1.1.1 The Market Flashcards
Market
- buyers &sellers
- exchange goods/services
- exchange of money at a set price
production product promotion price place/people
marketing
the department tasked with targeting the right product for the right target market using the right combination of price promotion product and place (4Ps)
4 Ps
price
promotion
product
place
marketing strategy
plan of how you are going to achieve your marketing objective
SMART
mass market
products or services
targeted at whole market e.g mars bar
people: generic/wider pop
product: wide, low quality
promotion: mass media
price: competitive
production: high output, low cost EOS
ADV of mass market
1-wide TM = less risk
2-EOS
3-cheaper unit production cost (large)
4-large vol of sales = high revenue, invest in R&D
DIS of mass market
1-competitive = differentiate
2-not flexible in production (demand changes) high volume
3-homogeneous (all same) = differentiate = market cost
ADV of niche market
- premium price = profit
- less competition
- specific knowledge/skills
- smaller customer easier to target (loyalty)
- small scale production (flexible/follow trend)
DIS of niche market
- higher unit cost = No EOS
- risk of overdependence on single market/product
- risk = demand not constant (vulnerable to market changes)
- high skill staff
- small market = less demand
market size
total value or volume of sales in market
can be measured in monetary terms (e.g. £20million)
or by amount sold (e.g. 1 million cars)
market size formulae
number of units sold x price
market share
proportion of total market sales a firm has
sales of one firm divided by total market sales x 100
3 things market share influenced by
1-marketing focus
2-economic situation
3-competitors actions
dynamic market
constantly changing,
seller respond to the changing needs of buyers improving existing or introducing new ones
5 reasons why are markets dynamic
1-dynamic environment 2-social trends 3-changes in technology 4-competitive environment 5-consumer tastes
fails to keep up with trends = lose competitiveness
other market
relatively slow moving e.g. confectionary
stable market
pace of change is slow,
market size and share are fairly constant little variation in price
(innovation: rare, minor changes to existing products
markets have changed/how they change
technological changes (internet)
how:
digital economy
changes consumer tastes
online retailing
process of buying & selling goods and services over the internet (e-commerce)
ADVS and DIS of impact of consumer of online retailing
ADV:
- convenient - breaks geographical location barrier
- wider range (greater choice
- wider availability (new products/services)
- more price transparency
DIS:
- intangible product
- delivery issues
- fraud
ADVS and DIS of impact of business of online retailing
ADV:
- 24/7 sales always online
- increase demand - wider target market
- reduced rent payments
- small can reach global market (fast for growth)
- cheaper to run
DIS:
- more competitors (less barriers to entry)
- increased delivery, storage costs
- may have to reduce price
- specialist to set up &maintain website
digital economy
economy built on technologies (internet facilitates this use of technology)
3 main areas of digital economy
- supporting infrastructure
- e-business
- e-commerce
government innovation
increasing legislation in an industry - alter way marker operates
(automobile market affected - laws reducing carbon emissions)
Brand
product produced by one business using a specific business
creation of an identity for the business distinguishes that firm and product (other firms)
consumer have perception of what to expect
trademark not copied
-name, shape, symbol, colour, logo, images, celebrity endorsement
-build loyalty & repeat business as well as adding value =higher prices
branding
add value
charge higher prices
brand loyalty continue to buy
3 Benefits of branding
- brand extension (new products willing to try new products on brand loyalty)
- brand value
- brand personality (take on persona, certain human characteristics)
How do businesses respond to changes in market?
3 ways
- Offensive (increases sales/develop new markets)
- Defensive (react to competition & maintain market share)
- Mixture
market growth
- percentage increase in size of market
- change in size of market divided by original size x100
marketing
- action/process of promotion & selling products or services
- market research and advertising
- how business connects with customer (include 4Ps)
5 ways competition affects market
- price a business is able to charge
- buying power of customer
- selling power of supplier
- availability of substitutes
- willingness and ability of new firms to enter
degree of competition
- number of firms that exist in a market
- range from a monopoly (one firm dominates industry) where there are any buyers and sellers
product innovation
- occurs when new technologies make it possible to create completely new products
- increase sales / whole new markets = rapid growth
-being innovative = growth
process innovation
- using new technology to improve production methods
- cost reduced without loss in quality
- through distribution channel, stock control, supply chains
risk
(calculated) probability/possibility that things will go wrong
(calculated/weigh up)
situations where businesses may have to assess risk:
help/safety = risk product breaches regulations
weigh up risk of new product by market research
whether to diversify use cost benefit analysis / benchmarking (match to the best)
risk making business investment
risk MR will pay off
uncertainty
unpredictable and uncontrollable events that affect a business
- about sales success for new product launch
- effect of launching price war against competition
- external events
- economic variables
- how government may react to FDI
to reach equilibrium
D =S
excess supply when D
risk
calculate probability/possibility that things will go wrong
calculated/weigh up
situations where business need to assess risk
health/safety
new product MR. (Payoff).
diversify use cost benefit analysis, benchmarking (match to best)
making business inv
uncertainty
unpredictable and uncontrollable events that affect business
e.g. industrial action (strikes)
sales success for new product launch effect of launching price war against comp external events economic variables how governments may react to FDI
strategies to minimise risk and uncertainty
sales forecasting techniques (JIC) decision trees ensure liquidity "safe" working capital, acid test/current ration market research contingency plans/scenario plans RISK= loyal customer base developed broaden product portfolio
uncertainty strategies
excess cash supplies
decrease number of receivables and no of receivable days given increase payable days to suppliers
diversify
foster agility in decision making
risk strategies
take calculated risk
diversify = spread risk
look for increased returns to account for risk
be persistent
