All about markets and how they change – so what products and services are available in the market and how and why this changes over time. Think holidays and how Guggy didn’t go on an aeroplane until she was 18 and now there are many different types of holidays (short breaks, skiing, safaris) and most people go abroad rather than to the English sea-side.
Businesses make money by selling their goods and services in markets
the housing market – where people buy and sell houses
the consumer goods market – where products such as food, cosmetics and magazines are sold.
Marketing is the range of activities that help a business to sell its products by:
working out what consumers want
designing products that match what the consumer want
understanding the threats from competitors
telling consumers about your products / improving awareness of your product with the public
checking what price to sell at
persuading customers to buy your products
making products available in convenient locations
Mass market is a huge number of customers – so soft drinks, crisps, breakfast cereals – so loads of competition so loads of advertising (ie soft drinks market)
Niche is a small market – like the lacrosse stick market (hurrah!) – limited competition. Companies who sell in a niche market specialise – in a niche market there are a smaller number of consumers (fewer people want to buy a lacrosse stick than people who want to buy a can of Coca Cola)
The size of a market can be shown in
value – so the total amount spent on fast food or holidays in £
volume – the number of holidays sold or burgers sold rather than the amount by value.
If there are 1,000,000 burgers sold in London every year and McDonalds sell 200,000 then McDonalds have a 20% market share
Market share is a good measure of how you are doing and how much scope there is to sell more / win more business in the market from your competitors.
Apple, Google are brands. Brands attract loyalty, help with product recognition, develop an image and enable companies to charge more (ie Chanel)
Lots of markets change – so the market for personal music has changed from records, to cassettes to CDs to downloaded music.
Digital cameras is another example
If you don’t adapt in a dynamic market you will fail (ie Kodak)
Example – Amazon, Asos (love it!!)
Benefits – pretty obvious…
good for people who hate going shopping (me)
good for getting information about customers so they can be targeted in future (Asos must know what you like by now…)
reduced costs (you don’t have to have a shop)
you can reach lots of customers (emails to customers)
ability to reach customers all over the world through one website
much more flexible for seller and buyer and maybe more efficient (looking on a website is quicker than wandering around a shop)
think about on line grocery retailing / deliveries and comparison websites (for insurance, flights and energy prices) as good examples of the way that the internet has changed markets.
size – so the size of the milk market hasn’t changed but the mobile phone has
nature of the market – so in the UK the restaurant market has changed hugely – it used to be all fish and chips and greasy spoons, then fast food and now Indian and Chinese take aways, gastro pubs etc
new markets – so Brazil, India, Russia and China have more consumers who may want phones etc
Why would a market grow?
economic growth – if people have more money the market for a product may grow
innovation – products that get better are attractive to consumers (flat screen telly)
social change – less people smoke now / people get their news on line so sales of newspapers and magazines have reduced
change in legislation – renewable energy / solar panels are now preferred to coal by governments as they are more environmentally friendly so governments give subsidies to encourage people to use them
demographic change – people are living longer / more old people so things like stair lifts and care homes are more available now.
Businesses must adapt to remain competitive
They can do this by
being flexible in what is sold and how – you might need flexible staff
market research – see what the competition are doing and adapt to beat them
investment – so invest to come up with a better product (ie BMW)
continuous improvement – so become more efficient to save costs / reduce prices
develop a niche – so do something different for a particular type of consumer
make their product appear different to the competition
= offer better quality products
= advertise more
offer extras like better customer service
you might even buy one of your competitors
Consumers generally benefit from competition in a market because of wider choice, because competition generally means that businesses reduce their prices to win business. Governments don’t like monopolies (where there is only one company in a market) because they can charge what they like / can exploit their customers.
They sound the same but they are not.
risk is what people take when they are running a business – so you could lose money that you spend on setting up a business – if you decide to invest in a new product or spend money on advertising you may find that it doesn’t work and you lose what you have spent. That is the risk faced by all businesses.
uncertainty is more external – things that can happen outside your business that you cannot control – so things like
a new competitor
a change in consumer taste
new technology (although that can be good too so lots of firms have benefitted from the internet)
change in the economic outlook (so if there are lots of people losing their jobs there is less money in the economy)