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Component 1 - Business Opportunities > Markets > Flashcards

Markets Flashcards

1
Q

What is a market?

A

A meeting place between buyers and sellers where goods and services are exchanged, usually for money.

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2
Q

What is competition?

A

The businesses that compete for a share of the market.

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3
Q

Types of market

A

Global / Local
Mass / Niche
Trade / Consumer
Seasonal

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4
Q

Global Markets

A

Global markets is all about selling goods and services to overseas markets.

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5
Q

Advantages of Global Markets

A

Higher Earnings

Spread risks - by moving into new markets risks are now spread.

Economies of Scale

Survival - some businesses need to be global to survive

Saturation of the home market

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6
Q

Local markets

A

Businesses are limited to selling goods and services to the local region/area.

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7
Q

Advantages of local markets

A

Knowledge of customers needs

Opportunities to devlop strong customer relationships

Fewer competitors

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8
Q

Mass Markets

A

Mass marketing involves a business aiming products at a whole market, rather than particular parts of them.

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9
Q

Advantages of Mass Market

A

Provides a business to larger customers bases

Untargeted marketing can be used

Low-cost operations

Can produce large numbers of standardised products

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10
Q

Niche markets

A

A niche market is a specialised market where you cater for the demand for products/services that are not currently being supplied by the main suppliers.

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11
Q

Advantages of a Niche Market

A

Businesses can charge higher prices that customers are prepared to pay.

Competition is initially low

Focus on needs of customers

Promotion costs can be kept lower - as businesses can focus on specific target group.

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12
Q

Trade Markets

A

Trade marketing involves the sale of goods and services to distributors, suppliers, wholesalers and other businesses instead of the consumer.

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13
Q

Advantages of trade markets

A

Producers seek to increase demand for their goods

Effective trade marketing makes it likely that sales to the final consumer will rise.

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14
Q

Consumer markets

A

Consumer markets are the markets for products and services bought by individuals for their own or family use.

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15
Q

Seasonal markets

A

Many markets have seasonal variations for example, ice cream in summer.

Seasonal marketing will have a huge influence on the activities of a business involved in these industries as each will have a critical sales period which can make or break a business.

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16
Q

Market Share

A

Market share is the measure of the percentage share that a business hold of the overall markets

The higher the market share the more power and influence they have of market price.

Formula = Total sales of a firm
————————— X 100
Total market sales

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17
Q

Market size

A

The total amount of sales in a market measured in terms of value or volume.

E.g apple might sell 10 million units of their new iPhone which is worth £250m.

Number of sales in industry x selling price

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18
Q

Market Segmentation

A

Market segmentation is breaking down a market into sub-groups that share similar characteristics.

19
Q

Methods of segmentation

A

Demographic: Gender, Age , Income

Geographical: Regions of the country

Psychographic : Personality and emotionally based behaviour. E.g lifestyles, opinions and attitudes.

Lifestyle - e.g young adults and sports cars

Culture / religion: food, clothes.

20
Q

Rules of market segmentation

A

Segments must be recognisable and different enough from other segments.

Market segments must have critical mass - they must be big enough to make the targeting of them financially worthwhile.

Segments must be targetable

21
Q

Benefits of market segmentation to the customer

A

Receive a product that is closer to their expectations

Can fit better with their budgets and lifestyle

Can make them feel that they are getting value for money

Consumers are aware of new features of products

Can be superior to competition

22
Q

Benefits to the business of market segmentation

A

Gain greater knowledge about its customers

Can match needs of different groups more precisely

Can target advertising

Increase brand loyalty

Can adjust product to consumer

23
Q

Problems of market segmentation

A

By focussing on one specific group of consumers a business risks alienating all other groups

Market reseach is needed to pick up changes to consumer tastes and fashions. This takes time and money.

Many consumers don’t really fit nearly into one specific group.

Poor quality reseach could lead to business misjudging what their target market want.

24
Q

Types of competition

A

Monopoly
Oligopoly
Monopolistic Competition
Perfect Competition

25
Q

Monopoly

A

A single producer within a market

One business has 100% of the marketplace

Likely to erect barriers to prevent others entering their market.

Monopolists are called the price makers.

Any business with over 25% of market share is considered having monopoly power.

26
Q

Impacts of monopoly’s

A

Consumers have less choice

No competition

Dictate price

Create barriers to entry

27
Q

Oligopoly

A

There are many business but only a few dominants the market.

28
Q

Characteristics of a oligopoly

A

Each business tends to have differentiated products with strong brand identity

Brand loyalty encouraged by use of advertising and promotions

Prices can be stable for long periods, short price wars do occur

Some barries to entry do exist

29
Q

Monopolistic competition

A

Monopolistic competition - many firms competing to sell similar but differentiated products.

A large number of smaller business competing with each other.

Few barriers to entry

Brand identity is relatively weak

Competing for the same customers

30
Q

Perfect competition

A

A market in which many small business produce identical products at similar prices

Not one business is large enough to influence the activities of others.

No price makers or market leaders

No barriers to entry.

31
Q

Why do consumers need protection?

A

Businesses understand how to manipulate customers behaviour; they try to control price and competition in the market place.

They are in the position to produce goods and services that perhaps do not fully meet the expectations of the consumer.

Without a strong legal framework, businesses will operate in a way to maximise profits.

32
Q

What is demand?

A

The amount of a product that consumers are willing and able to purchase at any given price.

33
Q

What is supply?

A

The amount of a product that suppliers will offer to the market at a given price.

34
Q

What is equilibrium price?

A

This is the price where quantity demanded is equal to quantity supplied

35
Q

Factors that cause the demand to change.

A

Population
Advertising
Substitutes
Income
Fashion and trends
Interest rates
Complements

36
Q

Factors that cause the supply to change

A

Productivity
Indirect taxes
Number of firms
Technology
Subsidies
Weather
Cost of production

37
Q

Elasticity of demand

A

The relationship between changes in demand, changes in price and income.

38
Q

Price elasticity

A

Measures the sensitivity of demand to change in price.

Formula : percentage change in quantity demanded
———————————————————-
Percentage change in price

A value greater than 1 is called price elastic, whist a value between 0 and 1 is called price in elastic.

39
Q

Price Elastic

A

A product where an increase or decrease in price leads to greater increase or decrease in quantity sold.

40
Q

Price Inelastic

A

Where change in a products price leads to a smaller change in quantity sold.

41
Q

Income Elasticity

A

Measures how sensitive demand is to a change in income.

Formula : percentage change in quantity demanded
———————————————————
Percentage change in income

42
Q

Normal goods

A

As real incomes increase the demand for normal goods will also increase. Eg lemonade, newspapers

43
Q

Luxury goods

A

When real incomes increase so does the demand for luxury goods as people have more money to spend of luxury items. Eg holidays, cars

44
Q

Inferior goods

A

These are cheap substitutes of products people prefer to buy when their income is reduced. Eg Supermarket own baked beans

Component 1 - Business Opportunities (7 decks)

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