The Market - Size And Growth, How Its Classified, Market Dominance

Question 1

market

Answer 1

any situations where buyers + sellers are in contact in order to establish a price

affects all of the business trading in it as is important as:

• all buisnesses have competitiors
• market prices affect a business’ mark up
• not responding to a change in market price means lower profits affecting negative stakeholder groups
• firm can go into liquidation
• internet means competition is glovbal not just local now

Question 2

how are markets classified

Answer 2

competitive or perfect competition
oligopoly
monopoly

Question 3

market size and growth

Answer 3

markets can and do change over a period of time with the size of a market being able to change too

Question 4

whats market size

Answer 4

the number of individuals in a certain market who are potential buyers or sellers of a product or service

important to have an accurate idea or a market size especially if they plan to launch a new product

Question 5

whats market growth

Answer 5

refers to an increase in the demand for a business’ products over a period of time

if consumer spending falls (recession) its likely that growth falls anyway

when income rises, market growth rises then

Question 6

competition

Answer 6

regarded as beneficial because it forces buisnesses to be efficient in terms of keeping costs low as possible in order to keep prices down for consumers

also encourages innovation and emphasis on meeting consumer needs

small firms in a competitve market means they might not be able to gain EOS

Question 7

stakeholders that dont benefit due to market competition

Answer 7

Employees
- competitive pressure to keep costs down can impact on service conditions and conditions at work

Suppliers

• may be offered the ‘take it or leave it’ approach to the conditions of supply and payment in a bid to keep costs down
• little loyalty to a supplier if a business is under a lot of competitive pressure

Shareholders

• a small firm that is subject to intense competition will have little market power + little degree over price control
• dividends are low especially is its not easy for the firm to cut costs

Question 8

whats market dominance

Answer 8

a measure of the strength of a business and its product relative to the competition

best way to calculate it through MARKET SHARE

Question 9

how a business can increase its market share and market dominance

Answer 9

• being aware of customer needs
• selling more to existing customers
• having a clear marketing plan
• fidning out why old customers no longer use their products
• using a vareity of marketing techniques
• merging or taking over another firm

Question 10

market dominance

Answer 10

less dominant - weaker the market power over price will be

may be easy to enter a market but its likely to be competitive

entrepreneurs want to enter a profitable market or break into one where there is potential future growth

Question 11

BARRIERS TO ENTRY

Answer 11

• large start up costs
• matching the market budgets with those that are also in the market
  (customers loyal to existing firms so to get customers to change their behaviours will be hard)
• legal restrictions - patents or government restrictions
  (legal action trying to copy someone else if the product has a patent with some systems set up by the government)
• inability to gain EOS and achieving low unit costs
  (profit per item low with hight unit costs)
• possibility that the existing firms in the market can start a price war
  (could damage the new firm before they even establish as a buisness)

Question 12

BARRIERS TO EXIT

Answer 12

business not profitable or sees little opportunity for future growth it will simply close down and leave the market

not a straightforward process and a firm may have to continue trading even if its very profitable

• difficulty of selling off expensive plant and machinery
  (sunk costs may be huge if the business closes down so it may take months to sell a factory and even then it may be sold at a smaller cost than of its original price)
• high redundancy costs
  (firm may face a large bill for making employees redudant as after 2 years they’re entitled to it)
• contracts with suppliers
  (face a legal challenge and potential bad publicity for breaking contracts)

Question 13

barriers to exit/entry intentions

Answer 13

deter new entrants because its risky and expensive to enter a market or expensive to leave it if it fails

these barriers make the market less competitive

strengthen the dominance and market power of the exisiting firms

Question 14

other ways to achieve market dominance

Answer 14

• organic growth

- mergers and aquisitions

Question 15

smaller business tactics to operate in a competitive market

Answer 15

• compete in a niche in the market rather than competiting in the market as a whole
  as mass market is expensive so getting at the smaller market segments is better
• offer better customer service so they can differentiate that way
• offer longer opening hours to make buying more convienent

Question 16

the restrictions on market dominance in the UK

Answer 16

when a buisness or group of businesses become dominant it is investigated by the CMA

both UK + EU competition law are against 2 types of anti-competitive activity:

• anti-competitive agreements
• the abuse of a dominant market position

Question 17

use of the CMA

Answer 17

= has powers to investigate firms
= examine evidence to see whether there is an anti-competitive agreement in existance
= aims to prevent actions that would allow the abuse of a dominant market position to affect consumers

• business can be fined up to 10% of their global turnover
• can fine individuals if they fail to comply with the requests during the investigation
• can be disqualified for beign a compny director
• competitors/consumers can sue damages as a result of being affected by anti-competitive behaviour