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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.
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
Potential benefits of trading internationally
Answer
Saturated markets, such as those characterized by limited growth in the domestic market, can incentivize companies like Netflix to explore international opportunities. With nearly 10 million subscribers in the UK market, which is relatively limited compared to the US market, Netflix may seek to expand into new regions to capture additional customer bases. This could unlock new revenue streams and lessen dependence on domestic growth.
In Europe, where the potential for new subscribers remains promising, Netflix may experience a significant gain in subscriber numbers, further boosting its financials.
Step 2
Challenges of entering saturated markets
Answer
Despite the opportunities, Netflix faces challenges when entering saturated markets. Competition from local players and established companies such as Amazon and other OTT services may pose significant barriers. Additionally, logistical complexities in reaching new audiences and navigating different regulations can hinder international trade efforts.
For instance, companies aiming to penetrate new markets like the UK must address local preferences and barriers to entry, which can limit the potential gains.
Step 3
Counterbalancing factors
Answer
Another factor to consider is the effectiveness of Netflix's international expansion strategy. The company might rely on economies of scale to reduce costs, but the balance between maximizing growth and maintaining service quality is crucial. External pressures, such as economic conditions in new markets or consumer preferences, may dictate Netflix's approach.
Furthermore, Netflix’s pricing strategies could be influenced by local market conditions. Ensuring the right value proposition is key to making international ventures successful.
Step 4
Conclusion on the need for international trade
Answer
In conclusion, saturated markets compel Netflix to pursue international trade as a means of sustaining and enhancing its subscriber growth. However, the success of such initiatives hinges on its ability to adapt to varying market conditions, efficiently managing competition, and understanding consumer preferences in diverse regions. This strategic navigation will determine how well Netflix can leverage potential opportunities in international markets amidst the complexities of competition and local dynamics.