1.1.1 The market Flashcards
What is a market?
Where buyers and sellers can meet, such as Amazon.com.
What is the aim of a market?
To identify, anticipate and satisfy consumer needs and wants profitably.
What is a mass market?
In a mass market products are aimed at large market segments, production usually happens on a larger scale.
What is a niche market?
In a niche market products are aimed at a subset of the larger market, production usually happens on a smaller scale.
Characteristics of a mass market.
- Products are less unique as they are aimed at broad market segments
+ Low average costs due to large scale production and economies of scale
+ Low prices lead to greater affordability and higher sales volume - Low prices lead to low profit margins
Primark is an example of a clothing company that focuses its products on a mass market.
Characteristics of a niche market.
+ Products are more specialized and unique
- High average costs due to small scale production, no benefit from economies of scale
- High prices make products less affordable and lead to lower sales volume
+ High prices can allow businesses to have higher profit margins
Louis Vuitton is an example of a fashion company that aims its products at a niche market.
How do you work out the size of a market?
Sales volume - The amount of products/units sold.
Sales value - price x quantity sold.
What is market share?
The percentage of a market the business has total sales in. For example Tesco has 26% of the UK grocery market.
How do you work out market share?
Sales of a business
————————— x100 = Market share
Total sales in the market
What is a brand?
A brand is a name, logo or image which helps a product/service stand out from competitors.
Characteristics of brands.
+ Brands are unique and protected by law
+ Brands add value
+ Brands influence the position of a product within its market, stand out from competition
+ Can charge higher prices because of their perceived quality
What is a dynamic market?
A dynamic market is a market that is subject to rapid or continuous changes.
Will businesses with monopoly power face dynamic pressures?
No monopoly power businesses such as Amazon will not experience the same dynamic pressures as businesses in more competitive markets.
What is online retailing?
Online retailing involves selling products/services via the internet.
Advantages and disadvantages of online retailing.
+ Provides business access to more customers, including internationally
- There may be high costs for website development, maintenance and promotion
+ Enables longer trading hours as the business can be open 24/7
- Online retailing is dominated by larger businesses that are more well-known
+ Cheaper to run as it lowers fixed and variable costs compared to bricks and mortar retailers
- There is a lack of personal connection with customers
How do markets change?
/ Change in consumer tastes and preferences
/ Changing demographics
/ The amount of competition
/ Changing legislation
What is innovation?
Product innovation - Involves the adaptation or improvement of existing products.
Process innovation - Involves the adaptation or improvement of existing processes.
What is market growth?
Market growth is the measurement of the change in the entire market, expressed as a percentage of the original size. A businesses market share does not necessarily grow with the market.
Causes of market growth.
/ Increasing population
/ Increasing incomes
/ Changing tastes and preferences
What is adapting to change?
Adapting to change is recognizing and adapting to market changes to thrive in dynamic markets.
Strategies to adapt.
/ Create flexible business structure
/ Meet customer needs
/ Invest in staff training, new products and processes
/ Innovate so as to gain the first mover advantage
When does competition occur?
Competition occurs when at least two businesses are providing goods/services to the same target market. The more the business the more tense the competition.
What is the difference between direct and indirect competition?
Direct competition - When the business is targeting customers with the same product as a competitor.
Indirect competition - When firms sell different products but all compete with each other for the customers disposable income.
Why is competition a good thing?
The absence of competition reduces incentives for business to innovate, be efficient or offer consumers lower prices.
Difference between risk and uncertainty?
Risk - The potential threat to a businesses success.
Uncertainty - When outcomes are difficult to predict.
