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Use 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
Use 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:Use 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
Assess the potential for new customers in saturated markets
Answer
Markets are considered saturated when the potential number of new customers is zero. For a business like Netflix, this implies that growth is limited within existing markets. Consequently, to gain new subscribers, it is essential to explore new markets, such as international expansion into places like the UK and Europe.
Step 2
Evaluate the opportunities presented by international markets
Answer
The UK market presents an opportunity for Netflix, which has approximately 10 million extra subscribers compared to its domestic US market. This extra revenue stream can significantly benefit Netflix's overall growth, especially considering the projected decrease in traditional video revenue.
Step 3
Analyze competitive factors influencing decision-making
Answer
Netflix faces strong competition in new international markets due to local players and other global giants like Amazon. Establishing a presence in these markets may not only boost subscriber numbers but could also assist in obtaining competitive advantages, potentially allowing Netflix to leverage economies of scale.
Step 4
Consider counterbalancing factors affecting international trade
Answer
Conversely, challenges such as the presence of established players and fluctuating customer preferences may hinder successful expansion efforts. Additionally, Netflix's home market is very large, and expanding internationally may not provide the expected subscriber gain due to market conditions and preferences that differ from those in the US.
Step 5
Judgment regarding the importance of international trade
Answer
In the rapidly evolving OTT market, seeking out new avenues for growth is crucial. While saturated markets present challenges, they also encourage businesses like Netflix to innovate and develop unique offerings tailored to international consumers to ensure long-term sustainability.