unit 1 - business

• Mass market


  Aimed at general population
• Niche market


  Aimed at a specific group
• Mass market characteristics


  • One ad for everyone (only small tweaks like language, flavor, etc.)
  • Brand loyalty, people will be committed to one brand, especially luxury brands
• Mass market pros


  • Large scale low cost, marketing is easy, everyone is targeted, large volume high revenues
• Mass market cons


  • Lots of competition, products need to stand out - which is expensive, not flexible to demand change
• Niche market pros


  • Can justify the high price, easier to target customers, small-scale flexible production, less competition
• Niche market cons


  • Inconsistent demand risk, more expensive to produce since not bought in bulk, limited market for hyper-expensive items
• Manufactured by a large company

  i.e Fanta is owned by Coca-Cola
• The market is most likely measured in value rather than volume
• Market size


  Total of all sales of all producers in the market, measured by the amount sold & money earned
• Dynamic markets


  A market subject to rapid change, i.e. fast fashion trends, online retail
• How competition affects the market


  • Businesses need to be efficient to keep up
  • Businesses need to be customer need oriented not product-oriented
  • Businesses need to be less wasteful
• Risk


  Risk that a business won't make enough profit
• Uncertainty


  Risk is influenced by composition material cost, economic climate
• Market research


  The process of collecting data from consumers and end users which can be used by a business to identify marketing opportunities and develop marketing strategies
• Primary research methods


  • Surveys/questionnaires
  • Focus groups/consumer panels
  • Face-to-face/telephone interviews
  • Product trials/test marketing
• Secondary research methods


  • Websites/social media
  • Newspapers/magazines/TV/radio
  • Reports
  • Databases
• Quantitative data


  Gathering data and measuring responses i.e. charts graphs numbers statistics
• Qualitative data


  Opinions, personal experience, not numbers or statistics
• How market research helps a business

  • Reduce risk
  • Understand consumer behavior to better advertise, set up, etc.
  • Understand how much to produce and how much is going to sell
  • Understand how much consumers will pay for a product
  • Identify potential competitors
• Sampling


  The act process or technique of selecting a suitable sample of the population to test your product for research purposes
• Sampling methods


  • Quota sampling - participants chosen by selection from a population
  • Random sampling - randomly selected group of participants from a population
  • Stratified sampling - broken up groups of the whole population that is being sampled
• Market share


  The percentage of an industry or market total sales that is earned by a particular company over a specified time period
• Product orientation


  When a business only looks at the product/production process when deciding its next move. This means the business is looking inward.
• When product orientation is good


  • There is little competition in the market so the business can make what suits their production process
  • Customers do not have much knowledge about the service being provided. I.e dentistry
  • There is low consumer disposable income so consumers will buy what is cheapest/available
• Market orientation


  When a business looks at consumers and consumer needs when providing products
• Market mapping


  A way of diagramming the different variables which separate and differentiate brands in a market and placing them on a map
• Market segmentation methods


  • Segmentation by location - country, region, state, climate etc.
  • Segmentation by demographics - based on statistical data about particular groups
  • Segmentation by lifestyle - active, family oriented, working people etc.
  • Segmentation by income - how much money the different groups make
  • Segmentation by age - market divided by age group
  • Segmentation by gender
• Competitive advantage


  An advantage a business has over its competitors, allowing for larger than average profit turnover than expected for the industry
• Ways to achieve competitive advantage


  • Good price for value
  • Added value to existing product
  • Innovation
  • Reliability
  • Quality
  • Reputation
• Demand


  The amount of a good that consumers are willing and able to buy at a given price
• Factors that determine demand

  • Price - As price increases the demand will decrease
  • Price of substitutes - a substitute product is an alternative, if a customer cannot afford they will find a cheaper option
  • Marketing - marketing can stimulate demand, e.g promotions can help encourage sales, marketing can drive demand to a website
  • Alternative brands - if an alternative brand is available and the original product is not available then this will affect demand, and customers will buy an alternative brand
  • Price of complements - a complementary product needs to be used with another product, as the price of complements rise demand for products falls
  • Changes in consumer income - as consumer incomes rise the demand for some products that are cheap or unhealthy less expensive items fall. Although, as consumer disposable incomes rise they have more money to spend on products
  • Population structure and demographics - as population trends and social norms change so do the demands for certain products and services
  • Time of the year - seasonal holidays and weather affect demand i.e. back to school, Christmas, Halloween, summer
  • External shocks - world events such as terrorist attacks, pandemics, natural disasters effect consumer demand
• Supply


  Supply is measured in terms of the quantity of a good or service that a producer is willing and able to make available on the market, at a given price, over a given period of time
• As price increases


  Supply normally increases
• Non-price factors that affect supply


  • Cost of production - if the cost of production increases i.e. due to the cost of raw materials so business may decide to produce less or an effect will be had on price
  • Introduction of new technology - new tech means new machines and production processes which are more efficient, increasing capacity and decreasing time spent, costs can be reduced allowing for more supply
  • Indirect taxes - when government increases taxes on goods such as petrol then supply will decrease
  • Government subsidies - when government encourages with a subsidy more suppliers to enter the market and supply more. These subsidies lower costs causing an increase in supply
  • External shocks - supply can be impacted by things like war, weather, natural disasters, changes in labor laws
• Surplus


  When supply exceeds demand
• Shortage


  When demand exceeds supply
• Supply diagram


  Price on y-axis, Quantity on x-axis, Supply has positive slope, Original supply labeled S, New supply labeled S1, S2 etc.
• Demand diagram


  Price on y-axis, Quantity on x-axis, Demand has negative slope, Original demand labeled D, New demand labeled D1, D2 etc.
• Market clearing price


  The price at which the quantity supplied equals the quantity demanded, labeled with the letter E and a dashed line on the diagram