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An extension strategy is aimed at preventing the decline stage of a product/service's sales in the medium-to-long term - Edexcel - A-Level Business - Question 1 - 2019 - Paper 1
Question 1
An extension strategy is aimed at preventing the decline stage of a product/service's sales in the medium-to-long term. Discuss how Spotify might extend the product... show full transcript
Worked Solution & Example Answer:An extension strategy is aimed at preventing the decline stage of a product/service's sales in the medium-to-long term - Edexcel - A-Level Business - Question 1 - 2019 - Paper 1
Step 1
Option 1: Development of New Video Experiences
Answer
Spotify's introduction of new video experiences could attract more users to its platform. As sales of pure streaming may be reaching maturity, incorporating video can offer an alternative way to engage customers and maintain their interest. By utilizing new technologies and harnessing trends like Virtual Reality, Spotify could provide unique experiences that differentiate it from competitors. Early adopters in the US and Europe, who tend to have higher disposable incomes, may be willing to pay more for these immersive experiences.
Step 2
Option 2: Expanding into New Markets
Answer
Forecasting growth in Asian markets presents a viable opportunity for Spotify. With only 14% of digital music revenue coming from this region, there exists substantial potential. By partnering with mobile providers that include music streaming in their packages, Spotify could penetrate markets previously untapped. It's important to consider, however, the competitive landscape and the price sensitivity of consumers in these regions. Setting a competitive subscription price while maintaining profitability will be crucial as Spotify launches new services tailored for local audiences.
Step 3
Potential Judgement
Answer
Focusing on existing markets reduces risk due to established brand trust. However, new markets, especially in Asia, could provide greater sales growth, requiring Spotify to balance caution with ambition. The planned stock market flotation may influence Spotify's strategic decisions, emphasizing the need to attract growth while managing risk in its expansion strategies.