Theme 1 Flashcards
Mass market
Tries to make products and/ or services for all consumers. Larger and products are more generalised
Niche market
Appeal to a much smaller market, much smaller than mass market. Products are focused on specialised wants or needs.
Benefits/drawbacks of mass markets
Benefits
- More customers
- Economies of scale
- Build strong market presence
Drawbacks
- More competition
- Lower profit margins
Benefits/drawbacks of niche markets
Benefits
- Less competition
- Specific market
- Customer loyalty
Drawbacks
- No economies of scale
- Vulnerable due to small product portfolio
Brands
A brand is a good or service that has something unique. A brand is more likely to become strong if it is easily recognised and distinctive.
Strong brands
Usually benefit from Higher customer loyalty.
Create higher profitability as people are more likely to buy the product.
Impact of competition
Competition will affect costs and demands.
Competition can force lower prices or increase in sales.
The presence of a competitor will increase business costs as a business will spend more on promotion or R&D to improve products
Market share
Sales of a business/total sales in market * 100
Risk and uncertainty
Uncertainty is when a business is u able to foresee problems.
Risk is where there is a chance something could go wrong and not end up as expected.
Benefits of offering online retailing services
> market goods further
marketing costs are lower
reach larger audience
open 24/7
A market may grow due to the following reasons
> economic growth
innovation
social changes
demographic changes
Adapting to change
>flexibility >market research >investment >continuous development >develop a niche
Product orientated
Business focuses on the production process and the product itself
Market orientated
Product is led by the market, looking at consumers needs and wants.
Whether a business will be market or product orientated
> nature of the product
views of those in control
nature and size of the market
degree of competition
Market research
Gathering data about the marketing and consumption of goods and services
What does market research do
> identify customer needs and wants
quantify likely demand for the product
provide an insight into consumer behaviour
Primary research
Collecting data which did not exist before research has began. Must be collected by the researcher
Methods of primary research
>telephone interviews > personal interviews >focus groups/consumer panels >questionnaires —> postal surveys >test marketing >observation
Secondary research
Information that already exists in some form. It is either internal or external data.
Limitations of market research
>Human behaviour >sampling and bias >questionnaires must be carefully put together >secondary may be outdated >costly >time consuming >opportunity cost
Use of ICT on market research
> company websites
>social media
Advantage of social media for research
>free/low cost >reach millions >fast >allows specific people to be targeted >easy >communication on personal level
Database?
Is an electronic filing system, that allows a great deal of data to be stored
Market segmentation
Markets can be divided into different segments, each segment has consumers who have similar needs
Geographic segmentation
Different customer groups are likely to have different needs depending on where they live
Demographic segmentation
>age >gender >income >social class >religion >ethnicity
Psychographic segmentation
Groups customers depending on attitudes, opinions and lifestyles
Behavioural segmentation
Segments markets according to how consumers relate to a product
Benefits of market segmentation
> higher revenue
higher loyalty
avoid wasting promotional resources
market wider range of goods
Supply
Supply is the amoun of a product that suppliers will offer to the market at a given price. The higher the demand the more that will be supplied.
Total Revenue
Price * quantity
Cost per unit * number of units sold
The equilibrium price
Where supply and demand are equal
Changes in demand to price
If demand increases price will rise
If demand decreases price will drop
Changes in supply
If supply increase price will fall
If supply decreases price will rise
Excess demand
Where demand is greater than supply at a given price and there are shortages in the market
Excess supply
Where supply is greater than demand at a given price and there are unsold goods in the market
Distribution
Refers to the location where consumers can buy products from
Distribution channels
The route taken by a product from producer to consumer.
Direct selling
Some producers market products directly to consumers. This can be done by: >internet >direct mail >door to door selling >mail order catalogues >direct response adverts
Retailers
A business that buys goods from manufacturers and wholesalers and sells them to consumers in small quantities
Wholesalers
Buys from manufactures and sells to retailers
Agent/broker
An intermediary that brings together buyers and sellers
Choosing a channel
> the cost
the market
control
the nature of the product
Changes in distribution to reflect social trends
>growth in social media >building of large shopping malls >sellers using call centres >supermarkets extending product range and opening hours >growth in use of tv shopping channels
Online distribution/E-commerce
The use of electronic systems to sell goods and services. 2 main types Business to business (B2B) and Business to consumer (B2C)
Entrepreneur
Individuals who typically set up and run a business and take the risks associated with it
Characteristics of an entrepreneur
>self determination >initiative >judgement >commitment >being a self starter >self confidence
Skills required by an entrepreneur
>Financial managing >managing people >negotiating >communication >organising >IT skills
Sole trader
A business organisation which has a single owner
Partnerships
A business organisation ran by 2-20 people
Private limited companies (Ltds)
Small or medium sized however some may be the same size as Plcs
>directors will be shareholders
>family business
>shares transferred privately
Franchise
A business model in which a business allows another operator to trade under their name
Social enterprise
A business that trades with the objective of improving human or environmental well being (charities and workers cooperatives)
Lifestyle business
A business that aims to make enough money to support and provide the flexibility needs to support a particular lifestyle of a person
Online business
A business that uses the global communication infrastructure of the internet as a trading base
Stock market floatation
When a business goes public which means a company’s shares are offered to the public for the first time
Advantages of a plc
>more power >limited liability >lots of money can be raised >pressure from media may make them work harder >easier to raise finance
Disadvantages of a plc
> high set up costs
outsider may take control
may be a divorce of control and ownership
harder to deal with public/consumers
financial accounts can be seen by anyone
Exports
Goods and services that firms produce in a home market but sell in a foreign market
Imports
Goods and services that a bought into one market from an international one
Specialisation
Can increase the speed and skill with which a task can be done and also save time improving efficiency
Comparative advantage
The theory that a country should specialise in products and services that it can produce more efficiently than other countries
Competitive advantage
The idea that a business should specialise in any area where it can perform better than it’s competitors
FDI
(Foreign direct investment) business investment undertaken by a firm in another country
Horizontal FDI
Refers to producing the same product/service as it does at home
Vertical FDI
Is where a firm is seeking to squire materials or support for its own products or services. The firm is looking to move into another part of the value chain
Globalisation
The growing intervention of the worlds economies
Factors contributing to increased globalisation
>reduction of trade barriers/trade liberalisation >political change >reduced cost of transport >increased significance of global companies >increased investment flows >technological change >migration >growth in global labour force >structural change
Trading blocs
A group of countries that has signed an RTA to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves
RTA
(Regional Trade agreement) an agreement made between two or more countries within a geographical region, which is designed to facilitate trade by bringing down barriers.
They create trade blocs.
PTAs
(Preferential trading area) a trading bloc where certain types of products from participating countries receive a reduced tariff rate
FTA
(Free trade area) a region where member states remove all trade barriers between themselves, but each member states keeps different barriers against non member states
Custom union
A union where members remove all trade barriers between themselves and members adopt a common set of barriers against non members
Common market
A market where goods, labour and capital can move freely across the member states
Single market
A market where almost all trade barriers between members are removed and common polices and laws aim to make the movement of goods, services, labour and capital between countries as easy as the movement between each country
Economic union
An economic union that uses the same currency
What is the EU union?
Single market
What is the ASEAN
Free trade agreement / common market
what is NAFTA
A free trade agreement. (Canada America and Mexico)
Factors to consider in a trading bloc
> where to produce
where to sell
business strategy
how to enter a market
Impacts of trading blocks on businesses
OPPORTUNITIES
>economies of scale >specialise in countries comparative advantage >FDI >more efficiency due to more competition >easier to source resources >give power to negotiate better deals >markets will grow more
Impacts of trading blocs on businesses
DRAWBACKS
> may lead to tension with outsiders
may result in more competition for smaller firms
benefits are distributed unequally
overall benefits may be small if agreements have limits on goods
Global competitiveness
The extent to which a business or a geographical areas such as a country, can compete successfully against rivals
Competitive advantage
Is the advantage one company has over another or several others in the provision of a particular product or service
Cost competitiveness
This allows the firm to deliver the same product or service as its competitors but at a lower cost, which allows it to make more profit
Differentiation
This is where the firm select certain attributes of its products or services and then tries to match this with the specific customers
Skill shortages
Are when potential employees do not have the skills needed by the firms.
Impact of MNCs on local economy
> job creation
higher wages
better working conditions
local businesses — giving better work ethics, can negatively affect by taking employees
> impact on local community — better infrastructure. Help in local communities.
However, pollution and environmental harm
Impact of MNCs on national economy
> positive on country’s balance of payments
higher tax revenues
tech and skills transfer
improve business culture
gives consumers more choice, lower prices and improved quality
FDI flows improve, higher income, higher revenue, more employment less nation debt
