Market

this is the third topic that covers types of markets, protection, competition, data, segmentation and supply & demand

Product definition

A tangible, physical, good. E.g. phones, clothes and chairs

Service definition

Are non-tangible activity that other people or businesses do for you sometimes. E.g. a hairdressers or a restaurant

Market definition

A place where buyers and sellers meet for the mutual exchange of goods and services in return for money or barter

Local market definition

Where buyers may be a short distance from the sellers, typically local goods/services e.g. highstreets or retail parks

National market definition

Where customers are spread throughout the country or over a large area. E.g. National chain business such as supermarkets or fast food that have locations across the UK

Global market definition

Where goods and services of one country are traded to people of other countries E.g. car manufactures

Mass market definition

involves a business aiming products at a whole market, rather than parts of them

Niche market definition

A small segment of a market that offers specialist products or services to a unique group of customers.

Seasonal markets definition

A market where businesses will experience seasonal variations in output or sales E.g. fireworks

Consumer markets definition

A market for products and services are sold to the public (B2C).

Trade markets definition

A market that involves the sale of goods and services between businesses (B2B). E.g. businesses selling raw materials or components such as coal or steel to other businesses

Market segmentation definition

Involves the breaking down of a larger market into small sub-groups that share common characteristics

Demographic definition

Splitting the market up based on observable characteristics. Methods: Age, Gender, Social economic group (social class)

Psychographic definition

Splitting up the market based on personality and traits. Methods: values, interests, and lifestyles.

Geographics definition

Splitting up the market based on their location Methods: Country, county, post code, or type of area e.g. rural, urban, suburban, global.

Segmentation benefits for business

better able to meet needs, allows for precise targeting, reduce marketing wastage

Segmentation benefits for customers

will get products closer to their needs/wants, shown products that better fit their budget/lifestyle

Segmentation drawbacks for businesses

Have to keep up to date with market trends, poor research could misled business

Segmentation drawbacks for customers

Some customers are excluded, many customers don’t fit one category, could increase prices for customers

Market size definition

This the total value or volume of sales in the market. Market size = number of units sold x price

Market share definition

This is the proposition of total market sales that business has. Market share = (sales of firm / total market sales) x 100

Market Trends definition

These are the overall changes in the market in the buying or selling of products.

Importance of competition in markets

Helps develop high-quality products/services, increase customer choice, lower price for customers

Competitive advantage definition

A feature of a business that allows it to perform more successfully than others in the market. E.g. value, quality, service.

Price takers definition

Are businesses that have no influence over the price that is being charged for its products.

Price Makers definition

Have a strong influence on the prices set for products

Barriers to entry definition

Something that prevents a business from easily being able to set up a business in a market

Perfect competition characteristics

Homogenous products, Lots of buyers and sellers, Assumes perfect knowledge, Price takers, Little/no barriers to entry or exit

Monopolistic competition characteristics

Still lots of competition, Similar but differentiated products, Limited price setting powers, Few barriers to entry

Oligopoly characteristics

Market is dominated by a few firms, Compete via non-price means, Price making power, Might have collusion, Some barriers to entry/exit

Monopoly (Pure) characteristics

One supplier, 100% market share, Maximised profits, Larger barriers to entry, Price makers'.

Monopolistic power defintion

Any firm with 25% market share is said to have some of the powers of a pure monopoly

Why do consumers need protection?

To prevent exploitation by businesses, ensure product quality and safety, and maintain fair pricing and competition in the market.

Legislation that protects consumers

The consumers rights act 2015 and trade description act 2011 ect

CMA definition

The Competition and Markets Authority (CMA) is a UK government agency responsible for enforcing competition law and protecting consumer interests through market regulation.

Ombudsman definition

An organisation that has been appointed to look into complaints about companies and organisations.

Demand definition

Is the quantity of a good or service that consumers are willing and able to purchase at any given price.

The law of demand

The law of demand states that at a higher price, consumers will demand a lower quantity of goods and vice versa.

Factors affecting demand

Population, Adverting, Substitutes price,Income,

Fashion/tastes, Government legislation,

Complement price, Seasonality, External shock

Supply definition

The quantity of a good or service that suppliers/producers are willing and able to produce at a given price.

Law of supply

As the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.

Factors affecting supply

Cost of production, Productivity, Number of firms, Technology, Weather/Climate, Government – Regulations, Subsidies, Indirect tax, Exchange rates, Change in the price of a substitute

Price elasticity definition

Measures the responsiveness of quantity demanded to a change in its own price.

price elasticity = % change in quantity demanded / % change in price

Price elastic demand definition

When the price elasticity is greater than 1. The quantity that consumers want is sensitive to how much it cost them to buy.

Price inelastic demand definition

Is when the price elasticity demand for a product is less than 1. The quantity that the consumers want is not sensitive to how much it costs them to buy.

Disposable income definition

Income that is left after paying taxes and for the essentials

Income elasticity definition

Measures how sensitive demand is to a change in income.

Income elasticity = % change in quantity demanded / % change in income

Income elastic demand definition

When the YED is greater than 1, sowing the amount of good that a consumers are willing to buy is significantly affected by the amount they earn.

Income inelastic demand definition

When the YED is below 1, showing that the amount consumers are willing to buy is not significantly affected by the amount they earn.

Normal goods definition

Items that consumers purchase on a daily basis

Luxury goods definition

A good that is purchased more regularly as disposable income increases

Inferior goods definition

A goods that are purchased more regularly as income decreases