the market Flashcards
the term ‘market’ refers to:
all the buyers and sellers that trade a particular type of product in a particular place
in most markets there are:
a mass market and several smaller niche segments/markets
products in a mass market are:
- aimed at a large group of buyers
- have a wide appeal and are useful to a variety of people, not just small segments of the population
products in a niche market are:
- aimed at a specific group of buyers
- specialised to meet the particular requirements of buyers in the niche market
confectionary market mass market and niche segments:
mass market: cadbury - sell a wide range of standard chocolate to a large range of consumers
niche market: moo free - specialises in dairy free chocolate
businesses in mass markets sell to:
- more consumers than those in niche markets
- sales volume in mass markets is higher than in niche markets
sales volume in mass markets being higher means that:
businesses in mass markets are more likely to benefit from economies of scale
economies of scale means that:
products sold in mass markets can be cheaper to produce than those sold in niche markets
to meet the large scales of volume needed to be successful in a mass market, businesses need:
a lot of capital, so new or small business can find it hard to succeed in mass markets
businesses in niche markets can be:
- more risky than businesses in mass markets as they sell to a smaller number and narrower range of customers
if there’s a change in the niche market that affects what customers want to buy:
they could quickly lose sales and struggle to survive
usually in niche markets:
there’s a lot less competition than in mass markets
businesses in niche markets can usually charge higher prices than those in mass markets because:
- a lot less competition
- sell specialised products
market size is:
the total value of sales in a market over a certain time period (usually a year)
market size could also be measured by:
total number of consumers in that market
market share of a business is:
the proportion of the total market that the business holds
market share is calculated by:
dividing their sales in a certain time period by the total sales in the total market
market share is usually shown as:
a percentage
mass markets have a:
- larger market size than in niche markets
- there are usually many more businesses in a mass market than in a niche market
each business within a mass market is likely to have:
a smaller market share than each business within a niche market
branding creates a:
clear and obvious logo, name or statement that customers can instantly recognise
branding helps consumers to:
differentiate a business’s product from that of its competitors
branding is important in markets because:
it can encourage consumers to buy products and therefore affect the maltier share that a business has
in mass markets there are more:
businesses selling similar products than in niche markets
there is more competition in:
mass markets than in niche markets
because of more competition in mass markets, businesses in mass markets might focus more heavily on:
strong branding than businesses in niche markets
in niche markets consumers are more likely to be interested in:
whether the product meets their particular requirements rather than being influenced by branding
most markets are:
dynamic - they change and evolve rapidly
markets can change in a variety of ways, for example:
- consumer preferences
- innovation
- ways in which customers want to shop
- competitors
- changes in legislation
consumer preferences:
can change - e.g. due to changes in fashion or advances in technology
innovation:
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
ways in which customers want to shop:
can change, like the growth of online shopping
competitors:
can leave or enter the market
changes in legislation:
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
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
- change how they market their products to keep up with the competition and changing consumer preferences
- may also need to find ways to cut costs so they can lower prices and maintain demand for their products in a changing market
online retailing is:
selling products via the internet, e.g. through apps or websites
the growth of online retailing and the presence of big online retailers has had a negative impact on:
traditional retailers who have a shop-front on the high street. many high street retailers have been forced to close down completely, while others have survived by starting to sell online themselves
benefits of online retailing for both businesses and customers:
- a business’s costs are lower as it doesn’t need to have a physical shop or hire as many staff - lower costs allow it to sell for 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
drawbacks of online retailing for both businesses and customers:
- 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. by 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
in a competitive market:
products are sold to the same group of customers by many competing businesses
direct competition is:
when two or more businesses sell similar products that appeal to the same group of customers. for example, in the grocery market, Sainsbury’s, Tesco, Asda and Waitrose & Partners are all in direct competition as they all sell similar food and household products
indirect competition is:
when two or more businesses sell products that are different, but they are competing for the same customers. for example, an Indian takeaway restaurant sells completely different food to an Italian takeaway restaurant, but they are in indirect competition as they are both competing for customers who want a takeaway meal
the level of competition a firm faces affects:
many of the decisions it makes. for example, competition has a lot of influence on the decisions a firm makes about its marketing mix
marketing mix:
- product
- promotion
- pricing
- place
product:
a competitive market contains a lot of similar products.
competition means that firms need to make sure that:
the product they are providing is of a good quality - if it’s not, then customers can easily choose to buy from a competitor
firms also need to make sure that their products are:
distinctive from competitor products - this can mean that there is lots of innovation in competitive markets in order to create products that have a unique appeal over competitor products
promotion:
competition means that firms have to try really hard to get their products noticed and encourage customers to buy them over competitor products. this means that there’s often a lot of promotional campaigns and advertising in competitive markets, which inform customers about the business’ products
businesses in competitive markets may also focus heavily on:
branding and use methods such as celebrity endorsement to try to entice customers to buy their product
pricing:
firms in a competitive market often use a competitive pricing strategy, which means prices are based on competitor prices - if a similar competitor product is of a similar quality but is cheaper, then customers are more likely to buy the cheaper product
sometimes firms with new products on the market try to tempt customers away from competitors by using a:
penetration pricing strategy, which is where they set low prices for their products initially
overall, prices are often cheaper for customers in a:
competitive market than in less competitive markets
place:
in a competitive market, businesses need to make sure it’s as easy (or easier) for customers to access their product as it is to access competitor products. this can mean that in a competitive market, lots of businesses sell online - for many this includes apps so customers can buy more easily on the go
firms have to be aware of what competitors in the market are doing and:
be ready to take action if the market becomes more competitive
many competitive mass markets are:
dominated by a few national or global businesses - for example, the UK breakfast cereal market is dominated by firms such as Kellog’s, Nestlé and the Weetabix Food Company
new and smaller firms often:
struggle to survive in these competitive markets as they haven’t got the budgets needed to make themselves stand out from the bigger firms and win market share
these businesses might need to get:
investors to help raise more funds in order to compete successfully - this means there’s more incentive for firms in a competitive market to be limited companies rather than operate as sole traders or partnerships
even big and established companies might need to:
change the nature of their ownership in order to gain more market share in a competitive market - e.g. a private limited company might transition into a public limited company
a new firm can find it easier to succeed in a competitive market by operating as a:
franchise. a franchise is an agreement that allows a business to use the idea, name and reputation of an established business
all business activity comes with an:
element of risk - there’s always a chance that something could go wrong
when taking a risk, the probabilities of different outcomes are:
often known. before making a decision, businesses can consider the probability of a negative outcome and think about how they can minimise the chance of this happening. they can make a conscious decision about whether or not to take the risk - this means that risks are controllable
uncertainties are:
unexpected events - they’re often things that firms know could happen, but it’s very difficult for them to predict if or when they’ll actually happen, or what their outcome will be
uncertainties are usually:
external things that businesses can’t control, like unexpected bad weather. they’re things that often affect the market as a whole rather than just individual businesses
