Business- topic 1.1

• Market


  Any place where buyers and sellers can meet e.g. amazon.co.uk or a shopping mall
• Marketing

  The aim is to help identify, anticipate and satisfy consumer needs and wants profitably
• Needs

  Essential e.g. shelter or food
• Wants

  Desires which are non essential, even if consumers consider them to be essential e.g Nike trainers
• Market research

  The process of systematically gathering data from consumers which can be used to influence the business decisions
• Characteristics of markets

  • Mass markets
  • Niche markets
• Mass markets


  • Products are less unique as they are aimed at broad market segments
  • Low average costs due large scale production - economies of scale
  • Low prices lead to greater affordability and higher sales volumes
  • Low prices lead to lower profit margins
• Niche markets


  • Products are more specialized and unique as they are aimed at narrow market segments
  • High average costs due to small scale production
  • They do not benefit from economies of scale
  • High prices make products less affordable and lead to lower sales volumes
  • High prices can allow businesses to earn higher profit margin
• Sales volume


  The number of products sold i.e the physical number of units sold
• Sales revenue


  Price x quantity sold i.e the financial value of the units sold
• Market share


  The proportion of the total sales of a product/service compared to the market as a whole
• Calculating market share


  Sales of a business / Total sales in the market x 100
• Brand


  A name, image, or logo which helps one product/service stand out from its competitors
• Branding


  One of the key ways in which businesses achieve product differentiation
• Adding value

  The process by which firms increase the price that the consumer is willing to pay
• Dynamic market

  A market that is subject to rapid or continuous changes
• Areas to consider when examining dynamic markets

  • Online retailing
  • How markets change
  • Innovation and market growth
  • Adapting to change
• Advantages of online retailing for firms

  • Provides business access to more consumers, including internationally
  • Enables longer trading hours as the business is open 24/7
  • Cheaper to run as it lowers fixed and variable costs compared to bricks and mortar retailers
  • Businesses can collect data by tracking consumer behaviour which helps with primary market research
• Disadvantages of online retailing for firms

  • There may be high costs for website development, maintenance, and promotion
  • Online retailing is dominated by larger businesses that are more well-known
  • High levels of competition mean that it will be expensive to make a website stand out
  • There is a lack of personal contact with customers
• Advantages of online retailing for consumers

  • Consumers can receive offers that they are more likely to benefit from
  • Consumers can shop at a time that suits them
• Disadvantages of online retailing for consumers

  • Consumers may find it difficult to get the desired level of customer service
  • Consumers may find it difficult to return unwanted products
  • Online purchasing opens consumers up to credit card fraud
• Factors that cause markets to be dynamic

  • Changing consumer tastes and preferences
  • Changing demographics
  • The amount of competition
  • Changing legislation
• Product innovation

  The adaptation or improvement of existing products
• Process innovation


  The adaptation or improvement of existing processes
• Market growth

  The measurement of the change in the entire market, expressed as a percentage of the original size
• Factors that can cause market growth

  • Increasing population sizes
  • Increasing incomes
  • Changing tastes and preferences
• Calculating market growth

  Sales in current year / Sales in previous year x 100
• Strategies to adapt to change

  • Create flexible business structures
  • Meet customer needs
  • Invest in staff training, new products and processes
  • Innovate so as to gain the first mover advantage
• Competition


  When at least two businesses are providing goods/services to the same target market
• Direct competition

  When the business is targeting customers with the same product as a competitor
• Indirect competition

  When firms sell different products but compete with each other for the customers disposable income
• Risk


  The potential threat to business success
• Uncertainty

  When outcomes are difficult to predict
• Examples of risk

  • Technical failures due to the break down of essential equipment
  • Cyber security threats
  • Loss of key staff
• Examples of uncertainty

  • Currency fluctuations for firms trading internationally
  • Businesses continue to face uncertainty after Britain's exit from the European Union
  • Will the economy go into recession?
  • Will energy prices continue to rise?
  • What will happen to interest rates?
  • How will rivals react to a new product launch?
• Product orientation

  An approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer
• Market orientation


  An approach to marketing that focuses on the needs of consumers and uses this information to design products that meet customer needs
• Primary research

  The process of gathering information directly from consumers in the target market using field research methods such as surveys, interviews, etc
• Primary research methods


  • Surveys
  • Interviews
  • Focus groups
  • Observation
• Secondary research


  The process of gathering information that already exists, such as published reports, industry data, and government statistics