create a podcast from the point of view of educating high school students around business studies topics outlined below; Branding might be used to: ⚫ differentiate the product from those of rivals ⚫ create customer loyalty ⚫ help product recognition ⚫ develop an image ⚫ charge a premium price when the brand becomes strong. Branding is discussed in more detail in Unit 10. Dynamic markets Most markets do not remain the same over time - they tend to be dynamic, which means they are likely to change. They may grow, shrink, fragment, emerge or completely disappear. For example, there is no longer a market in the UK for cassettes. Most people buy DVDs or download music from the internet. Dynamic markets can have a huge impact on businesses. A failure to adapt in a dynamic market can lead to the collapse of a business. For example, when digital photography emerged in the 1980s, Kodak (the camera company) continued to rely on sales of film cameras. Eventually, the market for these types of cameras collapsed and Kodak went into liquidation. Those businesses that can adapt to changes in dynamic markets are more likely to survive in the long term. The changing nature of markets is discussed in more detail later. Online retailing One of the biggest changes to occur in the marketing of products has been the development of online retailing or e-tailing. This is a popular branch of e-commerce that has emerged along with the development of the internet. It involves shoppers ordering goods online and taking delivery at home. There are specialist e-tailers such as Amazon and Alibaba – retail ‘giants' that sell a huge range of goods online. However, many retailers, both large and small, now have online services. Growth in online retailing is rapid and expected to continue into the future. Businesses may enjoy a number of benefits from offering online retail services. • Retailers can market their goods to people who prefer to shop from home or who find it difficult to get to traditional shops. For example, people who do not enjoy the physical shopping experience, people too busy to go shopping and people with conditions or disabilities that make physical shopping difficult. ⚫ It is easier to gather personal information from customers so that they can be targeted with other products and offers in the future. Selling costs such as sales staff, rent and other store overheads can be avoided. The savings might be enormous and allow online retailers to charge lower prices. • Marketing costs will also be lower. It is much cheaper, for example, to send a marketing message by e-mail to 1,000 customers than it is to send 1,000 newsletters by post. • Online retailers can reach more customers. A single store in a high street can only attract a limited number of customers. However, a website advertising a 15,000-item product range can have a global reach. An online retailer is open 24/7. There are not many stores that can match this level of service. Marketing and people • Online retailing affords greater flexibility. An online store can be updated instantly and as frequently as is necessary. For example, it is possible to promote a 'deal of the day' on the home page, without the need for expensive printed display material. • Distance is no object with online retailing. Customers can buy products from anywhere in the world. Question 2 Online grocery retailing has not quite taken off in the same way that other forms of online retailing have. However, reports estimate that online grocery sales may rise from 4.4 per cent to 8.3 per cent in the period 2014-2019. This may be due to busier lifestyles and the further integration of mobile technology into daily life as people increasingly become on-the-go consumers. Online shopping is convenient and saves time and fuel. Research shows that 27 per cent of people shopped online for groceries in 2014, with 10 per cent buying the majority of their groceries via the internet. It was reported in 2014 that click & collect was also being used by around a quarter of online shoppers and this figure was growing as more services were made available. Click & collect is a good example of a trend that took off. Major retailers, including Tesco and ASDA, invested heavily to roll out the service to the majority of their stores, as well as convenient locations such as London travel hubs. Click & collect became available at some London tube stations, with plans to include travel hubs and workplaces as future locations, as retailers continue to experiment and innovate. Source: adapted from www.essentialretail.com (a) Explain one reason why online grocery retailing is likely to grow in the future. (b) Assess the benefits and drawbacks to supermarkets of online retailing. Thinking bigger A development in online retailing is the emergence of comparison websites. These sites provide shoppers with search engines that can filter and compare products based on price, features and other criteria. Most comparison shopping sites compare prices from many different retailers, but do not sell products themselves. They also tend to specialise in particular product groups. For example, trivago is used to compare hotel prices, skyscanner compares the prices of flights, MoneySuperMarket.com compares financial products and uSwitch.com compares energy prices. However, some of these sites have been criticised for not giving the best deals. For example, it was reported in 2014 that consumers were missing out on the best energy deals. This was because comparison sites filter out the tariffs that do not pay commission. The Big Deal website was set up in 2013 to help consumers reduce their energy bills. They reported that the cheapest energy deals were not presented to customers by the five major price comparison websites. Instead, the sites provide an option to users to click 'yes' if they want to see tariffs they can switch to 'today' or 'now'. Any deals that do not earn the comparison site commission from the energy companies are filtered out from the search findings. How markets change The size of markets: The size of some markets can remain quite stable over a period of time. For example, the size of the milk market in the UK probably hasn't changed much for many years. This is because consumption of milk is fairly constant. However, the majority of markets are likely to grow. For example, The Future of Global Packaging to 2018 reports that the global packaging market stood at $799 billion in 2012, increasing by 1 per cent over 2011 with sales projected to increase by 3 per cent. Some forecasters reckoned growth to 2018 would reach 4 per cent per year, with sales reaching over 1 trillion US dollars. Factors for growth in packaging include increasing urbanisation, investment in construction and housing, development of retail chains, and the expanding cosmetics and healthcare sectors in the emerging economies. Some markets are in decline. For example, the market for coal in the UK has fallen sharply since 1970. Markets often decline because the need for a product ceases to exist. In the case of coal, other fuels, such as oil, gas, nuclear and renewable sources are now preferred by households and industry. The nature of markets: Many markets are in a state of flux. This means that the structure and nature of the market is subject to constant change. For example, in many markets products are constantly updated, modified and re-launched - the choice available increasing enormously over time. This is the result of new entrants into the market and existing firms widening their ranges and extending their lines. For example, the restaurant market in the UK, worth around £40 billion in 2014, has seen many changes. In the 1960s, the industry was dominated by fish and chip shops, the occasional Chinese restaurant, cafés, independents and hotel restaurants. Today the sector is large and diverse. Restaurants range from top-end fine-dining establishments to quick service takeaway outlets. UK high streets tend to be dominated by chains, such as Nando's, Prezzo and Domino's Pizza, and café chains, such as Costa Coffee and Caffè Nero. There has been a significant development of 4 'upmarket' restaurants, some of which evolved around famous chefs, for example Jamie Oliver, Marcus Wareing and Gordon Ramsay. Add to this the huge range of ethnic restaurants selling, among others, Indian, Thai, Chinese, Vietnamese, Malaysian and Japanese cuisines. New markets: While it is possible for some markets to completely disappear, new markets are always developing. One big source of new markets is from the development of 'emerging economies'. These include the BRIC (Brazil, Russia, India and China) countries and other developing nations, such as Mexico, Thailand, Indonesia and some South American countries. New markets also appear when completely new products are launched. In the 1970s no one had a mobile phone. In the 1980s no one had a smartphone. In the 1990s no one had a flat-screen television. In the 2000s few people had e-books. These are all examples of brand-new markets. Innovation and market growth Markets can grow over time - some rapidly, some more slowly. Growth in existing markets and new markets may occur for the following reasons. • Economic growth. Global living standards tend to rise over time. This means that the world's population has more money to spend. As a result businesses can supply more of their output to growing global markets. Also, as people get wealthier they are likely to demand different types of goods. For example, the markets for holidays, electronic goods, cars, air travel, cosmetics, furniture and luxury goods will grow. ⚫ Innovation. Businesses can grow their markets through the process of innovation. They can create new wants and needs and meet them with new products. A lot of innovation emerges through technological research and development. The arrival of smartphones, tablets, the internet, 3D printing, driverless cars, wearable technology and space travel have all created brand-new markets that did not exist before the technological breakthroughs. However, innovation can take other forms. Businesses can use clever marketing techniques to develop new wants. They can supply their products in new locations - for instance supermarkets offering a click & collect service at London tube stations. New businesses can cash in on the inadequacies of others. For example, since the 'credit crunch' in 2008, new businesses have been set up to compete with banks. Crowd funding and peer-to-peer websites have started to provide unsecured loans. At the moment their market shares are relatively small. But if they prove successful the established banks will have to match these new innovations. • Social changes. Changes in society can have a big impact on markets. For example, the decline in the number of marriages, an increase in the proportion of working women and the growth in the number of one-parent families have increased the market size for childcare and housing. ⚫ Changes in legislation. New laws can affect markets. For example, environmental legislation has helped to foster growth in renewable energies and 'green goods'. Tighter laws relating to payday lending has resulted in many firms leaving the market. A ban on tobacco advertising in the UK might have reduced the market size for cigarettes. • Demographic changes. Changes in the structure of the population can affect the size of markets. In most countries the population is aging. This will help a lot of markets to grow because populations get bigger. But there will also be an increase in the markets for specialist holidays for the elderly, healthcare, care homes and mobility aids. Adapting to change If businesses do not adapt to market changes, they are likely to lose market share. At worst they could collapse. In 2014, it was reported that Tesco was losing market share to other supermarkets. There were a number of reasons for this, but several reports suggested that they were failing to meet customer needs. They were losing market share to the big discounters such as Aldi and Lidl. There was a need for Tesco to adapt quickly, or risk losing more of their market share. What might help businesses adapt to market changes? Flexibility: Businesses need to be prepared for change. One way is to develop a culture of flexibility within an organisation. A business might need flexible working practices, machinery and equipment, pricing and staff. This could mean that staff have to be trained in a variety of skills and be prepared to change the tasks they undertake in the workplace. This might help businesses to serve customers more effectively when changes occur. For example, if customers want access to the business during the evening, then staff might have to work shifts. If businesses have flexible operations it will be a lot easier for them to adapt to market changes. Market research: Businesses must keep in touch with developments in the market. One way to do this is to undertake regular market research. This might be aimed at current customers or potential customers. Firms need to be aware of any changes in customer needs or tastes. Communication with customers and potential customers should be an ongoing process if firms want to keep completely up to date. Market research is discussed in Unit 2. Investment: Those businesses that invest in new product development are likely to survive for longer in the market. Although expenditure on research and development is expensive, a failure to innovate could be costly. A unique new version of a product or a brand-new model could rejuvenate sales and help win a larger share of the market. In the car industry, firms spend very large sums of money in product development. BMW has enjoyed a larger slice of the small car market by extending the range of its Minis. Investment might also be needed in training and use of flexible machinery. Continuous improvement in the increasingly competitive environment: Businesses need to make continual improvements in all aspects of their operations. For example, if they can improve efficiency, costs will be lower and prices can be held or reduced. If customer service is flawless, customers are more likely to return. If new product ideas are encouraged, they may gain a competitive edge. A culture of continuous improvement can help businesses be more adaptable in the market. Marketing and people Develop a niche: If a market is in decline and a business is unable to diversify, it may survive by serving a niche. A niche strategy is appropriate if groups of loyal customers can be served profitably. For example, Harley-Davidson survived by leaving most of the motorcycle market to the Japanese. They sold high-horsepower 'hogs' to a small segment of motorcycle enthusiasts. As a result they became quite profitable and survived. Generally, if firms cannot adapt quickly to the changing needs of customers, they will lose out to rivals that do adapt. How competition affects the market Competition is the rivalry that exists between businesses in a market. It would be rare for a business to operate in a market where there was absolutely no competition. The existence of competition will have an impact on both businesses and consumers in the market. Businesses: Competition puts businesses under some pressure. It means that they have to encourage customers to buy their products in preference to those of rivals. They will use a range of methods to attract customers. These methods include: ⚫ lowering prices ⚫ making their products appear different to those of rivals ⚫ offering better quality products ⚫ using more powerful or attractive advertising or promotions ⚫ offering 'extras' such as high-quality customer service. All of these methods cost money and generally reduce the amount of profit a business can make. However, businesses have to use such methods in order to survive in the market. Because competition makes running a business more challenging and reduces the profit potential, owners and managers might try to reduce competition in the market. One way of doing this is to take over their rivals. This might be achieved by purchasing a rival in the market. Alternatively, they might try to create obstacles that make it difficult for others to enter the market. For example, they may spend huge amounts of money on advertising, which potential entrants might struggle to match. It is generally the larger businesses in the market which are able to reduce competition in this way. However, there is a range of legislation which prevents businesses restricting competition using practices that are considered unfair. Consumers: Consumers will generally benefit from competition in markets. In markets where there are lots of businesses competing with each other, there will be more choice. Most people enjoy having lots of choice because it makes their life more interesting. For example, when people buy a car they can choose from a huge range of different models, styles, colours and endless variations in specifications. Consumers may also enjoy better quality products and lower prices. In the absence of competition consumers might be exploited. A business with little or no competition might raise prices and restrict choice. They will lack the incentive to innovate. For example, they are unlikely to invest money to develop new products. Consequently, one of the roles of a government is to ensure that competition exists in markets. The difference between risk and uncertainty One of the challenges when running a business is dealing with risk and uncertainty. Although both risk and uncertainty are likely to pose threats to a business, they are not the same. Risk: Owners take risks when running a business. This means they take actions where the outcomes are unknown. More specifically, they commit resources that could be lost. Initially, they take a risk when setting up a business. This is because they invest their own money to get the business 'up and running' and there is a chance that the business will not succeed. If the worst happens and the business collapses it is possible that all the money invested by the owner is lost. In the UK, around 23,000 businesses each year are expected to fail. It is also reckoned that about 90 per cent of all new businesses do not survive beyond five years. Even when businesses are established, they may continue to take risks. This is because they often spend money on ventures that may not yield positive results. For example, they may invest in a new product which subsequently fails in the market. If the product is withdrawn, most of the money spent on development and launch will be lost. In 2014, Amazon, the online retailer, launched a mobile phone called the Amazon Fire Phone. It failed in the market and the price was reduced very quickly from $199 to just 99 cents. It was reported that Amazon lost $170 million as a result. Uncertainty: The markets in which businesses operate are often subject to external influences. This means that events which are completely beyond the control of businesses can have an impact in the market, which can have financial consequences. For example: a new competitor might enter the market with a superior product · • consumer tastes might change as a result of a new social trend the government might introduce a new policy or piece of legislation ⚫ some new technology might be invented ⚫ there may be a natural disaster such as a flood the economy might go into recession. Unfortunately, such influences are very difficult to predict. This means that businesses have to operate all of the time in an environment of uncertainty. However, the consequences of uncertainty are not always negative. For example, new technologies can provide new opportunities. The introduction of the internet has resulted in an enormous range of new business opportunities. Generally though, businesses do not like uncertainty. It makes decision making more difficult - particularly when making investments for the future. Key terms Brand name - a name, term, sign, symbol, design or any other feature that allows consumers to identify the goods and services of a business and to differentiate them from those of competitors. E-commerce - conducting business transactions online. Online retailing or e-tailing - the retailing of goods online. Market - a set of arrangements that allows buyers and sellers to communicate and trade in a particular range of goods and services. Marketing – a management process involved in identifying, anticipating and satisfying consumer requirements profitably. Market share – the proportion of total sales in a particular market for which one or more businesses or brands are responsible. It is expressed as a percentage and can be calculated by value or volume. Mass market - a very large market in which products with mass appeal are targeted. Niche market – a smaller market, usually within a large market or industry. Knowledge check 1. What is the difference between a mass market and a niche market? 2. What is a key advantage of selling in a mass market? 3. State two disadvantages of selling in a niche market. 4. How is market share calculated? 5. State three advantages of giving products brand names. 6. State two advantages to customers of online retailing. 7. What is meant by a dynamic market? 8. How might the nature of a market change over time? 9. State three reasons why a market might grow. 10. Describe two ways a business might adapt to changes in markets.