Netflix Marketing Strategy in Eastern and Central Europe Essay Example

growth between 2001 and 2011, rendering it a desirable investment destination.

The political environment in the Czech Republic should consider several important factors. Firstly, there were corruption scandals among senior government officials in 2012 that exposed a lack of transparency and led to the European Commission reducing EX. aid by around $650 million. However, the judiciary's independence is largely respected. Furthermore, property rights are adequately safeguarded and contracts are generally secure. Secondly, the Czech Republic has a small government, with a maximum individual income tax rate of 15 percent and a corporate tax rate of 19 percent.

In addition to a value-added tax (VAT) and an inheritance tax, there are various other taxes in effect. The overall tax burden is equivalent to 35.3 percent of GDP, while government spending has reached a stable level of 43 percent of GDP as a result of surpluses achieved through recent tax increases and budget cuts. Public debt accounts for approximately 45 percent of the domestic economy. In terms of regulatory efficiency, the process of establishing a business has become less time-consuming and licensing requirements have been eased. Moreover, the minimum capital requirement now stands at less than 30 percent of the average annual income level.

Although labor regulations are flexible, the cost of employees, excluding salary, can still be high. The state has made attempts to reduce subsidies for state pensions and green energy but has also maintained various price controls. When it comes to open markets, member countries have an average tariff rate of merely 1.1 percent and face minimal non-tariff trade barriers. Restrictions on foreign land ownership have been progressively removed. The financial market is experiencing

steady growth and is relatively well regulated. Additionally, the banking sector is competitive and resilient, providing a wide range of financial products.

The Czech Republic is viewed as having a highly developed economy in comparison to other emerging democracies in Central and Eastern Europe. It is acknowledged as one of the most stable and prosperous post-communist countries in the region, possessing a well-educated population and established infrastructure. Its favorable location in Europe, cost-effective structure, and skilled workforce have resulted in significant foreign direct investment (FDI). The projected GDP for the Czech Republic by the end of 2017 amounts to US $279.8 billion.

The open investment climate and immense potential in sectors like energy, automotive, retail, and construction are expected to drive the economy over the forecast period. The real GDP experienced a modest expansion of 0.2% in the third quarter of 2013 but increased to 1.6% in the fourth quarter, confirming the recovery that had already begun in the second quarter. According to data from the Czech Statistics Office, after Netherlands, Germany, and Austria, the Czech Republic has the fourth lowest unemployment rate in the EU.

The Czech Republic had a lower unemployment rate of 7 percent in 2013, compared to the European average of 11 percent. However, there was a lack of people employed in part-time positions. In terms of inflation, consumer prices experienced a significant decrease of 0.2% in November, contrasting with October's increase of 0.2%. This drop was the largest since September 2013. According to CNN, inflation for 2014 is projected to be at 0.7% and is expected to rise to 1% in 2015.

In terms of the socio-cultural environment, the Czech Republic

has political stability and an expanding economy that offers various incentives for foreign investors. Before conducting business operations there, it is important for our American company to analyze cultural differences between both countries. The Czech culture differs from American culture as they tend to have a more indirect and formal approach. The Czech people are modest and prefer avoiding confrontation in order to maintain social expectations related to politeness.

The Czech people have a more structured and rule-following approach, which can be perceived as slow by Americans. To succeed in the Czech Republic, investors need to be formal and patient. The US and Czech cultures differ primarily in individualism and uncertainty avoidance. As indicated by the power distance and uncertainty avoidance indexes, the Czech people prefer structured organizations that adhere to rules meticulously.

The Czech people have a unique cultural perspective on authority, which is different from Americans. The telecommunications sector in the Czech Republic has experienced rapid growth recently, although its infrastructure may not be as advanced as other countries. However, there has been a significant increase in services due to higher customer demand, foreign investments, and improvements in wireless and wireline technologies. As a result, the telecommunications industry is considered one of the fastest-growing sectors in the Czech Republic.

Foreign investors have ventured into various sectors of the industry including terrestrial and mobile telephony, data services, and satellite transmissions. The Czech Republic's advantageous position in Central Europe is seen as a significant motivation to penetrate the market. In terms of online communication, although it remains relatively pricey, the Internet is extensively utilized in the Czech Republic. With the growing competition among Internet service

providers and the hesitation regarding telecommunications services, prices are expected to decrease to a more affordable level for most Czech citizens.

Around 300,000-400,000 people in the Czech Republic use the internet daily, but fewer individuals have home internet access. Now let's examine the micro environment in this country. First and foremost, we need to understand the customer segment in the Czech Republic. These customers are actively engaged and demonstrate practical behavior while maintaining a positive outlook on market changes, all while having a solid emotional foundation.

It is important to note that customers in Czech Republic are experiencing a new need for language support. We can distinguish between two generations: the older generation (35 years old and above) who are TV watchers and prefer Czech dubbing, and the younger generation (between 15-35 years old) who are online viewers and mostly prefer other languages (English with Czech subtitles). Hence, Nettling needs to accommodate these local preferences while also adapting its content to cater to the specifications of the younger generation. After addressing these considerations, we can proceed to analyze Porter's five forces.

Barriers to Entry:

If we examine the primary hurdles faced by Nettling in the Czech Republic, we must first consider the various distribution channels available to Nettling. The entry into the in-home video entertainment industry is limited by the expenses associated with obtaining new distribution rights from Studios. In the Czech Republic, it is crucial for Nettling to locate local distributors who offer video and television content specific to that region. This necessitates the adaptation of Nettling's content to meet the specific demands of its new competitors.

The extensive variety provided by Nettling is

clearly one of its main strengths, with a majority of original productions from the US. In the Czech Republic, research shows that the most requested TV shows from the US in terms of episode interest are Game of Thrones (200,000), asparagus (70,000), Dexter (50,000), Big sang Theory (45,000), and Vampire Diaries (40,000). This data suggests that Nettling should continue offering all its US programs while also introducing more popular local content. The bargaining power of suppliers is moderately high.

Nettling acquires its video content through various means such as direct purchases, revenue sharing agreements, and licensing agreements. These agreements allow Nettling to rent DVDs and stream video content, primarily sourced from studios, networks, and distributors. Hence, it can be assumed that the prices Nettling pays for its video content are determined by these suppliers - movie studios, networks, and distributors. Suppliers generally possess the ability to increase prices or decrease product quality, which could impact a company's profitability.

The First Sale Doctrine is a copyright law that Nettling uses. It states that once the owner sells a work, they lose control over it and the buyer can redistribute it as they wish. This doctrine protects Nettling's ability to distribute DVD titles. However, streaming content is not included in this doctrine. As a result, Nettling is vulnerable to supplier power when negotiating costs for streaming distribution.

The studios and distributors that license streaming content are fully introducing Nettling to the terms and conditions, and they may withdraw the availability of the content whenever they want. As streaming video content gains popularity and the DVD format becomes increasingly outdated, Nettling becomes more vulnerable to the influence of

their suppliers. The bargaining power of buyers is high because the in-home video entertainment industry is highly competitive with customers subscribing to multiple providers simultaneously, and it costs virtually nothing for them to compare prices between providers.

Customers who are highly price sensitive possess significant influence due to the abundance of options and low switching costs. Additionally, the ever-changing landscape of video consumption technology leads to fluctuating buyer preferences. Consequently, Nineteen's buyers enjoy moderate power as they can simply cancel their Nettling subscription if alternative video providers offer more affordable prices.

To remain competitive in the industry, companies like Nettling must be aware of their rivals' prices and strive to keep subscription costs low due to the significant threat of substitute products. Even though buyers are fragmented and lack individual influence over product or price, their declining brand loyalty grants them a certain degree of power. Thus, Nettling needs to stay up-to-date with evolving industry trends such as video streaming in order to retain their subscriber base and maintain consistent pricing for similar products. Keeping costs low is vital for maintaining competitiveness.

Nettling is experiencing competition from several entertainment options, including VOID, pay-per-view, and online streaming. These alternatives include activities like going to movie theaters, watching television, browsing the internet, or playing video games. Previously, consumers used to subscribe to a combination of these services. However, due to their similarities and easy accessibility for switching at low costs, even slight price adjustments can lead consumers to abandon one format in favor of another.

Technology has greatly contributed to the increase in substitute product threats. Comparatively, rivalry among established companies in the movie rental industry is

minimal, despite its high competitiveness due to a large number of firms and various consumer options for obtaining movies. In the Czech Republic, Nettling faces weak competition from Vivo, Output, and Laszlo. Vivo (CAME/Time Warner), for instance, has approximately 20,000 subscriptions after two years and primarily focuses on local shows, sports, and A-movies.

Output is a local company with around 27,000 subscriptions in seven years. It specializes in a-movies, Czech movies, and no shows. Laszlo is known as the prominent file sharer in the Czech Republic; however, it is currently encountering challenges due to copyright infringement allegations and legal action. In terms of market entry strategy segmentation, Nettling identifies the target market segment as urban, middle-class individuals who have internet access and own televisions. This segment comprises both males and females aged between 17 and 60.

To effectively target urban consumers in the Czech Republic who have higher purchasing power and Internet access, it is advisable to concentrate marketing efforts on Prague. With a population exceeding 1 million people, which accounts for over 10% of the total population ("Doing Business" 2013), this city presents an appealing opportunity. This is particularly the case for the middle and upper classes, who possess more disposable income to invest in luxury items. Nevertheless, because Nettling's product possesses distinct attributes, employing a contemporary segmentation strategy is necessary.

In the United States and select countries in Western Europe, Nettling targets three main groups of people: those who are too busy to shop for movies, frequent movie buffs, and people who prioritize value for their money (Project Report, 2013). By focusing on values and motivation, Nettling gains a deeper understanding of its

consumer base and tailors its marketing approach accordingly. As Nettling expands into the Czech Republic, it should continue to target these groups, with a particular emphasis on establishing the perception that its product offers exceptional value at an affordable price.

To better define the segment, it is appropriate to use Cross Cultural Consumer Characterization (ACS). The Nettling product aligns well with the mainstream and aspirer classifications, which make up a considerable portion of the Czech population. Mainstream consumers are loyal to certain brands and tend to favor popular ones. This is advantageous for Nettling as they are rapidly growing into one of the biggest and most renowned movie and television streaming services.

The increasing popularity of Nettling in Europe and its presence in TV programs and movies make it attractive to those who want to stay trendy and look presentable. According to our research, approximately 39% of the population, equivalent to around 3.5 million people, belongs to our target market, which shows significant potential for growth (Press Release 2011). As the lower class decreases in size and the middle class grows, more consumers currently classified as part of the resigned and struggling poor segments will shift into mainstream society and aspire to a better lifestyle soon.

To reach the target segment, Nettling should capitalize on the increasing disposable income and Internet accessibility. Effective positioning in a competitive market is crucial for Nettling's success. While adapting Nettling to align with Czech language and culture, adopting a global consumer culture positioning (CUP) strategy would be suitable. Nettling is a global product, and the worldwide popularity of film and television has generated a universal preference for viewing.

By

slightly customizing itself to the Czech culture, Nettling has the opportunity to become a platform that the Czech population can relate to and connect with the global culture (Basher 2011). In terms of marketing mix, which includes product, place, promotion, and price, a trend in consumer preferences has been identified through extensive secondary research. Czech consumers can be described as ethnocentric consumers, meaning they tend to perceive their country's products as superior to others'. To cater to this, Nettling should develop a product selection that aligns with Echo's film preferences in order to customize its marketing mix specifically for the Czech Republic.

When expanding into the French market, Nettling encountered resistance from French movie enthusiasts who were concerned that the presence of a large foreign company like Nettling might undermine the French film industry. To address these concerns, Nettling made a commitment to invest in producing local content and expanding its collection of French films (O'Brien, 2014). Similarly, to engage with Czech consumers, Nettling should acquire the rights to distribute popular Czech movies such as I Served the King of England, Sukiyaki's Rose, Something Like Happiness, and Salary (Substandard).

The Czech people would appreciate movies filmed in the Czech Republic, featuring the Czech language and traditions. Including popular television series from the country would also be a good idea to tailor the product to Czech consumers. This familiarity with local film selections may help Nettling appear less foreign to the Czech market. The pricing strategy is also important to consider. According to Number, consumer prices in the Czech Republic are 34% lower than in the US, while local purchasing power is 51.3% lower and cinema

ticket costs are 32.95% lower ("Cost of Living Comparison Between United States and Czech Republic", 2014). In Western European countries, the product is sold for about â?7.99 per month, but the purchasing power there is higher than in the US (Smith, 2014).

In the US, the product is priced at about â?6.48 per month. Nettling should analyze what price to offer to Czech Republic consumers. It is recommended that Nettling selects a price around â?3.8 per month, which is 30% lower than the US price. This pricing package would be more affordable for Czech citizens and better match the demand in the country. Nettling also needs to consider the "place" segment of the marketing mix. According to the Country Commercial Guide of 2013, there is a wide population dispersion in the Czech Republic, with 10% of the population residing in Prague, the capital. Urban dwellers in Prague generally have higher purchasing power compared to rural dwellers ("Doing Business", 2013).

Nettling should consider launching its product in Prague due to the city's younger population and their preference for high-quality and luxury items. The larger market size in Prague would lead to decreased promotional costs and offer valuable insights on expanding infrastructure throughout the Czech Republic. It is important to highlight that promotional efforts are vital in marketing, particularly in smaller markets like the Czech Republic compared to the United States. Thus, targeting consumers in the Czech Republic would be more cost-effective and efficient.

The Country Commercial Guide of 2013 states that trade shows, technical seminars, media events, and press conferences have historically shown to be highly effective in the Czech market ("Doing Business", 2013). When Nettling

finds the ideal cable company to act as their distributor, it is important that they collaborate in order to design a booth that can be showcased at various events. The local distributor will have valuable insights on the best shows, locations, and venues for presentations, and can guide Nettling in creating impressive presentations tailored to the preferences of the local audience.

Nettling should ensure that a brand representative is present to showcase the product mix effectively. Additionally, Nettling should identify influential individuals in the Czech Republic and offer them a complimentary trial of the product. If successful, these opinion leaders can become "apostles" for Nettling, enabling effective brand promotion through word of mouth and online blogging platforms. By employing these promotional strategies, Nettling can enhance their product's acceptance among the Czech population.

The Echo's have a strong attachment to their traditions and take pride in their nationally manufactured products. As a foreign company, Nettling needs to tailor their product to appeal to the Czech's national pride. According to the Country Commercial Guide of 2013 by the U.S. Embassy Prague, establishing a local presence through an agent, distributor, or representative office is crucial for success in this market ("Doing Business," 2013). Therefore, it is advised that Nettling forms a joint venture with local cable providers.

By collaborating with local cable providers, the need for extensive infrastructure development in the Czech Republic will be minimized. Customers will have the convenience of accessing Nineteen's services through various platforms such as mobile devices, personal computers, and household televisions. This strategy has been effective in other European markets by leveraging the expertise and existing distribution systems of local companies.

Additionally, Nettling will use licensing and independently sell its online streaming products. Thus, the Czech Republic market holds great potential.

Due to its advanced broadband infrastructure and high internet speeds, the Czech Republic stands out for Nettling. In fact, a research study conducted by IMPACT reveals that the country ranks as the 6th fastest in the world with an average internet connection speed of 1 Mbps (Cowling, 2014). This advantageous situation allows Nettling to refrain from investing in building up the internet infrastructure in this market since it already exists. Consequently, Czech consumers will have fast access to Nettling's online streaming services, resulting in increased satisfaction and loyalty. Conclusion References Basher S. Gammon, Anthony C.