The Market Flashcards
What is a market?
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.
Definition of mass and niche markets
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.
Pros of Mass Market:
-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.
Cons of a Mass market
- 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.
Pros of a Niche market
- 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
Cons of Niche market.
- 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
Market size & Market Share:
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
Branding
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
Dynamic markets:
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.
Sources of changes within dynamic market;
- 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
Pros of Dynamic market
+ 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.
Cons of dynamic markets:
-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
Competitive Advantage (CA).
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
Examining dynamic markets; online retailing:
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
Changes in market which cause dynamic markets;
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
Innovation impacting dynamic markets;
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
Pros of Product/Service Innovation.
+‘First Mover Advantage’.
+Chance to build early customer loyalty.
+Enhances reputation.
Pros of Process Innovation.
+Reduce (labour/product) cost.
+Improved quality.
+Responsive to customer needs.
How adapting to market changes influences dynamic markets:
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
Competition influence on market;
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
Difference between risk and uncertainty:
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.
