Published by MBA Skool Team, Last Updated: February 07, 2022
PESTLE Analysis of Netflix analyses the brand on its business tactics. Netflix PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as Netflix, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the Netflix PESTLE Analysis can be explained as follows:
Netflix is not available in every country. China the biggest economy we know doesn’t allow Netflix to operate because of US policies. So, because of these restrictions in various countries by USA Netflix has many untapped market. Also, there is censorship on some of the content shown on Netflix so some countries don’t allow it to screen. Further in EU Nations the tax rate applicable to Netflix is quite high which is also a threat for the company.
Below are the economic factors in the PESTLE Analysis of Netflix:
The entire OTT industry has grown a lot during the past 2 years from the start of Pandemic and there are more than 100 OTT platforms out of which major revenue share is occupied by Netflix having 29% market share.
Currently, Netflix is at booming stage. With high GDP growth rate the demand for Netflix market will increase as we can see the trend. Unemployment, wage rates, taxation, inflation and interest rates are economic factors that affect the growth of Netflix. Because of more OTT platforms coming Netflix need to create original content to survive in the market. Also, in countries like India they need to keep prices less and give more offers to survive because other platforms offer this at less cost. Domestic streaming cost and marketing expenses are other cost which also need to be controlled to survive. Since Netflix operates in various countries so exchange rate fluctuation is also a factor which need to be kept in mind.
Following are the social factors impacting Netflix PESTLE Analysis:
Unemployment, wage rates, taxation, inflation and interest rates are economic factors that affect the viewership of Netflix. Demographic trends, gender, equality roles and societal norms are important to keep in mind for Netflix. Online shopping of customers and their spending patterns can also help Netflix in determining the social trend of the customers. As it all depends on the purchasing power of the company. On the other hand, the working environment of Netflix also encourages employees to join the organization and produce quality of content. To grow in the market Netflix can do market research in different demographic segments to understand the needs of the people and then produce the content on their likings.
In USA, because of the entertaining content every household can be seen having Netflix Account. Following this trend over past couple of years students has also attracted towards Netflix and are spending more time in watching online content. Availability of reliable broadband connectivity and wide area target networks for expansion should also be seen
The technological factors in the PESTLE Analysis of Netflix are mentioned below:
Since, Netflix is an online based app so technology plays an important role for them. Trademark copy right, patent and other intellectual property right are important for Netflix. They need o constantly have intellectual rights update from third party to stream their content.
In countries like India they need to make sure that their websites are proper functioning otherwise customers find ways to see series and movies through illegal hacking. They also need to make sure about the cyber security as at the time of payment there are chances of theft.
Coming 5G technology will be a major transformation for Netflix as it will increase the speed of surfing. This constant upgradation of technology has helped to bring various new contents at every short period of time.
The Netflix new thumbs up option helps in improving the personalized view content as it helps the company to know the view interest of viewers and then shows similar shows to them based on their likings. The use of various algorithms and machine learning to promote the shows is positive point for Netflix.
The company spends huge money on research and development to have higher user engagement.
Following are the legal factors in the Netflix PESTLE Analysis:
Before entering into any new market policies of the government are important to look into as it affects the business. With advancement of technology, it becomes important to keep data safe and secure. Intellectual Property Rights, Consumer Protection Law, security laws should be taken care for the customers of that particular country.
Streaming on multiple devices at the same should also be checked because users have a habit of sharing credentials with each other. Copyright issues is the major area in which Netflix can suffer problem. So to safeguard themselves they should have proper licensing for the series and movies being shown.
It is also sometimes difficult for them to understanding and complying with local laws, regulations and customs in foreign jurisdictions, including local ownership requirements for streaming content providers.
Netflix also need to block various technical blocks so as to make sure that users from various countries don’t hack the content to stream online.
In the Netflix PESTLE Analysis, the environmental elements affecting its business are as below:
With growing concern regarding environment and sustainability environment factor become an important aspect of PESTEL Analysis.
Since Netflix is a company, whose business is completely online and they don’t have direct impact on the environment still they do their best to protect the environment.
To protect the environment Netflix tries to use renewable technologies to ensure sustainability.
To reduce the Carbon footprint Netflix has invested in wind power to offset energy for cloud storage. This is because according to a survey every streaming company adds to 1% carbon footprint in to total global emission. Company tries to be sustainable as much as possible.
Other step taken to protect the environment is that they try to minimize the use of paper in the office.
Only major factor that Netflix need to make sure is the use of heavy consumption of electricity.
To conclude, the above Netflix PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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