The Market 1.1

Question 1

What is the Market?

Answer 1

Refers to the place where buyers and sellers trade a particular type of product in a particular place. However now trading can be doing over the telephone, using newspapers, through mail orders or the internet.

Question 2

Examples of markets

Answer 2

Consumer goods markets - where products such as food, cosmetics and magazines are sold.
Markets for services - this can include services for individuals, such as hairdressing, or business services, such as auditing.
The housing market - where people buy, sell and let property.
Commodity markets - where raw materials such as oil copper, wheat and coffee are traded.
Financial markets - where currencies and financial products are traded.

Question 3

Marketing def

Answer 3

Marketing however involves a range of activities which facilitate the selling of products. Marketing can be described as the process responsible for identifying, anticipating and satisfying consumer requirements profitably.

Question 4

Mass Markets

Answer 4

sells the same type of products to all consumers and markets in the same ways- they target large groups of buyers. If products are sold globally the customer number reach to nearly billions. Businesses can produce large quantities are lower unit costs by exploiting economies of scale— Higher sales and higher profits however there is a lot of competitors & therefore businesses spend s lot of money on marketing (e.g Coca-cola spent 3.3B on global advertisement in 2013).

Question 5

Niche market

Answer 5

aims their products at a specific group of buyers. The product is specialised to meet particular requirements of buyers in the niche market. Within the niche markets if successful businesses are able to charge premium prices (e.g Gucci is in the niche markets). Businesses in niche markets can be more risky that businesses in mass markets as they sell to a smaller and narrower range of customers— if there is a change in the market that affects what customers want to buy, they could quickly lose sales and struggle to survive. Usually there’s lot less of competition as they focus on selling specialised products but if competition is attracted they might struggle to support many competing firms (if a large business decides to enter the niche market they will probably overrun their smaller rival).

Question 6

Value

Answer 6

total amount spent by costumers buying products

Question 7

Volume

Answer 7

physical quantity of products which are produced and sold.

Question 8

Market share or Market penetration

Answer 8

The market share is the proportion of the total market which a business holds— calculated by dividing their sales in a certain time period by the total sales in the total market.

Question 9

Why is market share so important?

Answer 9

-indicate a business that is market leader- influencing other companies to follow the leader or influence the leader to maintain its position.

-Might influence the strategy or objectives of a business

-Indicate success or failure within a business or its strategy

Question 10

Brands

Answer 10

Products are given a brand name to differentiate them form other products in the market.
-particularly important in mass markets where lots of products/ businesses are competing for a share of the market.

Question 11

Branding might be used to …(5)

Answer 11

Differentiate the product from that of competitors

Create costumer loyalty

Help product recognition

Develop an image

Charge premium price when the brand becomes strong

Question 12

Dynamic markets

Answer 12

Most markets are dynamic meaning that they change and evolve rapidly

Question 13

DNMIC M- They can change in a variety of ways

Answer 13

-Costumer preferences can change - e.g. due to changes in fashion or advances in technology. -The ways in which customers want to shop can change, like the growth of online shoppingCompetitors can enter or leave the market.

Question 14

DNMIC M- They can change in a variety of ways

Answer 14

-Innovation means that new products or processes emerge — this can lead to the growth of some markets and the decline of others. For example, the development of digital cameras meant that this market grew and the market for older camera types such as Polaroid or disposable cameras declined.

Question 15

DNMIC M- They can change in a variety of ways

Answer 15

-There can be changes in legislation - these can affect the products sold in a market. For example, in 2018 the UK government introduced a tax on sugary drinks — many drinks manufacturers responded to this by changing their products so they contained less sugar, so they didn’t have to pay the tax.

Question 16

Adaptation

Answer 16

Businesses need to adapt to changes in the market in order to be successful and maintain their market share. For example, firms may need to change existing products, develop new products or change how they market their products to keep up with competition and changing consumer preferences. They may also need to find ways to cut costs so they can lower prices and maintain demand for their products in a changing market.

Question 17

Online retailing

Answer 17

The selling of products via the internet

Question 18

Online retailing benefits

Answer 18

A business’s costs are lower as its doesn’t need to have a physical shop or hire as much staff— lower costs allow it to sell lower priced products or keep prices the same and make more profit.

Customers can order any time they want and often from anywhere in the world — this is convenient for the customer and increases the opportunity for sales for the business.

Customers can easily compare prices between different firms and find the lowest prices.

Question 19

Online retailing drawbacks

Answer 19

Businesses face more competition as customers can easily shop around. Retailers try to combat this by making the shopping experience on their website better than on their competitors’ websites, e.g. saving payment and delivery details so it’s easier for customers to make repeat purchases.

Some consumers like to see products before they buy and some like to speak to staff. Ways to tackle this include free returns to encourage consumers to purchase and online chat services

Businesses need to make sure their customers’ personal details are protected from cyber criminals and that they aren’t processing fraudulent transactions. Maintaining security is expensive but the consequences of having an insecure site can cost the firm lots of money and damage its reputation.

Question 20

The size of markets

Answer 20

Stable markets: Some markets, like milk in the UK, remain constant due to steady demand.

Growing markets: These markets are in a state of flux and they change due to factors like urbanisation, innovation, and economic growth (e.g., global packaging and technology).

Declining markets: Demand ceases due to alternatives or irrelevance (e.g., coal in the UK).

Question 21

Nature of Markets

Answer 21

Constantly evolving due to new products, changes in customer preferences, and market entrants (e.g., UK restaurant industry diversification).

Question 22

Emerging Markets

Answer 22

New markets appear from economic development (BRIC nations) or innovation (smartphones, e-books).

Question 23

Factors Driving Market Growth-
Economic Growth

Answer 23

-Higher incomes lead to increased demand for both essential goods and luxury items.

Question 24

Factors Driving Market Growth-
Innovation

Answer 24

-Technological advancements introduce new products that create fresh demand (e.g., smartphones, electric cars).

-Innovative marketing techniques (e.g., social media, personalised ads) attract new customers and boost sales.

Question 25

Factors Driving Market Growth-
Social and Demographic Changes

Answer 25

-Changing family structures: increased divorce rates cause women to enter jobs and therefore the demand for these type of products and services increase ready meals, childcare services.

-Aging populations: Drives growth in healthcare, retirement services, and products tailored to seniors.

-Urbanisation: Expands markets for housing, transport, and modern retail in growing cities.

Question 26

Factors Driving Market Growth-Legislation

Answer 26

-Environmental laws drive demand for renewable energy (e.g., wind turbines, solar panels).

-Regulatory support for “green” products boosts sustainable industries (e.g., electric vehicles, eco-friendly packaging).

Question 27

Adapting to Market Changes- Flexibility

Answer 27

Training staff to develop diverse skills allows businesses to pivot when needed.

Implementing adaptable systems ensures quick responses to new trends or challenges (e.g., automation, cloud computing).

Question 28

Adapting to Market Changes- Market Research

Answer 28

Continuous analysis of consumer preferences and competitor strategies keeps businesses informed.

Question 29

Adapting to Market Changes-Investment

Answer 29

Regular spending on R&D fosters product development and innovation.

Effective marketing campaigns build brand loyalty and attract new customers.

Staff training programs ensure workforce readiness for emerging demands.

Question 30

Adapting to Market Changes-Continuous Improvement

Answer 30

Refining production processes reduces costs and boosts efficiency.

Enhancing customer service increases satisfaction and loyalty.

Embracing incremental innovation keeps offerings relevant and competitive.

Question 31

Adapting to Market Changes-Niche Markets

Answer 31

Focusing on specific customer groups helps businesses withstand economic downturns.

Loyal niche customers provide steady revenue even when broader markets decline (e.g., gluten-free products, vintage clothing).

Question 32

Impact of Competition- on businesses

Answer 32

Lower Prices: Businesses cut prices to attract customers, which can erode profit margins.

Product Differentiation: To stand out, firms must create unique products or brands (e.g., Apple’s focus on design and user experience).

Increased Costs: Competing requires higher spending on marketing, innovation, and customer service.

Reduced Profits: Intense competition squeezes profits, particularly for businesses unable to differentiate effectively.

Question 33

Impact of Competition- on customers

Answer 33

Greater Choice: Competition leads to a wider variety of products and services.

Lower Prices: Price wars benefit consumers, making goods and services more affordable.

Improved Quality: Companies innovate to meet customer expectations and surpass competitors.

Question 34

Direct Competition:

Answer 34

Rivalry between businesses offering similar products to the same market (e.g., Coca-Cola vs. Pepsi, McDonald’s vs. Burger King).

Question 35

Indirect Competition:

Answer 35

Competition between businesses offering different products but targeting the same customer group.

Question 36

Risk

Answer 36

Risk refers to situations where outcomes are unknown but can be quantified or measured-businesses can minimise the chance of this happening . In business, taking risks involves committing resources with the possibility of losing them- conscious decision

Question 37

Uncertainty

Answer 37

involves events or conditions that are unpredictable and beyond the control of businesses. This can include unexpected changes in the market, such as new competitors entering with better products, shifts in consumer preferences, new government policies, natural disasters, or economic downturns. Uncertainty is harder to predict and manage because it encompasses a broader range of unknown factors. While it can pose challenges, uncertainty can also create opportunities, such as the rise of new technologies. However, it generally complicates decision-making and strategic planning for businesses.