SUNY Old Westbury Netflix Company Costs of Production Analysis My chosen firm for this assignment is NETFLIX ! Prompt: Submit a draft of the Costs of Prod

SUNY Old Westbury Netflix Company Costs of Production Analysis My chosen firm for this assignment is NETFLIX !

Prompt: Submit a draft of the Costs of Production (Section IV), Overall Market (Section V), and Recommendation (Section VI) of your research paper, including all critical elements listed below. You will review your firm’s financial reports and other relevant data sources to collect and analyze cost information for your firm over the past five or so years. Using real data and the economic tools developed in Module Four, you will analyze your firm’s profitability and how costs impact its growth. Additionally, you will find data on your firm’s competitors in order to detail your firm’s place within the market currently and over the past five or so years. Lastly, you will develop a recommendation for how the firm can manage its future production.

Assignment:

IV. Examine the costs of production for your firm.

a) Analyze the various costs a firm faces, their trends over time, and how they have impacted your firm’s profitability (Netflix).
b) Apply the concepts of variable and fixed costs to your firm (Netflix) for informing its output decisions. For instance, analyze how different kinds of costs(labor, research and development, raw materials) affect the firm’s level of output (Netflix).
Explore
a) Discuss the market share of the firm (Netflix) and its top competitors by providing details on current percentages for each firm and describing the trend over time. You might consider presenting the data graphically.
b) Analyze the barriers to entry in this market to illustrate the potential for new competition and its impact on your firm’s (Netflix) future in the market.
c) Describe the market structure for this firm (Netflix) and analyze how this affects the firm’s ability to influence the market.
Recommendation
a) Develop a recommendation for how the firm (Netflix) can manage its future production by synthesizing the data presented.
b) Suggest how the firm’s (Netflix) position within the market and among its competitors will allow it to take your recommended action.
c) Describe how the firm (Netflix) can sustain its success going forward by evaluating the findings from demand trends and price elasticity.

My essay is attached to this post. This assignment is a continuation of what is already completed !!!!
Rubric:
Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Costs of Production: Profitability Analyzes the various costs a firm faces, their trends over time, and how they have impacted the firm’sprofitability Analyzes the various costs a firm faces, and their trends over time, but does not discuss how they haveimpacted the firm’s profitability Does not analyze the various costs a firm faces, their trends over time, or how they have impacted the firm’sprofitability 12
Costs of Production: Output Decisions Accurately applies the concepts of variable and fixed costs to the firm for informing its output decisions Applies the concepts of variable and fixed costs to the firm for informing its output decisions, but applies concepts inaccurately Does not apply the concepts of variable and fixed costs to the firm for informing its output decisions 12
Overall Market: Market Share Discusses the market share of the firm and its top competitors by providing details on current percentages for each firm and describing the trend over time Discusses the market share of the firm and its top competitors, but does not provide details on current percentages for each firm or does not describe the trend over time Does not discuss the market share of the firm and its top competitors 12
Overall Market: Barriers to Entry Analyzes the barriers to entry in this market to illustrate the potential for new competition and its impact on the firm’s future in the market Analyzes the barriers to entry in this market, but does not illustrate the potential for new competition or its impact on the firm’s future in themarket Does not analyze the barriers to entry in this market 12
Overall Market: Market Structure Describes the market structure for this firm and accurately analyzes how this affects the firm’s ability toinfluence the market Describes the market structure for this firm, but does not analyze howthis affects the firm’s ability toinfluence the market or analysis is inaccurate Does not describe the market structure for this firm 12
Recommendation: Future Production Effectively develops a recommendation for how the firm can manage its future production by synthesizing the data presented Develops a recommendation for how the firm can manage its future production, but recommendation is not effective or is not based on a synthesis of the data presented Does not develop a recommendation 12
Recommendation: Recommended Action Suggests how the firm’s positionwithin the market and among its competitors will allow it to take the recommended action Suggests how the firm’s positionwithin the market and among its competitors will allow it to take the recommended action, but suggestions are not appropriate Does not suggest how the firm’sposition within the market and among its competitors will allow it to take the recommended action 12
Recommendation: Sustain its Success Describes how the firm can sustain its success going forward by evaluating the findings from demand trends and price elasticity Describes how the firm can sustain its success going forward, but does not evaluate the findings from demand trends and price elasticity in the discussion Does not describe how the firm can sustain its success going forward 12
Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 4

Earned Total 100% Introduction : Purpose
The firm analysis involves an analysis of a certain company or organization to determine
its core competence. The firm analysis helps understand how a company established itself in a
market and maintained a competitive advantage. The purpose of this final project research paper
is to provide a detailed analysis of a firm that is currently in the U.S market. The firm selected for
this research paper is Netflix. The research first outlines the history of the firm and provides an
overview of its operations; including the services provided by the firm. In the history of the firm,
I’ve focused my attention on the establishment and the growth of Netflix since it was developed.
I’ve also included the content provided by Netflix and how the content has evolved over the years.
Through analysis of these details about Netflix, I will be able to understand its operations and how
it has evolved.
Introduction : History and Overview
Netflix is a leading American streaming entertainment provider. The firm was started in
1997 by Reed Hastings and Marc Randolph (Funding Universe, 2011). The reason that spurred
its founding was one of the co-founders Hastings being fined for the late return of a rented DVD.
They both decided to start an online pay per rent DVD store. Just three years from its founding the
company grew to have more than 300,000 American subscribers after the introduction of monthly
subscriptions. Since its development, Netflix has had its share of downs including lawsuits and
losses. The company moved from DVD rental to the provision of online videos on demand in 2007
(Funding Universe, 2011). 1n 2018, Netflix was confirmed to have grown from 300,000
subscribers in the U.S only to more than 130 million subscribers worldwide.
The content provided by Netflix has also changed over time. At first, Netflix provided
DVD rental for independent movies and films. Later, the firm grew to production and provision of
original content in partnership with other firms like John Waters (Funding Universe, 2011). Netflix
finally noted the underlying potential in e-commerce and the internet and moved to the provision
of videos online on-demand giving it a highly competitive advantage in the market (Funding
Universe, 2011). The partnership of Netflix with many media production houses like Disney,
Paramount, and Starz has revolutionized the industry both content-wise and revenue received from
the business.
The main service provided by Netflix is an online video-on-demand streaming service.
This service enables users to access videos, movies, and films directly on their personal computers.
The introduction of the Netflix app also allows online video streaming form tablets, Smart TVs,
and mobile phones (Netflix, 2020). At first, the service only allowed a limited number of hours of
streaming correspondent to the cost per monthly subscription. However, the restriction was later
lifted to the unlimited streaming of videos. Currently, Netflix offers its subscription limiting only
the number of devices that can be streaming videos at a time. These subscriptions come in three
categories; single devices, two devices, and four devices. The services provider has also evolved
from streaming videos only with internet connectivity to the availability of offline videos. The
standard and quality of the videos remain high even while offline (Netflix, 2020). Netflix has also
retained its DVD rental business that was the main service provided during its founding. The period
for a rental is unlimited but there is a restriction on the number of DVDs that one can rent and
retain at a time. In 2018, Netflix also ventured into video game production in partnership with
Telltale Games.
Netflix has grown and evolved over the years. Despite the different challenges that
the company has faced over the years, it has managed to rise out of the situation stronger. The firm
identifies the areas of highest potential from its establishment and maximizes the opportunities
that are presented in its way. Through its ability to venture into new ideas and activities, the
company has been able to maintain a high competitive advantage. The company’s strategies have
also played a big role in ensuring that the number of subscribers to its services is constantly on a
rise.
Netflix Company
As a leading American entertainment company, Netflix mainly streams its online TV
shows as per the demands and its global footprint can be traced to roughly 190 countries (Netflix,
2016). Giving it an edge over most of its rivals is the fact that, Netflix can be accessed from any
internet accessing device regardless of the location. Also, Netflix has been involved in the
production of various films such as the Daredevil, Sense 8, Narcos, among others. This paper tends
to shed some insight into the demand and supply of the firm’s packages and services.
Supply and demand
Compared to other firms providing similar services, Netflix mainly attracts its customers
based on the tailoring of their product, packages, and service delivery. Netflix has endeavored in
promoting client satisfaction by ensuring the accessibility of its packages and services at the
convenience of its location. One can easily access the films, whether sitting at home, in the office,
or on the go (bus rides, walking). However, it cannot go unnoticed that competition is increasingly
becoming stiffer with its rivals also wanting a stake in the online entertainment platform. The most
significant threat to note is Netflix’s transmission of some of its shows through Comcast. Just like
Netflix, Comcast also has stakes in the online entertainment business. Comcast partly owned
online service providers like Hulu and also promoting companies like amazon’s prime video
(McMillan, 2018, Kafka, 2019). Every player in the industry wants to gain and control a significant
number of audiences, Comcast could enhance its service and overlook that of Netflix hence
significantly affect Netflix’s demand.
Netflix investors (n.d)
Trends in Demand
Netflix has faced a surge in competition from other entrants such as Hulu, and Amazon’s
Prime Video continuously. As pointed out by William (2016), Netflix will be facing stiffer
competition based on the products offered. As displayed in the diagram above, Netflix has
experienced a drop in its shares since Q2 ’19. Observations from the presentation and the market
trend, it is clear that the firm needs to adapt to the current demands of its customers. Netflix should
device new ways of airing its contents and reduce its reliance on Comcast. Also, the firm needs to
review its pricing and also strengthen its content as a way of attracting more subscribers (Sandler,
2019). If put into consideration, these factors can improve on Netflix’s influence on the
subscribers.
An increase in price generally translates to low demand and an increase in demand will
typically necessitate an increment in supply. However, different product’s supply reacts differently
to the various demands with some being affected less to price changes compared to others. In this
case, the demand for products offered by Netflix is greatly affected by pricing as well as the
presence of other affordable alternatives in the market.
In 2019, Netflix reviewed upwards the prices of its packages with the most popular one being
reviewed at an upwards of 18% from $10.99 to $12.99 (Leornhardt, 2019). This later resulted in
the number of its domestic subscribers registered, falling from expected 600,000 to 420,000 in
the US alone (Barhat, 2020).
PED formula
%? in Qd = Percentage Change in Quantity Demanded.
%? in P = Percentage Change in Price.
PED = %? in Qd / %? in P
Calculating the price elasticity demand
% Change in Price = ($10.99-$12.99)/($10.99)=-0.18%
% Change in Demand = (420,000-600,000)/(600,000) = -0.3%
Therefore, the Price Elasticity of Demand = -0.3%/-0.18% = 1.7.
This means the demand is relatively elastic. It can be defined as a result of a proportionate
change produced when the demand is higher than the product’s set price (Saricayir, 2018). The
change experienced in quantity demanded is greater than the price change. As per the data used,
there was an increase in price by 18%, resulting in a decrease in the number of subscribers by 30%,
making the demand relatively elastic.
The firm’s pricing may be dependent on a variety of factors. For instance, Netflix may not
have control over some of the units of production, which may force them to increase the prices in
realizing the desired profits. An example may be the cost of power; without an alternative, this
will see a rise in production if the cost of energy as an essential element rises. With this in mind,
any change in price can easily trigger consumer behavior based on a variety of factors.
The uniqueness of the product. Consumers will, before subscribing to Netflix, attempt to
compare the services it offers to other providers such as Hulu, Prime Video. They will choose the
product with the best feature compared to the prices charged.
Necessity or a luxury. The product can get higher priority if it is a necessity or a luxury (Saricayir,
2018). For instance, the priorities defer for different individuals- one who uses Netflix for business
and one who uses it only to watch at home. The one using purely for business will still consider
subscribing even with the price change, but those using for personal use may opt-out since it is
viewed as a luxury they can survive without.
Income level. Those with higher income levels have a greater purchasing power and will not
complain when Netflix increases its prices. However, for the lower-income earners, change in
price is a great determining factor on whether to purchase a product. In this case, an increase in
price can see Netflix losing some of its subscribers.
The situation of the economy. An economy’s overall performance can influence the price
elasticity of demand. If the economy experiences a boom, then Netflix will likely experience an
increased number of subscribers. But if the opposite is the case, then people will scale down on
their spending power hence cutting on unnecessary costs in which they will be sensitive whenever
Netflix reviews its prices. This means that Netflix products in such a market will be more elastic.
Price elasticity acts as a tool to measure the reactions of customers towards price
fluctuations and should, therefore, be taken into account whenever price decisions are being made.
To stay relevant in the market and wade off the competition, Netflix should consider the interests
of its clients and instead find alternative production strategies that will help in increasing its profits
and at the same time reduce the cost of operations.

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