How Netflix and Coca-Cola trade internationally including details of theory about developed and developing countries. Product diversification, exportation of products/ services, organisational structure and trading barriers to enter a new market.
types of finance that is available for both compan...
support available for the international businesses
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BTEC
PEARSON (PEARSON)
Business 2016 NQF
Unit 5 - International Business
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Reasons why Netflix and Coca-Cola trade internationally
The international trading of Netflix
Netflix started out in the US 1997 as a rental service alike to Blockbusters where Netflix would mail
customers DVD rentals. In 2007 streaming is introduced, allowing their members to instantly watch
shows and movies which increased their brand awareness and exploitation. In 2010 Canada was the
first country Netflix exported its services in. Moving on a year later in
2011 Netflix exports into Latin America and the Caribbean, then in
2012 Netflix exports into the UK, Ireland, and the Nordic countries.
Throughout the years Netflix continuously extends in countries and
now owns 71% of the global streaming video services and trades in
over 190 countries and streaming available in more than 30
languages. Their increase in funds have exposed Netflix to a powerful multinational enterprise which
means they can continuously rise in the service market.
Netflix is in the technology and entertainment mass media industry and trades in developed
markets and has gained advantages by doing so. The countries are already established which means
there is support that is available from agencies to help the enterprise trade in other developed/
developing countries such as Europe and UK. In addition, higher employment rates are in these
countries which means the national GDP would be higher compared to emerging countries. By
having a high national GDP, it means majority of the population would have income and likely to
have disposable income where people would be able to spend their money on luxuries such as
Netflix which means Netflix has a lot of potential customers in the countries. However, by having
more income in the countries it means the tax rates would be higher than other countries, Netflix
would have to pay a higher level of tax on their profit they make compared to if Netflix were in an
emerging country such as Turkey.
However, trading in a developed market has a disadvantage of having a competitive market. Amazon
is the biggest competitive threat to Netflix whose Prime Video service is cheaper and boasts 150
million subscribers, closely followed by Disney+. To get an advantage over their competitor, Netflix
introduced in 2018 their own production industry and creating an additional revenue stream. Their
increase in profit had led them to continuously export into foreign countries worldwide. Netflix are
hiring global directors, writers, and actors to create original content. By utilizing foreign trade, Netflix
will connect closely to global consumers by creating material that is relatable in various countries.
They benefit from selling their services internationally as it gives them stability and a business can
increase income.
Netflix decided international expansion by diversifying their services to appeal to specific
international markets. To maximize efficiency, Netflix ensured their service appeal to markets
outside the US. Netflix also invested in increasing local language options for its interface, subtitles
and dubbing for their viewers who desire to stream a show or movie that is not in their first
language. The content Netflix shares within the international countries has allowed their viewers to
be able access more services. I believe Netflix has done this so the service can get more potential
customers. By providing the needs of their customers, customer satisfaction would improve, and the
service would be more relevant to more people. It does mean that Netflix would have to have more
skilful employees to be able to provide the diverse service and having correct subtitles to the
,language they must be in, but I think it would allow Netflix to achieve more profits and export their
services into more countries.
However, while Netflix continued to export into international countries the relatively low price of the
subscription in the UK starting at £5.99 was considered too high for the less developed countries
such as Cambodia. As Netflix went global, they failed to adjust the pricing according to the average
incomes for their country. in 2019, the last recorded GDP amount of Cambodia was amounted at
27.09 billion USD which in comparison to the UK of 2.83 trillion USD. From these figures Cambodia
population has less income, this means that people would have less disposable income to spend on
Netflix and the prices that have been set out for the less developed countries were unfair to the
population. This can cause problems for Netflix as sales could decrease and exported services
demand may drop as the countries may find another service which is cheaper. A disadvantage of
Netflix trading internationally would be that prices are hard to establish due to inflation rates in
other countries, employment rates and the economy size.
Netflix decided to trade in the less developed countries and tailored its technology to meet the need
of the international markets. To account for slow internet speeds in developing countries, Netflix
invested in market-specific technology infrastructure. In certain African countries, for example,
Netflix deployed dedicated servers simply for streaming content. The company also developed video
compression technology to reduce data without diluting the viewing experience. This has allowed
Netflix to create a gain with there customer by providing the needs of the customers and have been
able to gain profit from doing this.
Netflix imports its content for the viewers by constantly negotiating new licensing deals with TV
shows, networks, and film producers, or investing in its own content production. Licensing content
involves obtaining rights from the owners of a TV show or movie to stream the content through a
service such as Netflix. For example, ‘Shameless’ is from ‘Showtime’ and ‘How to get away with
murder’ from ABC. Netflix uses consumer data mining to determine which content viewers pay to
see and relies heavily on this information to determine the total cost of each licensing agreement. It
will establish a cost per hour viewed the compares this metric to similar content arrangements, and
it bases final pricing on exclusivity as well as the time frame of the contract. Three of Netflix biggest
suppliers are ‘AT&T Inc’s, WarnerMedia, Walt Disney Co and DreamWorks
The original Coca-Cola was invented in 1886 by ‘John Pemberton’ serving 9 drinks per day in its first
year being sold in a pharmacy. Asa Candler purchased Coca-Cola in 1888, who was great business
acumen who saw the potential in the brand. Under Candlers leadership sales rose from about 9,000
gallons in 1890’s to 370,877 gallons in 1900’s during that decade, plants were established in Dallas,
Los Angeles and Philadelphia and soon across the whole of US. Coca-Cola has now been labelled as
the market leader for soda drinks, also being the leading manufacturer for soda drinks.
Coca-Cola started building the global network during WW2 in the 1920’s when Coca-Cola president
Robert Woodruff believed that every American service man and woman should have Coke at their
disposal, no matter where they were or the cost to the company. Woodruff’s vision during this
critical period in American history helped establish Coke as a global corporation by introducing the
product to different markets and in 1930 the company started moving globally, now operating in
more than 200 countries and producing nearly 500 brands.
Globally, Coca-Cola has five operating groups: North America, Latin America, Europe, Eurasia and
Africa and Pacific. All these countries cover from emerging countries, less developed countries, and
developed countries. Coca-Cola work as a franchise system, their bottlers are primarily local. In
Turkey, for example has a Turkish bottler. Coca-Cola manages franchise relationships to have a
geographic orientation structure. To manage variations in cultures and politics among Coca-Cola 90
markets it trades in they have 6 business units and a functional team that works as part of the global
team to come up with strategic plans for each market, those are shared with the business units
located around the globe who are expected to adapt them to their own countries needs.
With Coca-Cola trading in so many international markets the brand has access to trillions of potential
customers. The US has the largest economy of the world however it only accounts for 5% of the
world’s population so if Coca-Cola restricted the brand just to US it is restricting the potential gain of
growth the business has. By trading in so many markets that Coca-Cola does it gains cost
advantages, however with the struggle with dealing with suppliers, the growth that overseas
expansion creates leads purchases supplies in massive numbers. This can provide a firm with
stronger leverage when negotiating prices with its suppliers.
As well as suppliers struggles trading in every market comes with a lot of political risk especially in
the emerging countries that have unstable governments however has offered enormous growth
opportunities. For example, in early 2000’s Coca-Cola faced allegations of illegal soil and water
pollution, as well as allegations of sever human rights violations. In emerging countries ethical
considerations such as child labour give potential risks if all laws are not followed. Lower
employment rates and lower wages may restrict the sales growth in emerging countries because the
population may have smaller disposable income, Coca-Cola may need to adjust the pricing to make
the products more affordable. In addition, Cola-Cola has diversified its products to suit the
customers needs.
Less developed countries such as India, Pakistan, Sub-Sharan Africa, Russia and Asia, those markets
have very low per capita consumption for the whole Coca-Cola industry. In most of these countries
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