Why some markets become more competitive

Government intervention in marketsLegal controls- laws against anti-competitive behaviour.

Selling off public sector organisations to the private sector.Privatisation,

Deregulation- the removal of government controls from an industry.

Providing financial and other assistance to new and small to medium sized businesses.- (SEDA- the Small Enterprise Development Agency)

Growth of free trade between countries• Free trade: No barriers exist that might prevent trade between

different countries.

• Development of e-commerce and social networks.

• Own websites;

• Social network sites- facebook

• Increased consumer choice and competition.

How businesses respond to changing spending patterns and increased competition• Product development- Market research will identify how the

needs and wants of consumers are changing.

• Improve efficiency- In order to reduce average costs.

• Increased promotion- increasing advertising to persuade consumers to buy your product and not that of competitors.

• Look for new markets- Sometimes consumer spending patterns change so much, or the level of competition in a market becomes so great.

• Business• Develops new products

• Uses resources efficiently to reduce costs and lower prices

• Increases promotional activities, e.g. advertising, money-off vouchers

• Finds new markets

Niche marketing and mass marketing

• Two types of target markets- niche, or specialist, markets and mass markets.

• What is Niche marketing?• Developing products for a small segment of the market.• Often sell high priced and high status goods= Rolex watches

and Rolls-Royce motor cars. • Wedding cakes are not high status or high priced.

• What is mass marketing?• Selling the same product to the whole market.• flour

Benefits and limitations of niche marketing and mass marketing.

• Dividing the market so that products better meet the needs of different types of consumers can help to increase sales, revenue and profits.

• Benefits of niche marketing- • Small firms are able to survive and earn profit even in

markets that are dominated by larger firms.

• Less competition, firms do not waste scarce resources responding to competitor actions.

• Consumers will usually pay more for a high status, exclusive product. This offers firms the opportunity to charge high prices and earn high profit margins.

• Limitations of niche marketing-• The opportunity to earn high profits might attract competitors

and this will reduce prices and future profits.

• Economies of scale are unlikely to be achieved. This means that unit costs are higher than they would be if the product was sold to a mass market.

• Small changes in consumer spending patterns could have a very significant impact on firms operating in niche markets.

• Benefits of mass marketing• Mass marketing requires large scale production. Larger firms

often benefit from economies of scale which reduces unit costs.

• A much larger market has the potential for high sales and profits.

• Changes in consumer spending patterns might have less effect on firms selling to a mass market. This reduces the risk to firms who operate in mass markets.

• Limitations of mass marketing• Much more competition in the market which lowers prices

and profit margins.

• Not all markets are large enough to support a mass marketing approach.

• Consumers today are often looking for something slightly different from that offered by same product mass marketing. This has led to greater division of the whole market and reduced the scope for mass marketing.

• Pg.. 147 Case study