Highlights all key terminology including definition, advantages + disadvantages as well as diagrams. 2 Years of content in 1 document! Aimed at students of all grades!
1.1.1 The market
Mass markets and niche markets:
- Mass market - Refers to a large market which is undifferentiated; e.g selling of milk
in supermarkets.
- Purchasing goods and materials in bulk - economies of scale.
- Deal with high sales volume, affording larger advertising.
- Wider market, lower risk as business resources focused on one market.
- Increased competition, more advertisement required/ need USP.
- Difficult to satisfy customer needs and wants - one big market.
- Inefficient for small businesses - difficult to gain market share.
- Niche market - A smaller section of a larger market where goods and services are
tailored made to satisfy customer needs and wants; e.g filtered milk.
- Less competition - products can be tailored to meet customer needs.
- Increased customer loyalty - fewer alternatives.
- Increased profit margins - adding value to its goods.
- Fewer potential customers - smaller section of larger market.
- Lack of economies of scale - lower unit costs.
- Customer needs and wants may change - business will be unsuccessful.
Dynamic markets:
- Dynamic market - A market that is constantly changing - it can grow, change and
decline very quickly.
- Online retailing - Branch of e-commerce that has emerged along with the
development of the internet.
- Easy access to the market - increased customer satisfaction.
- Reduced overheads - no bricks and mortar.
- Potential for rapid growth - increased target market.
- Website costs - increased fixed costs.
- Customer trust - may not be willing to provide this.
- Advertising costs - requires positive cash flow.
The difference between risk and uncertainty:
- Risk - Factors that are not expected but can be quantified; e.g the risk of your factory
being flooded.
- Uncertainty - Being unsure on the factors influencing sales and therefore being
unable to predict what will happen to the business in terms of profits or growth.
1.1.2 Market research
Product and market orientation:
- Product orientation - Where a business focuses primarily on creating and
developing a high quality good or service.
- Market orientation - Where a business chooses to design a product or service to
meet customer needs/wants.
,Primary and secondary market research data:
- Primary market research - Data gathered first hand, such as customer interviews,
probably using specifically designed questionnaires:
- Observation - How a customer behaves when purchasing a product.
- Online surveys - Asking customers questions about a product or service over the
internet.
- Face-to-face surveys - Personal interviews conducted face to face to obtain
customer views on products or services.
- Focus groups - Groups of potential customers brought together to discuss their
feelings about a particular product.
- Specific to the needs of the business.
- More up to date and reliable.
- Better for collecting qualitative data.
- More time consuming - more costly.
- Difficult to conduct a large sample size.
- Secondary market research - Involves using data collected by someone else that
has not been designed specifically for the business:
- Government statistics - e.g demographic trends.
- Businesses own data - Sales figures + number of customers.
- Competitors data - Publicly available sales and profit margins.
- Easily accessible and a good starting point.
- Fast and less time consuming.
- Better for collecting quantitative data.
- Some data is free but detailed reports can be expensive to purchase.
- It is not always up to date or specifically tailored to the business’s needs.
- Market segmentation - Involves dividing a market into smaller sets of customers
who have similar needs and interests.
- Differentiate itself from competitors.
- Develop and build its brand.
- Identify and satisfy the needs of a specific group of customers.
- Very expensive to produce - difficult to make a profit.
1.1.3 Market positioning
Market mapping:
- Market mapping - Creating a diagram that identifies all the products in the market
using two key features; e.g price and quality.
- Helps to spot gaps in the market.
- Allows the business to see what competitors are doing in the market.
- Encourages use of market research.
- Even if there is a gap in the market, there is no guarantee that there will be no
demand for a new product.
- The mapping is only based on two variables; therefore not taking into account other
influences.
- There is no guarantee of success - market research may be unreliable.
, Competitive advantage of a product or service:
- Competitive advantage - This is a way a business can keep ahead of competition in
the long term; e.g lowest-cost supplier.
The purpose of product differentiation and adding value to products/services:
- Product differentiation - The perceived features of a product that a business uses
to convince customers to buy is a product instead of a competitor.
- Added value - If a business can distinguish its products from competitors, this
means that they can add value to their new products as there is no other alternative.
1.2 Market:
1.2.1 Demand
Factors leading to a change in demand:
- Substitute goods - If the price of one good increases - then demand for the
substitute good is likely to rise (chocolate) - demand curve shifts to the right.
- Complementary goods - If the demand for one good goes up - then demand for
complementary goods will also rise (petrol and cars) - demand curve shifts to the
right.
- Changes in consumer incomes - If income increases - customers will buy more of
the product or service - demand curve shifts to the right.
- Fashion, tastes and preferences - If a business product or service becomes more
fashionable - demand curve shifts to the right.
- Advertising and branding - If a business spends heavily on advertising - demand
curve should shift to the right - meaning more demand.
- Demographics - Population trends will affect demand curve - demand curve shifts to
the right.
- External shocks - e.g recession or change in exchange rates - during recessions,
demand curve for most products shifts to the left as customers have less income.
- Seasonality - Some goods or services face a change in demand depending on the
time of year they are sold - demand curve shifts to the right.
Price is the ONLY factor that moves demand up and down the demand curve. All other
factors that change demand move the curve left or right.
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