Edexcel Business Studies: Theme 1 Notes
1.1.1
Mass market:
Market targeted at general public, where many similar products are
offered
Advantages:
- Economies of scale - lower production costs due to mass
production
- Higher demand due to lower prices set
- Large customer base
- Less vulnerable to market changes as businesses who mass
market tend to have expanded product lines - also less
dependent on one product/market
Disadvantages:
- More competition as there are many other businesses who are
trying to attract the same customers in the mass market
- Have to charge a lower and competitive price as customers will
just go to a business substitute who sells cheaper
- Tend to be less loyal customers
- Profit margins lower as prices charged are usually lower
Niche market:
Small segment of a market that specifically targets a certain groups’
demands
Advantages
- Less competition - small market, less people who target this
specific group of customers’ needs and wants
- Building up specialist skill and knowledge to have market
expertise - more trust from customers
- Premium pricing - charging a higher price as customers are
ready to pay for market expertise and specialisation
, - Loyal customers if can provide exactly what they’re looking for
Disadvantages
- Lack of economies of scale, no lowering unit costs as operations
are smaller
- Overdependence on single product or market
- Attract competition if niche operations are successful, bigger
companies may overshadow
- Vulnerable to market changes - small companies, small product
lines, expensive and time consuming to change according to
market needs like trends, regulations and technology changes
Dynamic markets (opposite: static)
- Constantly changing markets, that grows, changes and declines
very quickly
- Subject to rapid and continuous changes
- Examples: petrol, media (consumption of media, tech changes),
taxis (hail riding apps changes), hotel and rental market
(emergence of apps and services like AirBNB)
Reasons for dynamic markets changing
1. Technology changes
New technology/design techniques make it possible to invent or
innovate products, or create substitutes to become more competitive,
as new businesses emerge when technology improves.
2. Trends
Responding to customers’ changing wants by improving or introducing
products, like demographic changes.
Tastes and preferences
3. Income changes
Depending on customers’ incomes, if disposable income increases
then price can increase or people buy more products.
4. External shocks
,Economic factors like recessions or booms that businesses have no
control over can affect market demands and changes. Legislation and
regulations.
Implications:
- Creates a stream of opportunities and threats, existing market
leader: threat. New entrants that provide more
innovative/different service: attract customers
- Recognise and adapt to change, even if costs increased, to
respond with new research and development, compete/adjust
business model to invest in innovation to maintain
competitiveness
Risk (Can be calculated)
- Possibility that events will not occur as hoped
- Examples: cyber security, fraud, environmental damage,
changing legislation, supply chain shocks
Uncertainty (The unknown)
- Unpredictable and uncontrollable events that affect business
decision and actions
- Examples: How market will respond, will business achieve break
even, employee turnover
, 1.1.2
Product orientation
- When the product develops according to what the business is
good at making
Advantages
- Quality products as attention/resources to manufacturing are
excellent
- Innovative approach: launch unique products that rivals follow
Disadvantages
- Lower relationship between customers and business, so brand
loyalty may be lower
- Low sales: not knowing demands: production of undesirable
items
- Limited ideas: no engagement with customers: less learning and
developing product ideas from customer supply
Market orientation
- When the business reacts to customers’ demands and develops
their product around that
Advantages
Disadvantages
Implications
- Most markets moving towards market-orientated
- Customers more knowledgeable about market, requiring
variety and quality
- To compete: sensitivity to needs - or lose sales to rivals
- High technological content or innovative product: creates a
demand from customers
Primary research
Definition: Collecting data first-hand for a specific research purpose
Methods: Interviews, questionnaires, surveys, product trial, mystery
shopper, focus groups
1.1.1
Mass market:
Market targeted at general public, where many similar products are
offered
Advantages:
- Economies of scale - lower production costs due to mass
production
- Higher demand due to lower prices set
- Large customer base
- Less vulnerable to market changes as businesses who mass
market tend to have expanded product lines - also less
dependent on one product/market
Disadvantages:
- More competition as there are many other businesses who are
trying to attract the same customers in the mass market
- Have to charge a lower and competitive price as customers will
just go to a business substitute who sells cheaper
- Tend to be less loyal customers
- Profit margins lower as prices charged are usually lower
Niche market:
Small segment of a market that specifically targets a certain groups’
demands
Advantages
- Less competition - small market, less people who target this
specific group of customers’ needs and wants
- Building up specialist skill and knowledge to have market
expertise - more trust from customers
- Premium pricing - charging a higher price as customers are
ready to pay for market expertise and specialisation
, - Loyal customers if can provide exactly what they’re looking for
Disadvantages
- Lack of economies of scale, no lowering unit costs as operations
are smaller
- Overdependence on single product or market
- Attract competition if niche operations are successful, bigger
companies may overshadow
- Vulnerable to market changes - small companies, small product
lines, expensive and time consuming to change according to
market needs like trends, regulations and technology changes
Dynamic markets (opposite: static)
- Constantly changing markets, that grows, changes and declines
very quickly
- Subject to rapid and continuous changes
- Examples: petrol, media (consumption of media, tech changes),
taxis (hail riding apps changes), hotel and rental market
(emergence of apps and services like AirBNB)
Reasons for dynamic markets changing
1. Technology changes
New technology/design techniques make it possible to invent or
innovate products, or create substitutes to become more competitive,
as new businesses emerge when technology improves.
2. Trends
Responding to customers’ changing wants by improving or introducing
products, like demographic changes.
Tastes and preferences
3. Income changes
Depending on customers’ incomes, if disposable income increases
then price can increase or people buy more products.
4. External shocks
,Economic factors like recessions or booms that businesses have no
control over can affect market demands and changes. Legislation and
regulations.
Implications:
- Creates a stream of opportunities and threats, existing market
leader: threat. New entrants that provide more
innovative/different service: attract customers
- Recognise and adapt to change, even if costs increased, to
respond with new research and development, compete/adjust
business model to invest in innovation to maintain
competitiveness
Risk (Can be calculated)
- Possibility that events will not occur as hoped
- Examples: cyber security, fraud, environmental damage,
changing legislation, supply chain shocks
Uncertainty (The unknown)
- Unpredictable and uncontrollable events that affect business
decision and actions
- Examples: How market will respond, will business achieve break
even, employee turnover
, 1.1.2
Product orientation
- When the product develops according to what the business is
good at making
Advantages
- Quality products as attention/resources to manufacturing are
excellent
- Innovative approach: launch unique products that rivals follow
Disadvantages
- Lower relationship between customers and business, so brand
loyalty may be lower
- Low sales: not knowing demands: production of undesirable
items
- Limited ideas: no engagement with customers: less learning and
developing product ideas from customer supply
Market orientation
- When the business reacts to customers’ demands and develops
their product around that
Advantages
Disadvantages
Implications
- Most markets moving towards market-orientated
- Customers more knowledgeable about market, requiring
variety and quality
- To compete: sensitivity to needs - or lose sales to rivals
- High technological content or innovative product: creates a
demand from customers
Primary research
Definition: Collecting data first-hand for a specific research purpose
Methods: Interviews, questionnaires, surveys, product trial, mystery
shopper, focus groups
