market structures, types and segmentation

Question 1

what are the 4 market structures

Answer 1

•Monopoly
• Oligopoly
• Monopolistic competition
• perfect competition

Question 2

1. what does a market structure do?
2. what do market structures involve?

Answer 2

1. separated markets by levels of competition that exist within the market and identifies the market conditions which the business operates.
2. involves dividing a broad target market into smaller more defined segments

Question 3

identify the key characteristics of a monopoly (4)

Answer 3

• a single producer within a market where one business has 100% of the market place also known as a pure monopoly.
• they are likely to errect barriers to prevent others from entering their market
• price makers as they have significant influence on price however they cannot just charge what they want as the law of demand still operates
• rare, but a business with over 25% of the market has potential monopoly power

Question 4

what are the benefits of monopolies

Answer 4

• can benefit from massive economies of scale because they are big, this reduces prices making goods affordable

• the profits earned can then be used for investment in improving products, improving production techniques and developing new products

Question 5

identify the characteristics of an oligopoly (5)

Answer 5

• there are many business but only a few dominate the market
• each business tends to have e differentiated products with strong brand identity
• brand loyalty is encouraged by the use of heavy advertising and promotion
• have some control over price, prices can be stable for long periods of time although short price wars do occur
• some barriers to entry such as high start up costs in relation to manufacturing

Question 6

what are the benefits of an oligopoly?

Answer 6

• large size leads to economies of scale, and high profits, therefore more money for investment and innovation
• oligopolies targeting a wide range of market segments provide variety and choice

Question 7

what is the disadvantage of oligopoly

Answer 7

• businesses in a oligopolistic market can collude (act together) and form a cartel. -cartels try to keep prices high and share the market between themselves
- this is illegal

Question 8

outline the characteristics of monopolistic competition?

Answer 8

• there’s a large number of relatively small businesses in competition with eachother
• there are few barriers to entry
• products are similar but differentiate by design, usp, delivery and online access
• brand identity is relatively weak
• businesses are not price takers but have a limited degree of control over the prices they charge

Question 9

outline the characteristics of perfect competition
(6)

Answer 9

• there’s a large number of businesses competing and no one business is large enough to influence the activities of others
• there are no market leaders or price makers so businesses are price takers
•the goods sold are homogenous
• businesses have equal access to tech meaning they have equal levels of productivity and each business will benefit the same from economies of scale available
• consumers have full market information so they know what is being sold and the price goods are being sold at
• no barriers to entry or exit

Question 10

what should we note about perfect competition

Answer 10

• the conditions are unrealistic so it is merely a model
- in reality there is always some type of differentiation

Question 11

1.what is a b2c market?
2.what is a b2b market?

Answer 11

1. business to consumer
2. business to business

Question 12

1.what is mass marketing?

2. what does it involve?

Answer 12

1.when a business targets its advertising and promotional spending at the whole market not a particular segment

2. it involved the marketing of a good or service to all possible consumers in the same way

Question 13

what are the key features of a mass market? (4)

Answer 13

• low cost opportunities
• heavy promotion
• widespread distribution
• the development of market leading brands

Question 14

what is the advantage of a mass market?

Answer 14

economies of scale can be taken advantage of because of higher production output capacity

e.g. toyota mass produced vehicles to a global mass market

Question 15

what are the disadvantages of mass markets

Answer 15

• the cost of setting up to compete in a mass market can be very high
• competition can be very fierce

e.g. coca cola and pepsi

Question 16

what is a niche market?

Answer 16

when a business targets a smaller segment of a larger market where consumers have specific needs and wants

Question 17

what are the key features of a niche market

Answer 17

• one or more specific segments of the market are targeted

• there must be a full understanding of the desires and needs of the niche
-this can be gained from market research but is often a ‘gut feeling’ and an understanding through experiences

Question 18

what are the advantages of niche marketing? (3)

Answer 18

• niche marketing businesses are able to concentrate on their strengths
-they can gain expert knowledge of the targeted part of the market
- so their goods or services directly meet the needs of customers
- so they have an advantage over potential customers

• low start up costs help niche market businesses in their early stages

• the business may have the market to themselves for a while because competitors may ignore the niche because of lack of awareness or because it is too small for the large business to focus on

Question 19

what are the disadvantages of niche marketing?

Answer 19

• market niches can disappear as a result of changes in economic conditions, fashions, or tastes

• mass market businesses can target the niche of it grows in value or size, existing small businesses may find this competition impossible to deal with

Question 20

what is market segmentation?

Answer 20

any sub- group of a larger market

Question 21

what are the 3 types of market segments?

Answer 21

• demographic
• psychographic
• geographic

Question 22

1. what does demographic segmentation refer to?
2. give an example

Answer 22

1. •Age
   • social class
   • geographic
2. banks offer different accounts to different age groups

Question 23

1. what does psychographic segmentation target?
2. give an example

Answer 23

1. groups on personality and emotionally based :
   • behaviour
   • attitudes
   • opinions
   • lifestyles
2. differentiating the safety and capacity for a family car

Question 24

1. what does geographic segmentation target?
2. give an example

Answer 24

1. regions of the country:
   • rural
   • urban
   • suburban

• often requires different products for different countries

2. Mc donald’s requires different ingredients for different countries

Question 25

what 3 rules apply to market segmentation?

Answer 25

• must be recognisable
• must have critical mass
• must be targetable

Question 26

why must market segments be recognisable

Answer 26

they must be different enough from other segments to make producing for that segment worthwhile

Question 27

why must segments have critical mass?

Answer 27

they must be big enough to produce enough sales value to make the production of the goods or services targeted at the segment worthwhile

Question 28

why must segments be targetable?

Answer 28

having their own identity means that they can be promoted to, and have marketing directed towards them

Question 29

1. once segments have been identified, what can business do?
2. what are the advantages?

Answer 29

1. use a segment orientated marketing approach which offers a number of advantages for both consumers and businesses
2. •targeting marketing allows the business to stress those product features that are most relevant for a particular segment

• sustainable customer relationships can come from segmenting markets

• businesses that serve different segments along a customer’s life cycle can lead their customers from stage to stage by always offering them a special solution for their particular needs

Question 30

what is global marketing?

Answer 30

•focuses on seeking goods or services to overseas markets

• different marketing strategies are implemented based on region country and religion

e.g. different packaging or pricing

Question 31

what are the advantages of global marketing
(5)

Answer 31

• higher earnings - margins in overseas markets may exceed those found at home
• spreads risk - decline at home smoothed out by overseas
• saturation of home market- businesses may have the finance to expand but be unable to do so because of competition
• economies of scale
• survival - some businesses need to go overseas to survive

Question 32

what are trade markets (b2b)

Answer 32

•focused on selling and supplying to distributors, retailers, wholesalers, and other supply chain businesses instead of the consumer

• they include:
- discounts
- promotional support
- special offers

Question 33

what are seasonal markets?

Answer 33

•markets of large seasonal variations

• has 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