Business Topic 2: Identifying a Business Opportunity

edexcel economics and business 1.2

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Niche vs Mass Marketing

Advantages of Mass Marketing:

  • Large range of potential customers
  • Marketing economies of scale
  • Profit margins may be low but profits are still high
  • Products aimed at everyone so easier to market products
  • Cash flow is steady and regular

Disadvantages of Mass Marketing:

  • High profits will attract competitors to the market
  • May be difficult to meet consumer needs because the market is so large
  • May be difficult to notice changes in the market because of size, so may lose market share.
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Niche vs Mass Marketing

Advantages of niche marketing:

  • Ability to focus on consumer needs and wants and the ability to react quickly to changes.
  • Marketing return is high because advertising is well targeted.
  • Little competition so can charge high prices.
  • Small firms can gain advantage by entering the market first
  • Can gain high market share.
  • Can gain customer loyalty
  • Even better with a patent.

Disadvantages of niche marketing:

  • Very specialised so Product Life Cycle could be very short
  • Could attract larger firms
  • Sales will be low which could be a problem if costs rise.
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The Influence of the Internet

  • Niche businesses can now operate globally because of the internet
  • Niche markets are growing quickly.
  • Market:Anywhere where buyers and sellers meet
  • Can exist on the internet, emails, telephone lines
  • Consumer markets:Where consumers interact with businesses
  • E.g. Retail outlet
  • Industrial market: Business organizations sell to other businesses
  • Not to a final consumer
  • Businesses use what they've bought to make other products
  • Commodity markets: Buying and selling products from the primary sector of industry (HQ in MEDC, factories in LEDCs)
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Factors that affect the amount that a firm should supply:

  • Price
  • Costs
  • Physical constraints

Factors influencing supply:

  • Price
  • Technology
  • Price that can be reached in the market place.
  • State of the economy
  • Physical constraints: Demand vs
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How does market structure affect business?

Charecteristics of a highly competitive market:

  • many firms with a small market share
  • Price takers
  • homogenous products
  • low prices

Productive efficiency:

  •  Firms have to accept market price.
  • Keep up with new development
  • Operate at minimum cost of production.

Allocative efficiency:

  • When resources are distributed amongst uses that meets the requirement of the customer to the greatest possible extent
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Reducing competition

  • Predatory pricing
  • Collusion
  • Branding
  • Control of suppliers
  • Use of patents
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The Long Tail

  • Looks at niche strategy such as Amazon, that sell a large number of unique items in relatively small quantities
  • Taking advantage of less popular products
  • ITunes- electronic rather than physical storage space
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