Business Strategy

Netflix's Blue Ocean Strategy: An Empirical Study on Its Shareholder Returns

Article Details

Pub. Date	: June' 2023
Product Name	: The IUP Journal of Business Strategy
Product Type	: Article
Product Code	: IJBS030623
Author Name	: Suvodip Sen
Availability	: YES
Subject/Domain	: Strategic Journals
Download Format	: PDF Format
No. of Pages	: 42

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Abstract

Given the highly competitive global marketplace, companies are working day in and day out to chart out strategies to get ahead of competition. Rather than contesting in the same markets or engaging in price war, firms generally try to move to uncontested markets by creating a "blue ocean strategy". Nowadays, it is quite evident that a formulation of the blue ocean strategy is not good enough. It must be backed up by competitive advantages which must be sustainable in the long run. Many firms which once enjoyed monopoly power in the market, have perished or have become sick firms. Competitive strategies are not sustainable without the support of internal resource that firms have or firms acquire. For example, firms pursue aggressive growth strategies, but do not have enough resources to support the growth. This paper takes the case of a latecomer firm Netflix to illustrate how a firm can develop an uncontested market or blue ocean strategy. The study concludes that the blue ocean strategy should culminate in superior financial performance than average industry performance. Netflix has converted its early days film DVD renting business model into online video streaming services and content creation, which presently caters to 137.5 million (statista.com) subscribers (part of television viewers) in approximately 160 countries. Now, Netflix has become a media giant in less than two decades and its market capitalization grew at least 7-8 times in the last seven years. This study is an attempt to identify and evaluate the strategies of Netflix from Resource-Based View (RBV) to recognize how it created catch-up strategies by creating Valuable, Rare, Inimitable and Non-Substitutable (VRIN) resources or maybe simply adapting copy-paste method. The study also argues that the blue ocean strategy is more dependent on building internal capabilities rather than attractiveness of an industry.

Introduction

In today's context, a buzzword in business school industry is "strategy", which means certain activities to get ahead of competition. The term 'strategy' is highly associated with military activity where the headquarters gives command and the frontline troops attack enemies either to regain their land or to invade an enemy's territory. Similarly, today most of the companies deploy their resources to outperform their business rivals. In fact, the entire focus is on how firms can acquire or build resources and internal capabilities to snatch the pie from competitors. But there is retaliation from rivals also. This retaliation can be in the form of price war, poaching top performers, negative publicity or in any other form. Finally, this kind of retaliation mainly leads to commoditization of product and services, i.e., customers are only bothered about price and generally do not look for value. To counter the competitor's