1.1.1 The Market

Question 1

Definition of nice markets

Answer 1

A specialist area of the market/ is a subset of the market on which a specific product focuses. It is a smaller segment of a larger market where consumers have specific needs and wants

Question 2

Advantages of a nice market

Answer 2

• less competition
• has a clear focus as it targets specific customers
• can often charge a higher price - customers are prepared to pay for expertise
• high profit margins
• customers tend to be loyal

Question 3

Disadvantages of a nice market

Answer 3

• lack of economies of scale (lower unit costs that arise from operating at high production volumes)
• risk of over dependence on a single product or market
• likely to attract competition if successful
• vulnerable to market changes

Question 4

Definition of a mass market

Answer 4

A large un segmented market where mass appeal products are on sale

Question 5

Features of a mass market

Answer 5

• customers form the majority of the market
• customers needs and wants are more general and less specific
• associated with higher production output and capacity (economies of scale)
• success usually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands

Question 6

Definition of market growth

Answer 6

An increase in demand/sales for a particular product/service

Question 7

Definition of market share

Answer 7

The % of the total market a business has in terms of volume or value

Question 8

Definition of market size

Answer 8

The total amount of sales/customers in a market measured by value/volume

Question 9

External factors affecting market share

Answer 9

• state of the economy
• inflation
• shocks i.e. Covid
• legislation
• media
• consumer trends
• competition

Question 10

How can a business influence their market share?

Answer 10

• pricing
• marketing
  Market research = trends
• USP (unique selling point)

Question 11

Definition of a dynamic market

Answer 11

A market that is subject to rapid/continuous change

Question 12

Advantages and disadvantages of online retailing = dynamic markets

Answer 12

Adv:
- access to international customers
- longer trading hours
- cheaper to run = lower fixed costs
Disadvantages:
- high costs = website development
- high levels of completion
- might find it difficult to get the required customer service

Question 13

Explain how markets change = dynamic markets

Answer 13

Key changes include:
- consumer taste
- affluence
- demographic
- competition
- legislation

Question 14

Explain innovation and market growth = dynamic markets

Answer 14

Innovation = bringing a new idea to life, such as launching a new product or service
- can help to gain a business market share and spur market growth

Question 15

Explain how business adapt to change = dynamic markets

Answer 15

Consumer tastes change
- clever businesses adapt rather than waiting and being forced to change

Question 16

Explain direct competition

Answer 16

When businesses produce similar products that appeal to the same group of consumers

Question 17

Explain indirect competition

Answer 17

Occurs when different businesses make or sell products that are not in direct competition but compete for the same consumer expenditure
E.g. shop selling dvds vs cinema

Question 18

Explain ways in which competition affects the market: battle for market share

Answer 18

• a constant battle to gain or protect shares
• threat of new market entrants always there

Question 19

Explain ways in which competition affects the market: pricing

Answer 19

• price wars are a regular feature of intense competition
• stronger competitors often set the market price

Question 20

Explain ways in which competition affects the market: battle for competitive advantage

Answer 20

• product differentiation is a key part of competition
  Competitive advantage = the ability of a business to add more value for its customers than its rivals and attain a position of relative advantage