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Component 1- Markets - Coggle Diagram
Component 1- Markets
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& Competition
different businesses can operate in very different markets; buyer and seller do not need to be in the same place in order to conduct an exchange of goods or services for money.
Local markets– where buyers may be a short distance from sellers, common for the sale of fresh and locally sourced products and local services; e.g. hairdressers
National markets– customers spread throughout country/ over large area, same product provided to customers spread throughout country; e.g. supermarkets/ fast food restaurants
Global markets– goods + services of one country are traded to people of other countries; e.g. car manufacturers
Consumer markets– products +services bought by individuals for personal or family use, can be categorised as fast-moving consumer goods, consumer durable goods and services
Trade markets– involves sale of goods +services between businesses, referred to as ‘Business to Business’ marketing (B2B); e.g. business selling raw materials/ components such as coal or steel to other businesses
Seasonal markets– businesses experience seasonal variations in output/ sales; e.g. businesses that sell ice cream, particularly through retail outlets/ice cream kiosks
Niche markets- business targets smaller segment of larger market, where customers have specific needs +wants
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Mass markets- business sells into largest part of market, where there are many similar products on offer
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Segmentation
process of splitting large market into different sub-groups of customers on basis of them having similar characteristics/ traits; use groups to make it easier to develop products/ services aimed at certain customers + help target marketing
Demographics:
Gender– products targeted at men/ women; e.g. cosmetics;
Age– target products at people of different ages;
Socio-economic groups/social class– target people in different job roles/ based on income levels; e.g. M&S supermarkets able to target customers with higher levels of income than Lidl/ Aldi
Geographical location:
Regions of country– target products at customers depending on where they live; e.g. McDonalds +Coca Cola require different ingredients in different countries
Psychographics- targeting customers based on:
personality + emotionally-based behaviour; e.g. different attitudes, opinions, lifestyles;
lifestyle- how customers lead their lives +attitudes they share; e.g. purchase foods based on a healthy lifestyle/ based on ethical views;
culture- based on ethnic origin, religion, personal belief; e.g. most useful for businesses operating in food sector;
customer receives product that is closer to their expectations because business is specifically targeting a segment of customers +can adapt product to meet needs;
allow customers access high quality goods +ensures that they feel like they are getting value for money;
fit better with a customer’s budget and lifestyle;
costs incurred by business may increase when selling different ranges of products +trying to meet needs of different market segments, leading to increased costs, thus forcing prices up even higher for customers-> some customers having a more limited choice due to income levels;
some customer segments are often excluded;
Structures
Perfect competition- exists in market whereby many small firms produce virtually identical products at similar prices
no business can influence activities of others;
not one dominant business classed as a market leader, all need to accept the going price of marketplace= price takers;
no barriers to entry/ exit market- all businesses benefit in same way from economies of scale/ levels of productivity;
same access to technology, thus equal levels of productivity;
customers fully aware of goods +services offered in marketplace +prices -> customers access wide number of suppliers
Monopolistic competition- market structure where elements of monopoly allow businesses/ consumers exercise some control over market prices
Oligopoly- when there are many businesses operating in marketplace but only a few large businesses dominate market; e.g. in retailing, grocery market is dominated by Tesco, Sainsbury’s, Morrisons and Asda
businesses tend to have differentiated products with strong brand identity;
prices tend to be stable in oligopolistic markets- price war= short period of time;
some barriers to entry ; e.g. high start-up costs in relation to manufacturing/ large businesses benefit from economies of scale
increased business size= economies of scale-> lower prices to consumers;
high profits-> capital available for innovation +investment;
targeting wide range of market segments provide variety +choice for consumers;
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Demand & Supply
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Demand: quantity of product that consumers are willing +able to purchase at any given price- assumed that this is effective demand
law of demand states- higher the price, lower the quantity demanded; if the price is lower, then quantity demanded will increase-> in a downward sloping demand curve
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Market equilibrium: where demand curve and supply curve intersect- means that, at a given price, demand for product equalled the supply
from market equilibrium, can derive market price +market quantity, but equilibrium price changes depending on factors that can impact demand/ supply
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Consumer Protection
practice of protecting customers from products that don't reach a certain level of safety+ advertisements that are deliberately misleading
Safety: in search for cost saving measures, businesses may be tempted to provide goods which are of an unsafe standard-> as consumers don't wish to be harmed by dangerous goods, its necessary for consumer protection legislation to be put in place-> failure to do so may result in severe consequences for consumers
Globalisation: many goods come into UK from abroad, from countries whose standards of safety may be lower than UK requirements
Internet: purchasing goods over the internet is largely unregulated-> consumers need protection from fraud, fake goods, non-delivery of goods
Fake goods: fake goods sold on streets all over UK, these goods will not have been tested for safety and could cause harm to customer
Scientific advances: R&D into goods such as pharmaceuticals/ electronics= proper regulatory testing carried out on these before sold to consumers
Increase in technology: changing technology+ complexity of goods means consumers are often ignorant of what they are buying
Fitness for purpose: goods still sold when they aren't fit for purpose, unsafe, poor quality-> businesses should be liable for damage + replacement of defective goods
Misleading customers: in business’ interest to make products seem exciting/ attractive, but may lead to some marketing campaigns excessively elaborating potential benefits of product
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