The working of PESTLE analysis is comparable to its SWOT Analysis which examines internal factors to give a view of opportunities and threats.
Political Factors
This segment includes the policies which are devised by the government with its institutions and are actively influencing the organization. It may contain taxes, fiscal and trade policies, or any specific policy. In the case of Netflix, the following are the political factors affecting Netflix:
- Netflix has faced the problem of censorship in many regions of the world. Content sensitivity has been a problem for Netflix since the beginning. For instance, Netflix was banned by the Chinese government owing to the presence of inappropriate content.
- The whole content of Netflix may not be available uniformly across the world. Instead, due to many governmental rules and regulations, Netflix lost a lot of potential income.
- Netflix is not allowed even in some countries. Restricted access policies are affecting the brands’ income in many states around the globe.
Economic Factors
These factors are responsible for shaping the company’s supply/demand cycle of the organization. These economic factors are prevalent in the external working environment of the organization like the inflation rate, the trade rates, and the overall growth of the economy. These economic conditions produce an enduring effect on organizational performance. Succeeding are the listed economic features that influence Netflix:
- Netflix meets the changing exchange rates when it buys content from outside. However, the company earns a stable profit from the original content, mainly TV shows and movies.
- Many customers of the company complain about the price hike in such a short time frame. These loyal users, if provided with high-quality data on a permanent basis, can sense that they are not wasting their money.
- Netflix is vulnerable to the competitive market. The streaming service sector is witnessing the rise of newcomers.
- The issue of content piracy is prevalent in this online streaming platform. It undermines security as well as the profitability of the organization.
Social Factors
This segment of Pestel Analysis provides the analysis of the socio-cultural environment prevalent in the organizational environment. The preferences and needs of consumers are analyzed in this section. The social elements include demographics, cultural trends, customs, etc. The following elements must be considered by Netflix in order to maximize growth, revenue, and brand image:
- Netflix has successfully created an impressive work environment that is ideal for employees.
- The generosity and kindness of Netflix, mainly the CEO are applauded by many people. The company allocates a mighty sum of 2% share of annual revenue to the welfare of the black people. Moreover, Netflix supports students with relatively low family earnings.
Technological Factors
Business growth is assured by the innovative approach to technology. Technical awareness, advancement, and automation play a significant role in the effectiveness and popularity of the business. Below are the technological factors which affect the company’s growth and business.
- Accessibility to high-quality content without spending excess data is a technological advantage.
- The dynamic algorithms often complicate the users. A content rating scheme is a preferred method for its easy usage.
- Netflix users are extensively using Hermes, a translating software.
Legal Factors
These factors are related to the legal policies or rules and regulations laid down by governments which must be followed by the companies operating in their range. These rules are related to consumer laws, copyright or infringement laws, labor laws, and others. The legal aspects affecting the online streaming industry are:
- The confrontation with many customers over copyright issues is a continuous legal threat to the company. The company must address these issues in a suitable manner.
- The next legal constraint that the company had to face was related to the price hikes in subscriptions. The disappointed customers filed a class-action complaint against the company over sudden price hikes.
Environmental Factors
New ecological awareness has signified new trends of low emissions of carbon, eco-friendly services, long-term sustainability, and reusable resources. Any organization to compete in the long-term must consider these environmental aspects. Subsequent environmental factors are affecting Netflix:
- The organization is shifting to the use of renewable resources. For this purpose, Netflix has joined hands with EPA. The company also tends to increase environmental awareness.
- Reduction in the use of hard paper is another promising step toward environmental conservatism.
- The company has no direct ecological impact as it operates online. Nevertheless, its electricity usage is quite substantial.
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