4.3.2 Niche markets (global niche and mass markets)

Question 1

balance of payments

Answer 1

record of international transactions

Question 2

transfer pricing

Answer 2

price established for any transaction that occurs whenever 2 companies that are part of same multinational group trade with each other

Question 3

niche market features

Answer 3

clear focus 
low profit margin 
specialist skills and knowledge 
lack EOS 
may attract competitors if successful 
less competition

Question 4

mass market features

Answer 4

low unit cost
product broad and appealing to customers
high profit margin
allows heavy promotion (due to competitors)

Question 5

global niche market

Answer 5

market where customers in many countries have specific needs and wants that are not satisfied by mass market product or service

Question 6

features of global niche market

Answer 6

very small market in each country
combination of all countries together makes enough demand to make business profitable
subset of a global market
highly specialised and characterised by very loyal customers and premium prices

Question 7

strategies to target global niche markets/how global niche markets develop

Answer 7

adapt prices = local culture

• consider local customers/culture (cultural diff)
• use polycentric approach = R&D and MR
• leveraging a joint venture
• specialist expertise developed
• different adoption of technology
• premium/luxury demand
• distinctive branding
• specialist distribution

Question 8

cultural diversity

Answer 8

range of different societies or people of different origins, religions, traditions, all living and interacting together

• value diverse culutre, understand and respect beliefs
• support keeping beliefs alive

Question 9

factors that influence cultural diversity

Answer 9

1. legal systems
2. economic development (education, disposable income, incomes, health)
3. language
4. religious/social norms
5. attitudes to outsiders
6. weather and climate
7. history and traditions

Question 10

pros of global niche

Answer 10

successful combined global niches = lucrative/profitable = prices higher = greater profit
barriers to entry high ease of doing business complex = essential to reduces risk
less competition = increase customer loyalty
specialist product = reduce PED = premium price

Question 11

cons of global niche

Answer 11

extensive R&D and MR = costly
make ROCE take longer to achieve
complex to distribute (physically infrastructure and relationships)
some global EOS - not achievable as each market needs individual attention
communication and co-ordination = difficult across differing brands/markets
product = unique ingredients/production techniques = decrease scope for EOS