Background on Netflix: SWOT Analysis Example

Netflix has been leading the way for digital content since its inception in 1997 (Netflix.com, 2018). As of now, it stands as the world's leader in internet entertainment, boasting an impressive 125 million memberships across over 190 countries. Members enjoy a vast array of entertainment, including original content, television series, documentaries, and feature films, all available in multiple languages and genres. With the convenience of the internet, members can stream and even download commercial-free content directly onto their internet-capable devices with just a click of a button.

Although Netflix has numerous reasons to boast of its successes and achievements in the entertainment field, executives must also remain mindful of potential weaknesses and threats that could disrupt or halt future success. This calls for a careful analysis of the company's current standing and strategic measures to safeguard its position in the industry.

The Purpose of This SWOT Analysis for Netflix

The purpose of this SWOT (strengths, weaknesses, opportunities, threats) analysis is to provide a comprehensive snapshot of Netflix’s current internal conditions and the external forces that the organization faces in the years to come. This analysis will help better identify each of the four aforementioned components so that they can be utilized during strategic planning phases, aiding the organization in developing strategies to address and mitigate any potential issues or threats.

The Importance of Strategic Planning

According to the article "The Advantages of SWOT Analysis in a Strategic Plan," Neil Kokemuller states that "A SWOT analysis is an integral part of a company’s strategic planning process because it provides a good all-around view of the company’s current and forward-looking situation." In short, the SWOT analysis is essential to an organization's strategic planning as it connects strategies and objectives to the roles and duties of its workforce.

SWOT Analysis for Netflix

The Strengths

Netflix has several strengths, one of which is its well-defined strategic plan. Employees are made aware of their roles within their respective departments and how they relate to the organization as a whole. Managers continuously coach employees to instill the organization’s core values and remind them of their responsibilities. This is crucial for Netflix, as the organization does not perform traditional performance appraisals.

The Human Resources Department is heavily involved in the strategic planning process. From the outset, HR is informed of company-set goals, duties, and expectations for employees. This empowers HR to shape the company culture necessary for achieving these goals. As S. Chand states in the article "Human Resource Planning: Objectives, Need, Importance and Levels," “HR needs a seat at the executive table.” This means that HR must be part of the strategic planning process from day one to effectively deliver skilled candidates, provide adequate training, and steer organizational policies.

Netflix employs Strategic HRM in its business strategy, which involves more than just traditional HR roles like recruitment, payroll, and employee benefits. In this macro/Strategic HRM setting, HR works with other departments and managers to develop a strategic process that the organization follows. This integration ensures that HR understands the organization’s goals and the skills needed in the workforce.

Another strength of Netflix is its gender-diverse workforce. According to Netflix.com’s diversity page, women comprise 42% of the workforce, including leadership roles and departments like Creative and Corporate functions. While women make up 27% of the IT department, the organization recognizes the need for further diversity.

Additionally, Netflix practices a trusting management style, or honor code, for employees. Employees manage their own expense accounts and enjoy perks like free lunches and snacks. The expense policy is simply “ACT in Netflix’s best interest.” This approach, along with unlimited vacation days for salaried employees, fosters a culture of responsibility and trust.

The Weaknesses

Despite the involvement of the HR department in the strategic process, lower-level supervisors or managers do not seem to have a significant role. The lack of key employee involvement can harm the organization, as managers and supervisors interacting with lower-level employees can offer invaluable insights into what works and what doesn't in terms of employee needs and skills. As Patty McCord notes, Netflix faces a challenge in finding skilled candidates for specialized roles, such as engineering. The desire to maintain only “A” players may lead to a shrinking workforce if not addressed.

Netflix has also eliminated formal employee performance reviews, which might result in a lack of accountability and clarity about expectations. Well-executed performance reviews provide an opportunity for managers to communicate expectations, set goals, and offer training.

The Opportunities

Netflix has opportunities to focus on the competencies and skills necessary for achieving organizational goals, which would enhance productivity and efficiency. Understanding these competencies aids in recruitment and staffing processes, ensuring a successful future. Additionally, Netflix should consider diversifying its workforce beyond gender. While over 40% of employees are female, less than 20% are from minority or non-white backgrounds. This could lead to potential discrimination lawsuits.

Recruiting from historically black colleges and universities (HBCUs), Hispanic-serving institutions, tribal colleges, and others with significant minority populations can enhance diversity. A diverse workforce brings varied experiences and perspectives, enriching the organizational culture.

The Threats

Netflix faces several external threats, including competition offering higher pay and more desirable benefits. To retain its workforce and attract new talent, Netflix must remain competitive in compensation and benefits. The organization must also continue innovating to deliver entertainment and create content that meets evolving consumer demands. This requires a skilled workforce, which could be threatened by an aging staff or a shortage of skilled recruits.

Conclusion

In conclusion, Netflix's position as a leader in digital content is supported by its strategic planning, diverse workforce, and innovative HR practices. However, the company must address weaknesses such as the lack of lower-level management involvement and the elimination of performance reviews. By seizing opportunities to diversify and enhance workforce competencies while staying vigilant against external threats, Netflix can continue to thrive in the competitive entertainment landscape. The SWOT analysis demonstrates that with careful strategic planning, Netflix can maintain its leadership and adapt to future challenges.

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