Quantify the competitive advantage in the following situation: A and B are two providers of music downloads. Firm A has spent £500,000 on marketing expenses and has acquired 200,000 customers; firm B has spent £1,200,000 on marketing and has acquired 400,000 customers. Provider A charges a price of £1.00 for each song, and has to pay royalties of £0.30 per song to music publishing companies. Provider B charges a price of £1.10 for each song, and has to pay royalties of £0.20 per song to music publishing companies. Streaming service A expects to sell 1,000,000 songs in total to their customers (over their lifetime as customers). Streaming service B expects to sell 1,600,000 songs in total to their customers (over their lifetime as customers). What is the total profit of each provider, A and B? Which of the two providers has a competitive advantage? How large is it, and what are its sources?
Quantify the competitive advantage in the following situation:
A and B are two providers of music downloads. Firm A has spent £500,000 on marketing expenses
and has acquired 200,000 customers; firm B has spent £1,200,000 on marketing and has acquired
400,000 customers. Provider A charges a price of £1.00 for each song, and has to pay royalties of
£0.30 per song to music publishing companies. Provider B charges a price of £1.10 for each song,
and has to pay royalties of £0.20 per song to music publishing companies. Streaming service A expects to sell 1,000,000 songs in total to their customers (over their lifetime as customers). Streaming service B expects to sell 1,600,000 songs in total to their customers (over their lifetime as customers).
What is the total profit of each provider, A and B? Which of the two providers has a competitive
advantage? How large is it, and what are its sources?
Step by step
Solved in 4 steps
