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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. (a) Discuss the implications of Spotify’s de... 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
Discuss the implications of Spotify’s development of new video experiences
Answer
Spotify’s introduction of new video experiences could significantly enhance its market position by attracting new subscribers and retaining existing ones. This development may drive more customers to the platform as it diversifies content offerings beyond just audio.
By incorporating Virtual Reality (VR) experiences, Spotify can cater to early adopters who are willing to pay a premium for innovative content. This strategy may help Spotify transition into the maturity phase of its product lifecycle, bolstering its brand image as an innovator.
As an established brand since 2008, Spotify can leverage its existing user base, creating engaging new content in the process. With competitors like Apple struggling to replicate this approach, Spotify’s focus on unique offerings could strengthen customer loyalty and improve market share.
Step 2
Assess the potential of targeting new markets for Spotify
Answer
Targeting new markets, particularly in Asia, presents substantial growth opportunities for Spotify. In these markets, only 14% of digital music currently comes from streaming, indicating a large potential user base.
However, Spotify must navigate significant challenges such as higher price sensitivity among Asian consumers and potential copyright infringements, which could complicate operations.
The approach of focusing on existing markets might be less risky because of Spotify’s established brand and trust. Nevertheless, expanding into Asia could lead to higher growth potential if executed wisely, particularly by exploring mobile and partnership opportunities that could enhance market penetration.