1.1.1 The market Flashcards
What is a Mass market?
A larger section of the market in which products are aimed at a broad range of consumers
What is a Niche market?
A smaller section of a larger market in which a specific product meets the needs and wants of consumers which isn’t already being addressed by another business
Characteristics of a Mass market
- Generic products which are broadly similar in form and function
- Low average costs due to large scale production (economies of scale)
- Low prices lead to greater affordability and higher sales volumes
- More competition
Characteristics of a Niche market
- Products are more specialised and unique as they are aimed at narrow market segments
- High average costs due to small scale production
so don’t benefit from economies of scale - High prices can allow businesses to earn higher profit margin
- Less competition
What is a Market segment?
A section of a market in which consumers share similar needs and wants
What is Sales volume?
Number of products sold
What is Sales revenue?
Financial value of the units sold
What is Market share?
Amount sold by a business as a percentage of the total market
What is a market?
Any arrangement that allows buyers and sellers to communicate and exchange a particular range of products and services
Advantages of Niche markets
- Less competition
- Can charge a high price
- Customers are more loyal
- Products meet consumer needs and wants
Disadvantages of Niche markets
- Fewer potential customers
- Vulnerable to market change
- Hard to persuade retailers to stock products
Advantages of Mass markets
- Higher volumes of sales mean businesses can afford larger advertising and marketing campaigns
- Larger scope for economies of scale
Disadvantages of Mass markets
- Fierce competition as their is potential for high sales
- Without a USP its hard to survive
What is a Brand?
A recognisable logo which distinguishes a product from its competitors
Advantages of having a strong brand
- Inspires customer loyalty so repeat purchases and recommendations are made
- Can charge higher prices
- Retailers will want to stock up top selling brand
What does Differentiation mean?
Making the product stand out from competitors e.g. by using a USP
What is a Competitive advantage?
An advantage held over competitors gained by offering consumers greater value e.g.
- changing prices
- advertising
- better customer care
- differentiation
What is a Dynamic market?
A market which is subject to rapid change and so customer demand is unpredictable
What does Online retailing involve?
Selling products via the internet
Advantages of Online retailing
- Provides business access to more consumers
- Enables longer trading hours as the business is open 24/7
- Cheaper to run as it lowers fixed and variable costs
- Businesses can collect data by tracking consumer behaviour which helps with primary market research
- Consumers can shop at a time that suits them
Disadvantages of Online retailing
- There may be high costs for website development, maintenance, and promotion
- Online retailing is dominated by larger businesses that are more well-known
- 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
and so consumers may find it difficult to get the desired level of customer service - Consumers may find it difficult to return unwanted products
- Online purchasing opens consumers up to credit card fraud
Why do markets change?
As a result of major external influences
What are the factors that cause markets to change?
- Changing consumer tastes and preferences e.g. consumers desiring electric vehicles in place of petrol cars
- Changing demographics e.g many developed countries have an increasingly older population who have different wants and needs to previous markets
- The amount of competition e.g. international trade means larger market sizes but also more competition between an increasing number of firms
- Changing legislation e.g. laws around environmental standards create new markets
What is Market size?
Total number of sales in £ in a market
What is Product innovation?
Adaptation or improvement of existing products
What is Process innovation?
Adaptation or improvement of existing processes
What is Market growth?
The measurement of the change in the entire market and is expressed as a percentage of the original size
What causes Market growth?
- Increasing population sizes can increase demand in certain markets
- Increasing disposable 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
What is a benefit of adapting to change?
Allows businesses to thrive in dynamic markets
What are the ways to adapt to change?
- Create flexible business structures, especially in terms of operations and people management
- 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 two businesses are providing goods to the same target market and the more businesses in the market, the more intense the competition
Advantages of competition for consumer
- Businesses offer lower prices
- Businesses produce better quality products
- Businesses provide better customer service
What is meant by Risk?
Potential threat to business success and can be internal or external
What is meant by Uncertainty?
When outcomes are difficult to predict
