GCE(A-level) ECONOMIC B Theme 1 - MARKETS, CONSUMERS AND COMPETITON
Market research
Purpose of market research
It helps to forecast future sale and revenues
Entrepreneurs are able to know whether the price which people want pay covers cost of production.
Business can explore new possibilities in the market and
check whether a business idea is able to survive and stand out from rival. Eventually it may help to get unique selling point
Primary research
Survey
Open question gives qualitative data.
Closed question provides quantitative data.
Focus group
Business can use focus group which gives qualitative data to figure out the reaction and attitude of the group.
It could be used to refine business ideas or new products.
Therefore, focus group can reduces risk involved and it also helps to overcome their weakness and overwhelm rivals.
Observation
Businesses may observe and study the action of consumer, supplier and rivals. These data are usually quantitative data.
For example, they may count people who passing shopping malls to find the most suitable products for them.
It can be quick and cheap unlike focus group.
Advantages
l Information will be up to date and designed specifically to suit the business
l Collected information is not available to competitors
Disadvantages
l It can be expensive to collect when they employ specialists.
l It can take a long time to collect and interpret date
Secondary research
Market reports
A company can buy market report from other organizations.
Government data
It provides the age, gender and income distribution in an area
Market report and government data can be both qualitative and quantitative.
Advantages
l It can be done very quick.
l It often cheaper than primary research.
l This research is often available immediately.
Disadvantages
l Data can be out of date and inaccurate
l it may not be exactly suitable with needs of business.
Evaluation
A business faces a trade-off between accuracy and cost when choose sampling sizes and types.
Therefore, good market research often should be linked both quantitative data and qualitative data to build up detailed picture of consumer’s preference.
However, some markets have rapid changes so that the market research can be not worthless and collected data might have bias towards the view of particular group.
Market segmentation (Categorising consumers)
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Advantages of segmentation |
Disadvantages of segmentation |
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l The more precisely a segment can be identified, the more sale will be made. l Segmenting the market reduces direct competition l It enables to develop brand loyalty and charge premium price
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l It can be expensive to research and identify different segment. l Targeting one particular segment may mean ignoring others l It can be more costly when business provides different products for different segment. |
Market positioning
It means that design a product to fit the preference of market segment and after business finish market segmentation.
The objective of market mapping is to create a product that can either appeal to consumers in mass market or very specific preferences in niche market.
It enables business to find gap in the market and differentiate product from the competition, which strengthen customer loyalty.
However, it can be hard to categorise some products.
Competitive advantage
All business must strive to get competitive advantages in order to avoid falling sales and profits.
Competitive advantages can be enhanced by:
l Cutting prices by training staff and increasing efficiency in the use of resources by introducing new production technologies.
l Adding value and products differentiation improve competitive advantages with building up consumer loyalty which enables to charge high price.
l Advertising which may create chance to expand sales without reducing price. It also helps to reposition
Adding value
Adding value is achieved by makes products more useful, reliable and desirable. Business can:
l introduce new products or re-designed products that have unique and attractive feature.
l target product reliability or customer service with appropriate staff training.
l They can adding value by differentiating products.
It occurs when business creates a distinctive product.
This involves unique features, functions and branding that can
attract consumers. They can make unique selling point.
Stable market and dynamic market
Successful businesses must have tactics and strategies to deal with market change.
A short term, they may focus make high price for profit.
For long term, the business aims to increase market share by keeping price as low as possible.
Market orientation
Market orientated business concentrates on consumer preference by focusing needs and wants of the customer so it helps to create competitive advantage against rival.
As a result, market orientation is vital in dynamic market.
Evaluation
Way to succeed business is always different.
In some market, product orientation is important but in other markets, market orientation is vital.
In product-oriented business, they are better to use products differentiation with technology
In market-oriented business, they better to do market research and market positioning and mapping.