Market And Market Forces Flashcards
What are consumer goods and services market
This is where households purchase the goods/services they desire and businesses try to meet their demand by selling the goods/services in store and online for example, hairdressing
What is the capital goods market
This is an industrial market selling tangible goods required by businesses who supply the consumer goods market. Items can include machinery, equipment, vehicles and tools.
what is the labour market
This is where those seeking work can interact with employers who are competing to hire them.
What does equilibrium price refer to
The price at which the quantity demanded by consumers is equal to the quantity supplied
What does niche marketing refer to
This is where a business aims their product at a narrow or focused subset of a larger market scene. It targets a product or service at a small segment of a larger market. For example rolls Royce or Vera wang address the need for a product or service which is currently not met by those operating in the main market sector.
Why would a business choose to join the niche market
It can be attractive for small firms due to minimal competition however, many businesses that are involved in the niche market are owned by larger organisations such as rolls Royce. These markets can also be based on selling exclusive or high-end products where higher prices can be charged due to there being little competition for example, Lefty’s a business that only sells products for people who are left handed
What are advantages of niche marketing (1)
Less competition- there can be fewer competitors as large companies arent as attracted to small markets for example, there is only one magazine about orienteering as its a small sport with low readers for there to be other businesses competing for customers allowing them to earn a decent profit. This can be an advantage as they can charge higher prices as there is a lack of competition.
Costs- as there can be a lack of scope for cost reduction by producing on a large scale, this can mean that small firms can compete more effectively in a niche market. Usually mass market firms can produce goods at a low unit cost due to buying in bulk (economies of scale) however, in the niche market there is too few customers for a small firm to get these advantages therefore, they can match their costs of larger rivals in a niche market.
Small-scale production- the limited demand may suit a smaller business that would lack the resources to produce on a large scale, for example, sole traders may only be able to produce enough products for a niche market
What are advantages of niche marketing (2)
Tailor-made products- a business can adapt its product to meet the specific needs of a niche market rather than compromise between the needs of many different groups of consumers. Tailor-made products, designed to meet the specific needs of a customer are common in niche markets. This makes the product more attractive to the customer allowing them to charge higher prices as they have a unique selling point
Targeting customers- it can be easier for businesses to target customers and promote their products effectively when they are only selling to a certain type of customer. The content of advertising can be designed to appeal more to the specific market segment being targeted. For example, children’s toys can be advertised during children’s programmes using images and messages that attract children
Fewer barriers to entry- its easier to set up in a niche market as there’s less barriers for example, competitors.
Loyalty- if a brand builds a good reputation they can establish a loyal customer base resulting in profit and are less likely to be effected by an economic recession due to being a smaller business that sells less products resulting in less waste
What are the disadvantages of a niche market
Lower profits- the scale of the market can limit the chances of making a high profit. Even if a high price is charged the lack of customers can reduce the profit made. The unit costs tend to be higher relative to larger companies due to not being able to take advantages of economies to scale. If the niche market is high enough for them to make a reasonable profit it may attract competitors resulting in a lack of customers which can make it difficult to for a business to survive.
Changes in demand- small business can be vulnerable to changes in demand as they are often specialised so firms operating in them arent able to deal with increased demand or if there’s a decline in demand it can threaten the firms survival however, larger firms can avoid this by producing a wide range of products.
Market entry- an increase in a niche market can attract larger markets. For example, Holland and Barrett identified as a health foods market were known as a niche market but has it grew competitors emerged as there has been in increase in health foods.
Costs- as they produce bespoke products with a higher unit cost the cost of labour also increases which can affect overall profit as they take more time and higher quality materials
What is mass marketing
This is a broad, non-targeted, non-segmented market. For example, petrol and bread. There is a limited scope for targeting as majority of the market needs things such as bread and water so they cannot modify their products to appeal to a niche market. They are standardised/ homogeneous.
What are the advantages of mass marketing
Large-scale production- In mass marketing the production on a large scale is possible as they can lower costs per unit as a result of factors such as bulk buying allowing them to improve profit margins as many businesses will not be large enough to compete in the mass market.
Higher revenues- the sheer volume of customers enable companies to earn huge revenues
Barriers to entry- this marketing allows businesses to use the most expensive marketing as there’s greater opportunity for large increases in revenue that will more than pay for the marketing. Not only does this eliminate smaller rivals it can act as a barrier to entry for smaller firms. They can afford large advertising costs
Research and development- they can appeal to a large, profitable mass markets to be able to fund research and development costs to introduce new products. For example, boots pharmacy is able to introduce new products due to trusted research and development that can gain trust from consumers.
Brand awareness- they can increase brand awareness and can break down consumer resistance to new products for example, Cadburys can use their high levels of brand awareness to encourage consumers to try new products they might not try if it was from a brand name they didn’t recognise
What are the disadvantages of mass marketing
Fixed capital- high fixed capital costs are incurred such as purchasing large factories, machinery and research that can prevent businesses from going into the mass market
Changes in demand- they can be vulnerable to changes in demand. A fall in demand can lead to unused spare capacity increasing unit costs as there is a lot of waste as businesses can waste money on creating and storing products. If the demand increases rapidly with consumers wanting the latest product they may struggle to upkeep the demand and have to hire more employees and spend more on materials.
Effects of standardisation. It can be difficult to appeal directly to individual consumers due to mass market products being designed to suit all customers. As a result prices tend to be lower reducing the opportunity for higher profits.
Competition- mass market organisation are more vulnerable to low-cost competition from abroad as the UK can’t match the low wage levels and other lower costs in these countries.
Adding value- in mass markets there’s less chance of adding value. Customers income increasing can cause them to want high-priced unique, quality products that may effect the sales of mass products.
What does demand refer to
the demand for a good or service is the quantity of that good or service that customers would buy at a given price.
If the market price is low, more people will by the product with the exception of expensive products such as cars or phones if they are a low price consumers might think there is something wrong and not buy it.
The higher the price the less quantity demanded creating a downward slope from price (Y) to quantity (X) known as the demand curve.
what are the factors that determine demand (1)
Price- the higher the price the lower the quantity demanded, if changes in other factors occur a new demand curve can be created as consumers may change what they buy. As well as the price of substitutes if there is a product that is similar to the main product (an alternative product that serves the same function) that is cheaper than the main product they will be more likely to be bought for example, pears and apples.
Income- an increase in income can lead to an increase in demand for most goods. Discretionary income
Advertising, promotional offers and public relations- To adverts and sponsorships can affect demand as it draws more attention to a brand creating more awareness that can help the brand raise.
Competition- if there is competition the demand for a product in the mass market may be lower but if a new product or quality is increased it can draw attention creating more demand for a specific businesses or brands product.
Taste/fashion- if there is fashionable products that are seen as more in or trendy the demand for this product can increase
Seasonal.
what are the factors that determine demand (2)
Change in price of complementary goods or services- when the demand for one product rises, demand for the complementary product will also increase meaning the demand curve will shift to the right.
Changing population- demand will be affected when a population increases for example, if the average age is over 70 the demand for products such as mobility aids will increase demand
Government actions- a campaign by the government eg; encouraging life style choices will influence consumption such as unhealthy foods or smoking.
