Create a podcast based on my below learning material discussing all the key points: The market Key points 1. Mass markets and niche markets: * characteristics * market size and market share * brands 2. Dynamic markets: * online retailing * how markets change * innovation and market growth * adapting to change. 3. How competition affects the market. 4. The difference between risk and uncertainty. --- ## Getting started The market for holidays has changed dramatically over time. In the 1960s a typical holiday for a UK person might have been an annual two-week family trip to the seaside at Blackpool, Scarborough or Brighton, staying in a caravan, a holiday camp or small hotel. Today people might take several holidays a year and the choice of destination, duration and style is enormous. Holidays can range from a weekend break with friends in an Eastern European city, such as Prague, or a romantic mini-break for two in Paris, to a fortnight in the sun in the Caribbean, or a camping expedition in the Lake District. There are specialist holidays, such as trekking in the Atlas Mountains, golfing trips in Dubai or white-water rafting down the River Wye, and theme-park holidays, such as Disneyland®. Increasingly people are going to long-haul destinations, such as Australia, China and South Africa. How has the market for holidays changed over time? What might have caused these market changes? How do people choose their holiday destinations? What role does the internet play in the sale of holidays by businesses? --- ## Marketing Marketing involves a range of activities that help a business sell its products. However, marketing is not just about selling, it involves: * identifying the needs and wants of consumers * designing products that meet these needs * understanding the threats from competitors * telling customers about products * charging the right price * persuading customers to buy products * making products available in convenient locations. According to the Chartered Institute of Marketing, ‘Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably’. --- ## Markets and marketing Businesses make money by selling their goods and services in markets. Historically, markets were places where buyers and sellers would meet to exchange goods. However, today it is possible to trade goods and services without buyers and sellers meeting up. For example, trading can be done over the telephone, using newspapers, through mail order or on the internet. Some examples of markets are given below. * Consumer goods markets – where products such as food, cosmetics and magazines are sold. * Markets for services – this can include services for individuals, such as hairdressing, or business services, such as auditing. * The housing market – where people buy, sell and let property. * Commodity markets – where raw materials such as oil, copper, wheat and coffee are traded. * Financial markets – where currencies and financial products are traded. --- ## The characteristics of mass markets and niche markets Some businesses sell their products to mass markets. This is when a business sells the same products to all consumers and markets them in the same way. Fast-moving consumer goods, such as crisps, breakfast cereals, computer software and Coca-Cola®, are sold in mass markets. The number of customers in these markets is huge – possibly billions if products are sold globally. This means that businesses can produce large quantities at a lower unit cost by exploiting economies of scale. This might result in higher sales and higher profits. However, there is often a lot of competition in mass markets and therefore businesses may spend a lot of money on marketing. For example, *Advertising Age* reported that the Coca-Cola Company spent around $3.3 billion on global advertising in 2013. A niche market is a small market segment – a segment that has sometimes gone ‘untouched’ by larger businesses. Niche marketing is the complete opposite of mass marketing. It involves selling to a small customer group, sometimes with specific needs. Small firms can often survive by supplying niche markets. They may also avoid competition. It is a lot easier to focus on the needs of the customer in a niche market. Also, if there is no competition it may also be possible to charge premium prices. An example of a business that targets niche markets is Zumiez, which sells products related to surfing, skateboarding and snowboarding. --- # Image 2 — “The market Unit 1” (Page 2) ## The market Unit 1 However, if a business successfully exploits a niche market it still may attract competition. Niche markets, by their nature, are very small and unable to support many competing firms. As a result, if a large business decides to enter a niche market they may find it easy to overrun a smaller rival. Also, businesses that rely on a single niche market may be vulnerable because they are not spreading their risk. If they lose a grip in their chosen market, they may collapse because they do not have other products or markets as a back-up. --- ## Exam tip In examinations it is helpful to give examples when explaining the meaning of business terms and concepts. Relevant examples support your answer and show that you understand the meaning of the term or concept. It is also important to use information in the case material in the question to support your answer. This approach will show your skills in ‘application’ in your answer. --- ## Question 1 David Alqunik, a Canadian Emergency Room doctor, designed Banana Guards. He wanted to prevent bananas from being bruised and squashed during his journey from home to work, so designed Banana Guards from lightweight plastic. Once shut inside a Banana Guard, a banana of almost any shape or size can be transported completely undamaged inside a lunchbox, bag or backpack – even when travelling on a packed tube. The contents are kept fresh by ventilation holes in the side of the bright yellow Banana Guard, which also prevent the banana from ripening prematurely until ready for consumption. The Banana Guard is also safe for the dishwasher. Sources: adapted from [www.bananaguard.com](http://www.bananaguard.com) and [www.johnlewis.com](http://www.johnlewis.com) (a) Explain what type of market the Banana Guard is aimed at. (b) Explain one possible disadvantage of targeting a niche market for a business selling a product like Banana Guard. --- ## Market size The size of a market can be estimated or calculated by the total sales of all businesses in the market. Market size is usually estimated in a number of ways. ### Value: This is the total amount spent by customers buying products. For example, it was estimated that the value of the fast-food market in 2014 was just over £29.4 billion. This included branded fast-food chains and independent outlets selling hot or cold eat-in food without table service, or takeaway food. ### Volume: This is the physical quantity of products which are produced and sold. For example, the global crude steel production in 2014 was 1,661 million tonnes (worldsteel.org). Some estimates of volume are based on the number or percentage of users, subscribers or viewers. This is often the case in markets for services, such as the number of mobile phone users, the number of television viewers or the percentage of households with digital television. Different markets are likely to differ in size. For example, the sale of savoury snacks in one year is likely to be much smaller than the sales of footwear in the same year in the UK. --- ## Market share Market share or market penetration is the term used to describe the proportion of a particular market that is held by a business, a product, a brand or a number of businesses or products. Market share is shown as a percentage. The market share of a business can be calculated as: Sales of a business / Total sales in the market × 100% Why might the measurement of market share be important? It might indicate a business that is a market leader. This could influence other companies to follow the leader or influence the leader to maintain its position. It might influence the strategy or objectives of a business. A business that has a small market share may set a target of increasing its share by 5 per cent over a period of time. It may also be an indication of the success or failure of a business or its strategy. Figure 1 shows the market shares of supermarkets in the UK in 2013. It shows, for example, that Tesco was the market leader with nearly one-third of the total market. It also shows that the top four supermarkets share 75.3 per cent of the total market, i.e. the market is dominated by just four firms. ### Figure 1 UK market shares of supermarkets in 2013 Key: * Tesco * Asda * Sainsbury’s * Waitrose * Aldi * Morrisons * Co-op * Lidl * Iceland * Others Source: [www.kantarworldpanel.com](http://www.kantarworldpanel.com) (data for 12 weeks ending 10.11.2013 and from data source comparing 12 weeks ending 25.11.2012) --- ## Brands Many businesses try to establish themselves in markets by giving their products a brand name. Products are given brand names to distinguish them from other products in the market. Branding is particularly important in mass markets where lots of products are competing for a share of the market. Examples of common brand names include Google, BBC, Toyota, Nike and Apple. 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. * 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](http://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. --- # Image 2 — Page 4 ## 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 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 ‘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.