Porter’s 5 Forces For Competitive Advantage

Remember: this model is to scan from outside-in, not the opposite. If you're interested in inside-out scanning, look up Hamel & Prahalad (1990), they suggest that you should identify and build your core competencies before internationalizing.

Nawaf Almohaimeed

How useful is Hofstede’s cultural dimensions framework in explaining differences in communication and negotiation practices between countries? What other frameworks or theories might help us to explain such differences?http://www.12manage.com/images/picture_hofstede_cultural_dimensions.gif

TL;DR: Hofstede's framework does not explain communication, it's existentialist in it's approach, and outdated. But you shouldn't really disregard it because of said reasons. The framework is pioneering and opened the door for many culture-in-organisation research. Consider it the tip of the iceberg.

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As globalisation continues and fuels trade liberalization; it appears almost impossible for an organization to isolate itself and avoid engagement in intercultural communication. Whether it was the workforce, suppliers, clients or other stakeholders, an organization wishing to be involved in intercultural communication must realise that best practices don’t necessarily translate from country to another and in many cases, require more than minor tweaks. It takes radical rethink of the differences between own culture and other culture. Failure to do so will result in communication noise, a profound interruption that negatively affects the interpretation process between parties, which is very likely to disrupt the flow of communication and lead to undesired outcomes.

To avoid such outcomes and help bring people closer, psychologists, anthropologists, and management researchers attempted to understand organizations communication through a cultural lens for years. Even though the field of Cross-cultural management research is not particularly new; there is no formula to solve it all! Culture is such a dynamic concept that even experts could not agree on one definition to it. Selecting a single framework to understand this phenomenon and underlying cognitive factors is not recommended (Walt, 1998). Reputed theories and frameworks should be used as complementary instruments in the organization’s cross-cultural communication “tool box”.

The pioneer work of Greet Hofstede (1984) comes in mind as a main tool to identify and categorise culture. The Cultural Dimensions framework is the most widely used national cultural framework in psychology, sociology, marketing and management studies. He used 116,000 questionnaires from over 60,000 respondents in 70 countries (Hofstede, 1991, 2001). One must acknowledge that the dimensions and features displayed in Hofstede’s work were unheard of at the time it was developed. Thus, his findings throughout the years became widely preached in universities and often used as a framework to understand workplace diversity. Hofstede first and most remarkable research in the field was conducted in the 1980s as a part of IBM personnel research department. A worldwide survey regarding the effects of national culture on IBM employees around the world was measured and used to test his cultural dimensions comparison framework (Hofstede, 2011). Hofstede then theorized that nations fall on 5 dimensions. Each nation fell on either a high level or a low level of these dimensions. For the purpose of this essay, we shall discuss each dimension briefly, attempt to examine the effectiveness of the framework as a whole as a tool to understand cross cultural communication, and introduce a complementary framework that will aid us to understand communication across cultures.

Power Distance
Power distance (PD) refers to the extent in which inequality in hierarchical relationships and authority exists and accepted (Hofstede, 1984). Cultures with high PD tend to expect and accept relatively higher autocratic and paternalistic relationships, as well as a steep compensation gap between supervisors and subordinates. As a result, strong vertical hierarchical structures where chain of command looks like a pyramid as usually practiced. Communication is transferred from the top of the pyramid to the bottom in a relatively authoritative language accompanied by causal high levels of voice (Brockner et al., 2001). This brings in mind the question of effectiveness of such settings. Lian et al. (2012) suggest that higher PD cultures are not only prone to abusive supervision, but also more likely tolerate such mistreatment. A scenario study was conducted between two groups, a high PD and a low PD culture, China and USA, respectfully, supports this suggestion. Whereby a high-ranking member from each group insulted an inferior member in the same group. As expected, high PD culture were less critical of the insulter as long as he or she had a higher-status than them (Bond et al., 1985). Low PD cultures, on the other hand, have of an open flow of communication, they are more innovation driven (Van Der and Van De, 2005). This can be seen when employees are encouraged express their opinion and debate despise differences job and social ranking. Thus, organizational communication in low PD cultures tend are more consultative and democratic (Dysart-Gale, 2006).

Uncertainty Avoidance (High vs. Low)
People’s tolerance for ambiguity in unknown situations was measured in this dimension. According to Hofstede (1984), high uncertainty avoidance cultures tries  to minimize uncertainty by enforcing precision and rules, thus outcomes are mostly likely predicted. These cultures practice consises information exchange and spend time to prepare and plan before presenting or executing a project. On the other hand, cultures with low uncertainty avoidance not only enjoy a more flexible, informal business attitude. The do not impose rules or structures where it is unnecessary.  These also seem to be more accepting of change and undertaking risk (LangCircle, 2013).  Whether it was high or low, uncertainty avoidance influences ritualistic, harmonious, and aggressive facework strategies in an embarrassing situation within a culture (Merkin, 2006).

Individualism vs. Collectivism
This dimension relates to the extent and strength to which individuals relate to others within the community. High levels of individualism indicate loose interpersonal connections that don’t usually go beyond family and close friends (Hofstede, 1984). Although some researchers contend that individualised cultures are predominantly of low-context communication style and collective cultures are predominantly high-context communicators (Ting-Toomey, 1994), a study published in the Human Communication Research Journal disagrees. It indicates that cultural individualism-collectivism are not appropriate indicators of low- and high-context communication styles Gudykunst et al., (1996). The study in turn suggests that a person’s individual level factors (i.e. construals and values) mediate the influence of cultural Individualism or collectivism on low- and high-context communication. Individualism is relative, not absolute. Scholars suggest that it is “fairly fragile, and depends on the contextual factors” (Triandis et al., 1986). Highly collective cultures emphasize a greater deal of harmony to in-group members, yet are not quickly to grant trust to out-group members (LangCircle, 2013). One might assume that this in- and out-group orientation might prevent or limit the frequency of out-group interactions or trust. Yet, these cultures have their own rapport building system to use with outsiders. It is sort of an informal, trust and vouching system. The Japanese call it keiretsu, the Koreans call it chaebol, and the Chinese call it guanxi. These strategies have been used by collectivist cultures to expand the scope of their communication and networks (Huff and Kelley, 2003). This group-oriented mentality depends on high levels of respect and loyalty. In some parts of the world, religious systems, such as Islam, or philosophical teaching, such as Confucianism, are embedded in the culture beyond mere teaching. Thus be Relationships are also tighter; people know and have interest in each other’s life. relationships, conformity, and group harmony outweigh tasks, autonomy and self-achievement in these collective societies (Hofstede, 1990).

Masculinity vs. Femininity
This dimension portrays the extent to which a collective set of traits interpret masculinity and which portrays femininity as well as refer to the degree to which socially prescribed roles operate for men and women. (Hofstede, 1984).  Certain traits, such as authority, assertiveness, and competitiveness are linked to masculine cultures. Whereby traits such as personal relationships, quality of life and service are linked to feminine cultures (Jones, 2007). Hofstede’s findings clustered countries into a continuum in which highly masculine cultures tend to have well defined distinction between man’s work and women’s. On the other hand, countries that ranks low on masculinity (high on femininity) usually have no particular roles that specified for each gender work (LangCircle, 2013). This can be linked to communication and negotiation practices by considering the way gender roles play out in the cultural contexts of their counterparties.


Long-Term Orientation vs. Short-Term Orientation
This dimension was a later addition to the original 4 dimensions after finding that Asian countries with a strong link to Confucian philosophy had different work-related values than western cultures (Hofstede and Bond, 1988). Long-term Orientation cultures tend to be more value thrift and perseverance. Whereby values associated with short-term orientation were found to value respect for tradition, fulfilling social obligations, and protecting one's 'face' (LangCircle, 2013). Examples of long-term oriented cultures are: South Korea, Japan, China and France. Examples for short-term oriented cultures are: UK and USA (Hofstede and Bond, 1988).

Hofstede’s framework: law set in stone?
Cross culture research is not an easy task. Hofstede’s framework gained plausible credibility as the most comprehensive study of culture and became an essential part of cross-cultural education. Similarly, the framework appears to have implication to practitioners who require insight on the dynamics of culture. Consultancy firms as well as multinational retailers resort to Hofstede dimensions in their intercultural planning. Itim International, a Finnish consultancy firm, uses Hofstede’s framework to advise on business functions such as outsourcing, change management, recruitment and virtual teams management (Itim.org, 2014). Multinational online retailer, Zappos, has utilized Hofstede’s work during the process of formulating an organizational strategy. Chief Leadership Advisor, Camille Preston, expressed that using the framework as a part of Zappos overall organizational strategy has helped define the corporate culture in Zappos such as levels of job control and autonomy.

Hofstede himself claimed in 2011 that his framework was validated by more than 140 survey and non-survey studies, resulting in considerable conceptual and empirical evidence. Steenkamp and Geyskens (2012), confirm that many similarities occur in different proceeding typologies of culture that overlap Hofstede’s framework. Table 1 (attached in Annex) compares cross-cultural frameworks proceeding Hofstede, revealing a distinct level of convergence across the frameworks and thus enhancing its legitimacy.
 
Indeed, Hofstede’s work is widely validated and some proceeding works had leapfrogged it, but does it explain individual communication practices or merely addresses and identify cultural differences? Although Hofstede’s framework was intended to be applied in human resources management, academics find it useful in formulating hypotheses in other aspects of comparative cross-cultural research such as entrepreneurial behavior, training design, conflict resolution, leadership style and M&A integration (Shaiq et al., 2011). This broad transparency between disciplines sure does give the framework adaptive qualities, but does it relate to deeper communication aspects such as religion and negotiation?
 

Religion and culture dimensions
A study was conducted by the International Business Centre attempted to apply Hofstede’s framework along with an analysis of countries’ religious backgrounds. The study concluded that predominant Buddhist and Shinto countries were closely correlated to Uncertainty Avoidance and Long Term Orientation dimensions. Which goes along with the reason behind Hofstede adding the fifth dimension. Alternatively, Catholic and Jewish predominant countries, had correlation with Uncertainty Avoidance. Thus, it is suggested that predominantly Catholic countries, such as Mexico and Israel, respectfully, tend to be a “highly rule-oriented society” in order to control the levels of uncertainty within. Next, Predominantly Christian countries had correlation with high Individuality levels. As we know from Hofstede’s (1980), highly individualised societies have looser relationships. There was one Hindu predominant country in Hofstede’s dimensions and it was India. It seems that there’s strong correlation between Hinduism and Power Distance.This perhaps suggests strong appreciation and consideration for religious authorities in India. Finally, Muslims countries were found to have a correlation with Power Distance and Uncertainty Avoidance, creating a culture where leaders tend to have strict control over the society coupled with high inequality levels (Taylor, 2014).

Overall, the study gives some aspect to whether or not there’s a correlation between religion and Hofstede’s work. Yet it has many limitations, such as taking into account that Catholic countries are no clustered in one geographic location, there are Latin American Catholic countries and there are European Catholic countries.
 
What about negotiation?
Reaching an agreement through negotiation requires flows of communications between parties. A study that integrated Hofstede’s framework with Weiss and Stripp’s (1985) twelve aspects of negotiation behaviors suggests the utility of Hofstede’s framework in identifying a given culture’s position on the various negotiation dimensions. Uncertainty Avoidance was suggested to have strong correlation to seven negotiation dimensions: Internal decision making process, orientation towards time, risk-taking propensity, basis of trust, concern with protocol, nature of persuasion and basic concept of negotiation. On the other hand, Individualism was related to: influence of individual aspirations, style of communication, and most significant type of issue dimension. Lastly, the study finds no correlation between Power Distance and selection of negotiators.
 
The first part of the findings suggests that negotiation, to a large extent, involves reducing uncertainty to reach a mutual agreement (Metcalf & Bird, 2004). The second part confirms Hofstede’s (1980) remarks that members from highly individualized cultures enjoy personal challenges and expect rewards for hard work.
 
The two communication examples previously addressed had shed the spotlight on attempts that took advantage of Hofstede’s flexible framework and integrated it into communication frameworks for hypothesis testing. It appears that Hofstede’s framework on its own is a classification of national cultures. In order to apply it to communication and negotiation, it is perhaps best to embed it with other frameworks in order to address communication topics. An Organization may use the framework as a preliminary guide to have a general attitude on what to expect from a certain culture, but it should not devote its entire learning process on Hofstede’s framework. Even such colossal work cannot escape criticism.
 
Hofstede’s framework shortcomings
It was Hofstede himself who declaimed that he was merely providing “the edge of understanding”. It is important to understand that culture itself is a collective and comprehensive concept to distinguish one group from another. Whereby communication, by definition, is the “activity of conveying information through the exchange of ideas, feelings, intentions, attitudes, expectations, perception or commands, as by speech, non-verbal gestures, writing and behaviors” (Wiener & Norbert, 1948). Communication requires a sender and a receaiver,  . Although Hofstede went back to provided guidelines on communication and negotiation with individuals from different countries in 2001, his model is still being criticized to be partially or fundamentally invalid.
 
Schwartz (1994) was first to point out that Hofstede’s sample is too narrow and specific. The research was conducted entirely on IBM employees who were either salespersons, managers or technicians. This cannot be applicable to a whole culture for many reasons. First, IBM’s corporate culture, values and goals might been dominating the subsidiaries’ operations. Corporate culture has been found to be a preference over national culture in many multinational companies (Schneider, 1988). Second, Salespersons, managers and technicians make up a partial fraction of an organizational culture, let alone a nation. Even for the untrained eye, they are not a representative sample of entire culture.

Although some scholars discard the whole research based on the fact that culture is dynamic, not static, others dogged even deeper. The dimensions themselves were considered western (and thus ethnocentric) approach cannot be universal (Jones, 2007). To illustrate, what is defined as a feminine trait in one country may be different in another, such as a Middle Eastern country and a European country. Moreover, the idea that everybody is has an innate essence of which they cannot escape is an essentialist approach to culture. The assumption that people will behave according to where they were born is essentialist in nature (Patel, 2007).

In terms of the data eligibility, it seems a bit outdated. During the late 1980’s and early 1990’s, the Internet has not fully integrated, and the number of English speakers is with no doubt less. The framework did not take into account the integration of the internet, language proficiency or even the effect of low-cost airlines in bringing people closer. Lastly, the data did not take into account subcultures within or across regions. Organizational culture in the Australian Salvation Army is certainly different than organizational culture in the Australian Mayers stores. In terms of regions, regional subcultures were reported to have different values than each other (Huo and Randall, 1991).

When it comes to negotiation practices, Hofstede’s framework does not really provide us with specific negotiating and persuading characteristics across cultures. We would go as far as not recommending the use of it for such purpose. To examine this closely, we recall that Hofstede’s framework shows dissimilarity between Brazil and United States in dimensions such as Power Distance, Individualism, and Uncertainty Avoidance. Compare this dissimilarity with findings of negotiation scholar, Nancy Adler, it is revealed that negotiators from both Brazil and United States are almost identical in characteristics such as perceive and exploit power, thinking under pressure, judgment and intelligence, and preparation and planning skills. Even for the untrained eye, these characteristics are, to some level, related to Power Distance, Individualism, and Uncertainty Avoidance of Hofstede’s.     

Where does this leave us?
As we have previously mentioned, the use of one sole theory or framework to explain a phenomenon as complex and intertwined as culture communication is unwise. We recommend aiding Hofstede’s cultural framework with one or two intercultural communication frameworks to allow triangulation assessment of results. Edward Hall is an anthropologist who was interested in the way cultures communicated. He hypothesized that culture communication is dependent on factors of context; high and low (Hall, 1959; 1990). 

High-context culture is described as implicit; the use of metaphors and reading between the lines is common. The use of non-verbal communication should be expected. In a negotiation situation, mere disagreement can be expressed by breathing from the mouth while teeth are clinched. A person engaging in communication with a high-context contact must strive to earn the trust of their contacts. Whereby a low-context cultures are more verbal or open about their feelings, there are no hidden messages, disagreement will be expressed with no hesitation. 

End of Part I

Nawaf Almohaimeed 

Applying the CISG in Moot Arbitration

IN THE MATTER OF THE CONVENTION OF CONTRACTS FOR INTERNATIONAL SALE OF GOODS (CISG)

CASE I IN THE MATTER OF ARBITRATION BETWEEN :-

{Basil Green}

       Australia                    RESPONDENT - SELLER

-AND-

{Beautiful Clothes Ltd}

China         CLAIMANT - BUYER

AWARD

FACTS

1. CISG contract where goods were damaged during delivery. Buyer accepts goods to discover damages in addition missing and extra items. Buyer dumps entire load in harbour and claims damages equal to contract price plus loss of profits.

CLAIMANT - BUYER’S SUBMISSIONS

2. Claimant accuse seller of breach of obligation Art. 35(1), (2)(a), 36(1) and 52(2) and seeks fundamental breach Art. 25 with lack of conformity Art. 51(2). Estimates damages at 150% under Art. 45, 46, 52, 74 and 77.

RESPONDENT - SELLER’S SUBMISSIONS

3. Respondent seeks non-fundamental breach under Art. 25 as damages could be repaired, surplus is sellable, and missing goods does not amount to a faulty breach. Evidence was destroyed as to Art. 79(1), Art. 79(2) and Art. 38. Estimates undamaged 30% and damaged 70%, yet not liable for both. Offers remedy to non conforming batch of goods only under Art.49 and 50.

FINDINGS

4. Non fundamental nature by virtue of Art. (25). Seller not liable for lack of conformity, buyer did not give notice within reasonable time. The application of ‘Jeans’ and ‘Steel bars’ cases is inappropriate.

ACCORDINGLY WE MAKE AND PUBLISH THIS AWARD AND DIRECT AS FOLLOWS:

5. Claimant shall not claim for 150% under Art. (74). Respondent can claim for retribution, but not in total. The panel provides that the dumping of the evidence deprives the buyer from claiming loss of profit only. Buyer has to compensate the full amount of surplus that have been dumped accordance to Art. 46(3).

CASE II IN THE MATTER OF ARBITRATION BETWEEN :-

{Basil Green}

        Australia       CLAIMANT - SELLER

-AND-

{Oui Oui}

France RESPONDENT - BUYER

AWARD

FACTS

1. Contract of the sale of goods. Seller request payment after completion. Buyer did not reply and asked the assistant to return both. Seller deny the responsibility for the payment due to faulty goods.

 CLAIMANT SELLER’S SUBMISSIONS

2. CISG is applicable, based on Art. 1(1)(a) and goods are for commercial use, according to Art. 2(a). Buyer loses right on lack of conformity virtue of Art. 39(1) and liable to pay and take delivery under Art. 53, 54 and 58(1). Seeking damages under Art. 74.

RESPONDENT BUYER’S SUBMISSIONS

3. CISG does not apply due to Art. (2) and Claimant breached contract under Good Act Vic (s.18) and (s.19).

FINDINGS

4. CISG does not apply by virtue Art. 1(1) as it states CISG only applies in places of business. There’s no clear evidence of whether it was sent to a business or residence. Art. 2(a) explicitly discloses CISG is not applicable to sale of goods for personal use. The respondent is an artist, and many artist have unique, individualistic taste. Although an autographed photo imply buyer’s celebrity status ,but does not necessarily express her intentions with goods.   
5. Goods Act Victoria (1958) is inapplicable, because choice of law is not declared.

ACCORDINGLY WE MAKE AND PUBLISH THIS AWARD AND DIRECT AS FOLLOWS:

6. The matter of this arbitration is not governed by the laws of CISG. Thus it is out of this panel’s jurisdiction. Parties can rely on other ADRs to resolve this dispute.

MADE AND PUBLISHED IN AUSTRALIA, BEING THE SEAT OF THIS ARBITRATION

[Signed]   Nawaf Almohaimeed; Qinyuan Dong; Chulun Shang; Binh Duc Mai; Yang Yang; Yichen Zhang.  [28th of September 2014]

Netflix in Australia: Country Analysis & Market Entry Plan

MKX5955 -Marketing and International Consumer

Chief Examiner: Kimble Montagu

Team leader: Nawaf Almohaimeed

Team: Jason Alvin, 陈思敏, Rei Sasaki

Market Entry

Executive Summary

This marketing plan aims to provide a concise, yet complete, overview of Netflix, as a video-on-demand service, assess the attractiveness of the Australian market, and provide strategic measures for entry.  

The scope of this plan begins firstly with evaluation of the Australian market, secondly, segment and select target markets, thirdly, indicate marketing mix strategies, and lastly, provide a robust and desirable exchange of value between Netflix and the consumers.

recommended entry modes and strategies, along with controlling and implementing measures.

Based on rigorous measures, the market was divided to two major targets: university students and young families. Target markets will receive different marketing messages yet with the same marketing tools. A concept that was adopted for the nature of the brand and it’s associations. Below is the proposal budget to enter the market.

1.0 Introduction

Netflix is an on-demand television and movie streaming service based in the United States of America. It humble beginnings in 1999 consisted of mailing DVDs to subscribers for a small fee. The service soon became popular for it’s simplicity; consumers can watch advertisement-free shows and movies anywhere conveniently at their own pace. In 2007, market penetration was the highest it ever been, 10 million subscribers in USA alone. Netflix’s innovation and market leadership caused major shakedowns to the movie rental industry. It was the first to introduce on-site, DVD rental booths in supermarkets, shopping malls and hotels. Two years later, Netflix streaming was introduced; an online service that gave it’s subscribers access to view thousands of entertainment content using a computer device. After a successful domestic market penetration, Netflix decided to go public and announced it’s plans to expand internationally. In 2010, Netflix first experimented in expanding to Canada for it’s relative similarity to the US market, and it was a success. Today, 44 million subscribe to the service that operates in more than 40 countries. Moreover, Netflix started producing it’s own programs and shows in 2013.   

Market leadership and innovation are, without a doubt, two of Netflix's core competencies. The decision to introduce Netflix to the Australian market was in fact, triggered reactively; the Australian consumers has already been demanding and subscribing to Netflix using a VPN service (Harvey, 2014). When it comes to paid digital media, Australian consumers are estimated to pay 400% more than the average international consumer (ABC News, 2014)

Netflix, at it’s core, is an entertainment content provider that consider itself to be on a continuous ‘quest’ to simplify the process of watching TV while revolutionising the technology behind it (Netflix, 2011).

1.1 Purpose

The purpose of this marketing plan is to firstly introduce Netflix. Then, evaluate the Australian market and assess its attractiveness and readiness for entry. And lastly, suggest marketing strategies and implementation and control measures for a successful entry.   

1.2 Assumptions

1. We chose Melbourne as a starting point for it’s diverse segments, technology competency, and size.
2. To simplify, we decided to assume two market segments: university students and young families.
3. Propose $1,000,000 as a market entry budget.
4. Although current Australian market is monopolized by Foxtel’s Presto service, we are proposing a political implementation strategy to push for change.

1.3 Limitations

1. The environment is constantly changing thus we need to be flexible: for instance the copyright law and regulations for contents are changing and technologies are advancing.
2. This research focus only Melbourne market and two main target markets for simplicity.
3. Secondary data was utilized for simplicity.
4. Limitations in using two methods to assessment: SWOT and Porter’s Five Forces analysis.
5. We did not take into account Australian ISP data limitation.

2.0 Current Marketing Situation

2.1 Marketing Analysis

Recently, Australia has been exposed as the world’s leading country in pirated multimedia. Hit TV shows, such as “Game of Thrones”, are aired days and weeks after global release (Ernesto, 2014). The reason behind such delay is that Foxtel hold a market monopoly for releasing new content in Australia. Even an untrained eye can identify the harms of a monopoly in an economy; it eliminates competition, reduces customer service, increases prices, lowers quality, resulting in outdated content, causing consumers to look otherwhere for up-to-date, cheap, high quality content.    

Simultaneously, the Australian government proposed tougher, and stricter anti-piracy laws by requesting internet service providers (ISP)  to block access to sites promoting pirated content (Smith, 2014). ISPs in return criticised the proposal, as ineffective. Smart Internet users will find way to deceive such rules. There are many legal shortcuts to purchase a Netflix account  by posing as a user from North America, using the VPN (Virtual Private Network) that costs only $5/month (Harvey, 2014).

Although technically it is not against the law, the Australian government is already taking steps and promoting their anti-piracy agenda, which proposes a window of opportunity to bring Netflix as a key player in the market. Firstly, it would reduce the number of pirated content; as Netflix is legal and comprehensive. Secondly, offers significantly lower prices while providing more content than the other Australian internet TV service provider. And lastly, Netflix is reactively triggered to internationalise to Australia; as it’s the second most demanded paid internet content provider in Australia even without it being available yet (Ryall, 2014).

Figure 1 – Most popular paid online streaming services in Australia (Pinatoan, 2014)

2.2 Product Analysis

2.2.1 Brand

Being the absolute first of it’s kind, Netflix’s identity as an American brand has positioned itself on using a simple and minimalist brand name association with white print, a black border, and a red background. It usually does not have an official slogan but it did recently use catch phrases to promote certain campaigns. Additionally, it’s consistency in low pricing gives it a reliable image to consumers (Netflix, 2014). This image is displayed in the product and service offered (explained thoroughly in the product analysis section in 10.1).

2.2.2 Service

Netflix analysis user preferences and selection preferences using computer generated algorithms to gain further understanding of their segments. Thus be able to recommend content with similar taste (Netflix, 2014). Moreover, there are not contract of hidden fees. Giving consumers the freedom to join when they want, leave when they want and come back when they want to (Netflix, 2014). These two strategies indicate a consumer oriented mindset that Netflix, as a service provider pride itself on having.

2.3 Environmental Analysis: Macro & Micro

As previously discussed, Netflix is platform that relies on the internet connection to provide it’s content. Thus, Internet availability and connection is considered a complementary good to Netflix; they go together.

Figure 2 – Fixed broadband subscribers in Australia (The World Bank, 2014)

Most of Australians are already connected to the internet. Figure 2 shows the number of fixed broadband Internet subscribers. The number of Internet users increased dramatically over the years, totalling 5,839,000 users in 2014 (The World Bank, 2014). Additionally, there has been significant increase in the demand for high speed, National Broadband Network (NBN) of 27% in 2013 (Turnbull, 2013). Data suggested in Turnbull (2013) indicate that at a macro level, the technological infrastructure is ready to obsorb Netflix.

Australia’s young population (including international students) are considered to be our major target audience as data suggests a 97 % penetration of between 15 to 34 years old use the internet to watch (ABS, 2014). Figure 4 (below) suggests that internet penetration is at it’s highest in age groups between 15 - 34 years old. The same study suggests that 58% of Internet users use it to watch movies online (ABS, 2014). The correlation that could be drawn is that the environment is at a micro and a micro level is accepting of the technology.

Figure 3 – Number of Internet user by Age-group (ABS,2014)

2.4 Porter’s Five Forces Analysis

     Figure 4 - Porter’s 5 Forces (Porter, 2008)

In order to effective power and industry rivalry impose higher threat than potential new entrance and substitutions, which are considered low threat.

The competition between Netflix and other online movie providers are high because there are already a numbers of competitor in Australia such as, Presto, BigPond Movie, Google Play, Quickflix, Mubi and many more (Table 1 in Appendix II  provides a comprehensive comparison of video on demand providers in Australia). Although the threat of new entrants will probably be decrease as the market is on the way to saturation. As an industry expert noted, the Australian market is enough for 3 or 4 players only (Turnbull, 2013).  However, since Netflix technically enters the market as a second mover, building up customer loyalty and overcoming entry barrier, such as competitors’ relationship between NBN, could impose an obstacle.

The threat of substitutes is low because in reality, online streaming. such as Netflix, has slightly altered and somehow substituted the traditional ways of watching movies, such as going to the cinema, already (Turnbull, 2013). Though consumers may alternate between the substitutes, online streaming services offer a cheaper price, especially for our selected target audience.

When it comes to power of suppliers, there are two main suppliers to Netflix, which are movie producers and ISPs. The power of suppliers are high in this case due to the fact that movies are the main content that Netflix offer and it requires Internet connection to operate. If content producers restricted Netflix’s supply of content or ISPs impose limits to what bandwidth, Netflix will instantly lose attractiveness. It goes without saying that consumers play a key role in the success of Netflix.  If Netflix fails to offer the right content coupled with the right price, consumers can switch providers.

Accordingly, the following marketing plan will carefully take into consideration the power of suppliers and buyers in order to aid Netflix to establish a sustainable market share as well as improving its competitive advantages in Australia.

3.0  Market Segmentation and Targeting

In order to enhance accuracy of marketing efforts, segmenting customers to identify potential customer groups and targeting on them is an essential step The segment should be measurable, substantial, accessible, differentiable, actionable so as to approach target segment effectively (Kotler and Keller, 2012).

3.1 Segment The Market

3.1.1 Geographic Segmentation

In case of Netflix in Melbourne, Australia, the market will be divided into two geographic segments: neighborhoods with National Broadband Network (NBN) connection, and university campuses.

First of all, Netflix would be advised to position itself geographically alongside of NBN areas due to its reliable and responsive service. Conveniently, these locations (indicated in purple) are close to Melbourne’s major universities, such as RMIT, University of Melbourne, Victoria University and La Trobe. As for the sake of this discussion, we shall examine three major areas, Brunswick, Docklands, and Bundoora. According to the 2011 Census, those areas have a fairly young average population (31 to 35 years old). Therefore focusing this geographic segment covers the potential target (DIBP, 2014).

Figure. 5 - NBN accessible area in Melbourne. (NBNCO, 2014)

3.1.2    Demographic Segmentation

Subsequently, geographic areas mentioned above receive hundreds of students on daily bases. In demographic segmentation, the market is divided regarding to variables such as age, gender, family structure, lifestyle, occupation, income and religion. We decided that Netflix would be generally affected by age, sex, income, lifestyle and accessibility to the technology.

Screen Australia (2012) suggests that young Australians aged between 18 to 33, are the early adopters to technological trends. Moreover, The Leading Edge Trends survey of 2013 suggests that 33% of young Australians aged 18 to 24 years are spending more money on online content than other groups. Keeping in mind that typically, young people are not the highest earners, Netflix would be a great substitute to the traditional ways. Lastly, we have derived that in terms of Product Life Cycle (PLC), young and modern people are most likely to be conscious of the latest technologies.

3.1.3 Psychographic Segmentation

For better understanding of consumer, demographic segmentation is effective that reflect consumers’ psychological and personal perspectives (Kotler and Keller, 2012). Customers are divided into three segments according to their psychological trigger of using Netflix: 1) a cheap way of watching content; 2) a hassle-free entertainment experience; or 3) an alternative to television. Screen Australia’s research also  suggests that the most common reasons for people under 29 to use online streaming for its accessibility, cheap price, and to keep up with missed content that otherwise would not be broadcasted again.

3.1.4 Behavioural Segmentation

By dividing customers using a need-based segmentation, we grouped people who want to spend time with their family together, who like to watch movies and TV programs together, and who use Internet as leisure together. To illustrate, the first group might be interested in cartoons for children, the second are movie buffs, and the third are who cannot afford Foxtel in their home or dormitory.

To conclude, Netflix should target its marketing and focus it’s advertising on two types of target audience.  students and young families living in NBN connected areas, they are most likely between ages of 18 to 33. They are tech savvy and trend-conscious.

3.2 Market Positioning

3.2.1 Perceptual Map

Netflix’s competitive position could be illustrated in the perceptual map shown in figure 6. Similar competitors, such as Quickflix, Presto, Bing Pond moxie, have already entered the market, indicating a strong competition to for the Australian market. However, Netflix’s competitive advantages lies in the unmatched combination of content size and price.  

                                     Figure 6 - Perceptual Map

Although Netflix’s potential rival, Quickflix, matches it in device availability, variety and pricing, the value of contents is less than what is offered in Netflix. Foxtel streaming service Presto has “exclusive” deals with content owners to show programs here in Australia (ABC News, 2014), since Foxtel is owned by the two giants, Telstra and News Corp (Foxtel, 2014). This current market has been dominant by them. However, their value position is low because of the high price setting and tight limitation for device availability.

In summary, though some competitors are imminent to Netflix in terms of the device availability, the value of contents are much less than those of Netflix. Thus Netflix can establish a distinguish position those it is late entry.

3.2.2 Point of Differences (POD) and Point of Parity (POP)

Point of difference (POD) and point of parity (POP) are useful when considering offensive and defensive strategy that a firm should undertake (Kotler and Keller, 2012). POD is a product’s advantageous attribute or value that cannot find in another competitive products. Thus, the POD of Netflix is its accessibility on multiple platforms, and valuable content in regards to price. Those factors are let by its desirability, deliverability and differentiability (Keller, 2009).

On the other hand, point of parity (POP) is the attribute that is also offered by other products and it is not necessary unique to the brand (Kotler & Keller,2012). Netflix’s core service, multimedia content streaming, is considered to be it’s POP.

3.2.3 Market share forecast

It is clear that Netflix will face a crowded and competitive market; a Citibank analyst speculated that the Australian market "only held room for one to two players" (Adhikari, 2014). Although the current Australian market has been monopolised by Foxtel’s Presto, the Australian Anti-piracy forum takes place later in December 2014. Where three issues, including this monopoly, will be investigated and hopefully eliminated.

Reasons for our optimism is the single fact that under Foxtel, the Australian consumers pay a 400% markup than Americans for digital programs. This is the exact cause why consumers are bound to look for alternative, perhaps illegal, ways of watching their favourite content (ABC News,2014). As stated earlier, monopolies destroy innovation. Foxtel is not motivated to update its technical abilities for the simple reason is that there are no threats. These reasons led to a decline in Foxtel’s household market, leaving it with only 26% penetration (Pash, 2014).

Figure 1 - Most popular paid online streaming services in Australia (Pinantan, 2014)

Netflix announced that 200,000 Australians have already subscribed unofficially by the use of VPNs (Pinantoan, 2014). Industry insiders estimate that Netflix has been secretly operating in the Australian market and surpassing its most potential rivals, Quickfix and Foxtel (Pinantoan, 2014).  Figure 1 might seem alarming at first, but it’s noteworthy to mention that it is possible for a company to grow, yet have shrinking market share. It happens when overall market is growing (Pinantoan, 2014). The path isn’t all clear for Netflix just yet.

When a customer signs up with a service, it doesn’t mean that they will stay with forever. Customers are consistently switching providers and services for a variety of reasons such as bad customer services, technical difficulties, expensive…etc.  Figure 8, displayed below, is findings of a study conducted to see the average time an Australian customer “sticks around” before looking for an alternative service or cancelling (Pinantoan, 2014).

Figure 7 - Subscription length of service users (Pinantoan, 2014)

Netflix users seem to stick around the longest and Quickflix seem to be the shortest. Australians who signed up to Netflix stayed, on average, for 110 days. While those who signed up to Foxtel during the same period stayed for slightly less than 80 days. Quickflix, on the other hand, seem to be losing customers at a ,relatively higher pace than Foxtel and Netflix.

4.0 SWOT analysis

Strengths	value proposition; the combination of content and price are superior. no hidden fees advertisement-free content transparent on all devices.
Weaknesses	regulation in Australia patent infringement
Opportunities	Foxtel’s monopoly will eventually dissolve. large numbers of international students (a part of 1st target market) in Australia.
Threats	changes in technology Foxtel’s strong lobbying power

Table 1: be advised that a complete, comprehensive SWOT analysis is attached in Appendix III.

5.0 Marketing Objectives

5.1 First half-year objectives (1st-6th Months)

1. Creating a bundle package in partnership with an Australian ISP.
2. Monitor ROI in terms of which promotional methods generated most sales, and eliminate ineffective ones.
3. Inform target market of the availability of Netflix in Australia.

5.2 Second half-year objectives (7th-12th Months)

1. To achieve an annual growth rate of 15%
2. To generate 50,000 sales volume in the first year.
3. Reduce informative marketing and indulge in promotional marketing.

6.0 Issues

Further analysis of the three methods of analysis used in this proposal, Porter’s 5, SWOT and PESTL we suggest that there are some issue for bringing Netflix to Australia:

1. Foxtel has become the monopoly in Australian digital distribution of movies. Unless the Australian government take drastic measures to offer a free market, implementation could face some rough patches.
2. Australia has a different motion picture rating schemes than America.

7.0 Marketing Mix Strategies

7.1 Product Strategy

For a small fee of $8.99 a month, Netflix provides subscribers with access to millions of titles, ranging from movies, TV shows,  to sporting events, to watch, whenever they want, as much as they want, anywhere they want (Netflix, 2013).

The actual product is a user friendly platform that requires an internet connection to launch. Users can access this platform via a computer, television, game consoles, android and apple devices. Upon launch, users are welcomed with an easy to navigate menu featuring movie suggestions based on view history, new arrivals, genres, and instant queue (Netflix, 2013). Since customers already pay a monthly subscription fee, Netflix does not show any advertisements in it’s platform or during viewing of the content.   

7.2 Pricing Strategy

Our target market utilize a ‘reference price’ in making decisions. Which is the price that they would usually expect to pay or the price they think the good is worth using all previous data. Consumers are often actively process price information, interpreting it from the context of purchasing experience.  According to the RBC survey, even $1 rising price may result in backlash, since 17% of customers answered that they are extremely or very likely to cancel Netflix if the price is increased even $1 (Spangler, 2013)

Provider	Parent Company	Monthly price
BigPond Movies	Telstra	$15.99
Mubi	N.A	$4.99
Fetch TV	iiNet	$14.95
Quickflix	N.A	$14.99 for package deals.               $9.99 for streaming
iTunes	Apple	$5.99 for rentals                          $25.00 for purchases
Google Play	Google	$24.99 - $29.99 per film only.
Presto	Foxtel	$47.00 per film $25.00 for packages

Table 2 - Online movie service’s fee (Appendix II)

As previously mentioned, Australian consumers are paying up a 400% markup. We propose two types of plans to accommodate our target groups. The first is a single device (one screen) plan for students costing AU$8.99, and the second is a multiple devices (four screens) plan for families costing AU$18.99.     

During the first month, and in order to achieve first phase marketing objectives, such as gaining market share, we propose a “a free month” for university students’ references. During Christmas, we are also going to deliver anniversary discount gift card for our loyalty customers who subscribe family plan over 4 months continuously. This anniversary discount offers 15% off for one year subscription.

7.3 Distribution Strategy

Dual distribution will be adopted due to the nature of the product. Netflix will use more than one channel simultaneously to supply the products to the customer. The dominant channel is online signups in which customers can subscribe through the platform (Kotler & Keller , 2012) and monitored using customer relationship management (CRM) software will be utilized to focus on the side of the value network that looks after the customer.

On the other hand, Netflix will negotiate international alliance with Australian ISPs, electronic companies (such as JB-HIFI and Dick Smith) where Netflix will place representatives in selected stores to signup small numbers of customers using personal selling. Netflix shall allocate 30% of sales to the hosting company. We decided to go this route because Netflix is a technology company that provides an intangible product that will rely heavily on two things: internet services and electronic hardware, hence the selection of alliances.  

7.4 Promotional Mix Strategy

7.4.1 Advertising

our main advertising mediums are the internet and public transports (vehicles and stations). The former is an assumption that university students will rely on public transport as well as young families (due to relatively low income). As for the latter, internet advertising represents the largest portion of our advertising program, as it constitutes approximately 38% of the total budget. As the internet is used by approximately 90% of the Australian public (Abs.gov.au, 2014). We summarized Netflix’s recommended advertising mediums as follows:

Print	Public transport stations. Taxis, trams, buses.
Social Media	Hire a social media consultant to develop and implement a Facebook and Twitter campaigns.
Internet	Use Google Analytics to generate pay/per click advertising solutions.

Table 3 - Advertising Strategy

7.4.2 Sales promotion

Netflix will be participating in loyalty programs, free trials, and redeemable tickets. Loyalty programs are important to reward our most loyal and continued customers. By extending extra perks to those customers that have stood by us the longest will create a more personal relationship between them and our company. This may include a free upgrade or free access to our beta streaming testing showing interest in their feedback.

7.4.3 Events & Sponsorship

Netflix will sponsor Melbourne International Film Festival which is holding during 25 July- 11 August every year in Melbourne. Except

providing free popcorn for ticket buyer, Netflix is going to provide 400 MIFF tickets to college students who are Netflix subscribers.

Moreover, we plan to sponsor scholarship for media professional students by launching campaign of  “Netflix’s annual creative advertising short-video” with $ AU 3,500 award.

8.0 Implementation & Control

8.1 Budgeting

Table 4 - Budgeting

The rest of the budget, $345,000, shall be allocated towards a political strategycreating a cartel of Australian online media providers to attempt and break Foxtel’s monopoly using a political strategy to gain public opinion and convince the government of such importance.   

8.2 Key Performance Indicators (KPI)

1. Return on Marketing Investment
2. Market Growth Rate
3. Search Engine and Social Media Ranking
4. Customer Turnover Rate
5. Customer Complaints Rate

8.3 DIG framework and Drop & Go error

The first step in entering new market and developing new product is generating ideas. We recommend the use of demand-first innovation growth (DIG) framework as the method to generate new ideas. DIG framework will give an outside-in unbiased view of demand perspective (Kotler & Keller, 2012). Instead of generally understanding the customer, the DIG framework focuses deeper about the realities of people’s routine, ritual, and thing that really matters to them (Joachimsthaler, 2007). Therefore, this method will ensure that Netflix will give what the customers actually wanted not what they think the customers wanted.

Moreover, Netflix should avoid DROP-error and GO-error. DROP-error happen when company abandon or miss a good idea that may be successful (Kotler & Keller, 2012), while GO-error occurs when they let a poor in the development (Naidu, 2008). To avoid these errors, Netflix will ensure that each idea will be looked into and studied deeper.

9.0 Conclusion

In conclusion, there are many moving parts to consider when entering the Australian market. We do not advise Netflix to benchmark on their U.S. or Canadian experience as Australian market is quite unique on it’s own. However, we do advise on creating strategic alliances in order to gain market power and targeting proposed target markets, especially in the case of a second mover like Netflix.      

Reference List

ABC News. (2014). 'Australia tax' and Foxtel monopoly mean consumers pay 400 per cent more for digital programs, Choice says. Retrieved from http://www.abc.net.au/news/2014-09-09/consumers-paying-400pc-more-for-digital-programs-choice/5729928

Abs.gov.au, (2014). 4102.0 - Australian Social Trends, Jun 2011. [online] Available at: http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features40Jun+2011#End1.

Adhikari, S. (2014). Hoyts Stream online video service on thin ice. Retrieved from http://www.theaustralian.com.au/business/latest/hoyts-stream-online-video-service-on-thin-ice/story-e6frg90f-1226958569599?nk=731a4b44adbace0a764b589f6911632e

Akamai, (2014). Prolexic Quarterly Global DDoS Attack Report. 7(1). Available at: http://www.akamai.com/dl/akamai/akamai-soti-q114.pdf?WT.mc_id=soti_Q114

Australian Bureau of Statistic. (2014). Household Use of Information Technology, Australia, 2012-13. Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/8146.0Chapter32012-13

Australia Classification. (2014). Refused Classification. Retrieved from http://www.classification.gov.au/Guidelines/Pages/RC.aspx

Department of Immigration and Border Protection. (2014). The People of Australia Statistics from the 2011 Census. Retrieved from https://www.immi.gov.au/media/publications/statistics/immigration-update/people-australia-2013-statistics.pdf

Foxtel. (2014). What We Do. Retrieved from http://www.foxtel.com.au/about-foxtel/what-we-do/default.htm

Harvey, A. (2014). Game of Thrones piracy war: Choice says Foxtel has itself to blame for illegal downloading of hit show. Retrieved from http://www.abc.net.au/news/2014-06-17/choice-backs-australians-who-pirate-game-of-thrones/5530710

Joachimsthaler, E. (2007). Room to Grow. Retrieved from http://vivaldipartners.com/pdf/MMGrow.pdf

Keller, K.L. (2009). Brand Planning. Retrieved from http://www.marksherrington.com/downloads/Brand%20Planning%20eBook.pdf

Kotler, P., &  Keller, K.L. (2012). Marketing Management. (14th) New Jersey, NJ: Pearson Education, Inc.

Naidu, N.V.R. (2008). Management and Entrepreneurship. New Delhi, ID: I.K. International Pvt Ltd (pp.120)

Netflix. (2014). Netflix Long Term View. Retrieved from http://ir.netflix.com/long-term-view.cfmRyall, J. (2014). How Netflix is quietly thriving in Australia. Retrieved from http://www.smh.com.au/entertainment/tv-and-radio/how-netflix-is-quietly-thriving-in-australia-20140716-ztirm.html

Pash, C. (2014). Quickflix Says Its Streaming In Australia Is Growing 20% A Quarter. Retrieved from http://www.businessinsider.com.au/quickflix-is-at-a-tipping-point-in-its-pursuit-of-australias-streaming-media-market-2014-4

Pinantoan, A. (2014). How Netflix Is Doing In Australia: 2 Stats That Should Scare Foxtel and Quickflix. Retrieved from https://getpocketbook.com/blog/netflix-australia-2-stats-scare-local-players/

Porter, M.E (2008). The Five Competitive Forces That Shape Strategy. Retrieved from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1

Reilly, C. (2014). Government’s anti-piracy measures divide industry. Retrieved from http://www.cnet.com/au/news/governments-anti-piracy-measures-divide-industry/

Screen Australia. (2012). What to Watch - Audience motivation in a multi-screen world. Retrieved from http://www.screenaustralia.gov.au/getmedia/4972fa65-caa5-4235-86be-1800e4a2815b/rpt_whatto

Smith, P. (2014). Australian government purpose tough new online piray rules. Retrieved from http://www.afr.com/p/technology/australian_government_proposes_tough_FvgNRqwdPJOOjFI3eqGa7O

Spangler, T. (2013). Netflix Could Feel Safe Raising Streaming Pricing Soon: Analysts. Retrieved from http://variety.com/2013/digital/news/netflix-could-feel-safe-raising-streaming-pricing-soon-analysts-1200481392/

The World Bank. (2014). Fixed Broadband Internet Subscribers. Retrieved From http://data.worldbank.org/indicator/IT.NET.BBND

Turnbull, M. (2013). Broadband Availability and Quality Report: National Overview. Retrieved from http://www.malcolmturnbull.com.au/media/broadband-availability-and-quality-report-national-overview

Figure Reference

Figure 1

Pinantoan, A. (2014). Most Popular Paid Online Streaming Service in Australia [Graph]. Retrieved from https://getpocketbook.com/blog/netflix-australia-2-stats-scare-local-players/

Figure 2

The World Bank. (2014). Fixed Broadband Internet Subscribers [Graph]. Retrieved From http://data.worldbank.org/indicator/IT.NET.BBND

Figure 3

Australia Bureau of Statistic. (2014). Number of Internet user by Age-group [Graph]. Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/8146.0Chapter32012-13

Figure 5

NBNCO. (2014). NBN Accessible Area in Melbourne [Graph]. Retrieved from http://www.nbnco.com.au/develop-or-plan-with-the-nbn/check-rollout-map.html#.VD0_O-d4H6B

Figure 7

Pinantoan, A. (2014). Subscription length of service users [Graph]. Retrieved from https://getpocketbook.com/blog/netflix-australia-2-stats-scare-local-players/

Appendix I

Mission Statement

"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."

Vision

“Becoming the best global entertainment distribution service Licensing entertainment content around the world Creating markets that are accessible to filmmakers Helping content creators around the world to find a global audience.”

Company Values

• Judgment
• Productivity
• Creativity
• Intelligence
• Honesty
• Communication
• Selflessness
• Reliability
• Passion

Appendix II

Appendix III

Complete SWOT Analysis

Strengths

Netflix has strong business model provides a superior value proposition. Netflix operates an internet-based subscription model which has done away with many disadvantages experienced in traditional outlets. The number of customers opting for Netflix over the traditional model is on the rise as it offers greater convenience. Netflix also enjoys additional competitive advantages. Netflix can offer old and new titles simultaneously without incurring additional costs. Technology enables customers to sort through the titles easily which is almost impossible to do so in the traditional model. With Netflix, customers pay a fixed monthly subscription fee, eliminating due dates, late payment fees, shipping fees and pay-per-view fees (Netflix Inc, 2008).

Weaknesses

Netflix is subject to various legal proceedings. The company is involved in litigation matters and claims, such as claims relating to business practices and patent infringement. In March 2013, the company agreed to pay nearly $9 million to settle a consumer privacy lawsuit filed in 2011. The complaints allege violation of the federal securities laws and seek unspecified compensatory damages and other relief. Litigations can be expensive and can disrupt business operations. Legal issues such as these would not only impact the brand image but would also affect Netflix's financial position and results of operations (Netflix Inc, 2008).

Opportunities

Growing demand for online video streaming has already increased viewership. The demand for online video streaming has been growing in the recent times. The growth in streaming subscribers is driven by the increasing media consumption over the internet, increasing broadband penetration, higher download speeds and growth in connected devices. Netflix has been aggressively investing in streaming of movies, TV programs and other videos in high definition to subscribers. Online video streaming is a high potential market and by investing in this market, Netflix can differentiate itself from competitors. It also leads to faster subscription growth, lower subscription acquisition costs and higher profits. As the market for online streaming grows, Netflix will reap increased benefits, with a positive impact on margins and profits (Netflix Inc, 2008).

Threats

As mentioned in weakness, Netflix has major competitors in several different categories of the entertainment industry in the Australian market, including Hulu Plus, Presto, BigPond Movie, Google Play, Quickflix, and Mubi. It is incredible how many other different services Netflix has to consider when strategically marketing toward our audiences. The growing changes in technology are allowing those competitors to advance their services much easier, therefore, making it more challenge for Netflix to keep up with new trends.(Netflix Inc, 2008)

PESTL Analysis

PESTL	Description
Political	Government wants to reduce the number of “Illegal Downloader” of piracy content Foxtel monopoly
Economic	Internet’s price Economy trends Social economy condition Market Trends
Social	Younger generation lifestyle Consumer characteristic and attitudes Marketing, advertisment and publicity
Technology	Maturity of technology Technology accessibility Internet Speed Smart TV popularity
Legal	Possible new strict Australian piracy law Different classification law, which make some content are not allow to be shown in Australia

Table 4 - PESTL Analysis