The market Flashcards
What are the two types of markets
Mass and niche
Features of a mass market
Aimed at a large group of buyers
Product has a wide appeal and is useful to a variety of people, not just small segments of the population
Features of a niche market
- Aimed at specific group of buyers
- Product is specialised to meet particular requirements of buyers in the niche market
Features of mass market
- Sales volume
- economies of scale
- start ups in mass markets
- Mass markets sell to more consumers, so sales volume is higher
- Businesses in mass markets are more likely to benefit from economies of scale, therefore cheaper to produce
- Need a lot of capital to start in a mass market, therefore hard for new or small businesses
Disadvantage of operating in a niche market
- They sell to smaller number and a narrower range of consumers
- If there’s a change in consumer preferences they could quickly lose sales
Benefit of operating in a niche market
- Lot less competition, and sell specialised products, meaning businesses can charge higher prices
What’s market size
- Total value of sales in a market over a certain period of time
- Could also be measured by the total number of consumers in that market
What’s market share
- Proportion of the total market that the business holds
- Calculated by dividing their sales by total sales in the total market
Shown as a percentage
Market size in mass markets
- Mass markets have a larger market size than niche markets
- Many more businesses in a mass market than in a niche market
Businesses market share in niche markets
- Businesses market share is likely to be smaller in a mass market than businesses in a niche market
Firms in mass markets need to make their brand distinctive
Why
- Branding creates a clear, obvious logo, name or statement that customers can recognise
- Helps customers differentiate a businesses product from their competitors
Why would businesses focus more on branding if they operate in mass markets rather than niche markets
- Sell similar products in mass markets, therefore more competition.
Why wouldn’t businesses in niche markets focus on branding
- consumers are more likely to focus on whether the product meets their particular requirements rather than being influenced by branding
How can dynamic markets change
- consumer preferences
- innovation, new products emerge
- ways in which consumers shop (online shopping)
- competitors entering and leaving market
- changes in legislation
Why do businesses need to adapt to change
To maintain market share, cut costs so they can lower prices to maintain demand for their products in a changing market
What is online retailing
Selling products via the internet
Benefits and drawbacks of online retailing
Benefits:
- Lowers costs as it doesn’t need physical shop or staff
- Customers can order anytime, anywhere
- Customers easily compare prices between firms
Drawbacks:
- Businesses face more competition as customers can easily shop around
- Customers like to talk to staff sometimes
- Ensure customers details are protected
What is direct competition
When two or more businesses sell similar products that appeal to the same group of customers
E.g. grocery stores
What’s indirect competition
Two or more businesses sell products that are different, but they are competing for same customers
E.g. Indian restaurant and Italian restaurant
How does competition affect how a firm operates
Marketing mix
- Product= Ensure high quality due to lots of competitors. Lots of innovation, to be distinctive (USP)
- Promotion= Lots of advertising to encourage consumers to go to them, not competitors. May also focus on branding, to entice customers
- Price= Use competitive pricing, to have similar, if possible lower prices than alternatives
- Place= Ensure it’s easy for customers to access their products. This could mean online
How does competition affect nature of ownership (for new and smaller businesses)
- New, smaller firms struggle to survive in competitive markets (mass) as they haven’t got the budgets. Therefore, need loans meaning more likely to be limited companies rather than sole traders or partnerships
How would a limited company gain more market share in a competitive market through changing the nature of their ownership
Change from a limited company to a public limited company
Is it easier or harder for a new firm to succeed in a competitive market by operating as a franchise
Easier for a new firm to succeed in a competitive market by operating as a franchise
What’s a franchise
An agreement that allows a business to use the idea, name and reputation of an established business
