This document provides an in depth summary of all of Theme 1 Business taken directly from the specification. It includes detailed notes from theme 1.1.1 all the way to theme 1.5.6
1.1.1 The Market:
Market- all buyers and sellers that trade a particular type of product in a particular place
Mass markets:
● Mass market- aimed at the general population.
Advantages:
● Sales volumes are higher which means economies of scale and lower average unit
costs
● Straightforward as everyone is equally targeted
● Large volume of sales means high revenues
● High revenues can be pumped into research and development
Disadvantages:
● Lots of competition in mass markets
● Homogenous products need to be differentiated through marketing which can be
expensive
● High volume production may not be flexible enough to keep up with changes in
demand
Niche markets:
● Niche market- aimed at a specific group. The product is specialised to meet particular
requirements of buyers.
Advantages:
● Can charge premium prices
● Easier to target customers
● Small scale production can be flexible and follow trends
● Less competition than in mass markets
Disadvantages:
● Very risky as demand may not be constant
● Higher unit costs so no economies of scale
● Smaller market size, so fewer potential customers
Market size:
● Market size- total of all sales of all the producers in the market
● Can be measured by: total volume of sales or total amount spent by customers
Market share:
● Market share- the proportion of the total market that the business holds.
● Market share = total sales of the company / total sales of the market x100
Dynamic markets:
● Dynamic markets- a market that is subject to rapid or continuous change
● Dynamic markets may change due to: consumer preferences, innovation,
competitors, changes in legislation etc.
● Businesses may need to change existing products, develop new products or change
how they market their products to keep up with competition.
Online retailing:
● Online retailing- Selling products via the internet
,Advantages:
● Business costs are lower as it doesnt need to have a physical shop or hire as many
staff
● Customers can order any time 24/7
● Wider customer reach
● Customers can compare prices
Disadvantages:
● Businesses face more competition
● Consumers like to see products before they buy
● Risks of scams and fraud
Innovation:
● Innovation- the development of a creative idea into a new product, process or
service. This could be through:
Product innovation- changing a product that already exists or developing an invention into a
brand new product.
Process innovation- changing a process of production or putting into practise a new
production process
Service innovation- changing the way a service is provided
How competition affects the market:
● Direct competition- when businesses sell similar products that appeal to the same
group of customers.
● Indirect competition- when businesses sell products that are different, but they are
competing for the same customers.
● Competition means a business may have to make decisions on the marketing mix:
good quality products, promotion, pricing and place.
● A business needs to be very efficient. Listen to consumer needs and wants, and not
be wasteful.
Risk:
● Risk- the situation under which the decision outcomes and their chances of occurring
are known to the decision maker.
● Business risk- the possibility a business will have lower than anticipated profits or
experience a loss rather than taking a profit
● A business owner may put their own finance or savings into the business, this could
be lost if the business fails
● If the business is too highly geared then it may have difficulty if interest rates rise
Uncertainty:
● Uncertainty- when businesses are unable to predict external shocks or future events.
The situation under which such information is not available to the decision maker.
● Uncertainty about future economic conditions can affect future spending decisions
● Companies may decide to delay an investment etc.
1.1.2 Market Research:
● Market research- the process of gathering data about a product, customers and
influences on the sales of a product.
, ● Can be quantitative (numerical) or qualitative (written) research which can be
analysed.
● Market research can also be primary data such as questionnaires, surveys,
observations first hand. They could also do sampling and test marketing.
● Secondary data includes internet sources, government resources, market reports,
trade publications: makes it easier, faster and cheaper to get access to data.
● Effective market research will help a business to:
-Reduce risk
-Understand how much consumers will pay for a product
-Understand consumer behaviour
-Identify potential competitors
Advantages of primary market research:
● Specific to the needs of the business
● More up to date and reliable
● Better for two way communication and follow up questions
● Often better if wanting to collect qualitative data
Disadvantages of primary market research:
● More time consuming and therefore more costly
● Difficult to conduct a large sample size
Advantages of secondary research:
● Easily accessible
● Less time consuming
● Better for quantitative data
Disadvantages of secondary research:
● Some data can be free but detailed reports may be expensive
● Not always up to date or specifically tailored to the businesses needs
Advantages of market research:
● Aids effective business decision making, reduces risks and reduces the costs of
making poor decisions
● Helps find the best places to sell to target audiences
● Helps the business to react and prepare for changes in the market
Disadvantages of market research:
● Can be biassed
● Small sample will limit the reliability of the research
● Collecting data can be time consuming
Product orientation:
● Product orientation -when a business looks at production and marketing decisions
focusing heavily on design, quality or performance, rather than what consumers
actually want.
● Product orientation is appropriate when: there is little competition in the market,
limited consumer knowledge and low disposable income of consumers
, ● Product oriented businesses may use advances in technology to develop new
products and functions.
Market orientation:
● Market orientation- when a business focuses most heavily on selling products that
march customer preferences.
● A market orientated business could be viewed as less risky as it is based on
consumer feedback and market research.
Market segmentation:
● Market segmentation- dividing a market into groups of buyers where consumers
share one or more characteristics or needs.
● They may be separated into demographic segments, geographic segments, income
segments and behavioural segments.
1.1.3 Market positioning:
● Market positioning- refers to the ability to influence consumer perception regarding a
brand or product relative to competitors.
● Market mapping- the process of finding the variables which differentiate brands in a
market and then plot them onto a map to identify a gap in the market.
● Gaps spotted in the market map can be filled in with new products or brands,
knowing there won't be any close competitors if they ensure there is actually demand
for the gap.
● If sales are declining, the business may use the market map to reposition themselves
Advantages of market mapping:
- Market gaps can be identified which can enable a business to come up with ideas for
new products
- Comparisons can be made between a business products and its rivals
- Market maps are simple to construct and offer a visual position of where the product
is in the market.
Disadvantages:
- A hap in the market may not exist as it is not profitable to fill
- Mapping a market may require primary research which can be expensive
- Can be simplistic
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller mariastavrou006. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £5.09. You're not tied to anything after your purchase.
