CHAPTER 2 - Market structure, types and segmentation

Question 1

Perfect competition (6)

Answer 1

• Large number of businesses competing and no business is large enough to influence the activities of others.
• No market leaders and no price leaders.
• The goods sold are homogenous – there is no difference between the goods sold by one business or any other business.
• Have equal access to technology, have equal levels of productivity
• have full market information, they know what is being sold and the price the goods are sold at. They can access a wide number of suppliers to the market.
• no barriers to entry or exit.

Question 2

Monopoly (3)

Answer 2

• A single producer within a market – one business has 100% of the marketplace. known as a pure
monopoly.
• erect barriers to prevent others from entering their market.
• price makers as they have a significant influence on price. however, cannot simply charge what they want as the law of supply and demand still operates.

Question 3

Oligopoly (5)

Answer 3

• Many businesses but only a few dominate the market.
• differentiated products with a strong brand identity.
• Brand loyalty.
• Prices can be stable for long periods, although short price wars do occur.
• Some barriers exist.

Question 4

Monopolistic competition (5)

Answer 4

• A large number of relatively small businesses in competition with each other.
• There are few barriers to entry.
• Products are similar, but differentiated from each other.
• Brand identity is relatively weak.
• Businesses are not price takers; however, they only have a limited degree of control over the prices they charge.

Question 5

Mass marketing

Answer 5

when a business targets its advertising and promotional spending at the whole market. Involves the marketing of a good or service to all possible consumers in the same way.

Low-cost operations, heavy promotion, widespread distribution and the development of market-leading brands are key features.

Costs of setting up in order to compete in a mass market can be very high and competition can be very fierce

Question 6

Niche marketing (4)

Answer 6

business targets a smaller segment of a larger market, where customers have specific needs and wants.

• A higher price can often be charged – customers are prepared to pay for expertise and tend to be loyal.
• There must be a full understanding of the desires and needs of the niche.
• Able to concentrate on their strengths, developing products from what the business is good at.
• Lower start-up costs

Question 7

Types of segmentation (3)

Answer 7

A market segment is any sub-group of a larger market

Demographic - Age, social class, gender, income.

Geographic - Regions of the country – rural, urban, suburban. Global marketing often requires different products for different countries.

Psychographic - Allows targeting of groups on personality and emotionally based behaviour – attitudes, opinions and lifestyles.

Question 8

What rules must apply to market segmentation? (3)

Answer 8

segments must be recognisable
segments must have critical mass.
Segments have to be targetable

Question 9

advantages of global markets (5)

Answer 9

selling goods or services to overseas markets.
• Higher earnings
• Spread risks
• Saturation of the home market 
• Economies of scale 
• Survival

Question 10

Trade markets

Answer 10

Marketing role that focuses on selling and supplying to distributors, retailers, wholesalers, and other supply chain businesses instead of the consumer.

Trade marketing will include price discounts, promotional support and special offers

Question 11

Seasonal markets

Answer 11

Many markets have large seasonable variations. e.g. ice cream (during the pre-summer period).
Seasonal marketing will have a huge influence on the activities of businesses involved in these industries as each will have a critical sales period, which can make or break a business. Few businesses are totally immune to seasonality of sales.