Business 10-11

cambridge igcse business flashcards

Target market

individuals or organisations identified by a business as the customers or consumers of their products.

Customer

an individual or business that buys goods and services from a business. Consumer: the final user of a product

consumer markets

markets for goods and services bought by the final consumer

Industrial markets

markets for goods and services bought by other businesses to use in their production process.

Business Environment

the combination of internal and external factors that influence the operations of a business.

Market

Customers and consumers who are interested in buying a product and have the financial resources to do so.

Changes in spending patterns

The price of the product, The price of competitors' products, Changes in consumer income, Changes in population size and structure, Changes in tastes and fashion, and Spending on advertising and other promotional activities.

Why has competition increased?

• Government intervention in markets

• Growth of free trade between countries

• Development of ecommerce and social networks

Government intervention increased competition

prevent individual firms from dominating the market (no monopoly), selling off public sector organisations the private sector, providing Financial and other assistance to new and small to medium-sized businesses

growth and free trade

Regional free trade agreements remove or reduce barriers to trade between countries.

Development of e-commerce 

Many businesses have developed their own websites and use these to sell their goods to customers in other regions of their own country and to customers in other parts of the world. 

Niche market

Niche marketing identities the needs of this small part of the whole market and then develops products to satisfy those needs. Businesses in a niche market often sell high priced and high status goods, for example Rolex watches and Rolls-Royce motor cars. 

Mass Market

Mass marketing is selling the same product to the whole market. 

Which is better, Niche marketing or Mass marketing?

Most businesses now see the benefits of dividing the market and providing a slightly different product to each segment. This recognises that consumers do not all want the same product; for example toothpaste is produced for sensitive teeth, for children's teeth and in different flavours. Dividing the market so that products better meet the needs of different types of consumers can help to increase sales, revenue and profits. 

Pros and Cons of Niche Marketing

Pros

Small firms are able to survive and earn profit even in markets dominated by larger firms

Consumers will usually pay more for high status and exclusive products

Less competition

Cons

Might attract competition, reducing prices

The small size of the market means that economies of scale are unlikely to be achieved

small charges in consumer market means economies of scale are unlikely to be achieved

Pros and Cons of Mass marketing

Pros

Requires large scale production

much larger larger market has the potential for high sales and profits

changes in consumer patterns have less effect

Cons

much more competition, lower prices and profit margins

not all markets are large enough to support a mass marketing approach

Due to consumer wants, there might be a greater division of the whole market and a reduced scope of mass marketing

Market segmentation

Market segment is dividing the market into consumer with certain characteristics.

Market segmentation: dividing the whole market into segments by consumer characteristics and then targeting different products to each segment.

benefits of segmentation

Increase in sales

Small firms

Marketing strategies can be better targeted at each segment

Market research

The process of collecting, recording and analyzing data about the customers, competitors and market for a product.

How does market help the business

• find out what consumers like and dislike about their products

• identity consumer tastes and preferences
  

• decide on the best promotion, packaging and distribution methods for its products

• identify the main competitors and what is special about their products

Uses of Market research

• Identify consumer needs. This Reduces the risk when developing and launching new products because the product has been designed and produced based on the market research information provided by potential consumers of the product. 

• Discover the current and future market size for the product. 

• Provide information about the business's existing products and markets.

Product Orientated vs Market Orientated Businesses

• A product-oriented business is one whose main focus of activity is on the product itself. 

• Eg. A newly developed Technological product.

• A market-orientated business is one which carries out market research to find out consumer wants before a product is developed and produced.

• Eg. New flavours of Ice cream

• Benefit of Market orientated:

Products that meet the needs of consumers are likely to last longer in the market than goods which have been produced using a product-orientated approach. This leads to higher sales and profits.

Primary research

Market research that is collected first hand, directly from the consumer

Pros and cons of primary research

Pros

Obtains the information you would want

information is up to date

Competitors will not have the information

Cons

It is expensive

takes longer to obtain

Difficult to obtain

Quantitative research vs Qualitative research

Quantitative research uses objective, numerical data to answer questions like "what" and "how often." Conversely, qualitative research seeks to answer questions like "why" and "how," focusing on subjective experiences to understand motivations and consumer opinions.

Primary research methods

Focus Groups, Observations, Consumer surveys, Test market 

Methods in more detail

 

Test marketing	When consumers trial your product and give feedback	Can find out problems with product	Takes longer to get product to the market
Focus groups	When you invite groups in your target market to discuss a product/concept	Can get opinions from your exact target market	Time consuming to arrange No numerical data
Question- naires	When you send a list of questions out about consumer tastes/habits	Cover wide area	Results unreliable Seen as ‘junk mail’
Obser- vations	Watching consumer activity first hand	Get to the truth (e.g. mystery shopper)	Can’t ask consumers why Expensive as need trained observers