The market

Question 1

What are the two types of markets

Answer 1

Mass and niche

Question 2

Features of a mass market

Answer 2

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

Question 3

Features of a niche market

Answer 3

• Aimed at specific group of buyers

- Product is specialised to meet particular requirements of buyers in the niche market

Question 4

Features of mass market

• Sales volume
• economies of scale
• start ups in mass markets

Answer 4

• 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

Question 5

Disadvantage of operating in a niche market

Answer 5

• They sell to smaller number and a narrower range of consumers
• If there’s a change in consumer preferences they could quickly lose sales

Question 6

Benefit of operating in a niche market

Answer 6

• Lot less competition, and sell specialised products, meaning businesses can charge higher prices

Question 7

What’s market size

Answer 7

• 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

Question 8

What’s market share

Answer 8

• 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

Question 9

Market size in mass markets

Answer 9

• Mass markets have a larger market size than niche markets

- Many more businesses in a mass market than in a niche market

Question 10

Businesses market share in niche markets

Answer 10

• Businesses market share is likely to be smaller in a mass market than businesses in a niche market

Question 11

Firms in mass markets need to make their brand distinctive

Why

Answer 11

• Branding creates a clear, obvious logo, name or statement that customers can recognise
• Helps customers differentiate a businesses product from their competitors

Question 12

Why would businesses focus more on branding if they operate in mass markets rather than niche markets

Answer 12

• Sell similar products in mass markets, therefore more competition.

Question 13

Why wouldn’t businesses in niche markets focus on branding

Answer 13

• consumers are more likely to focus on whether the product meets their particular requirements rather than being influenced by branding

Question 14

How can dynamic markets change

Answer 14

• consumer preferences
• innovation, new products emerge
• ways in which consumers shop (online shopping)
• competitors entering and leaving market
• changes in legislation

Question 15

Why do businesses need to adapt to change

Answer 15

To maintain market share, cut costs so they can lower prices to maintain demand for their products in a changing market

Question 16

What is online retailing

Answer 16

Selling products via the internet

Question 17

Benefits and drawbacks of online retailing

Answer 17

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

Question 18

What is direct competition

Answer 18

When two or more businesses sell similar products that appeal to the same group of customers

E.g. grocery stores

Question 19

What’s indirect competition

Answer 19

Two or more businesses sell products that are different, but they are competing for same customers

E.g. Indian restaurant and Italian restaurant

Question 20

How does competition affect how a firm operates

Marketing mix

Answer 20

• 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

Question 21

How does competition affect nature of ownership (for new and smaller businesses)

Answer 21

• 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

Question 22

How would a limited company gain more market share in a competitive market through changing the nature of their ownership

Answer 22

Change from a limited company to a public limited company

Question 23

Is it easier or harder for a new firm to succeed in a competitive market by operating as a franchise

Answer 23

Easier for a new firm to succeed in a competitive market by operating as a franchise

Question 24

What’s a franchise

Answer 24

An agreement that allows a business to use the idea, name and reputation of an established business

Question 25

Features of a risk in business

Answer 25

• The probabilities of different outcomes are known
• Businesses can think of ways to minimise the probability of the negative outcome happening
• Can make a decision whether to take the risk
• Overall, risks are controllable

Question 26

Features of an uncertainty in business

Answer 26

• Unexpected events
• They’re things that firms know could happen but hard to predict if or when they’ll happen, or what the outcome will be
• Usually External things like bad weather.
• They often effect whole market not just individual businesses