Business theme 1 revision

Question 1

What is a niche market?

Answer 1

A niche market focuses on a particular segment of the market.

In niche markets, products are aimed at a subset of the larger market e.g. gluten free products.

Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market.

Production usually happens on a small scale.

Products are more specialized and unique as they are aimed at narrow market segments.

Question 2

What are the pros of a niche market?

Answer 2

1) Less competition
which will allow businesses in niche markets to operate more effectively as they are not constantly worrying about competitors/rivals in the market.

2) Charge higher prices
Allowing businesses in niche markets to increase revenue, as they are able to attract customers with higher disposable incomes.

3) Brand loyalty
They will be able to build brand loyalty as their products will be of a high quality encouraging customers to continuously purchase their items.

Question 3

What are the cons of niche markets?

Answer 3

1) Less scope for growth
There is less scope of growth as you are only targeting a segment of the marker.
2)Lower profits
There could be lower profits as businesses in niche markets do not have access to a wide customer base.
3) Vulnerable to a fall in demand
A fall in demand could severely affect niche markets as they rely on demand from a limited customer base.

Question 3

What is a mass market?

Answer 3

A mass market focuses on the market as a whole.

In mass markets, products are aimed at broad market segments e.g. Kellogg’s Corn Flakes is an example of a breakfast cereal aimed at the mass market.

Market segments are groups of consumers who share similar characteristics e.g. age, lifestyle, etc.

Mass marketing occurs when businesses sell their products to most of the available market.

Production usually happens on a large scale.

Question 3

What are the pros of mass markets?

Answer 3

1) Wider customer base/Increased brand awareness
As businesses are entering huge markets they will be able to gain exposure from customers which will then increase brand awareness.

2)Higher revenues
Businesses will be able to increase revenues as they will have access to many customers.

3) Economies of scale
Businesses will produce a large scale of items together during the production process which will reduce unit costs. Therefore increasing profit margins.

Question 3

What are the cons of mass markets?

Answer 3

) Fixed costs
Fixed costs can be higher due to an increase in start up costs. Businesses may also produce standardised products, which could result in further costs as it may need to purchase expensive equipment such as machinery.

2) Increased competition
There will be greater levels of competition as the business will be targeting multiple segments of the market, where there could potentially be an oversaturation of businesses.

3) Prices
Business will need to adapt its pricing to customers. Therefore businesses may not be able to charge higher prices as this could alienate a large number of potential customers.

Question 4

What is a dynamic market?

Answer 4

A dynamic market is an everchanging market.

Question 5

What are the pros of dynamic markets?

Answer 5

1) Allow businesses to innovate
Dynamic markets will allow businesses to consistently develop new products in order to keep up with everchanging markets.

2) Competitive advantage
As businesses innovate they will be able to gain a competitive advantage that could allow them to stand out amongst other businesses.

3) Consumer Choice
Dynamic markets offer consumers a wider range of choices. Competition drives companies to differentiate their products and services, providing consumers with diverse options and fostering a competitive environment that benefits customers.

Question 6

What are the cons of dynamic markets?

Answer 6

1) High costs
Businesses will incur high costs as they will need to constantly innovate.

2) Increased competition
Dynamic markets typically attract more competitors, as the potential for profits encourages new entrants. This heightened competition can put pressure on existing businesses, leading to lower profit margins and increased efforts to differentiate products or services.

3) Uncertainty
Dynamic markets are frequently changing which could lead to business uncertainty. Uncertain economic conditions, shifting consumer preferences, and technological disruptions can make long-term planning and decision-making challenging.

Question 7

What is market research?

Answer 7

Market research is when businesses gather research about consumer preferences and choices.
Including details about potential customers, competitors, and the overall industry.

Question 8

What are the pros of market research?

Answer 8

1) Understanding Customer Needs
By studying customer preferences, behaviours, and expectations, businesses can tailor their products and services to better meet customer needs. This will improve customer satisfaction and loyalty.

2) Competitive Advantage: Through competitor analysis, businesses can gain a better understanding of their competitors’ strengths and weaknesses. This information allows them to position themselves strategically and develop a competitive advantage.

3) Product Development and Innovation: Researching market trends and customer preferences aids in product development and innovation. Businesses can create products that align with market demands, stay ahead of trends, and maintain relevance in a
dynamic market.

4) Strategic Planning Market research is a fundamental component of strategic planning. It helps businesses set realistic goals, prioritize initiatives, and develop long-term plans that are grounded in a thorough understanding of the market.

Question 9

What are the cons of market research?

Answer 9

1) Expensive
Conducting market research could be expensive.

2) Inaccurate research
Market research could be inaccurate especially if the data collection methods are flawed or if there is a bias in the sample population. Biased results can lead to misguided decisions.

3) Changing market conditions
Markets are dynamic and subject to change. Research findings may become outdated quickly if market conditions, consumer preferences, or external factors shift rapidly.

Question 10

What is product orientation?

Answer 10

Product orientation is an approach where a business primarily focuses on producing high quality products.

Question 11

What are the pros of product orientation

Answer 11

1) High quality products
Product oriented companies often excel in creating high quality products. which could therefore attract a large number of customers.

Question 12

What are the cons of product orientation?

Answer 12

1) High costs
Businesses could incur high costs as a result of producing high quality products.

2) Narrow Market Reach
A product-oriented strategy may appeal only to a niche market or a specific customer segment that highly values product features. This limits the potential customer base and market reach.

3) Threat of substitutes
Similar products could be available at lower prices therefore reducing demand.

Question 13

What is primary research?

Answer 13

Primary research is gathering data in regards to consumer tastes and preferences. This involves asking consumer’s questions(questionnaires) surveys and focus groups.

Question 14

What are the pros of primary research?

Answer 14

1) Relevant up to date information
This important as businesses will have up to date information when assessing the market.

2) Competitive edge
Primary market research could give businesses a competitive edge as businesses will be able to gain insight into the market adapting their products/services in line with customer needs and preferences.

3) Product Development
Businesses can collect feedback directly from customers to identify areas for enhancement or to create new offerings that better meet market demands.

Question 15

What are the cons of primary research?

Answer 15

1) Expensive
Primary market research is expensive as it requires various aspects, including survey design, data collection tools, participant incentives, hiring researchers or interviewers, and data analysis. Small businesses or start-ups with constrained budgets may find these costs prohibitive.

2) External Influences External factors such as economic changes, geopolitical events, or unexpected market shifts can impact the relevance and accuracy of primary research data. These external influences may not be controllable by the business conducting the research.

3)Data Collection Errors
Errors in data collection, such as misinterpretation of survey questions, sampling bias, or data entry mistakes, can introduce inaccuracies into the research findings.

Time consuming
Primary research can be time consuming as it requires gathering new information from the general public on their likes and dislikes.

Question 16

What is secondary research?

Answer 16

Secondary research is existing data that has already been collected.

Examples:
Online databases/websites

Surveys and studies: Data from surveys or studies conducted by others, which may be available in published reports or academic journals.

Question 17

What are the pros of secondary market research?

Answer 17

1) Cost-effective
Secondary research is generally more cost-effective than primary research, as it involves accessing information that is already available

2) Historical Trends: Historical data available through secondary research allows businesses to analyse trends over time. Understanding historical patterns can provide valuable insights into market dynamics and help in predicting future trends.

3) Time-Efficient: Secondary research saves time compared to primary research, which often involves a time-consuming data collection process. Accessing existing data can provide quick insights, making it a suitable option for time-sensitive decision-making.

Question 18

What are the cons of secondary market research?

Answer 18

1) Outdated Information Information obtained through secondary research may become outdated, especially in fast-paced industries or rapidly changing markets. The timeliness of the data may be a concern, and businesses need to ensure they are working with the most recent information available.

2) Potential Inaccuracy
Secondary research relies on data collected by others for different purposes. There is a risk of inaccuracies or biases in the original data, and the quality of secondary information may vary.

3) Unavailability of Specific Information
In some cases, the specific information needed may not be available through secondary sources. This is particularly true for niche industries or emerging markets where limited data may be accessible.

Question 19

What is quantitative data?

Answer 19

Quantitative data refers to information that is expressed in numerical terms and can be measured or counted.
Examples:
Height
Temperature
Statistics
Sales figures
Test Scores
Age
Weight

Question 20

What are the pros of quantitative data?

Answer 20

1) Objective Measurement Quantitative data provides an objective and standardised way of measuring phenomena. The numerical values eliminate subjective interpretations and facilitate consistent measurement across different observers or settings.

Question 21

What is market orientation

Answer 21

Market orientation focuses on the customers needs and wants.

Question 22

What is added value?

Answer 22

The extra features that may be offered by a business when selling a product, such as high quality customer service which helps to exceed customer expectation.

Question 23

Market mapping

Answer 23

Involves planning for the market to assess the number of competitors.

Question 24

What is market positioning

Answer 24

A business will consider how it positions itself within a market in relation to its competitors. The process of positioning involves deciding on the nature and characteristics of the products and services it sells to and whoever the target market is.
One process a business can use to carry this process out is a market map.

Question 25

Advantages of market mapping

Answer 25

1) It helps businesses to decide whether there is a gap/opportunity in the market.

2) It is a useful process for comparing similarities and differences between businesses.

3) It helps a business gain a better understanding of its competition.

Question 26

Supply

Answer 26

Factors Leading to a Change in Supply

A change in price causes a movement along the supply curve

A change in any other factor affecting supply will shift the entire supply curve to the left or right. These are called non-price factors affecting the supply.

E.g. If a firm’s cost of production increases due to the increase in the price of a key resource, then there will be a decrease in supply as the firm can now only afford to produce fewer products
This causes a shift in supply from S to S1. The price remains unchanged at £7 but the supply has decreased from 10 to 2 units

Question 27

Non price factors affecting supply

Answer 27

Changes in cost of production
New technology
Indirect taxes
External shocks
Government subsidies

Question 28

Non-price Factor

Explanations

Examples of the affect on Supply

Change in the costs of production

An increase in costs of production makes it more expensive to produce each unit and a business will be able to produce less at a given price.

A clothing manufacturer: an increase in energy and labour costs will increase the costs of making each item

Shifts the supply curve for clothing to the left

New technology

Advances in technology will lead to lower costs of production and businesses will be able to produce more at a given price

Robots have replaced many workers in car factories and this increases productivity

Shifts the supply curve for cars to the right

Indirect taxes

The government increases indirect taxes on businesses which causes an increase in the costs of production as firms have to pay extra costs

VAT - the rate of VAT increased from 17.5% to 20% in the UK in 2011

Shifts the supply curve for all businesses to the left

Government subsidies

A subsidy given by the government to businesses will reduce the costs of production

Electric vehicles - a subsidy to the largest battery producer in the UK lower the costs of production for electric cars

Shifts the supply curve for electric vehicles to the right

External shocks

An unexpected event can change the supply
The outbreak of Covid-19 caused many hotels, bars, and restaurants to close down

Shifts the supply curve for hotels, bars, and restaurants to the left

Question 29

An Introduction to the Marketing Mix
The marketing mix (4Ps of marketing) provides a framework for businesses to create and implement successful marketing strategies

The 4Ps represent the key elements of a marketing strategy: product, price, place, and promotion

These four components work together to satisfy the needs and want of a target market while achieving the company’s objectives
By understanding and manipulating the marketing mix, businesses can differentiate themselves from competitors
A marketing mix is an essential tool for any company looking to maximize its marketing impact and achieve long-term success

Question 30

Promotion

Answer 30

Sales promotion
Advertising
Public relations
Direct marketing

Question 31

Product

Answer 31

Features
Quality
Branding
Packaging
Services
Warranties

Question 32

Place

Answer 32

Channels
Market coverage
Assortment
Location
Inventory
Transport

Question 33

Price

Answer 33

Price strategy
Pricing
Allowances
Discounts
Payment items

Question 34

The Design Mix

Answer 34

The product design mix refers to the combination of elements that make up a product’s design.

These elements include function, aesthetics, and cost