ch1 potential qs Flashcards
Define market share.
Market share refers to the company’s total sales expressed as a percentage out of total market share.
Explain two factors that might decrease the market share of a business.
Competitors attempting to get higher percentage of market share through many ways.
Company suffering from quality control issues leading to higher customer dissatisfaction, thus lower sales.
Why would a product-oriented business find it difficult to survive?
The business cannot respond to customers’ demand because it fail to satisfy the demands or it is outdated. A market-oriented business can steal its customers due to its prior research on what are the demands.
Why is a market-oriented business more likely to be successful?
Its product are geared more to customers’ satisfaction as the business had done its research in what the demands are. This helps ensure that customers’ satisfaction are high and brand loyalty is strong.
P&M is a PLC that produces soap. The company is going to introduce a new fragrance. It carried out market research to find out what consumers wanted from their soap provider.
a) Do you think P&M is a product-oriented or a market-oriented business? Explain your answer.
b) What are the benefits of the type of business identified in part a)?
a) P&M is a market-oriented business because it conducted market research to identify the commercial preferences of consumers before designing and selling its new product.
b) The probability of success of a market-oriented business is high since the research conducted before launching a new product ensures that the item will be introduced where there is a market and a consumer base. This guarantees sales and enhances efficiency since revenues will be generated. Also, this motivates managers to search for possibilities for further profits.
A shoe manufacturer, who has seen his sales rise steadily over the past three years, operates in the mass shoe market. He believes he can do even better if he uses market
segmentation.
a) What is meant by mass market?
b) Identify and explain two ways a shoe manufacturer can segment this market.
c) What are the benefits of segmentation for this shoe manufacturer?
d) The shoe market is worth $3 million. This shoe manufacturer has about 3% of the market. What is the value of his sales?
a) A mass market sells a standard product in bulk, at a relatively low price.
b) A shoe manufacturer can segment the market in two ways; by taste and gender. For instance, older people look for different features in shoes (comfort) than younger people (style and fashion). Moreover, male and female consumers (both young and old) have different commercial needs and preferences for shoes. (It is also possible to segment the market by age: shoes for young and old).
c) Segmentation will allow the shoe manufacturer to identify the target market that will be addressed and increase sales and profit. Moreover, by segmenting the market, the shoe
manufacturer will be able to identify any gaps in the market that may offer new opportunities to increase sales and compete better.
d) Market Share = (sales of the company/total market sales) x 100% => Total Sales Volume = (0.03 x 3,000,000) = $90,000
Explain the difference between each of the following pairs:
a) market-oriented and product-oriented businesses
b) mass and niche markets
c) marketing strategy and marketing plan
d) consumer market and industrial market
a) A product-oriented firm considers the quality and price of products prior to searching for markets or establishing new ones. A market-oriented business carries out the
necessary research to understand the commercial preferences of consumers, before developing its products.
b) In a mass market, a standard product is sold in bulk, at a relatively low price. A niche market tends to be a smaller section of a mass market that promotes more specialized
products.
c) The marketing strategy outlines how the company intends to achieve its marketing objectives by considering the overall approach to be taken by the entire enterprise. A marketing plan is a written document that provides details about the necessary actions needed to achieve one or more marketing objectives.
d) Consumer market is for goods and services aimed at households. Industrial market is for manufactured goods (or capital goods), aimed at businesses
Explain why the following businesses might fail:
a) a product-oriented business
b) a business that does not have the function of marketing
c) a business that does not segment the market
a) The lack of market research about what consumers are demanding greatly increases the risk of making the product hard to sell.
b) Without marketing, the firm fails to inform consumers about its products. This leads to lower sales and market share.
c) Without segmenting the market, the business will not be able to identify its target market or benefit from potential opportunities or gaps in the market.
a) Identify two ways of market segmentation.
b) Explain how segmentation helps identify gaps in the market.
a) A market can be segmented by age; people of the same age share similar interests. For instance, older people look for different things in a good/service than younger people. A market can also be segmented by gender; for instance, male and female consumers (both young and old) have different commercial needs and preferences. Therefore, markets have developed to cater to these differences (e.g., men’s designer clothing, and cosmetics for women).
b) By identifying the target markets and dividing consumers into segments, a business can identify the segments “left behind” by competitors and develop a product to meet the demand of the small segment or niche market
One of the main reasons why people changed their purchasing habits is the internet.
a) Explain how the internet resulted in higher competition among firms.
b) List two other factors that resulted in a higher competition level within markets.
a) The internet encouraged e-commerce which facilitated the transfer of money and enabled consumers to purchase goods and services online. This resulted in a wider variety of products to choose from, thus increasing the number of competitors each business has.
b) globalization and improvements in transportation
The owner of a small bakery noticed a decrease in his doughnuts sales after an international bakery opened two blocks away from his shop.
a) Suggest one reason why the small bakery’s doughnut sales decreased.
b) What can the owner do in order to sell more and win back the customers?
a) The bakery lost some of its customers to new rivals.
b) The bakery can improve the quality of its existing doughnuts and work on creating a new type by adding new flavors or designing new shapes.
Identify the factor of segmentation in each of the following circumstances.
a) adults and young people buying a new energy drink
b) a family purchasing a new bigger car
c) a restaurant selling gluten-free food
a) age
b) socio-economic grouping
c) use of the product
[G] Which factors cause changes to the consumption patterns of consumers?
Changes in price, incomes, population, income tax, fashion or tastes result in a change the consumption patterns.
[G] What are the benefits and risks of niche markets?
Benefits: higher chance for survival and profit generation, resources are not over consumed due to low competition, firms can charge premium prices, firms can build consumer loyalty.
Drawbacks: cannot produce in bulk and achieve economies of scale.
[G] How does a business benefit from segmenting the market?
- Allows to increase sales and revenues
- Allows to know what consumers want and increase their satisfaction
- Allows to identify gaps in the market and benefit from first mover advantage
- Allows to set more successful marketing strategies
- Allows to provide a variety of products to meet different segments’ needs and hence increase profit
