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Using 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
Question 1
Using the data in Extracts B and C, assess the extent to which saturated markets might stimulate a business such as Netflix to trade internationally. Extract B Fore... show full transcript
Worked Solution & Example Answer:Using 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
Step 1
Assessing the impact of saturated markets on international trade
Answer
Saturated markets, such as Netflix's core US market, result in limited growth opportunities domestically. This drives businesses to explore new markets, which is particularly pertinent for streaming services like Netflix, where the potential for international subscribers could significantly bolster revenue streams. As noted, entering markets such as the UK presents a viable avenue for expansion given its substantial OTT market, with close to 10 million current Netflix subscribers. In contrast, this indicates that the company's growth within the US may be peaking, hence increasing the necessity to penetrate other countries.
Step 2
Evaluating the significance of international markets
Answer
The potential revenue from international markets, such as the UK’s burgeoning streaming landscape, is indeed attractive. For instance, the projected growth in the UK’s OTT sector could lead to an improvement in revenues; while estimates suggest that Netflix stands to gain around $2 billion if it successfully captures the UK market share. This indicates the importance of exploring saturated markets abroad as a means to offset stagnation in the US.
Step 3
Counterbalances in international trade decisions
Answer
Despite the opportunities, other factors play a crucial role in business decisions surrounding international expansion. Netflix must confront competition from local services, such as ITV, which are advancing their own subscription services to rival Netflix. Additionally, conditions in saturated markets may be fluid; for example, consumer tastes evolve and competition from platforms such as Amazon Prime complicates the landscape. Thus, while the lure of international markets persists, businesses must navigate competition and consumer preferences effectively.