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Senior Project NetflixJuanita BuckSiena Heights UniversityBAM 479Executive SummaryCase statementMission and vision evaluationMilestonesExternal assessmentInternal assessmentIndustry analysisFinancial analysisCompetitive StrategiesRecommended strategyEthical and social responsibility dimensions of the recommended strategyImplementation planCompany VisionBecoming the best global entertainment distribution serviceLicensing entertainment content around the worldCreating markets that are accessible to film makers Helping content creators around the world to find a global audienceNetflix appears to have a very clear vision focused upon consumers which should always be a primary goal in mind for any company. Netflix has also incorporated how they intended to establish more profit for themselves and who that might include such as film makers. Knowing what needs to be done and who is going to do those things are two priorities that help a company move closer towards their vision. One part that was not included that is also very crucial are those who invest in the company as they are a critical aspect that should be a high priority for company. Company Mission"Our core strategy is to grow our streaming subscription business domestically and globally. We are continuously improving the customer experience, with a focus on expanding our streaming content, enhancing our user interface and extending our streaming service to even more Internet-connected devices, while staying within the parameters of our consolidated net income and operating segment contribution profit targets."?Company ProfileNetflix is the world’s leading Internet television network with over 93 million members in over?190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any Internet-connected screen. Members can play, pause and resume watching, all without commercials or commitments.MilestonesIn 2013 Netflix received 31 primetime Emmy nominations including outstanding drama series, comedy series and documentary or nonfiction special for “House of Cards”, “Orange is the new black”, and “The Square” respectively. House of Cards won three Primetime Emmy Awards. Netflix was the first internet TV network nominated for the primetime flix began to offer customers more individual preference options in 1999 which would make suggestion based off of previously viewed content In 2014 Netflix reached a high of fifty million global subscribersIn 2015 Netflix had a total of 10 billion hours of streaming Netflix has become available worldwide Netflix reached 4.9 million global subscribers in 2015Netflix made improvements by switching from HTTP to HTTPS which allowed for customers to be better protected while utilizing services offered by NetflixThe External factor matrix above shows that Netflix has great strengths in multiple areas. Netflix has maximized on the ability to expand operations to overseas locations which is why the weighted score is .4. Diversifying the company into a worldwide conglomerate produced challenges associated with those endeavors, which accounts for the weighted score of .33 in the threat area for economics. Despite slightly higher operating cost overseas Netflix has still reported profits in their expansion flix also has a great viable advantage that lessens the impact of other competitive threats. Even though the weighted rate for competition is reasonably high at .39 for a weighted total, as other companies have ventured into real time streaming, Netflix offers shows that are only available through their company which is why the weighted total for competitive opportunities is .36. Through the offering of programs specific to Netflix they have been able to keep viewers and increase future users as well. Overall as dependence on technology increases so should the use of Netflix. Traditional television viewing is being replace for many reasons, which provides Netflix with another strong competitive advantage in the economic category. The weighted rate for economic opportunity is the highest at a .45. Steaming is more attractive to many due to the cost being cheaper then what is offered by regular television companies.After assessing the strengths and weakness associated with Netflix the overall weighted score is a 2.86. This score shows that Netflix still has some areas that can be better managed, but are currently being assessed. The weighted total also displays that the company is healthy and viable. Moving into the future analyst need to focus on how to address competition as well as how to lessen the financial burden of oversea operations. StrengthsNetflix has several internal strengths associated with the success of the company. In 2016 not only did their net income grow over thirty percent, the sales over the past five years exceeded the industry high which was only a little over fifteen percent. Netflix has also maintained low interest coverages which has led to profits over the years. Now that the company is available worldwide the company has been able to soar in profit margins. The P/E for the past five years has also been high which indicates that the company is one that is highly valued among other competitors. WeaknessesNetflix has some issues that have already been addressed which is why the weaknesses that are present have not hindered the overall growth. There are other companies that offer live streaming which Netflix presently does not, however; they offer unique programs that can only be views by their consumers. Netflix has had to endure quite a few taxes which may account for the five year low of net income sales which were listed at a negative 3.80 percent. Another reason that the net income was so low could have been Netflix’s dependence on outside internet providers. “As for the growth potential for streaming services: 35% of American households have broadband access but no streaming service.” Customers must utilize internet in order to access viewing through Netflix. Netflix has acquired a debt that is higher than the industry average which is one of the biggest internal weaknesses for Netflix, however; the company has great potential to overcome those challenges with proper analysis and implementation techniques.Overall Netflix has a total weighted score on the internal assessment matrix of 2.96. This score indicates that Netflix is strong. There is no indication that Netflix has any severe internal issues that are not being properly addressed. Stockholders should be able to confidently invest and expect to see returns as well. The internal weaknesses that are present within Netflix are not ambiguous, with proper management, and strategic planning those issues can be quickly resolved.Key StrengthsNetflix has several competitive advantages within the industry. A strength that has produced major profits is the company’s ability to offer low pricing options. Another key strength for the company is that they have created programs that are only viewable to those who buy their services. Netflix also has great internal strength as far as profits are concerned. Being able to take the company to the next level by offering services in other countries has broadened profit margins tremendously.Key WeaknessesNetflix is in an industry where the competition is fierce. Other companies re developing new ways to entertain consumers through use of rising technological advances every day. Netflix has faced hardships with being able to gain access shows that are regular to consumers that have cable television programming. Netflix has also had to overcome challenges associated with doing business in other places outside of the United States. These challenges have already been realized as potential weaknesses and carefully examined which is why Netflix has high profits and still diversified cross borders.Key OpportunitiesNetflix has advantages that will ensure that their profit margins are not only maintained, but also increase in the future. As long as the company chooses to pursue low pricing options that and continue to offer unique programming they will continue to see a high return on services offered. Netflix can also maximize by possibly deciding to merge with a company that does offer internet services as their business relies on that connection. Choosing to merge would cut down that taxing cost and potentially the interest rate as they cost would become shared among two companies.Key ThreatsUndoubtly the key threat is competition, there are however; others as well. Government regulations in the past have hindered operation and slowed the growth down but, not tremendously. Another threat to take into account is the ability to enhance programming to viewers that are most familiar with regular television primarily the older generation. Netflix must find a way to market their services to those who are not as savvy with newer technology. Case IIPorter’s AnalysisThreat of new entrants – medium pressureEntry barriers are relatively low for the beverage industry: there is no consumer switching cost.Products are being designed that offer similar services Threat of substitute products- high pressureThere are other companies that offer similar services as Netflix, the companies are looking for ways to drive down competition by providing cheaper services and by integration with other companies.Bargaining power of buyers- low pressureThe individual buyer has no pressure on Netflixbargaining power is lessened because of the end consumer brand loyaltyBargaining power of suppliers- medium pressureInternet is supplied by many companies so that users have options the company does rely on these services to function.Rivalry among existing firms- medium/high pressure There are only a few companies that offer similar products in the industry currently, but all are fighting to be front runners.There are several other companies in the industry alongside Netflix that fight fiercely to become the number one supplier for alternative television viewing. Hulu and Amazon have very different strategies that they implement to increase their profit margins. Each company including Netflix has relied on different methods in order to provide low cost services to consumers, despite apparent challenges. As our textbook states these companies use “sharing activities and resources, which enhances competitive advantage by lowering cost or increasing differentiation” (David and David, 2015, p.148). All three companies offer similar service to a wide consumer base, but; in unique ways.Hulu offers their services as low as possible to consumers who are very price sensitive. Cost leadership has been imperative to Hulu as it is one of Porters five generic strategies. Hulu is able to drive down cost for viewers as they have numerous partners, “Hulu Plus comes with ads; most people don’t want to watch ads when they can watch ad-free content for the same price with Netflix. The unrelated diversification model that is being followed by Hulu which, allows free ads to be displayed during viewing, is said to be “an appropriate strategy, especially when the company is competing in an unattractive industry” (David and David, 2015, p.143). Due to the many other companies that place ads during consumer viewing Hulu incurs cheaper cost and, competitive pricing options. “Through its 200 content partners, it is reported that Hulu retains between 50 and 70 percent of advertising revenue generated from its videos”(Nath,2016). Integrating the company has helped Hulu maintain healthy profits within the industry.There is a downside to the partnerships that Hulu has obtained over time. “it’s owned by 21st Century Fox (FOX), the Walt Disney Co. (DIS) and NBC Universal, a subsidiary of Comcast Corp. (CMCSK). Too many cooks leads to a lack of clear direction and innovation”(Moskowitz,2016). Every company need to have a clear and concise vision which may be a bit distorted for Hulu as their activities are intermingled with others. Not being to appropriately penetrate the market on its own may account for why Hulu is said to have a low share in the market. Amazon plus has managed to successfully render services to consumers at a low price. The company has also begun to develop new ways to offer their services through new technology such as the amazon fire stick. This newer device has controls that provide convince to the consumer that are not offered by Netflix. Amazons creation of the “fire tv stick, our best-selling streaming media stick, now comes with a voice remote” (Robot Check), and users are able to “bring Fire TV Stick with you to watch your favorites away from home, even in hotels and dorm rooms” (Robot Check). The new development of such technology threatens Netflix who does not offer such products. Netflix however; can be accessed wherever there is internet and television. Amazon has great innovation, but needs to remain vigilant as others are also developing similar products at lower pricing flix does have a good share of the market currently, and has made great profits in the past. Moving into the future Netflix needs to focus on the strategies that have allowed their competition to thrive. Netflix should look at ways to possibly integrate their services with a internet provider or think about investing in developing a unique device that offers greater capabilities then their competitors do in order to remain top ranked in the industry. SWOT AnalysisStrengthsNetflix has shows that are only available to their pany has expanded operations to some oversea locations.Internet is relatively cheap and there are many suppliers.Technology is advancing quicklyStreaming capabilities can be used as a bargaining tool for consumersWeaknessesNetflix has a high debtTaxes and government regulations may be higher overseas.Consumers may not have equipment that can access services ie: outdated televisionsSome shows may be out of date and uninteresting to viewersNetflix users must have reliable internet sourceOpportunities1.Branding more shows that are unique only to Netflix2.Distribution internationally would increase profits3.New technology of smart phones4. integration with internet supplier can drive down cost5. bundles that viewer can create adds to bargaining power6. regular ways of viewing television programs are becoming more unpopular SO Strategies1.Add more shows that only Netflix viewers can watch. (O1,S1)2. Create a bundle package to those who are overseas (S2, 02)3. Find a phone company to integrate services with. (S3, 03)WO Strategies1.Increase expansion to places where competitors haven’t already. (W2,O2)2.create streaming specially for smart phones. (W3,O3)3. Add/ replace shows that are least viewed and create packages with only the most popular ones at a very low price (W4, O1)Threats1.Content 2.Other streaming offering lower prices and quicker streaming options3.Digital Piracy of shows4.Regualtions that add taxes can be high5. cost of internet to high6. outdated televisions that don’t provide connectionST Strategies1.Create adaptor for televisions that are out of date. (T6,S5)2. Introduce faster streaming packages at a price that is just a little more then normal viewing options. (S4,T1,T2)3. Add more ways to block piracy (T3,S5)WT Strategies1.Partner with a internet provider to cut cost for consumers(T5,W5)2. Access how competitors in the industry are able to keep a low debt ratio while still yielding profits (T1,T4, W1)Netflix can surely continue to maintain their place in the industry as the threats and weakness are carefully examined and matched with the strengths and opportunities that are available. Netflix should find an internet provider to possibly integrate with so that taxes could be shared. By sharing taxes that would decrease the amount of debt as the interest rate is already substantiality low. Netflix would also be in a better competitive position by possibly merging with a phone company so that as new technology develops they share in the profits that are created.Being that there is the threat of piracy which undercuts the profit margins Netflix should incorporate more firewalls to block such users. Adding more protection for theft is another cost to the company but, in the long run Netflix will benefit. Netflix should use available information as to how others are able to remain profitable and afford to sell at the lowest possible pricing options even in oversea locations. Netflix has the opportunity to prosper and overcome present and future challenges as long as they keep up with the changing technological advances, and examine trends that are being set by competitors. The industry is small, but easy to enter into so Netflix must remain vigilant, and adjust when necessary. Despite the challenges of high debt, and other factors the company if it focuses attention on opportunities like, unique programs and expansion to more oversea locations will help Netflix to thrive.CASE IIICase Statement:Netflix can increase profits by choosing to expand operations to more oversea locations. For companies, such as Netflix, evaluating the financial condition through an analysis of the balance sheet is one of the best approaches. After reviewing the balance sheet Netflix is able to pay debt, repurchase stock and pay dividends, Netflix has high liquidity that can be used to expand their business. Where is the firm financially strong and weak as indicated by financial ratio analyses?When considering the positives and negatives of a public company the size of Netflix, there are many factors to take into account when determining how financially strong or weak the organization is. One of the most important aspects of evaluating a company is its financial condition. For companies such as Netflix, evaluating the financial condition through an analysis of the balance sheet is one of the best approaches. A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. By understanding Netflix's balance sheet, an investor, creditor, analyst or stakeholder can understand how well-positioned the company is to maintain and increase success CITATION Tar15 \l 1033 (Tarver, 2015)If you only consider long-term debt when looking at Netflix's D/E ratio, it would be at a healthy 1.07. In long-term debt, $2.37 to its shareholder equity of $2.22 (less other comprehensive loss) provides a healthy ratio. This is higher than one of its competitors, Inc. (NASDAQ: AMZN), which has a ratio of only 0.62. If you compare all of Netflix's debt to its equity, the debt to equity ratio is a much higher 3.23, and Amazon's debt to equity ratio is only 1.59. CITATION Inv151 \l 1033 (Investopedia, 2015)The capitalization ratio may be a better measurement for determining whether Netflix is in a healthy financial position. The long-term debt-to-enterprise value of the company, as of April 2016, was 0.05. This represents the large cash reserves of the company and its lofty enterprise value of $46 billion. If you include all debt, including shareholder equity, the number balloons to a 0.22 capitalization ratio. However, even at 22% leverage, Netflix is well under a typical capitalization CITATION McD16 \l 1033 (McDonald, 2016)Can the firm raise needed short-term capital?Netflix is more levered than it appears at first glance due to off-balance sheet content liabilities, which are significant in size. Netflix currently has a plan in place to expand globally. This plan will require upfront short term capital cash investments, which will lead to further capital raises. The method by which Netflix chooses to raise capital is important. The business risks are manageable and attractive, although they have not paid off yet in terms of profits and cash flows.Despite having over $1.8 billion of cash on its balance sheet, Netflix management has stated that they are likely to tap the capital markets in the next 12 to 18 months. As Netflix ramps up global expansion and content production, Netflix burns cash operating the business. Cash burn in FY 2015 was approximately $920 million. Cash burn is not expected to slow down in 2016. However, this cash burn represents investments that will pay off in the future, according to management.Because of the strength of its product, raising capital shouldn't be a problem for Netflix. There is plenty of capital out there, and hungry investors willing to get involved with Netflix. Despite the recent interest rate hike, the current monetary policy of the Fed is still pretty loose. With the strength of the dollar, I wouldn't be surprised that even international capital flows to the US markets. Whether or not Netflix can raise capital is not the concern. CITATION Macnd \l 1033 (MacroAxis, nd)Can the firm raise needed long-term capital through debt and/or equity?The first piece of Netflix's balance sheet to review is cash and cash equivalents. With more cash, a company is able to acquire companies, pay debt, repurchase stock and pay dividends. In 2014 for example, Netflix had over $1 billion in cash and cash equivalents, which is the norm over the long-term. This means the company has high liquidity that can be used to strengthen or expand the business. While the company made investments in licensed streaming content that reduced cash and cash equivalents in 2015, it expects to further increase its cash on panies in an aggressive acquisition mode can rack up a large amount of purchased goodwill in their balance sheets. Investors need to be alert to the impact of intangibles on the equity component of a company's capitalization. A material amount of intangible assets need to be considered carefully for its potential negative effect as a deduction of equity, which, as a consequence, will adversely affect the capitalization ratio. CITATION Wil13 \l 1033 (Wilkinson, 2013)Does the firm have sufficient working capital?Working Capital is measure of company efficiency and operating liquidity. The working capital is usually calculated by subtracting Current Liabilities from Current Assets. It is important indicator of the firm ability to continue its normal operations without additional debt obligations. CITATION Macnd \l 1033 (MacroAxis, nd).Working Capital can be positive or negative, depending on how much of current debt the company is carrying on its balance sheet. In general terms, companies that have a lot of working capital will experience more growth in the near future since they can expand and improve their operations using existing resources. On the other hand, companies with small or negative working capital may lack the funds necessary for growth or future operation. Working Capital also shows if the company has sufficient liquid resources to satisfy short-term liabilities and operational expenses. Are capital budgeting procedures effective?Capital budgeting decisions relate to decisions on whether or not a client should invest in a long-term project, capital facilities and/or capital equipment/machinery. Capital budget decisions have a major effect on a firm’s operations for years to come, and the smaller a firm is, the greater the potential impact, since the investment being made could represent a substantial percent of the firm’s assets CITATION Wil13 \l 1033 (Wilkinson, 2013) Capital budgeting is extremely important because capital budgeting decisions impact the firm for several years, they must be carefully planned. A bad decision can have a significant effect on the firm’s future operations. In addition, the timing of the decisions is important. Many capital budgeting projects take years to implement. If firms do not plan accordingly, they might find that the timing of the capital budgeting decision is too late, thus costly with respect to competition. Decisions that are made too early can also be problematic because capital budgeting projects generally are very large investments, thus early decisions might generate unnecessary costs for the firm. Netflix’s core strategy is to grow their streaming subscription business domestically and internationally by continuously improving the customer experience and expanding streaming content with a focus on programming an overall mix of content that satisfies its customers, including exclusive and original content, enhancing user interface and extending streaming service to even more Internet-connected devices while staying within the parameters of their consolidated net income (loss) and operating segment contribution profit (loss) targets. Contribution profit (loss) is defined as revenues less cost of revenues and marketing expenses. CITATION Net13 \l 1033 (Netflix, 2013)Currently Netflix is engaged in an effort to expand operations internationally. This is a capital plan that has been strategically budgeted to ensure success. Not only does Netflix have the capital to back the project, they also have they have a reputation to follow that will ensure the success of the expansion. As the company expands internationally, they are managing the business to address varied content offerings, consumer customs and practices, in particular those dealing with e-commerce and Internet video, as well as differing legal and regulatory environments. They have also chosen to separate the technology that operates their DVD-by-mail service from that which runs the streaming operations. If they are not able to manage the growing complexity of the business, including maintaining the DVD operations, and improving, refining or revising the systems and operational practices related to this capital project, the business may be adversely affected. CITATION Net13 \l 1033 (Netflix, 2013)Netflix increased it’s in debt capitalization ratio from a negligible level in 2013 to 22% at the end of 2015. In analyzing Netflix and its future opportunity for growth, its capital structure demonstrates that the company has made a prudent decision to leverage its market capitalization to a healthy, and lower than benchmark, level of 22% to grow both its product offerings and its customer base. As long as Netflix's management can maintain the healthy growth of subscribers to its platform, while keeping its customer acquisition and retention costs from raising significantly, this increased debt position is justified. CITATION McD16 \l 1033 (McDonald, 2016)Are dividend-payout policies reasonable?Dividends are common dividends paid per share. Dividends are reported as of the ex-dividend date. Generally, profits from business operations can be allocated to retained earnings or paid to shareholders in the form of dividends or stock buybacks if the company chooses. Stock owners typically receive dividends in proportion to the number of shares that they own. For example, if a shareholder owns five shares of a stock that pays one dollar divided, the shareholder will receive five dollars. Dividends can be company and growth-specific. Rapidly growing companies such as Netflix often do not offer dividends; the cash is expected to invest in other business projects that fuel more growth. Steady growth companies often offer small and consistent dividends. Netflix does offer dividend payouts, however they are not offered a long or consistently. This is however more than most of the larger competitors that it is up against. Apple for example rarely offers dividends even when they have had constant positive earnings. CITATION YCH16 \l 1033 (YCHART, 2016)Does the firm have good relations with its investors and stockholders?Netflix has a great relationship with its shareholders and investors. A quarterly financial document is released to shareholders. Netflix provides board contact information to its shareholders. This allows them to directly contact the board with any questions or concerns that may come up. This document reviews the past quarters financials while also showing the projected numbers for shareholders to review. This information is also shared publicly. Shareholders are provided very detailed financial information along with details on new acquisitions, partnerships along with what competitors the company is up against. This leaves very few questions or concerns for the shareholders and investors to have. CITATION Netnd \l 1033 (Netflix Inc., nd)Are the firm’s financial managers experienced and well trained?David Wells is Netflix’s’ current Chief Financial Officer. He has served as Netflix's Chief Financial Officer since 2010. His responsibilities include a number?of operating duties such as customer service, real estate, and employee technology. Mr. Wells has been at Netflix?since March 2004, serving in a variety of planning and analysis roles, including most recently as the Vice President?of Financial Planning & Analysis. Mr. Wells holds an MBA and M.P.P. from The University of Chicago and a Bachelor's Degree in Commerce from the?University of Virginia. He also has a long work history in the field of finance and has proven his training and experience to Netflix as they have been financially successful under his tenure. CITATION Netnd \l 1033 (Netflix Inc., nd)Ethical considerations:In the world of business today the main focus is often times placed on profit and not ethics. In past times, consideration was not given to the fact that standards were necessary to protect employees that work for their businesses. Due to frequent accidents occurring on the job governments have established workplace guidelines concerning health and safety issues for employees. Prior to acts passed by congress it was not uncommon for larger cooperation’s and even federal organizations to carry out practices that could be considered in one way or another unethical. Netflix needs to be careful on those whom they choose to conduct business with and ensure that no unfair labor practices are being used in new oversea locations. Another ethical consideration that Netflix needs to take into account is how shows portray possible real world situations. Yes, viewers have a right to choose what they want to see, but ultimately Netflix has control over what they choose to allow to be broadcasted through their company. Netflix should ensure that programs do not send messages that would entice viewers to commit illegal activities or cause harm to others as well as themselves. Even though most of what is available to be viewed today is fictional there needs to be standards set by Netflix and competitors that can considered ethical.QSPM Strategy SelectionThe best option for Netflix would be to continue to expand their operations overseas. The chart above shows two different strategies, one being expansion which has a total attractiveness score of 2.37. The results of this model indicates that if Netflix chooses to expand their boarders even more Netflix will benefit more than just adding more shows. Increasing the amount of viewers should yield greater profit margins and drive up the value of the company. The investment of expansions will add revenue which will allow Netflix to pay back the purchases of extra equipment that may be necessary before the end of their useful life. Increasing the customer base also pushes the NPV and will help Netflix to meet new customer goals as well. If Netflix decided against expanding and wanted to explore the option of producing new programs that are unique to their company that would certainly also raise the NPV but may take more time to do so. The other aspect is that capital budgeting may have a greater budgeting cost to the Netflix company initially, which they already have a substantial amount of debt that has been acquired over time. As stated in the case statement it is recommended that Netflix first concentrate their efforts of oversea expansion opportunities. Due to the possible positive NPV that would be created and the short payback period this investment proves to be the best avenue. Data shows that this assumption would have to be pushed to extremes to make the project result in a negative NPV. Expanding overseas will be a opportunity that will add value through adding more new customers who will become loyal to the firm, thus the future cash flows will be positively impacted allowing for other strategies to be implicated later on. Case 4Implementation planLives streaming is the leading revenue generator for Netflix. An industrial audit reveals that there is a dynamic shift from movie rental to streaming content consumption online. The current challenge is for Netflix to increase the content of their streaming library. Prevailing issue include the rising cost of postage. This renders the current business model less competitive in the future. The strategic plan is for Netflix to make a long term commitment to the growth of their streaming content library. Another long term objective is for Netflix to maintain flexibility. This ensures they are resilient to any market change as well as being able to penetrate new markets overseas. Emerging trends within oversea locations are more likely to impact the future of Netflix. A proper examination of cross-cultural differences must be inspected so that customer needs are properly understood. As a company, Netflix must utilize similar approaches from the past combined with newer innovative strategies as they venture into new territories. Netflix may benefit by developing strategic partnerships with existing ISPs seeking out integrated trans-media properties that can be tied to the traditional content offer great opportunities for future growthADDIN CSL_CITATION { "citationItems" : [ { "id" : "ITEM-1", "itemData" : { "abstract" : "This case describes how Netflix created the business model of delivering DVDs using mail services. Essentially, Netflix exploited a whitespace that other players, such as Blockbuster, could not engage in primarily because they were constrained by their own business models. 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Executives, finance, marketing, research and development and human resource department will all participate in activities that will allow for Netflix to further expand into the global economy.Executives:Management should keep tabs with the surrounding monitoring any emerging trends.Give employees freedom to make their own decision so they are inspired to grow and be innovative at work.Hold employees accountable for their actions so that they can work efficiently and independently.Finance:Budget and balance income and expenses that the company has or will produceMake recommendations to other departments that will allow for the greatest profits to be createdMake predictions based off of present finances of the current market along with past performance of the company.Marketing:Develop advertisements which market to audiences who may possibly desire to use Netflix or other services like themResearch and Development:Produce content that is easily accessible to new users and unique to NetflixDesign new ways to view content Develop faster and more reliable streaming options for customersHuman Resources:Reward employees for creative ideas that lead to new innovations Establish policies and procedures that will encourage employees to perform as efficiently as possible Netflix has several strong advantages that have great potential to grow the firm even more. Assuming that each department listed above carries out their task Netflix endeavor to penetrate the global market will succeed. Being that Netflix has already expanded to many locations outside of the United States this endeavor should be quite simple and inexpensive in comparison to other options. Netflix should focus a great deal of attention on bridging the gaps that between citizens of different countries. Netflix needs to establish a global library of programs that include local content specific to each location.In order to implement the plan of furthering oversee operations Netflix will begin with a financial analysis of their company. Netflix accounting team will decide on the best options available to secure the necessary funding for the project. Once funding has been decided upon the financial team will create a budget that will include all essential departments. Research will be conducted and information will be gathered to decide which locations would be the most suitable for flix will need to hire and train employees from within the country that they choose to expand. New employees will meet with teams from the marketing department as well as research and development so transitioning into the new locations can be a smooth process. Current employees will train the newcomers and obtain feedback from them as they are most familiar with what potential customers may enjoy the most. The executive team will ensure that leadership is promoting a team environment for all employees. The leadership team will have also be responsible for making sure that new employees understand the functional and technological needs of Netflix.FinancingGiven the fact that Netflix already competes in the global economy the necessary funds for the stregic implemtation to increase exspansion is 200,000,000. This amount would most liokely be better financed by using the method of common stock financing. The EPS for this method is the same as the option of using 65% percent stock, however in the long run the common stock option could prove to be the better approach.Amount needed $200,000,000Tax rate 30%Interest rate 5%stock price $147.81EBIT range $500,000,000 - $2,200,000,000Current share outstanding 429,140,000Projected Financial StatementThe projected income statement above shows that next year the amount of COGS will slightly increase and that the operating income should decrease for Netflix. The chart also suggest that the interest expense is expected to decline as well. Break Even AnalysisCost DescriptionFixed Costs ($)Variable Costs (%)Variable CostsCost of Goods Sold 823 20.0%Inventory 68 30.0%Direct Labor (Includes Payroll Taxes) 100 20.0%0.0%Fixed CostsSalaries (includes payroll taxes) 100 Supplies 10 Repairs & maintenance 7 Advertising 83 Accounting and legal 8 Rent 90 Telephone 3 Utilities 3 Insurance 3 Interest 13 Depreciation 7 Miscellaneous expenses 3 Principal portion of debt payment 13 Total Fixed Costs Total Variable Costs - Breakeven Sales level =243??70%810ConclusionUsing the strategic plan that has been outlined Netflix will be able to increase profits. Netflix has a great advantage to using this plan because of the familiarity from past endeavors of previous oversea expansion. Netflix can utilize past experiences that they have had in order to more easily carry out the plan to expand. Research suggest that there are some impediments that must be overcome, however the advantages are strong and should be capitalized. Netflix competitors may attempt to also seek to expand into new oversea locations so Netflix must act carefully but swiftly. Overseas expansion appears to be one of the better options that Netflix has as they move into the future as long as effort is made by all necessary individual from all of the major departments within Netflix.References;Achievement Timeline: Netflix Over The Years!" EverydayElectronics. N.p., 21 Apr. 2016Web. 25 Feb. 2017. <, F. R., & David, F. R. (2015). Strategic management concepts and cases: a competitive advantage approach. Upper Saddle River, New Jersey: Person Education. Investopedia. (2015, May 22). How are HBO, Amazon and Google working to overtake Netflix? Retrieved from Investopedia: . (nd). Balance Sheet. Retrieved from Investopedia: . (nd). Netflix Workign Capital. Retrieved from Macro Axis: , T. (2016, May 17). Netflix Stock: Capital Structure Analysis (NFLX). Retrieved from Investopedia: , D. (2016, March 15). Who Are Netflix's Main Competitors? Retrieved March 06, 2017, from , T. (2016, May 20). The Pros And Cons Of Hulu, Netflix, And Amazon Instant Video. Retrieved March 07, 2017, from . (2013, February 1). Annual Report- Netflix, Inc. Retrieved from Netflix: Inc. (nd). Netflix Will Need To Raise More Debt. Retrieved from Seeking Alpha: hits a milestone: 50M global?subscribers." VentureBeat. N.p., n.d. Web. 25 Feb. 2017. < Inc." NFLX - Research and Analysis for Netflix Inc - MSN Money. N.p., n.d. Web. 25 Feb. 2017. < Inc." Netflix Inc. N.p., n.d. Web. 25 Feb. 2017. <;. NFLX Income Statement. (n.d.). Retrieved April 09, 2017, from . (n.d.). Retrieved February 25, 2017, from Check. (n.d.). Retrieved March 08, 2017, from , E. (2015, August 3). How To Analyze Netflix's Balance Sheet (NFLX, GOOG) . Retrieved from Investopedia: , J. (2013, July 23). Capital Budgeting Methods. Retrieved from Strategic CFO: . (2016). NETFLIX. Retrieved from YCHART: Income Statement (values in 000's) Get Quarterly Data Period Ending:Trend12/31/201612/31/201512/31/201412/31/2013Total Revenue$8,830,669$6,779,511$5,504,656$4,374,562Cost of Revenue$6,029,901$4,591,476$3,752,760$3,117,203Gross Profit$2,800,768$2,188,035$1,751,896$1,257,359Operating ExpensesResearch and Development$852,098$650,788$472,321$378,769Sales, General and Admin.$1,568,877$1,231,421$876,927$650,243Non-Recurring Items$0$0$0$0Other Operating Items$0$0$0$0Operating Income$379,793$305,826$402,648$228,347Add'l income/expense items$30,828($31,225)($3,060)($28,131)Earnings Before Interest and Tax$410,621$274,601$399,588$200,216Interest Expense$150,114$132,716$50,219$29,142Earnings Before Tax$260,507$141,885$349,369$171,074Income Tax$73,829$19,244$82,570$58,671Minority Interest$0$0$0$0Equity Earnings/Loss Unconsolidated Subsidiary$0$0$0$0Net Income-Cont. Operations$186,678$122,641$266,799$87,274 ................
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