Theme 1 Flashcards
Mass market
Large market, many similar products offered by competitors, sells into the largest part of the market
Niche market
Small specialised market, where customers have specific needs and wants
Advantages of targeting a niche market
Less competition, clear focus , builds up specialist skills, can charge higher price, customers loyal
Disadvantage of targeting niche
Less opportunity for economies of scale, likely to attract competition if successful, vulnerable to market change
Implications of dynamic markets
Greater need for innovation, have to adapt to change quickly, can lead to market growth
Risk
The possibility that things will go wrong, risks can be planned for and can be assessed
Uncertainty
Unpredictable and uncontrollable events
Product orientation
Develops products on what is it good doing and focuses on design performance and quality
Market orientation
Responds to customers wants and needs, focuses on meeting customer preferences
Product orientation evaluation
Increased economies of scale, focus on what it does best
Market orientation evaluation
Higher chance of success, increased customer loyalty and satisfaction
Product differentiation
Customers perceive a distinct difference between you product and competitors
Product differentiation evaluation
Competitive advantage, ideally hard to copy, strengthen customer loyalty, allow higher price, higher profit margins
Requirements for product differentiation
Capable of delivering, not easily copied, profitable, distinctive
Added value
The difference between a price of the finished product and the cost of the inputs involved in making it
Demand
The amount that customers are willing and able to buy at a given price in a liven period of time
Demand law
As price decreases demand increases
Factors leading to a change in demand
Change in consumer income, fashion tastes and preferences, demographics, external shocks, seasonal, change in price of substitutes and complementary goods
Supply
Amount of goods or service a producer is willing and able to give
Supply law
Higher price means higher supply
Factors leading to a change of supply
Changes in cost of production, introduction of new technology, indirect taxes, government subsidies, external shocks
Interaction of supply and demand
As demand increases supply increases
Equilibrium
Demand and supply are equal
Price elasticity of demand definition
Measures the extent to which the quantity demanded of a product or service is affected by a change in price
PED formula
%change in quantity demanded / %change in price
More than 1
Price elastic
Less than 1
Price inelastic
Exactly 1
Unitary price elasticity, change in demand = change in price
Factors affecting PED
brand strength, necessity, habit, availability of substitutes
Income elasticity of demand definition
Measures the extent to which the quantity demanded of a product or service is affected by a change in income
YED formula
%change in quantity demanded / %change in income
More than 1 (YED)
luxury
Less than 1 but more than 0 (YED)
necessity
Less than 0 (YED)
inferior
Factors affecting YED
type of product eg luxury , economic uncertainty
Significance of YED to a business
Business can plan, increase product portfolio,
Design mix
Function, aesthetics, cost
Promotion
Sales promotion eg buy one get one free, online advertising, personal selling, sponsorships
Branding types
Corporate, product, own brand
Benefits of a strong brand
Charge premium prices, reduce PED, loyalty
Ways to build a brand
Advertising, sponsorships, use of social media
Cost plus pricing
Adding a mark up to the overall price
Price skimming
Setting a high initial price then lowering it over time, eg apple
Penetration pricing
Offering product at very low introductory price
Predatory pricing
Prices are set low to prevent competition, is illegal
Competitive pricing
Setting prices based on competitors pricing
Psychological pricing
Setting prices to look lower, to appeal to customers who use emotional repsosmes to pricing eg 12.99 rather than 13
Distribution channel stages
Manufacturer, wholesaler, retailer, customer
Types of distribution channels
Retailers, wholesales, distributors, agents
Retailers
Final step in the chain, deals directly with customer, chains of shops, department stores, independent shops
Wholesalers
Buy in large quantities, sell to retailers
Distributors
Sell on products and serve as a local sales point, eg building supplies, industrial clothing
Agent
Specialist distributor, does not hold stock, operate in tertiary sector eg travel, insurance
Direct distribution
Producer and consumer deal directly with each other
Indirect distribution
Involves use of intermediaries between producer and consumer
Changes in distribution factors
Online retailing, changing from product to a service
Product life cycle
Development, introduction, growth, maturity, decline, (extension strategy)
Extension strategies
Lowering price, changing promotion, changing product, repositioning the product
Boston Matrix
Assesses the position of each product in product portfolio to help determine right marketing strategy
Stars
Product with Hugh market share and high growth
Cash cow
High market share and low growth
Question marks
Low market share high growth
Dogs
Low market share low growth
Flexible workforce
Working patterns which don’t fit the normal 9-5
Multiskilling
Carry out variety of tasks
Part time
Work fewer hours than full time
Temporary staff
Only employed for certain amount of time
Advantage of internal recruitment
Cheaper, quicker, provides opportunity, motivation, already knows business
Disadvantage of internal recruiemtm
Limits number of applicants, limit new ideas, creates another job that needs to be filled
Induction training
New employee receives when they first join
On the job training
Receives training while still in the workplace
Off the job training
Attendance at a college, online training , professional development course
Span of control
Number of subordinates for whom a manager is directly responsible for
Centralised structure
Decision making firmly at top of the hierarchy
Decentralisation
Decision making is spread out to include junior manners
Tall structure
Many layers of hierarchy, allows tighter control, longer for communication to pass
Flat structure
Fewer layers, less staff lower costs, staff given greater responsibility
Matrix structure
Individuals work across teams and projects as well within their own department
Taylor motivational theory
Workers are motivated by pay
Mayo motivational theories
Motivated by having social needs met
Maslow
Physiological needs of employees
Herzberg
Hygiene factors like pay, supervision, working comditons amd pay, motivators like recognition, achievement, growth
