1.1.1 The Market

• A market


  any place where buyers and sellers can meet
• Different markets have different characteristics and are affected differently by changes
• The aim of marketing

  to help identify, anticipate and satisfy consumer needs and wants profitably

  • Needs are considered to be essential e.g. shelter or food
  • Wants are 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
• Market research is essential in helping businesses to identify products/services they can develop in response to the needs and wants that their customers have
• Mass markets


  Products are aimed at broad market segments 

  • Market segments are groups of consumers who share similar characteristics e.g. age, lifestyle, etc.
  • Mass marketing occurs when businesses sell their products to most of the available market 
  • Production usually happens on a large scale
• Niche markets


   Products are aimed at a subset of the larger market

  • Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market
  • Production usually happens on a small scale
• Characteristics of 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
• Characteristics of 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
• Market Size


  • The size of a market can be measured through  sales volume  or sales value
  • Sales volume is 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 market share that a business enjoys is the proportion of the total sales of a product/service compared to the market as a whole e.g. Tesco has 26% of the UK grocery market  
  • Market Share can be calculated as follows:   

  
• Brands


  • A brand is a name, image, or logo which helps one product/service stand out from its competitors
  • Branding is one of the key ways in which businesses achieve product differentiation
• • Brands are unique and are protected by law
• Brands add value


  Brands add value, often making the product/service more desirable to consumers

  • Adding value is the process by which firms increase the price that the consumer is willing to pay
• Brands influence the position of the business within its market


  • Businesses operating in mass markets use branding to stand out from the competition
  • Businesses operating in niche markets use branding to communicate their offering to a small, well defined group of consumers
  • Strong brands are more likely to be able to charge higher prices for their products than weaker brands
  • The perceived quality of a strong brands products is better than that of weaker brands
• dynamic market 


  A market that is subject to rapid or continuous changes
• Many markets are becoming more competitive and change is inevitable


  • Those businesses which do not adapt are less likely to survive in the long run
•  Monopoly power


  • Businesses with  monopoly power (e.g. Amazon) might not face the same dynamic pressures as businesses in more competitive markets
•  Four areas to consider when examining dynamic markets

  • Online retailing
  • How markets change
  • Innovation and market growth
  • Adapting to change
•  Online retailing


  Online retailing involves selling products via the internet
• The Advantages of Online Retailing for Firms & Consumers


  • 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
  • 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 Firms & Consumers

  • 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
  • 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
• Changing market conditions


  • Offer new opportunities for firms
  • Pose threats
• Changes that cause markets to be dynamic


  • Changing consumer tastes and preferences
  • Changing demographics
  • Amount of competition
  • Changing legislation
• Changing consumer tastes and preferences


  • Consumers desiring electric vehicles in place of traditional petrol/diesel
• Changing demographics


  Many developed countries have an increasingly older population who have different wants and needs to previous markets
• Competition


  Can be direct (the sale of similar products) or indirect (e.g. airlines compete with each other but also with other forms of transport such as trains)
• International trade means larger market sizes but also more competition between an increasing number of firms
• Changing legislation causes markets to be dynamic
• How Markets change


  • Changing consumer tastes and preferences

  • Changing Demographics

  • The amount of competition

  • Changing legislation

  
• Innovation and market growth: INNOVATION


  • Product innovation involves the adaptation or improvement of existing products e.g. improved video cameras on laptops
  • Process innovation involves the adaptation or improvement of existing processes e.g. just in time stock control
•  Innovation and market growth: MARKET GROWTH

  • Market growth can be caused by numerous factors e.g.
  • Increasing population sizes can increase demand in certain markets
  • Increasing incomes can increase demand in certain markets
  • Changing tastes and preferences can cause the market to grow e.g. the growth in the electric car market
• Market growth


   the measurement of the change in the entire market, expressed as a percentage of the original size

  • The businesses market share does not necessarily increase automatically as the entire market continues to grow
• Adapting to change

  • Recognizing and adapting to market changes allows businesses to thrive in dynamic markets
  • Strategies to adapt to change include
  • Create flexible business structures, especially in terms of operations and people management 
  • Meet customer needs, by carrying out market research and communicating with customers
  • Invest in staff training, new products and processes
  • Innovate so as to gain the first mover advantage(The first business to introduce a product etc)
• Competition


  • Occurs when at least two businesses are providing goods/services to the same target market.

  • The more businesses in the market, the more intense the competition
• Direct Competition


  • occurs when the business is targeting customers with the same product as a competitor
• Indirect Competition


  • Indirect competition occurs when firms sell different products but compete with each other for the customers disposable income e.g. cinema and theatre companies are in indirect competition 
• Competition results in many benefits for the customer, such as:


  • Businesses offer lower prices
  • Businesses produce better quality products
  • Businesses provide better customer service
• Absence of competition


  the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices
• Risk


  the potential threat to business success

  • Risks can be from inside the business (internal) or from outside the business (external)
  • Risks can be measured and prepared for using risk management