1.1.1 Markets Flashcards
What is a market?
Anywhere where buyers and sellers meet e.g Westfield
Define ‘market research’?
- The process of systematically gathering data from consumers which can be used to influence the business decisions
What is market size?
- The total sales value or sales volume in a given market
What is a mass market?
- Where products are aimed at the largest (broadest) part of the market
Production usually happens on a large scale
Mass marketing occurs when businesses sell their products to most of the avalibale market
What is a niche market?
- Where a business targets a smaller segment of a larger market, where customers have specific needs and wants
Production usually happens on a small scale
What are the characteristics of a mass market?
- Products are less unique as aimed at broader market segments
- Low average costs due to large scale of production- benefit from economies of scale
- Low prices lead to greater affordibility & higher sales volume
- Low prices lead to lower profit margins
e.g. Primark
What are the characteristics of a niche market?
- Products more specialised & unique as aimed at narrow market segments
- High average costs due to small scale production
- High prices make products less affordable & lead to lower sales volume
- High prices can allow business to earn higher profit margin
e.g. Louis Vuitton
What can the size of a market be measure through?
- Sales volume or sales value
What is sales volume?
- The number of products sold
(i.e physical amount of products being sold)
What is sales revenue?
Price X Quantity sold
(i.e the financial value of the units sold)
How can you calculate market share?
Sales of a business/Total sales in the market X100
What is a brand?
- A name, image or logo which helps one product/service stand out from it’s competitors
Branding is one of the key ways businesses achieve product differentiation
Define ‘product differentiation’.
- The process of distinguishing a product or service from competitors products in the market
Why are brands so good?
- Brands add value, often making product/service more desirable to consumers
- Businesses operating in mass markets use brands to stand out from competitors
- Brands influence the position of a business within its market- stong brands are able to charge higher prices than weaker brands
What is meant by a business ‘adding value’?
- The process by which firms increase the price that the consumer is willing to pay
What is meant by a dynamic market?
- A market that is a subject to rapid or continuous changes
e.g. the mobile phone market- landline-Iphone 15
What are the 4 areas to consider when examining dynamic markets?
- Online retailing
- How markets change
- Innovation and market growth
- Adapting to change
What is online retailing?
- Selling products via the internet
What are the advantages & disadvanatages of online retailing?
- Advantages:
- Provides business access to more consumers, including internationally
- Enables longer trading hours as the business is open 24/7
- Cheaper to run as it lowers fixed and variable costs compared to bricks and mortar retailers
- Businesses can collect data by tracking consumer behaviour which helps with primary market research
Disadvantages:
* May be high costs for website development, maintenance, and promotion
* High levels of competition mean that it will be expensive to make a website stand out
* There is a lack of personal contact with customers
What changes cause markets to change & become dynamic?
- Changing consumer tastes and preferences
- Changing demographics
- Amount of competition e.g. international trade means larger market sizes but also more competition
- Changing legislation
Innovation and market growth
What does product innovation involve?
- The adaptation or improvement of existing products
e.g. improved camera on new iphone
Innovation and market growth
What does process innovation involve?
- the adaptation or improvement of existing processes
e.g. just in time stock control
Innovation and market growth
What is market growth?
- Measurement of the change in the entire market, expressed as a percentage of original size
Innovation and market growth
What can market growth be caused by?
- Increasing population sizes can increase demand in certain markets
- Increasing incomes can increase demand in certain markets
- Changing tastes and preferences can cause the market to grow
e.g. the growth in the electric car market
Adapting to change
What strategies are there to adapt to change?
- Meet customer needs, by carrying out market research and communicating with customers
- Invest in staff training, new products and processes
- Innovate so as to gain the first mover advantage
When does competition occur?
- When at least 2 businesses are providing good/services to the same target market
What is direct & indirect competition?
- Direct competition-Occurs when businesses are targeting the same customers with the same product as a competitor e.g. iphone
- Indirect competition-When firms sell different products but compete with each other for the customer disposable income e.g. cinema & theatre companies
How can competition beneift a customer?
- Businesses offer lower prices
- Businesses produce better quality products
- Businesses provide better customer service
What is the difference between risk & uncertainty?
- Risks can be calculated & prepared for
Uncertainties cannot as they are unexpected events
e.g. of risk- loss of staff e.g of uncertainty-will energy prices rise?
