1.1.1 The Market

• Mass market


  market for goods produced in large quantities
• Niche market


  segment of larger market, defined by own unique needs
• Characteristics of mass market

  • high volume production
  • customers form majority of market
  • customer needs and wants are general
• characteristics of niche markets

  • loyal customer base
  • specific wants and needs of a customer
• advantages - niche markets

  less competition

  clear focus of target market - easy to find/reach

  can charge higher price - willing to pay for expertise

  competitive advantage created a USP
• disadvantages - niche market

  lack of economies of scale

  risk of over dependence on single product

  attract competition if successful

  vulnerable to market changes
• advantages - mass market

  large volume of sales, high revenues

  mass marketing straightforward, equally targeted

  wide reach of audience
• disadvantages - mass market

  lots of competition

  high volume production not flexible to demand changes

  lack of personalisation

  products must differentiated, expensive
• market size measured in 2 ways:

  by volume, quantity of products sold

  by value, total amount spent by customers
• market size measured by volume


  quantity sold (tonnes, units)
• market size by value

  value of sales, price x quantity sold
• market growth

  amount by how much the market has increased over a given period of time
• market share formula - % of market owned by each business

  sales of a business / total sales in market x 100
• market growth - amount by how much market has grown/shrunk

  change in market size / original market size x 100
• new - old / old x 100
• market growth driven by:


  change in income levels

  trends

  new technology

  health concerns
• importance of market share

  economies of scale

  brand recognition

  competitiveness
• what is branding used for?

  • differentiate your product
  • create customer loyalty
  • create brand image
• Online retailing advantages

  improved cash flow

  target wide audience

  build databases

  reduces staff costs
• Online retailing disadvantages

  security problems

  lack of contact with customer service

  costs of setups

  increased international competition
• A dynamic market is one that is in a rapidly changing business environment.
• Customer pros online shopping

  shop 24/7

  comfort of home

  save on transport and parking
• Customer cons online shopping

  loss of personal contact

  refund/delivery costs

  damaged product
• business pros online shopping

  lower fixed costs

  trade 24/7

  wider target audience
• business cons online shopping


  tech maintenance

  poor customer relationships

  increased competition
• how do markets change?

  size of markets, nature and new markets
• what dynamic factors impact business PESTLE

  PEST, political, economic, social, technological

  legal, environmental
• Businesses have to adapt to market change by:

  flexible

  conduct market research, be aware of changes

  invest - product development

  developing a niche
• why do markets change

  • supply and demand
  • change in consumer tastes
  • changes in technology
• how can a business adapt to its market

  • market research
  • innovation
  • differentiation
  • attention to customer wants and needs and adapt
• advantages e commerce


  faster buying process

  broad audience

  database

  cost effective
• disadvantages e commerce


  security threats

  competition

  It issues and costs

  shipping logistics and costs
• advantages physical store

  customer loyalty

  promotes legitimacy

  excellent customer service
• disadvantages physical store


  higher costs

  limited operating hours

  geographical limitations
• competition


  competition between competitors in same market
• indirect competitor

  businesses with different products or services that target the same client needs as your business
• Competition in business encourages innovation and motivates companies to create products people value at prices they can afford

  two or more businesses try to supply product at same target market
• why is competition good for consumer

  keeping prices low and the quality and choice of goods and service high

  increases business efficacy

  business listens to customer needs

  producing good quality product

  less wasteful
• Competition affects decision making in terms of nature of ownership, nature of product/service and product range, pricing, policies and marketing methods
• competition factors

  • market growth
  • tastes and fashion
  • technology
  • brand power