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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
The dynamics of the market provide Spotify with opportunities to diversify its offerings. For instance, the introduction of video subscriptions can attract new subscribers, helping to increase the overall revenue. Furthermore, this shift allows Spotify to focus on niche markets by offering premium services targeted at high-end customers seeking unique experiences, such as Virtual Reality.
In addition, the evolution of listening habits, facilitated by technologies like Amazon Echo and Google Home, creates alternative platforms for competition. This forces Spotify to continuously innovate to meet changing consumer preferences.
Step 2
Potential counterbalance
Answer
Despite these opportunities, the dynamic nature of the market also implies increased costs for development and adaptation. New music subscription services launched between 2015 and 2017 have struggled to remain profitable, indicating that while opportunity exists, competition remains fierce. This may challenge Spotify, which must effectively manage its costs to compete with companies like Apple and Google, who might be willing to operate at a loss initially to gain market share.
Step 3
Potential judgement
Answer
For Spotify, understanding the ever-changing market is crucial. Operating efficiently will require continuous adaptation to new technologies and consumer trends. While Apple and Google leverage their substantial resources to navigate the dynamic market, Spotify must innovate and possibly rethink its strategies to maintain its competitive edge and profitability. The company's historical participation in this market offers some credibility, but remaining vigilant to market changes is essential in such a fluctuating environment.