1.1.1 the market

Question 1

definition of a market

Answer 1

where buyers and sellers come together and agree a price for a good/service

Question 2

definition of a mass market

Answer 2

where a business sells into the largest part of the market

where there are many similar products offered by competitors

Question 3

advantages of operating in a mass market

Answer 3

low average costs - economics of scale

low prices = higher sales

easy access to raw materials

large product portfolio

Question 4

disadvantages of operating in a mass market

Answer 4

high competition

products are less unique

low prices = lower profit margins

Question 5

definition of a niche market

Answer 5

where a business targets a smaller segment of a larger market

where customers have specific needs and wants

Question 6

advantages of operating in a niche market

Answer 6

products are more specialised and unique

higher prices = higher profit margins

loyal customers

Question 7

disadvantages of operating in a niche market

Answer 7

high prices = lower sales volume

higher average costs (small scale production) - do not benefit from economies of scale

Question 8

market share formula

Answer 8

market share = (sales of a business / total sales in the market) x 100

Question 9

sales revenue formula

Answer 9

sales revenue = price x quantity sold

Question 10

definition of a brand

Answer 10

a name, image or logo which helps one product/service stand out from its competitors

Question 11

definition of added value

Answer 11

makes the product/service more desirable to consumers

the difference between the price of a finished product/service and the cost of inputs involved in making it

Question 12

definition of a dynamic market

Answer 12

a market that is subject to rapid/continuous change

Question 13

definition of competition

Answer 13

when at least two businesses are providing goods/services to the same target market

Question 14

definition of direct competition

Answer 14

when the business is targeting customers with the same product as a competitor

Question 15

definition of indirect competition

Answer 15

when firms sells different product but compete with each other for the customers disposable income

Question 16

advantages of competition

Answer 16

lower prices

better quality products

better customer service

Question 17

definition of risk

Answer 17

the potential threat to business success

Question 18

definition of uncertainty

Answer 18

when outcomes are difficult to predict

Question 19

advantages of good branding

Answer 19

adds value = making the product more appealing to consumers so firms can charge more for the product

stand out against competition

perceived quality of strong brands is better than that of weaker brands

Question 20

what businesses are less likely to be affected by a dynamic market?

Answer 20

businesses with monopoly power (e.g. amazon) may not face the same dynamic presses as businesses in more competitive markets

Question 21

what are the four areas to consider when examining dynamic markets?

Answer 21

online retailing

how markets change

innovation and market growth

adapting to change

Question 22

advantages of online retailing for firms and consumers

Answer 22

provides business access to more consumers (including internationally)

enables longer trading hours as business is open 24/7

cheaper to run as it lowers fixed costs compared to brick and mortar retailers (physical stores)

Question 23

disadvantages of online retailing for firms and consumers

Answer 23

consumers may find it difficult to get the desired level of customer service

high levels of competition = expensive to make a website stand out (may need to hire an expert which is an additional cost)

consumers may find it hard to return products

Question 24

what changes cause markets to be dynamic

Answer 24

changing consumer tastes and preferences e.g. electric vehicles over petrol

changes in demographics

amount of competition (international trade = higher competition and larger market sizes)

changing legislation (laws around environmental standards create new markets)

Question 25

definition of a demographic

Answer 25

the qualities of consumers e.g. age, sex, income, ethnicity etc.