The Market

Question 1

What is a market?

Answer 1

A market is when buyers and sellers come together to trade goods & services. The price of goods are determined by level of supply and demand.

Question 2

Definition of mass and niche markets

Answer 2

A mass market- business’ sell into the largest parts of the market.
A niche market- business targets smaller segments of large market to meet customers specific needs. Products are specialised in niche markets.

Question 3

Pros of Mass Market:

Answer 3

-targets large groups of customers - increases sales volume
-better brand recognition in a large market- target wide audience- increases sales
-gain economies of scale when producing large quantities of output- productive capacity utilisation- decrease costs thus allows to decrease prices too which increases sales as price is elastic to demand.

Question 4

Cons of a Mass market

Answer 4

• High market size indicates high levels of competition- disloyal customers= decreases market share
  -Business may need to lower price in mass market for price elasticity of demand which decreases profits.

- May need to lower prices = lower profit margines.

Question 5

Pros of a Niche market

Answer 5

• Market size is smaller than mass market as its a smaller market for specific needs - less comp increases market share.
• Products are specialised- high quality has value to customers - Easier to create USP = increase profit
• Meet specific needs- customers satisfied - more customer loyalty- repeated purchases- increase revenue

Question 6

Cons of Niche market.

Answer 6

• Little brand recognition which increases spending on branding and advertising for recognition.
• Increases production costs as materials have more value for specialised goods- no economies of scale
• risk of changes in the market like customer tastes - increase costs for R&D

Question 7

Market size & Market Share:

Answer 7

Market size is total value of sales in the market over time period
Market size = No* of Units sold X Selling Price.
Market share is the percentage of sales a business holds within the sales of the whole market
Market share = Sales of 1 Firm/Total Market Sales X100.
% Change = new - old / old X100.

Mass markets; large market size; small market share
Niche markets: small market size; large market share

Question 8

Branding

Answer 8

Branding is important for business when looking to add value to goods- eg by advertising- increase brand recognition- gain customers and competitive advantage-increase sales

Question 9

Dynamic markets:

Answer 9

A dynamic market is one that is subject to rapid and continous changes. Dynamic markets are more competitive & change is inevitable. Businesses with monopoly power (e.g. Amazon) dont face dynamic pressures as businesses competitive markets.

Question 10

Sources of changes within dynamic market;

Answer 10

• customer preferences - demographics
• seasonal trends in goods
• changes in the economy like income levels changes income elasticity of demand
  -innovation in market and improvements due to technology
  -changes in legislations

Question 11

Pros of Dynamic market

Answer 11

+ high levels of innovation allows business to cater to customer needs - customers satisfied- build brand reputation.
+Attracts more customers.
+Adds value to their products which helps achieve a CA.

Question 12

Cons of dynamic markets:

Answer 12

-demand increase- pressure on workers & demotivate them which mean high staff turnover /producing at faster rate cause quality issues = ruin brand reputation
- Invest in R&D to stay dynamic/up to date w customer preferences - time consuming and costly.
-high levels of comp creates threats for business’ market position & market share however use of barriers to entry in dynamic markets like first mover adv minimises new entrants in dynamic market

Question 13

Competitive Advantage (CA).

Answer 13

The ability for a business to add more value for its customers and achieve a position of relative superiority than other firms in the market.
how?
-USP
-Pricing
-Branding
-Service

Question 14

Examining dynamic markets; online retailing:

Answer 14

online retailing involves selling products over the internet.
+ access to global markets 24/7- shop at time that suits customers- convenient/efficient/faster for customers
+target broader segments of the market spreads brand recognition
+Customers compare prices - show PED
+helps primary market research as businesses collect data by tracking consumer behaviour online - helps to keep up with trends and meet needs.

• high costs for developing websites
• Security issues; potential for fraud - cause mistrust with customers and damage brand reputation

Question 15

Changes in market which cause dynamic markets;

Answer 15

Market changes create new opportunities but also threats
Changes in the market which cause dynamic markets;
-consumer tastes/preferences
-change in demographics e.g developed countries have increasing older population who have different wants and needs
-level of comp e.g. international trade means larger market sizes but also more competition due to larger market size - can have direct influences eg sale of similar products.
-changes in legislation e.g. laws around environmental standards create new markets

Question 16

Innovation impacting dynamic markets;

Answer 16

Invention is formulation of new product and product innovation is improvement/development of already existing product. process innovation is the adaptation/improvement of existing processes - finding more efficient ways of production e.g. just in time stock control

Question 17

Pros of Product/Service Innovation.

Answer 17

+‘First Mover Advantage’.
+Chance to build early customer loyalty.
+Enhances reputation.

Question 18

Pros of Process Innovation.

Answer 18

+Reduce (labour/product) cost.
+Improved quality.
+Responsive to customer needs.

Question 19

How adapting to market changes influences dynamic markets:

Answer 19

adapting to market changes allows businesses to survive in dynamic markets
can adapt to market changes by;
-flexible business structures, people management and flexible decision making
-meet customer needs w/ market research and communicating with customers
-invest in staff training, new products and processes
Innovate so as to gain the first mover advantage - costly

Question 20

Competition influence on market;

Answer 20

Competition affect ;
-pricing- price must be competitive as there is ped- customers can benefit from lower prices- demand increase
-gaining a competitive advantage in the market means business try add value or improve quality to products which ensures customer satisfaction= customer loyalty

Question 21

Difference between risk and uncertainty:

Answer 21

Risk is probabilities of different outcomes that can be calculated/estimated eg possibilities like loss of resources or staff
Uncertainties are unpredictable and uncontrollable events that affect business unknown events, e.g. a pandemic or economic uncertainties.