Business theme 1

• Mass markets


  A generic market that sells standard, widely available products that target all consumers
• Mass markets


  • Ability to reach a large volume of customers
  • Opportunity for higher sales
  • Increased revenues
  • Business is more profitable
  • Profit can be used to re-invest into the business
  • Accelerate business growth
• Mass markets


  • High level of output produced
  • Fixed costs spread over a wider range of output
  • Able to benefit from economies of scale
  • Lower cost per unit
  • More cost competitive
• Mass markets


  • Lots of competition
  • More substitutes available for customers
  • May lower sales of the business
  • Have to become more price competitive
  • Lower profit margins
  • Require higher sales to reach break-even point
• Mass markets


  • High advertising costs
  • Pressure on selling price per unit to maintain profit margins
  • Have to charge higher prices
  • Less cost and price competitive
  • Deter customers
  • Lower sales
  • Opportunity cost if unsuccessful
• In the long term, may result in lower unit costs, in the short-term, there may be high costs spent on advertising that may not attract customers
• Niche markets


  A specialised market that sells products that meet specific customer needs and wants
• Niche markets


  • High quality products produced
  • Very little competition
• Niche markets


  • High costs
  • Small customer base
• Can charge higher prices and this may not have a negative effect on sales due to limited availability of substitutes, depends on PED, tends to be more inelastic in niche markets, increased revenues
• Market share


  Sales of business/total market sales x 100
• Brand


  A unique element of a business such as its logo that makes it distinctive and recognisable, helping to differentiate it from its competitors
• Strong brand


  • Higher customer loyalty
  • Willing to pay higher prices as demand is more inelastic
  • Higher revenues
  • Higher market share
• Dynamic market


  A market that is constantly and rapidly changing eg, online retail
• Dynamic market


  • Changes include: New technology, changes in consumer tastes and preferences
  • Encourages innovation
  • Encourages efficiency
• Dynamic market


  • Easy to lose competitiveness, constantly have to innovate and respond to consumer tastes to avoid stagnating
  • High costs
• Success in a dynamic market depends on the business' ability to constantly innovate and maintain competitiveness
• Competition


  • May reduce demand for your product or service
  • Have to become more price competitive (reduce prices)
  • Have to increase spending on advertising, promotion and product development to try and attract sales
• Risk


  You can predict the likelihood of an outcome in the future. Thus, risk can be managed
• Uncertainty


  You are unable to predict the likelihood of an outcome in the future. Thus, it is uncontrollable and can't be managed
• Market orientation


  Business have done market research in order to develop products that focus on customer needs and preferences
• Market orientation


  • Close fit with customer expectations, high customer satisfaction
  • Greater confidence that new products are meeting customer needs, responsive to consumer trends, reduces risk
• Market orientation


  • High cost of market research, opportunity cost if inaccurate
  • May reduce innovation and creativity, struggle to keep up with product-orientated businesses
• The successfulness of market orientation depends on the accuracy of the market research
• Product orientation


  Business produces products that focus on their strengths, rather than responding to customer needs and preferences
• Product orientation


  • High quality products
  • Focusing on strengths may lead to greater innovation, could develop a product the market didn't know it wanted
• Product orientation


  • Less confident that products will be received well by customers, risk no demand for products, customers shop elsewhere where needs are met eg, market orientated businesses
  • High costs of product development
• Successfulness of product orientation depends on how well-received products are by customers, despite not matching their usual needs and preferences
• Market research can be used to

  • Identify and anticipate customer needs and wants
  • Quantify likely demand
  • Gain insight into consumer behaviour
• Primary market research


  Research collected first-hand, specifically for your business
• Primary market research


  • Tailored to the needs of your business, more likely to meet customer needs
  • Information is up-to date, reduces risk
• Primary market research


  • Expensive to collect
  • Time consuming to collect
• Successfulness of primary market research depends on the accuracy of the data collected, risk of wasting finance and time if the data is inaccurate
• Secondary market research


  Research collected from existing sources, not specific to your business
• Secondary market research


  • Cheap to collect
  • Less time-consuming to collect than primary market research
• Secondary market research


  • Not tailored to the needs of your business, risk of not meeting customer needs or demand being lower than expected
  • May be out of date, customer needs and wants may have changed, fall behind, struggle to keep up with competition
• Successfulness of secondary market research depends on the accuracy and relevance of the data collected
• Quantitative data


  Research based on numerical data, such as closed ended questionnaires
• Quantitative data


  • Less time consuming to gather and analyse
  • Cheaper to collect than qualitative data (e.g, questionnaire can easily be printed and sent out)
• Quantitative data


  • Unhelpful for in depth data, more difficult to understand issues and consumer needs in depth
  • Risk that if sample is too small and unrepresentative of the target market, results may not be valid, less reliable