Notes Case

Netflix, like other firms in the movie rental industry is subject to political, economic, social and technological macro-environmental factors. Changes to any of the factors in this arena can have a substantial impact the operations and livelihood of movie rental firms.

In terms of the political and legal landscape, firms could be affected by changing laws regarding copyrights of certain types of content, such as movies and television shows that firms rely on to provide to consumers. Any change in copyright law that affects their ability to distribute this content to consumers could drastically affect business because this content can represent large segments of a firm's product offering. Firms are dependent upon content licenses from studios to distribute content, because they usually do not actually produce any content, and any change in these licenses could cripple their business model (Fritz, 2009).

To maintain a competitive advantage, firms are required to price competitively against rivals. Netflix operates in an industry that relies primarily on the disposable income of consumers. If economic growths were to slow and the purchasing power of consumers was negatively affected, firms in this industry would feel the effects of this decreased purchasing power first.

Netflix relies on the popularity of movies among consumers in their target market segments. As the average age of the population continues to grow older and movie consumption among the older demographic becomes less popular, business could be negatively affected. Also, if the online consumption of movies became unpopular among large segments of the population, business could be adversely affected as more movies are streamed online.

Technologically, as an internet based business Netflix must contend with the constantly evolving internet, as the industry moves toward online consumption. As technological factors lower barriers to entry in terms of streaming content, Netflix faces challenges to its market share from new rivals. The rate of technological change in terms of the internet forces rivals in this industry to constantly update their business model to maintain market share.