Netflix has grown into a giant company in the USA with 40 million customers (Ramachandran & Kostov, 2016). Now the growth of the customer base in the USA has slowed down and Netflix is trying to expand overseas as much as possible. The company has 26 million customers abroad: 8.3 million - in Latin America and Caribbean, 6.8 million - in Western Europe, 5 million - in the UK and Ireland, 4.6 million - in Canada and 1.3 million - in Asia Pacific (Ramachandran & Kostov, 2016).
Netflix is quite successful in winning the customers abroad because of strong financial performance and ability to offer the best bids to the TV studios that produce the content for streaming. Netflix offers the best content and the customers decide to watch it switching from the local companies that are the market leaders in their countries. Even the large companies such as Sky and Canal Plus feel that they have to develop a new strategy in order to keep their customers.
At the moment, the overseas companies have fewer resources than Netflix and cannot compete on one level with Netflix because of Netflix’s large scale of activity. This is why some of the major companies intend to join their efforts when bidding for the new TV-products. Together they will be able to offer better bids and make Netflix’s expansion much more expensive and economically unsound. Despite the strong performance Netflix’s budget for purchasing the new content is limited and the company will have to compete against alliances and other American companies that are ready to enter the foreign markets.
In conclusion, the idea to unite into alliances is not simple to put into practice because of the different legal and business environment. Therefore, the overseas companies will continue to struggle against Netflix in the short-term. Netflix will still have the competitive advantage unless the number of customers stops to grow or the expenditures for the new content significantly increase.
References
Ramachandran, S., Kostov, N. (17 January 2016). Netflix’s Global Growth Faces New
Threats. The Wall Street Journal. Web. Retrieved from
http://www.wsj.com/articles/netflixs-global-growth-faces-new-threats-1453026602
