When a firm opts to expand globally, it must first identify a strategy for creating value within these new markets. Companies can choose to adapt current products and services to better suit local markets or standardize offerings across the global market. International market segmentation can help firms determine the extent to which products and positioning need to be standardized or adapted.
After launching in a few international markets at first, Netflix made the announcement in January 2016 that its services would be available in nearly 200 countries around the world. While the company had previously aimed to cater offerings to local audiences, the major international expansion would be universal. In other words, Netflix planned to offer the same content to viewers around the world. At the time of the launch, Bloomberg called it, “a bold move based on two very optimistic assumptions: that Netflix can re-order the way media companies dole out rights to their television shows and movies, and that its algorithms are more powerful than the cultural differences between humans living in different countries.”
Localization vs. Standardization
Netflix opted to disaggregate market segments and leverage original programs with global appeal. In its Q1 letter to shareholders, the company shared that it is focusing on comedy as well as celebrities with strong international presence. This is starkly different from competitor Amazon’s approach, which is significantly more localized.
Critics argued that language barriers and limited local content would present “stumbling blocks” for Netflix. However, the streaming service added 5 million global members in the first quarter of 2017, and the firm recently crossed the 100 million subscriber mark worldwide.
Striking a Balance
While Netflix aims to create a universal service, it also recognizes that some localization is crucial for satisfying customers. To address this, Netflix is “developing a growing number of non-English language originals from places such as Mexico, France, Italy, Japan and Brazil. With global distribution, Netflix is well positioned to bring engaging stories from many cultures to people all across the globe.”
Will Netflix’s standardized approach ultimately beat Amazon’s localized focus lead to competitive advantage in the global market? We’ll have to stay tuned to find out.