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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. Dynamic markets are those subject to rapid and fundamental change over a shor... show full transcript
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
In a dynamic market, Spotify faces both challenges and opportunities. The introduction of new developments, such as video subscriptions, offers avenues for the streaming service to attract new customers. This can enhance its revenue streams significantly.
Moreover, rapid changes compel Spotify to alter its business strategy, allowing it to focus on niche segments and potentially higher-end customers who are willing to invest in immersive experiences.
Additionally, the evolution of listening habits towards smart home devices like Amazon Echo and Google Home signifies a shift in the competitive landscape, requiring Spotify to innovate continually to retain its user base.
Step 2
Potential counterbalance
Answer
The dynamic nature of the music streaming market encourages constant evolution in products, including music, videos, and even virtual reality, significantly affecting Spotify’s operations. The high development costs associated with such innovations can challenge profitability.
Though new music subscription services attempted to enter the market from 2015 to 2017, none have managed to turn a profit, underscoring the competitive pressure and operational challenges inherent in this rapidly changing environment.
Step 3
Potential judgement
Answer
Companies like Apple and Google can afford to incur losses on their music streaming services to attract new subscribers. In contrast, Spotify must prioritize profitability, making it essential for them to adapt swiftly to changes within the dynamic market.
Spotify has been in this sector since 2008, and with the significant market presence in Europe and the US, it indicates that the company has some understanding of evolving market dynamics. However, its ongoing need for adaptation remains crucial to its sustainability.