Find Three Connected Gaps, One Long Paragraph Per Gap ✓ Solved

FIND THREE CONNECTED GAPS, ONE LONG PARAGRAPH PER GAP: Now that you have written a Situation Analysis

Now that you have written a Situation Analysis, you should have a good overall perspective on your chosen company. Using that information, identify at least three gaps or symptoms that indicate deeper problems the company faces. For each gap, write a detailed paragraph describing the specific symptom or sign, including relevant data and numbers, and explain how it reveals a discrepancy between the desired state and actual performance. Conduct additional research to perform a root cause analysis for each symptom, asking why the symptom occurred and exploring possible underlying causes. Note that multiple symptoms may stem from a common root cause, or a single symptom may have multiple causes. Summarize your root cause analysis and narrow your focus based on your findings, as this will be critical for your research paper. Spend sufficient time on this step to ensure thorough understanding of the underlying issues, as it forms the core of your problem statement and will enable you to develop effective solutions.

Sample Paper For Above instruction

Connected gaps are crucial indicators that reveal underlying issues within a company, serving as signposts for strategic problem-solving. Based on a thorough situation analysis of Netflix (NFLX), three significant and interconnected gaps emerge, each reflecting deeper operational and strategic challenges.

First Gap: Inability to Increase Subscription Prices Due to Consumer Expectations

Netflix's primary revenue-generating model relies heavily on maintaining a low subscription price point, which has cultivated a consumer expectation of affordability. According to Statista (2017), 56.6% of Netflix subscribers in 2017 subscribed primarily because of the low-cost service. This tight pricing constraint constitutes a significant gap: despite rising content costs—projected to reach $7-8 billion in 2018—Netflix faces considerable pressure to increase prices without alienating its subscriber base. The desire to support international growth and sustain cash flow conflicts with customers' expectation of value for low prices. This situation reveals a gap between revenue needs and consumer perception, risking subscriber attrition if prices are raised. The root causes include fierce competition and the company's reliance on its brand image as an affordable entertainment provider, which limits pricing flexibility and threatens future profitability.

Second Gap: Escalating Content Expenditure in a Competitive Environment

Netflix's strategic response to content loss—caused by major acquisitions such as Disney's purchase of Fox content and WarnerMedia's expanding content library—is an increase in original production spending. The company plans to spend approximately $7-8 billion in 2018 on original content to compensate for content expiration and loss of licensed titles. However, this aggressive spending introduces a financial gap: with the trend of competitors such as Disney, Apple, and Amazon investing heavily in original content, Netflix is required to escalate its expenditure to maintain subscriber interest and brand relevance. The root cause stems from the rising competition for exclusive content, which diminishes supply and forces Netflix to spend more to differentiate its offerings. This gap underscores a strategic challenge—balancing content investment with profitability while safeguarding market share amidst an industry content war.

Third Gap: Global Piracy and Password Sharing Eroding Revenue

Another critical gap involves the escalating problem of piracy and password sharing, which significantly reduces Netflix's revenue potential. Statista estimates that in 2017, approximately $31.8 billion was lost globally due to piracy, with projections suggesting that losses could nearly double by 2022. Moreover, Parks Associates reports that in 2019, $550 million was lost to password sharing alone (Fortune, 2019). These issues indicate a revenue leakage that is hard to address through traditional means, especially since password sharing is ingrained in consumer behavior. The root cause includes widespread internet connectivity, high piracy rates, and consumer convenience, which hinder revenue growth. This systemic problem, if unmitigated, threatens long-term profitability and market competitiveness.

Summarizing these three interconnected gaps, it becomes evident that Netflix faces a strategic dilemma: balancing consumer expectations for low prices against rising content and operational costs, all within an environment plagued by piracy and shared passwords. Each gap influences the others—pricing constraints influence investment capability; content spending impacts competitive positioning; and piracy reduces revenue, constraining future investments. The primary root cause underlying all these issues appears to be Netflix’s dependence on a low-price consumer perception in a dynamic and highly competitive global market.

References

  • Fortune. (2019). People Sharing Passwords Are a Growing Problem for Netflix. Retrieved from https://fortune.com
  • Low, E. (2017). Streaming Content May Become King, but Who Will Wear the Crown? Investors Business Daily.
  • Statista. (2017). Which of The Features of Netflix's Service Do You Find Appealing? Retrieved from https://statista.com
  • Seitz, P. (2017). Netflix Stock Retreats on Disney Competitive Threat. Investors Business Daily.
  • Rayburn, D. (2017). OTT's Troubling Trend. Streaming Media.
  • Amazon. (2017). Form 10-K. Retrieved from Edgar Online.
  • Digital TV Research. (2018). Global Online TV and Movie Revenue Lost through Piracy from 2010 to 2022.
  • FierceCable. (2018). Feature analysis of Netflix service appeal. Statista.
  • Statista. (2018). Trends in digital piracy and revenue loss.
  • Additional reputable sources as needed to meet citation requirements.

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