Netflix Company
Essay Preview: Netflix Company
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With more than 30 million streaming members globally, Netflix is the leading online subscription service streaming movies & TV episodes over the Internet. For only $7.99 a month, Netflix members can instantly watch unlimited movies & TV episodes streamed to their TVs and computers. Netflix is the largest online movie rental company in the world. With zero shipping fees, late fees, or due dates, Netflix is the optimal movie rental service. Netflix does not have an “official” published vision or mission statement, but at a conference in 2011, co-founder and CEO Reed Hastings expressed a clear vision for the future of Netflix.
Becoming the best global entertainment distribution service
Licensing entertainment content around the world
Creating markets that are accessible to film makers
Helping content creators around the world to find a global audience
Netflix could benefit from an official published vision statement, not only so there investors, employees, and customers know where they stand, but also so thier potential investors know what the company strives to become.
Netflix could benefit from a published mission statement as well because it would let thier customers and thier stakeholders know exactly what thier business is, what they are going to offer, and what they want to become. A mission statement for Netflix could be “Netflixs appeal and success are built on providing the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery, with zero late fees”.
An internal assessment of Netflix shows that their gross profit margin in 2008 was 35% , their operating profit margin was 9%, and their PE ratio was 24%. In 2009 they had a slight increase of 3% in their gross profit margin showing that the company was slowly growing. Their operating profit margin was up 2% from the previous year, and their PE ratio was also up 4%. In 2010 Netflix seen a slight dip in their gross profit margin which was down 4% but their operating profit margin was up another 2% and their PE ratio had more than doubled from the previous year. Netflix price to equity ratio has continued to rise over the past couple of years showing that streaming videos might just be the market for them, their PE ratio currently stands at 105%
In July of 2011, Netflix was trading at $300.00 per share, but by November 2011 Netflix was trading at $69.85 per share. As of October of 2012 Netfix was trading at $60.70 per share and had a price/earnings to growth ratio (PEG ratio) of 1.16. An important factor found in the internal assessment for Netflix shows that a five year average ROE is 34% and ROA is 11%. Netflix gross profit margin shows that they are staying strong with a 5 year average at 55.6%. When Netflix decided to hike their prices in July of 2011, in an attempt to raise cash to license more streaming content, the company increased the price for its combination Internet streaming and DVD service, angering customers. The name Netflix would remain for movie streaming. It lost about 800,000 subscribers in the United States in the third quarter of 2011, leveling off at 23.8 million; at the end of the fourth quarter, it had 24.4 million, somewhat more than it had expected to have.
Internal Factor Evaluation (IFE) Matrix
Strengths
Weight
Rating
Wt. Score
Largest DVD library
Financial Stability
Variety of offers
Partnerships with well-known studios
Gross Profit Margin of 37%
Customer Loyalty
Stock Prices rise 11%
Competition
Cost effective operating