1.1.1 - The Market Flashcards
1
Q
What is a Mass Market
A
Market that is aimed at the general population
2
Q
What are the characteristics of a mass market
A
- Product is sold to all consumers in the same way
- Many products can be sold on a global scale with just a few language tweaks
3
Q
What are the advantages of a mass market
A
- Large scale production means economics of scale and lower average unit costs
- Mass marketing is straightforward as everyone is equally targeted
- Large volume of sales means high revenues (this can be pumped into research and development)
4
Q
What are the disadvantages of a mass market
A
- Lots of competition in mass markets
- Homogenous products need to be differentiated thorough marketing which can be expensive
- High volume production may mot be flexible enough to keep up with changes in demand
5
Q
What is a niche Market
A
- A subset of the main market and addresses a specialist need
6
Q
What are the characteristics of a niche market
A
- Subset of the main market and caters to a particular segment of the market that is not being met by other providers
7
Q
What are the advantages of a niche market
A
- Charge premium prices
- Easier to target customers
- Small scale productions can be flexible and follow trends
- Less competition than in mass markets
8
Q
What are the disadvantages of a niche market
A
- Very risky as demand may not be constant
- Higher unit cost so no economies of scale
9
Q
What is a dynamic market
A
A market that is subject to rapid or continuous changes
10
Q
What is Market Size
A
- The size of the market is the TOTAL of all the sales of all the producers
in that market - This can be measured two ways:
1. Volume of sales, or quantity of products sold e.g. 91 million burgers
sold every year**
2. Value, total amount spent by customers e.g. The UK burger bar market is
estimated to be worth Β£3.28billion in 2016*
11
Q
What does a business do with information about market size
A
- Coca Cola can look at the data and decide if the market is expanding or contracting
- Coca cola can calculate their market share in relation to competitors
- Coca cola can look at other markets e.g. China or emerging economies and see if they are worth entering
12
Q
What is a Market Share
A
- This means the proportion (%) of a market that is taken by a business,
product or brand. It is calculated using the following formula:
πππππ ππ π₯ / Total sales in whole market x 100
13
Q
What is online retailing
A
- This is a dynamic market because it is constantly changing, developing, expanding and offering customers new products and new ways to shop
- Shoppers can make 51% of there purchases online
14
Q
What are the advantages of online retailing
A
- Shops can open round the clock so they donβt miss critical times when customers can shop
- Orders can be taken automatically without the need for staff
- Shops can reach international markets easily
- Low overheads (no need for shop premises)
- Stock can be easily withdrawn or updated to keep up with dynamic market changes in tastes
- Flexible and easy to set up
15
Q
What are the disadvantages of online retailing
A
- Issues with sending goods back may put customers off
- Issues with online security worries put off older customers and those not keen to share their bank details
- very competitive market
- owners need IT skills
- problems with fraud/spam/viruses
- competitors can be aware of owners business model, prices, activity
16
Q
What is Market Growth
A
- With dynamic markets, comes constantly changing consumer tastes and preferences
- Products not used widely 20 years ago:
Internet
Mobile Phones
PC computers for home use
Computer games / games consoles - Technology is a massive growth market, consider how many of these items are in most UK householdsβ now
17
Q
How does a competitive market benefit the consumer
A
- More competition means a business needs to be very efficient
- More competition means the business needs to listen to
consumer needs and wants and constantly strive to meet those
needs rather than being product orientated - More competition means a business must be less wasteful
18
Q
How does competition affect the market
A
- More competition means a business must produce a good quality product or service, or their customers will go elsewhere
- More competition in homogenous markets means that businesses must complete on non-price factors, meaning lots of exciting promotions to persuade consumers to switch supplier or product
19
Q
What is risk
A
- Business risk is the possibility a business will have lower than anticipated profits or experience a loss rather than taking a profit
- Business risk is influenced by; raw material costs, competition, the overall economic climate and government laws e.g. minimum wage
20
Q
What is risk (Lack of job security)
A
- When a person starts a business they may leave behind a secure job, this means they may suffer stress and anxiety as a result. Setting up your own business can be a huge risk financially, and there are lots of factors to consider before starting out on your own.
- The risk of business failure means the business owner may not be able to meet their own financial bills
21
Q
What is risk (Financial risk)
A
- A business owner may put their own savings or finances into the business, this could be lost if the business fails
- If the business is too highly geared (dependent on debt) then it may have difficulty if interest rates rise
- Most businesses fail due to poor cash flow management
- Cash flow can be improved by making sure that customers pay on time
22
Q
What is uncertainty
A
- Uncertainty is when businesses are unable to predict external shocks or future events
23
Q
How does uncertainty affect spending decisions
A
- There is a degree of uncertainty in most business decisions
- This is because the future cannot be predicted with any certainty, we cannot be 100% sure that any event will happen
- Uncertainty increases with time; a forecast a week ahead will be more accurate than a year ahead
24
Q
How might a business protect itself from uncertainty
A
- A business may worry about fluctuating interest rates and so may take out a long term loan at a FIXED rate of interest, then it will know exactly how much loan interest will be a month, making it easier to budget and plan
- This means that loan payments stay the same each month and the business knows its fixed costs each month will not change
