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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
Operating in a dynamic market has several consequences for a business like Spotify.
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New Revenue Streams: As new developments arise, such as video subscriptions, Spotify can explore new revenue avenues. This not only attracts new customers but secures a competitive edge in the rapidly evolving market.
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Focus on Niche Markets: The dynamic nature of the market allows Spotify to refine its offerings, targeting more specialized audiences who are willing to pay for premium experiences, such as immersive Virtual Reality music. This can lead to higher profits and customer loyalty.
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Evolution of Listening Methods: The shift in how consumers engage with music—transitioning from smartphones to smart speakers like Amazon Echo and Google Home—means Spotify must adapt its strategies to include these platforms, thus remaining relevant and competitive.
Step 2
Potential counterbalance
Answer
Despite these opportunities, Spotify faces challenges within the dynamic market, particularly through the increased costs associated with product development. New entrants in the music subscription service market, launched between 2015 and 2017, have failed to establish profitability, highlighting the competitive strain within the industry. Spotify must navigate these dynamic market challenges to maintain its position.
Step 3
Potential judgement
Answer
In this dynamic environment, companies like Apple and Google can afford to operate at a loss to gain new subscribers, which puts pressure on Spotify to continually innovate and retain its customer base without sacrificing profitability. Spotify’s relatively short presence in the market since 2008 makes it crucial for the company to understand and adapt to these market changes quickly.