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Assess the consequences to a business, such as Spotify, operating in a dynamic market. - Edexcel - A-Level Business - Question 1 - 2019 - Paper 1
Question 1
Assess the consequences to a business, such as Spotify, operating in a dynamic market.
Worked Solution & Example Answer:Assess the consequences to a business, such as Spotify, operating in a dynamic market. - Edexcel - A-Level Business - Question 1 - 2019 - Paper 1
Step 1
Consequences of a dynamic market
Answer
Dynamic markets, such as the music streaming industry, are characterized by rapid and fundamental changes. This creates various consequences for businesses like Spotify:
- New Revenue Opportunities: Innovations, such as video subscriptions, provide Spotify with new avenues to attract customers and generate additional revenue streams.
- Niche Market Focus: As competition intensifies, Spotify can narrow its focus towards high-end services, providing unique offers that stand out in a crowded market.
- Evolution of Listening Habits: Consumers are increasingly using devices like Amazon Echo and Google Home to stream music, prompting Spotify to adapt its services accordingly, which may involve new development costs.
Step 2
Potential counterbalance
Answer
Despite the opportunities, the dynamic nature of the market affects Spotify negatively in some aspects:
- Increased Development Costs: To meet changing consumer demands, Spotify must invest in developing new features, including music, videos, and immersive technologies like virtual reality.
- Challenging Competition: With many music subscription services launched recently, some of which struggled to gain profits, Spotify faces continuous competition from established companies like Apple.
Step 3
Potential judgement
Answer
In summary, companies like Apple and Google can operate their music services at a loss initially to capture market share, which places pressure on Spotify to maintain profitability. Moreover, Spotify's relatively short existence in the market compared to its competitors necessitates a keen understanding of these dynamics to navigate effectively.