The Market

Question 1

What are the definitions of a mass market and a niche market?

Answer 1

Mass market - This is the market that is aimed at the general population.

Niche market - This is a subset of the main market and addresses a specialist need.

Question 2

What is homogeneous?

Answer 2

The products are alike

Question 3

Give an example of a mass market?

Answer 3

The car market

Question 4

What are the advantages of operating in a mass market?

Answer 4

1) Large scale of production means economies of scale and lower average unit costs.
2) Mass marketing is straight forward as everyone is equally targeted.
3) Large volume of sales means high revenues.
4) This high revenue can be pumped into Research and Development (R&D).

Question 5

What are the disadvantages of operating in a mass market?

Answer 5

1) There’s lots of competition in your way.
2) Homogeneous products need to be differentiated through marketing which can be expensive.
3) High volume protection may not be flexible enough to keep up with changes in demand.

Question 6

Give an example of a niche market?

Answer 6

The supercar market.

Question 7

What are the pros of a niche market?

Answer 7

1) Charge premium prices.
2) Easier to target customers.
3) Small scale production can be flexible and follow trends.
4) Less competition than in mass markets.

Question 8

What are the cons of a niche market?

Answer 8

1) Very risky as demand may not be constant.

2) Higher unit costs so there’s no economies of scale.

Question 9

Why are niche markets very profitable?

Answer 9

Because prices are charged higher therefore consumers in that niche are willing to pay for exactly the right product. These profits can also encourage competitors to enter the market. But there are only a small range of products which make them more risky ventures.

Question 10

What is market size and how can it be measured?

Answer 10

The size is the total amount of sales of producers in the market. It can be measured in both volume of sales and in value.

Question 11

What is market share and how is it measured?

Answer 11

Market share is the proportion of a market that is taken by the brand.

It is worked out by: Sales of a business divided by the total sales in the whole market x100

Question 12

What is a dynamic market?

Answer 12

A market that is subject to rapid or continuous change

Question 13

What is an example of a dynamic market?

Answer 13

Online retailing where new products are being launched in websites every day. In order to get these new products as soon as possible, 51% of shoppers now make all of their purchases online.

Question 14

What are the advantages of online retailing?

Answer 14

1) Shops are open 24/7.
2) Orders can be taken automatically without the need for staff.
3) Shops can reach international markets easily.
4) It’s easy to set up.
5) It’s flexible since the owner can be anywhere in the world.
6) Opportunities for fast growth.

Question 15

What are the disadvantages of online retailing?

Answer 15

1) Issues with sending goods may out customers off.
2) Issues with online security worries outs older customers off and those keen not to share details.
3) Owners need IT skills.
4) Frauds, spam and viruses can sometimes occur.

Question 16

Give 3 ways in which very competitive markets benefit consumers.

Answer 16

1) More competition means a business needs to be very efficient.
2) More competition means the business needs to listen to consumer needs and wants.
3) More competition means a business must be less wasteful.

Question 17

What would businesses have to do if there’s more competition in homogeneous markets?

Answer 17

They would have to complete on non-price factors which would result in exciting promotions to persuade consumers to switch suppliers or product.

Question 18

What is business risk?

Answer 18

The possibility that a business will have lower profits and a loss rather than taking one.

Question 19

What are the risks?

Answer 19

When a person starts a business they may be leaving behind a secure job, this means they could stress and anxiety as a result. Setting up a business is a huge risk financially. The risk of business failure means the business owner may not be able to meet their financial bills.

Question 20

What is uncertainty?

Answer 20

This is when businesses are unable to predict shocks or future events.

Question 21

Uncertainty can affect spending decisions like…

Answer 21

1) If one company is taken over by another then the employees may feel uncertain if the fees will be higher or lower.
2) Households may save more rather than spend.
3) Consumers might delay the purchase of an item such as a car or house.

Question 22

How can a business protect itself from uncertainty?

Answer 22

A business may take out a long term loan at a fixed rate of interest then it knows exactly how much loan interest will be a month, making it easier to budget and plan.