth." Financial Times 4 March 2016: 3-6. Print.
