Page 9 - SCS May 2018 - Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

demands on its cash to keep its existing catalogue of content up to subscriber expectations; an
attempt to diversify at this time could put its existing competitive advantage at risk.

Overall, the strategy does not appear feasible.

Acceptability

A strategy is acceptable when it is aligned with the interests of stakeholders.

Two immediate bodies of stakeholders would appear to be relevant here – customers and
providers of finance.

Customers are likely to welcome an enhanced product offering, assuming that it leads to better
value for them. For example, a subscriber may currently have both a Couchweb and a Spotify
account, and be paying two different subscriptions for TV/movies and music. If one company can
offer the same overall content for lower total cost, they will react well to the move.

Providers of finance will be the company’s shareholders and those who have lent money to the
business (debt financiers). Their reaction will depend on the perceived risk and return from the
venture. As mentioned under feasibility above, there must be doubts over Couchweb’s ability to
compete effectively against established operators, and this increases the risk to financiers. If there
is no compensating increase in possible return, the proposal will be deemed unacceptable.

Overall, the strategy is likely to be unacceptable.

Conclusion

The proposal to add music to our portfolio of products would appear to fail both the feasibility
and acceptability tests, and should therefore not be pursued.

Tutorial note – when evaluating a proposal in this way, it is possible to arrive at a different
overall conclusion. What matters most is that the justification for your conclusion is credible in
the eyes of the marker!

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