1.2 Spotting Business Opportunity

• a business needs to have an effective understanding of the needs/wants of customers in its target market segment
• to be successful a business will need to know what its customer needs are and understand what customers expect.
• Customer needs: right product/service, convenient, offers expected quality, provides choice, right price
• customers will want the product/service to be of the quality that they require and expect. not necessarily high quality as they may be happy with a cheaper product of a reasonable quality
• customers expect to pay reasonable prices for goods/services. Can vary depending on quality, timing, delivery arrangements, popularity.
• Customers may be looking for a wide choice of features or options from a product or service. Might be looking for range of options for their possible purchase: brands, quality, price combinations, varieties of same product.
• Customer needs have changed over the years. Growth of online shopping and home delivery proves this. Expected by customers. Opeining hours and location are also customer needs
• Businesses need to understand the market they are in or intend to enter; Lack of understanding increases the risk that the business will fail.
• New businesses are rarely able to afford substantial market research; The challenge is to focus on te information that the business planning process.
• Useful info: How big is the market (sales, volume, etc.), how fast is the market growing, who are existing competitors and what market shares do they have, how is the market segmented (e.g. low price, high quality, etc)
• A new entrepreneur will start with finding out and identifying what a customer wants and needs through market research. He/she will design goods/service that meet needs, and price.
• Identifying and understanding customers will help to secure the survival of a business
• the purpose of market research is to gather information. This will enable the business to be informed in its decisions and so
• Market research enables entrepreneurs to find out information, such as what customers want, what needs aren't currently being met, how much competition there will be
• Methods of market research: surveys, focus groups, interviews, libraries, government agencies, and trade associations.
• surveys and questionnaires can be done by post, telephone, face to face, etc. Relatively cheap & can produce good quality data. Usually quantitative, easy to analyse. Needs well designed questions, reply rates are low, can be expensive and time consuming especially using large population.
• Focus groups are good ways of getting detailed information and opinions on customer tastes and preferences. Can be costly and time consuming, needs to be carefully managed. Only small amounts of data can be collected.
• Observations work well in retail, can observe the footfall outside a shop, window displays, stock layouts, etc. Expensive and time consuming, larger businesses will use data from tills which can provide detailed sales records.
• Market segmentation involves dividing a market into parts that reflect different customer needs and wants.
• example of ways in which markets differ: customer needs & wants, how customers buy, location of customers, knowledge & experience of customers.
• Main market segment categories:

  • Demographic - age, gender, family , religion, ethnicity, etc.
  • Income - on the basis of social-economic grouping
  • Geographical - nations, regions, cities, neighbourhoods, etc.
• benefits of effective market segmentation: better matching of customer needs, allows business to grow or target segments, new product development (focuses on cutomer needs in segment), makes marketing mix more effective.
• drawbacks of market segmentation: imprecise science (data not always available/up-to-date), doesnt mean you can reach the customers in segment, markets are increasingly dynamic (fast changing)
• possible dimensions of a market map: low price/high price, basic quality/high quality, necessity/luxury, low-tech/high-tech, etc.
• advantages of market mapping: helps spot gaps in the market, useful for analysing competitors, encourages use of market research
• disadvantages of market mapping: just because theres a "gap" doesn't mean there is a demand, not a guarantee of success, how reliable is the market research?
• competitive environment is where a business operates in a market where there are other businesses producing the same or similar products/services
• situations where business faces little or no competition: business is only seller, develops unique product, offer better value for money than competitors.
• how many firms/brands are in the market + how easy it is to enter the market is what makes a market more or less competitive
• benefits of competition: encourages businesses to make product better, focus on one area (market strengths), research to improve product, improved customer service to retain existing customers, can look at what competitors do well in & improve
• types of competition: price (may decrease, possible price war), quality (may decrease to save costs or increase to differentiate), location (close competitors to steal customers & create monopoly), customer service ( will increase to gain loyalty and reputation)
• looking at 2 businesses: 1. which business feel is the most competitive? 2. which business is the least competitive? 3. suggest ways in which businesses can improve its competitiveness
• in order to make successful decisions, a business requires information.
• Internal information about a businesses situation is easy to find and use in making a decision. External information about the market which the business is competing is harder to get and more difficult to interpret and to use in order to make decisions
• products produced -- are they the same (As competitors)? can you protect your product?
• price -- is it similar or lower than its competitors?
• quality -- is it as good as competitors? do they provide good customer service?
• location -- where are they based compared to competitors? What are their distribution costs?
• impact of competition on business decision making -- level of competition and actions of the competitors will influence the decisions a business makes
• (e.g.) faced with competition, should the business lower the price, widen the product range, or focus on innovation? Decisions will be important to a business if it is to remain competitive