1.1

• Risk


  Exists because entrepreneurs commit resources (such as money) that could be lost. Many businesses fail, and new start-ups face this risk
• Uncertainty


  Exists because businesses operate in an ever-changing environment and are subject to changing external factors such as legal, economic and social factors
• Mass market


  Targeting a large population of the market with a generic product. Requires production on a large-scale and investment in capacity. Potential for high sales revenue. May compete with many other businesses in the market. Promotion will involve mass market techniques such as TV and media. Businesses will have to be price competitive in order to succeed. Brand names are given to products to distinguish them from other products on the market
• Niche market


  Targeting a small population of the market with a specialised product. Production on a small scale (possibly bespoke). Low volumes but high profit margins. Few competitors but limited number of potential customers. Promotion through specialist media. Business will have to compete on quality and customisation in order to succeed
• Purpose of marketing

  To support the process of communicating with customers with the goal of selling them products that meet their needs. Involves understanding customers' needs, understanding the dynamics of the market (including competitors), developing successful products, and promoting the business and its products
• In some industries, technology has allowed businesses to profile individuals and customise their products so that they can target customers as individuals, such as online bespoke greeting cards
• Dynamic markets

  An ever-changing market that is subject to external factors. Factors that contribute to this change include innovation, social change, demographic changes, changes in legislation, and competition
• Market size


  Can be measured by value (total amount consumers spent on the product) or volume (total quantity sold by businesses)
• Market share


  The proportion of a particular market held by a business. Can be used as a measure of success. Calculated as: Sales of a business / Total sales in the market * 100
• Adapting in a dynamic market

  • The most successful businesses are those that can adapt and keep up with the changes in their market. This involves being flexible in the way they operate, carrying out market research to have a better understanding of their customers, investment in new technology, people and products, and continuous improvement
• Low competition


  Businesses can dominate the market, can afford inefficiencies, set high prices, have little incentive to increase, and provide limited choice, high prices, and poor service. This is a disadvantage for customers
• High competition


  Lots of choice, good value for money, exciting new product development. Incentive to innovate and get better, focus to improve efficiencies, and competitive pricing
• Primary market research


  Research collected first-hand; it is 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 you want to collect qualitative data. Sampling provides an insight into the market, but saves money as the whole population is not needed; a sample must be representative, unbiased and large enough to represent the whole market. Examples include questionnaires, consumer panels, interviews, focus groups and customer observations
• Secondary market research


  Research that already exists, conducted by another organisation; it is easily accessible and a good starting point, fast and less time-consuming, often better if you want to collect quantitative data. Some data can be free but detailed reports can be expensive to purchase. It is not always up to date or specifically tailored to the business's needs. Examples include market research reports, competitors' websites, government statistics and newspaper articles
• Product orientation


  Focused on production efficiencies and the product itself (product features, profit margins and efficiency)
• Market orientation


  Focused on consumer needs. Understanding customers and developing products that meet their needs (customer attitudes, characteristics and how the product is used)
• Most successful businesses will tend to have a market orientation. This is because businesses can only succeed in a competitive market if they meet the needs of customers better than their rivals. However, some businesses still approach the market with product orientation if there is relatively little competition or information available to customers
• Limitations of market research


  • Market research can be biased
  • Small sample size
  • Causality can be hard to identify
  • Collecting data is very time-consuming
• Sampling


  Selecting a representative group of people from the target population
• Sampling


  • The bigger the sample size, the more representative it will be
  • If the sample size is not representative of the market then the market research will always be limited
• Uses of market research

  • Product development
  • Budgeting
  • Cash-flow forecasting
  • Developing marketing activities such as promotional campaigns
• ICT and market research


  ICT can support the collection and analysis of market research data in a number of ways, such as collecting data through websites and social media, and analysing information in databases
• Technology and market research

  Technology can make the collection of market research data much faster and more specific to individual customers, and this data can be processed more effectively to uncover trends, patterns and correlations
• Market segmentation


  The process of dividing customers within a market into distinguishable groups based on similar characteristics and needs to allow positioning of the business and customer targeting to take place
• Market positioning


  The process of deciding on the nature and characteristics of the products and services to be offered and the target market
• Market maps


  A technique used to understand how products/businesses are viewed relative to competitors, based on two relevant characteristics. Market maps help businesses decide whether to set up in a market - is there a gap/opportunity?
• Market mapping is a useful process for comparing similarities and differences between businesses and helps a business gain a better understanding of the competition
• A limitation of market maps is that they only consider two main variables, but markets and customer perceptions are often very complex
• Head-to-head competition


  Businesses can target the same customers as other businesses and be successful if there is enough demand in the market or they are able to meet customer needs better than their competitors
• Limitations of market maps include that they are based on positioning against two variables, but perceptions of customers, other businesses and society are often very complex and may not fit into this model
• Differentiation


  The process of making a product different from a competitor's products, which may be achieved through developing unique brand characteristics, creating unique product features, providing a unique better customer experience, building good relationships with customers, or offering a price that undercuts the competition
• Unique selling point (USP)


  Something that sets the business apart and makes it distinguishable from any other business
• Competitive advantage


  A set of unique features of a business and its products that are perceived by customers as significant and superior to the competition
• Ways to achieve sustainable competitive advantage

  • Innovation - the ability to create new and unique processes and products
  • Architecture - the relationships within a business that create synergy and understanding between suppliers, customers and employees
  • Reputation - brand values that are hard to replicate and may take years to develop
• Competitive advantage gives a business a basis for competition and a way of adding value that other businesses cannot imitate - a reason for customers to choose the business over its rivals
• Over time, factors that lead to competitive advantage can gradually erode, such as relationships in a business as the workforce changes or as a valuable patent expires
• Adding value


  The process of a business starting with raw materials, taking them through a process, and then selling them to customers at a price greater than the combined cost of the materials and the profits involved in the transformation
• Different ways a business can add value

  • Branding
  • Quality through promotion
  • Customer service
  • Speed of service and response time
  • Packaging
  • Frequent buyer offers (rewards for repeat purchase)
• Adding value


  Is closely linked to the concept of profit - the more value a business can add, the higher the price and the greater the profit margin
• A business will be competitive where the value it adds to its products and services matches the price that it charges customers