Netflix is paving the way, economics homework help

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The final project for this course is the creation of a research paper. Every day, millions of economic choices are made by people—from what brand of soap to buy to how many employees to hire for a factory. Microeconomics provides us with the tools, models, and concepts to better understand individual choices in the marketplace and how resource allocation is determined at the micro level. The decisions made by individuals and households impact the market and influence decisions made by firms. Firms use these tools as a way to determine pricing, output, and profit maximization. As a student of economics, you can use the microeconomic principles to gain an understanding of how firms and individuals make decisions and also to make your own conclusions about actions we can take to improve those decisions.   Now, imagine that you are a consultant to the firm of your choice. The firm has hired you to advise it on how it can ensure its future success as a company in its current market. To do this, you will write a 7–9-page research paper analyzing market and business data to explain how the core microeconomic principles impact the sustainability of the firm and what actions it can take to ensure success.  

The project is divided into three milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Two, Four, and Five. The final submission will occur in Module Seven.  

In this assignment, you will demonstrate your mastery of the following course outcomes:  

 Apply microeconomic models to real-world situations for informing effective business decisions  Analyze business and market data using microeconomic tools for their impact on business sustainability  Evaluate the structure of various markets for informing effective decision-making strategies  Assess the behavior and decisions of individuals and firms for their relation to the microeconomic framework  

Prompt  You will work with your instructor to choose a firm for which you can find reliable data and information, both at the firm level and the industry level. The firm you select must be a publicly traded company, must operate in the U.S. market, and must currently be in business. You will need instructor approval before continuing on with your research paper in order to ensure you have met the necessary requirements. Publicly traded companies file reports with a great deal of data that you will find useful for your analysis. Once you have selected a firm for your case study, you will gather information and data relevant to the firm and its industry and use the core microeconomic principles you have learned in class to analyze the information and make a recommendation for your firm. You will compose a 7–9-page research paper in which you will analyze the market and business data to explain how the core microeconomic principles impact the sustainability of the firm, and your recommendation will suggest the actions the firm can take to ensure success.  

Specifically the following critical elements must be addressed:  

I. Introduction Work with your instructor to choose a firm that matches the following criteria: a publicly traded company operating in the U.S. market that is currently in business. a) Outline the purpose of this paper and how it will inform your conclusion. b) Summarize the history of the firm, and provide an overview for what the firm does and what goods/services it sells. II. Explore the supply and demand conditions for your firm’s product. a) Evaluate trends in demand over time, and explain their impact on the industry and the firm. You should consider including annual sales figures for the product your firm sells. b) Analyze information and data related to the demand and supply for your firm’s product(s) to support your recommendation for the firm’s actions. Remember to include a graphical representation of the data and information used in your analysis. III. Examine the price elasticity of demand for the product(s) your firm sells. a) Analyze the available data and information, such as pricing and the availability of substitutes, and justify how you determine the price elasticity of demand for your firm’s product. b) Explain the factors that affect consumer responsiveness to price changes for this product, using the concept of price elasticity of demand as your guide. c) Assess how the price elasticity of demand impacts the firm’s pricing decisions and revenue growth. 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. b) Apply the concepts of variable and fixed costs to your firm 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. V. Explore the overall market for your firm. a) Discuss 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. 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 future in the market. c) Describe the market structure for this firm, and analyze how this affects the firm’s ability to influence the market. VI. Recommendation a) Develop a recommendation for how the firm can manage its future production by synthesizing the data presented. b) Suggest how the firm’s position within the market and among its competitors will allow it to take your recommended action. c) Describe how the firm can sustain its success going forward by evaluating the findings from demand trends and price elasticity.    

Milestones 

Milestone One: Introduction In Module Two, you will submit a draft of the introduction (Section I) of your research paper, including all critical elements of Section I as listed above. In one to two pages, you will detail the purpose of the paper, summarize the history of the firm, and provide an overview of the firm. This milestone is graded with the Milestone One Rubric.    Milestone Two: Supply and Demand Conditions and Price Elasticity of Demand In Module Four, you will submit a draft of the supply and demand conditions (Section II) and price elasticity of demand (Section III) of your research paper, including all critical elements as listed above for each of those sections. Each of these sections should be one to two pages in length and should incorporate relevant data and supporting evidence. This milestone is graded with the Milestone Two Rubric.  

Milestone Three: Costs of Production, Overall Market, and Recommendation In Module Five, you will 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 as listed above for each of those sections. Each of these sections should be one to two pages in length and should incorporate relevant data and supporting evidence. This milestone is graded with the Milestone Three Rubric.  

Final Submission: Research Paper In Module Seven, you will submit your research paper. It should be a complete, polished artifact containing all of the critical elements of the final project. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project Rubric.  

Deliverables 

Milestone Deliverables Module Due Grading  1 Introduction  Two Graded separately; Milestone One Rubric 2 Supply and Demand Conditions and Price Elasticity of Demand Four Graded separately; Milestone Two Rubric 3 Costs of Production, Overall Market, and Recommendation Five Graded separately; Milestone Three Rubric  Final Submission: Research Paper Seven Graded separately; Final Project Rubric  


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Running Head: ANALYSIS OF NETFLIX Analysis of Netflix ECO-201 Austin Garcia Southern New Hampshire 1 ANALYSIS OF NETFLIX 2 Costs of Production The income statement is essential in the evaluation of the financial condition of a company. Therefore, like with all income statements, Netflix shows its total profitability through its net income. The company incurs costs of goods sold and other expenses. The net income is derived from subtracting revenue from the costs incurred by the company. The table below shows the trends over time of the costs that Netflix has experienced over the past five years and how they have impacted the net income. 2011 2012 2013 2014 2015 Costs of goods sold 2B 2.58B 3.03B 3.70B 4.53B Operating expenses 779.61M 933.43M 1.06B 1.35B 1.88B Net income 226.13M 17.15M 112.4M 266.80M 122.64M The costs of goods sold have increased over the past five years. Likewise, the operating expenses have increased. This implies that the costs of production for Netflix have an increasing trend. They have resulted in fluctuations of the company’s net income. Therefore, the company’s profitability is affected negatively by the increase in the costs of production that the company experiences. Besides, the table above shows that the profits decreased considerably from 2011 to 2012. This was due to the substantial increase in both the costs of goods sold and the operating expenses. Still, from 2014 to 2015, profits decreased considerably due to the increase of both the costs of goods sold and the operating expenses ("Netflix Inc.", 2016). There has been cost inflation at Netflix over the past five years. This can be attributed to the rapid expansion into new international markets. For instance, research and development ANALYSIS OF NETFLIX 3 contributes most to the operating expenses of the company for the past five years. This is an indication that the company has been spending more on research and development into the new markets. However, the revenue has grown faster than the costs; this is a good progress for the company (Lyubareva, Benghozi & Fidele, 2014). Concepts of variable and fixed costs to Netflix for informing its output decisions Fixed costs are incurred independent of output. Contrariwise, variable costs are those costs that vary with the output levels. However, the fixed cost per unit decreases with an increase in the production levels. This is because the fixed costs are spread over more units. Therefore, a firm increases the output levels by increasing the variable costs. Through this, there is the maximization of profits in the short-term for the company. Since Netflix experiences a higher marginal revenue than the marginal cost, this implies that the company can increase its production levels. Overall Market Netflix, as an internet subscription service company operates in the online video streaming industry. Its top competitors include Amazon and Hulu Plus. Companies/ Netflix Amazon Hulu Plus 2011 61% 39% 18% 2012 93% 1% 7% 2013 89% 2% 10% 2014 36% 13% 6.5% 2015 53% 27% 18% Market share ANALYSIS OF NETFLIX 4 Clearly, Netflix is the market leader. However, Amazon is quickly gaining ground in the entertainment industry. As well, Hulu Plus is trying. According to the table above, Netflix shown consistency in leading as the major company in the online video streaming industry. Nonetheless, each company has had fluctuations over the past five years in gaining the market share (Kovacs & Jansen, 2015). Barriers to entry of Netflix The online video streaming industry possesses a strong barrier to entry. The major barriers to entry include the acquisition, creation and the licensing content. Other barriers to entry include the acquisition of the network capacity to have the capability in holding a substantial amount of video content. For instance, the first licensing deal for Netflix with Starz costed $30million dollars per year so that they could show their content. As well, Netflix pays CBS and Fox an amount totaling $250 million dollars so that programs can be aired from their archives (Ulin, 2013). Market structure for Netflix Netflix operates in an oligopoly. The market has high barriers to entry. There are few firms that sell the same product. The company is the most dominant in the market. Therefore, Netflix has significant control over its prices. Recommendation Netflix should capitalize on decreasing the costs of production so as to ensure that the profits go up considerably. For instance, there is the need to reduce the costs incurred in its research and development. The company should decrease the costs significantly. Through this, it ANALYSIS OF NETFLIX 5 will ensure that the output levels for the company meet me demand levels while ensuring that the profits are high. This will also make the company to remain dominant in the market. Netflix is the market leader in the industry in which it operates. Since the company has a significant control over the setting of its prices, it can set competitive prices that makes it to remain dominant in the market. Being dominant in the market allows the company to reduce the costs of production while maintaining the output levels required (Bauman, Deal, Ishak & Johnson, 2013). Netflix can sustain its competitive edge in the market through taking advantage of the demand trends and the price elasticity. Netflix can translate the sales targets into market share. This is because forecasts are attained by growing with the market and ensuring that market share is captured from competitors. Notably, market share is an indicator of the level of the competitiveness of a company. Through the market share, which can be determined by the market trends, Netflix can take advantage of the trends in the customer’s selections as well as those of the competitors. In case a company experiences a decline in the market share, it is an indicator that there are long-term problems that require strategic adjustments. Furthermore, Netflix has significant control over its prices. Thus, its price elasticity of demand is highly inelastic. The changes in prices are not affected as much by the changes in demand. ANALYSIS OF NETFLIX 6 References Bauman, L., Deal, N., Ishak, P., & Johnson, S. (2013). Netflix Environmental Scan/SWOT Analysis. Retrieved April, 22, 2013. Kovacs, G., & Jansen, J. (2015). An Analysis of Strategies by Netflix in the Television Market. Lyubareva, I., Benghozi, P. J., & Fidele, T. (2014). Online Business Models in Creative Industries: Diversity and Structure. International Studies of Management & Organization, 44(4), 43-62. Netflix Inc.. (2016). Marketwatch.com. Retrieved 28 September 2016, from http://www.marketwatch.com/investing/stock/nflx/financials Ulin, J. (2013). The business of media distribution: Monetizing film, TV and video content in an online world. CRC Press. Running Head: NETFLIX DEMAND AND SUPPLY Netflix Demand and Supply Austin Garcia Southern New Hampshire 1 NETFLIX DEMAND AND SUPPLY 2 Netflix is an entertainment company in Los Gatos that provides online TV shows and movies according to demand. Netflix is available in over 190 countries (Netflix 2016). The most attractive feature of Netflix’s products it is accessible from any device from phones, computers and even television sets. In addition, the corporation produces many popular shows such “The family Guy”, “Pretty Little Liars”, and “Narcos”. This paper will analyse the demand and supply trends of the company’s products. Supply and Demand Conditions The supply and demand circumstances for Netflix are dictated by the attractiveness of the product, delivery and packaging. The product delivery of Netflix’s programs is of a high standard because the products are accessed at the convenience of the client. One can watch shows on mobile devices while taking a bus ride from work. However there is competition from other companies providing similar services. The fact that Netflix transmits some shows via Comcast creates a threat for the corporation because Comcast also owns online streaming services that it. The corporation could create better network connection for its own service rather than fro Netflix thereby reducing Netflix’s demand. Trends in Demand Competition from other service providers has an adverse effect on Netflix’s demand trends. According to Williams (2016), Netflix’s shares have cumulatively dropped by 17% since the beginning of the year. Netflix (2016) NETFLIX DEMAND AND SUPPLY 3 12000000 10000000 Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) 8000000 Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) 6000000 Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) 4000000 Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) 2000000 0 Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) -2000000 Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) Netflix, Inc. Consolidated Balance Sheets (unaudited) (in thousands) Graph 1.0 Showing Netflix’s financial statement (April-2016) From these observations, recommendations for competitive advantage can be made. For instance Netflix should invest in independent delivery of products. They should stop relying on other companies such as Comcast. Also, Netflix should review its pricing to attract more subscribers. Wang (2016) explains that Netflix did not meet the expected new subscribers target because of the increase in prices. With consideration to these factors, Netflix will enhance demand for its products. NETFLIX DEMAND AND SUPPLY 4 References Netflix. (2016). Netflix to Announce Third-Quarter 2016 Financial Results. Netflix Retrieved from http://files.shareholder.com/downloads/NFLX/2854636834x0x908223/ECE367259585-4CB7-B5E2-ABAA12697693/Netflix3Q16ConferenceCallAnnouncement.pdf Wang, C. (2016). Bull says Netflix's subscriber miss was actually proof it has pricing power. CNBC. Retrieved from http://www.cnbc.com/2016/08/29/bull-says-netflixs-subscriber-miss-was- actually-proof-it-has-pricing-power.html Williams, T. (2016). Netflix is facing high content costs and increasing competition from Amazon. Market Watch. Retrieved from http://www.marketwatch.com/story/netflix-is-facing-high-contentcosts-and-increasing-competition-from-amazon-2016-09-13 Netflix is paving the way 1 Netflix is paving the way Milestone One Austin Garcia Southern New Hampshire Netflix is paving the way 2 Netflix is paving the Way It started on August 29th, 1997 when the movie experience changed forever. Netflix, started sending movies through the mail. Next, it was available on any device including the TV. Netflix is changing how society watches movies and television shows. Instead of going somewhere like the movies or Blockbuster it is now readily available in the comfort of own home. As a kid, going to Blockbuster was a family adventure. Being able to go with the family and everyone wanting to pick out a different movie was a fun experience. Now, It has changed to sitting on the couch with the family, making popcorn and everyone getting close together to enjoy one of Netflix great movies. History of Netflix Netflix has gained the popularity over the last couple of years due to the accessibility, cost, and vast amount of movies and TV shows it has to offer. The creator and co-founder of Netflix are Reed Hastings and Marc Rudolph. Both Reed and Marc are software engineers who founded Netflix in 1997 (Network, 2014). Hastings says he got the idea after Blockbuster charged him $40 bucks for not returning “Apollo 13.” Hastings then proceeded to cancel his membership at Blockbuster (Network, 2014). Netflix started a monthly subscription in 1999 (Network, 2014). Netflix made it possible for unlimited rentals for a single monthly rate. This drew the attention to movie and TV show enthusiasts (Network, 2014). As the years passed Netflix moved into streaming in 2007 (Network, 2014). Because Netflix started streaming online, it was readily available to anyone and in the result, Netflix increased their subscribers to 20 million (Network, 2014). Netflix invested 100 million for two 13 episodes seasons of House Of Cards. Although it was a significant risk, it paid off. House Of Cards went on to earn eight Netflix is paving the way 3 Emmy nominations which increased Netflix visibility (Network, 2014). As of 2014, Netflix has more than 50 million subscribers. Its stock is now over $400 a share (Network, 2014). Citations/Resources 1. Network, C. N. (2014, July 21). A brief history of Netflix. CNN. Retrieved from http://www.cnn.com/2014/07/21/showbiz/gallery/netflix-history/ 2. Kovach, S. (2016, July 15). This is the email Netflix sends you when your price is about to go up. Retrieved August 31, 2016, from www.TechInsider.com, http://www.techinsider.io/netflix- sends-emails-warning-of-price-increases-2016-7 Running head: SHORT TITLE OF PAPER (
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Explanation & Answer

Hi there!So, I went through the entire documentation required of you for this research paper. I combined your milestones into one document. Formal inspection of basic compliance was performed, and edited where necessary.Secondly, I went through and made revisions based on grammar and flow. Finally, in comparison to required content that is absent or could be further clarified, I went through the entire paper and sorted through everything. You may need to go under the Review pane in Word to turn on Revisions to see all the changes and comments made. You have a good draft of the final document. Once you decide which changes to keep and which comments to expand upon, go ahead and repost the same document here. I'll review that one too :)Thanks again!Selenica

Netflix is paving the way

1

Netflix is paving the way
Milestone One
Austin Garcia
Southern New Hampshire

Netflix is an entertainment company in Los Gatos that provides online TV shows and
movies according to demand. Netflix is available in over 190 countries (Netflix 2016). The most
attractive feature of Netflix’s products it is accessible from any device from phones, computers
and even television sets. In addition, the corporation produces many popular shows such “The
family Guy”, “Pretty Little Liars”, and “Narcos”. This paper will analyze the demand and supply
trends of the company’s products.

Netflix is paving the way

2
Netflix is paving the Way

On August 29th, 1997, the movie experience changed forever. A company by the name
Netflix started sending movies through the mail. Netflix has dramatically changed how society
watches movies and television shows, reshaped the internet landscape through creation of
demand via streaming, and ushered in a new golden era of television. That Blockbuster and
similar movie rental services are obsolete makes Netflix worthy of closer examination.
History of Netflix
Netflix has gained the popularity over the last several years due to the accessibility, cost,
and vast amount of movies and TV shows available through its medium. The creator and cofounder of Netflix are Reed Hastings and Marc Rudolph. Both Reed and Marc are software
engineers who founded Netflix in 1997 (Network, 2014). Hastings ...


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