Use the data in Extracts B and C, assess the extent to which saturated markets might stimulate a business such as Netflix to trade internationally. - Edexcel - A-Level Business - Question 1 - 2022 - Paper 3

Saturated markets occur when the potential number of new customers is zero. In this scenario, businesses like Netflix have limited opportunities for growth within their current markets. To sustain growth, they may be compelled to seek new markets, such as the UK and Europe, to mitigate the impact of saturation.

1. Rationale for Seeking New Markets:

   • Netflix is primarily established in the US, which has a vast population, but growth is becoming limited in saturated markets. Entering international markets can open new revenue streams, helping to compensate for stagnant growth in the domestically saturated market.
   • For instance, by expanding into the UK, Netflix could potentially capture new subscribers beyond the current US subscriber base of nearly 10 million.

2. Potential Revenue Opportunities:

   • According to reports, Netflix could realize significant revenue growth, estimated at around £2 billion from the UK alone by 2022.
   • With the projected decline in traditional viewing habits (approximately 1.7% growth in traditional video), the shift towards OTT services emphasizes the value of securing foreign markets.

3. Counterbalancing Factors:

   • However, it's important to consider challenges that might impede growth. Netflix's US market is highly competitive, facing threats from local companies like Amazon and regional players. Additionally, moving into saturated markets where competitors are also expanding could strain resources and redefine strategic objectives.
   • The efficiency of exporting content could influence Netflix's market entry decisions. In these scenarios, Netflix may benefit from economies of scale by leveraging its extensive library and branding.

In conclusion, while saturated markets are prompting Netflix to explore international trade opportunities, the effectiveness of such strategies will be dictated by competition and the adaptation to local consumer preferences.