1.1.1 the market Flashcards
definition of a market
where buyers and sellers come together and agree a price for a good/service
definition of a mass market
where a business sells into the largest part of the market
where there are many similar products offered by competitors
advantages of operating in a mass market
low average costs - economics of scale
low prices = higher sales
easy access to raw materials
large product portfolio
disadvantages of operating in a mass market
high competition
products are less unique
low prices = lower profit margins
definition of a niche market
where a business targets a smaller segment of a larger market
where customers have specific needs and wants
advantages of operating in a niche market
products are more specialised and unique
higher prices = higher profit margins
loyal customers
disadvantages of operating in a niche market
high prices = lower sales volume
higher average costs (small scale production) - do not benefit from economies of scale
market share formula
market share = (sales of a business / total sales in the market) x 100
sales revenue formula
sales revenue = price x quantity sold
definition of a brand
a name, image or logo which helps one product/service stand out from its competitors
definition of added value
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
definition of a dynamic market
a market that is subject to rapid/continuous change
definition of competition
when at least two businesses are providing goods/services to the same target market
definition of direct competition
when the business is targeting customers with the same product as a competitor
definition of indirect competition
when firms sells different product but compete with each other for the customers disposable income
advantages of competition
lower prices
better quality products
better customer service
definition of risk
the potential threat to business success
definition of uncertainty
when outcomes are difficult to predict
advantages of good branding
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
what businesses are less likely to be affected by a dynamic market?
businesses with monopoly power (e.g. amazon) may not face the same dynamic presses as businesses in more competitive markets
what are the four areas to consider when examining dynamic markets?
online retailing
how markets change
innovation and market growth
adapting to change
advantages of online retailing for firms and consumers
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)
disadvantages of online retailing for firms and consumers
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
what changes cause markets to be dynamic
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)
definition of a demographic
the qualities of consumers e.g. age, sex, income, ethnicity etc.
