Chapter 13- the market including physical and non physical markets Flashcards
1
Q
Competitive market
A
- a market in which large numbers of producers actively compete with eachother to satisfy the wants and needs of a large number of consumers
2
Q
Non physical market
A
- sellers compete with eachother but don’t meet or interact physically with buyers at all
3
Q
Online markets
A
- also known as digital markets
- businesses in these markets are able to gain and process data very quickly about customers and buying habits
- so they can better manage their supply chain, production and distribution network
4
Q
Why has non physical markets grown in recent years?
A
- ‘convenience’
- customers are pleased that they can make a purchase at any time without leaving their home and have it delivered to them directly
- from the sellers point of view, operating from one or two locations with a well designed website, secure payment system, and a reliable delivery network is far cheaper than operating a whole network of local or regional branches
5
Q
Market
A
Any situation where buyers and sellers are in contact to establish a price
6
Q
What are the reasons why market price is important?
A
- All firms have competitors
- Market price affects a businesses mark-up
- if the market price rises so does the mark-up
- if the market price falls, a business must lower its costs or else it would have to accept a lower mark-up and make less profit per item
7
Q
What is mark-up?
A
- the difference between the cost of producing an item and the price at which it is sold
8
Q
Competitive market
A
- a market structure in which there are a large number of firms producing a similar product who are competing to meet the needs of a large number of consumers
- they have to accept the price in the market
- they have little power in the market
- no single producer can dictate price
- mainly on the basis of price
- e.g. foreign exchange market
9
Q
Monopoly
A
- a market controlled by a single business is known as a monopoly and the firm is known as a monopolist
- opposite of a competitive market
- monopolist can control the market because it is the only supplier of the product and can therefore charge whatever price it likes
10
Q
What does the competition and markets authority define a monopoly as?
A
- a situation where a business has 25% or more share of the market
11
Q
Monopolistic competition
A
- similar structure to a competitive market
- there are a large number of businesses and a large number of consumers
- products in this market are essentially very similar so wont be much scope for trying to raise prices
- usually a lot of non price competition
E.g. through use of loyalty cards to gain and retain customers
12
Q
Oligopoly
A
- where a market is dominated by a few large firms
- they may secretly agree to keep prices higher
13
Q
Market size
A
The number of individuals in a certain market who are potential buyers and/ or sellers of a product or service
14
Q
Market growth
A
- refers to an increase in demand for a businesses products over a period of time
15
Q
Why is competition regarded as beneficial?
A
- because it forces businesses to be efficient in terms of keeping costs as low as possible in order to keep prices down for consumers
- also encourages innovation and emphasis on meeting customer needs
16
Q
Why competition in a market doesn’t necessarily mean that all stakeholders benefit
A
- employees: competitive pressure to keep costs down may impact negatively on conditions of service (wages, overtime payments, hours, holidays)
- may be little loyalty to a supplier if a business is under a lot of competitive pressure
- shareholders: will have little market power/ control over prices
- might mean dividends are relatively low
17
Q
Market dominance
A
A measure of the strength of a business and its products relative to the competition
18
Q
Ways in which a business may increase its market share
A
- being aware of customer needs
- selling more to existing customers
- finding out why old customers no longer use your products
- having a clear marketing plan
- using a variety of marketing techniques- pricing, advertising and promotion
19
Q
Barriers to entry
A
- the factors that could prevent a business from entering and competing in a market
20
Q
Barriers to entry include
A
- large start up costs
E.g. costs such as buildings and machinery - having to match the marketing budgets of those already in the market
- legal restrictions such as a patent or government restrictions
- inability to gain economies of scale and so achieve low unit costs
- possibility that existing firms in the market may start a price war
21
Q
Barriers to exit
A
- that factors that could prevent a business from leaving a market even if it would like to
22
Q
Barriers to exit include
A
- difficulty of selling off expensive plant and machinery
- high redundancy costs
- contracts with suppliers
23
Q
Organic growth
A
- growth that’s achieved by increasing the firms sales
- comes from selling more to existing customers, finding new customers or both
- helps to lead to market dominance
24
Q
Mergers and acquisitions
A
- merger is when 2 companies join together to form a larger business
- this larger business will be more dominant
- takeover involves acquiring control of another company by buying a majority of shares
