Market Characteristics (Miss Blackwell) Flashcards
Market Size
The collective value of the goods/services that buyers purchase.
Market Growth
The percentage change in the size of the market measured over a specific period.
Market Share
The percentage of total sales that a business has in a specific market.
Barriers To Entry
The factors that could prevent a firm entering and competing in a market.
Barriers To Exit
The factors that could prevent a firm from leaving a market, even if they wanted to.
Name 3 barriers to entry
- Large start up costs.
- Having the marketing budget to break customer loyalty.
- The inability to gain economies of scale.
- The possibility other businesses will start a price war.
- Legal restrictions such as patents.
Name two barriers to exit.
- The difficulty of selling off capital.
- High redundancy.
- Contracts with suppliers
- Leases with landlords.
Competition
Rivalry amongst sellers.
Market
Any situation where buyers and sellers are in contact in order to establish price.
Online Market
Where products are sold online and received as a physical product.
Digital Market
Where products are bought for online use only, downloadable.
How many firms in competitive markets?
Many
How many firms in monopoly’s?
1 (low)
What are the prices in competitive markets?
Low.
What are prices like in monopoly’s?
High (often)
Why are prices not always high for monopoly’s?
Due to price wars and economies of scale.
Competitive Market
A market in which there are a large number of sellers. Businesses mainly compete on price.
Monopoly
A market dominated by one seller.
CMA definition of a monopoly.
Any firm with more than 25% of the industry’s sales.
Oligopoly
Where a market is dominated by a few firms.
What do businesses in oligopolies compete on?
Non-price differences.
Collusion
When rival companies cooperate for their mutual benefit. Prevents fair competition.
Monopolistic Competition
A market structure with many competing firms supplying a slightly different product.
How many firms with monopolistic competition?
Several.
How many firms in oligopolies?
A few.
What are the prices like with monopolistic competition?
Relatively low, non-price differences.
What are prices like in oligopolies?
Relatively high, similar.
Market Power
The ability of a firm to influence / control the terms and conditions on which goods are brought and sold.
Market Dominance
A measure of market share compared to competitors.
Merger
Where two companies join together to form a new larger business.
Acquisition/takeover
Where control of another company is achieved by buying a majority of it’s shares.
Name two benefits of external growth to the business.
- May gain new management with different skills/talents.
- Will result in an increase in revenue and therefore market share.
- May be able to meet customer needs more effectively with combination of resources.
- May experience economies of scale.
Name two disadvantages of external growth.
- May suffer from diseconomies of scale. (Business/shareholders)
- May take on extra debts that the business could struggle to repay if the strategy is unsuccessful. (Business/shareholders)
- Could result in redundancies (employees)
- Could result in higher prices (customers)
- Could result in a dominant business dictating terms and conditions (suppliers)
Organic Growth
Involves expansion from within the business.
Name 3 examples of organic growth.
Opening new stores, launching new products, employing more workers, increasing production capacity, investing in new technology, launching existing products into new markets.
Name an advantage of organic growth.
- Less risk than external growth, less financially damaging.
- Able to use retained profit and not a need for a loan.
- Sensible and steady growth rate.
Name a disadvantage of organic growth.
- Stakeholders might want sales immediately and it is a slower process.
- The market size might be small/shrinking meaning a lack of opportunity.
- If market leader, already high sales so it might be hard to gain more.
What does the CMA stand for?
The competition and markets authority
What’s the main aim of the CMA?
To promote competition for the benefit of consumers, both within and outside the UK.
Cartel Offense
Where businesses agree not to compete, through market sharing, bid rigging and price fixing.
