1.1.1 The Market

Mass Market

• Ability to reach a large volume of customers, opportunity for higher sales, increased revenues, business is more profitable, profit can be used to re-invest into the business, accelerate business growth
• High level of output produced, fixed costs spread over a wider range of output, able to benefit from economies of scale, lower cost per unit, more cost-competitive
• Lots of competition, more substitutes available for customers, may lower sales of the business, have to become more price competitive, lower profit margins, require higher sales to reach the break-even point
• High advertising costs, pressure on selling price per unit to maintain profit margins, have to charge higher prices, less cost and price competitive, deter customers, lower sales, opportunity cost if unsuccessful In the long term, may result in lower unit costs, in the short term, there may be high costs spent on advertising that may not attract customers.

Mass market vs. Niche market

Niche Market

• High-quality products produced
• Very little competition
• High costs
• Small customer base Can charge higher prices and this may not have a negative effect on sales due to limited availability of substitutes, depends on PED, tends to be more inelastic in niche markets, increased revenues

$$\text{Market Share} = \left(\frac{\text{Sales of Business}}{\text{Total Market Sales}}\right) \times 100$$

Brand

• Strong brand, higher customer loyalty, willing to pay higher prices as demand is more inelastic, higher revenues, higher market share

Dynamic Market

Changes include: New technology, changes in consumer tastes and preferences

• Encourages innovation
• Encourages efficiency
• Easy to lose competitiveness, constantly have to innovate and respond to consumer tastes to avoid stagnating
• High costs

Success in a dynamic market depends on the business's ability to constantly innovate and maintain competitiveness.

• May reduce demand for your product or service
• Have to become more price competitive (reduce prices)
• Have to increase spending on advertising, promotion and product development to try and attract sales

The difference Between Risk and Uncertainty

Risk: You can predict the likelihood of an outcome in the future. Thus, risk can be managed Uncertainty: You are unable to predict the likelihood of an outcome in the future. Thus, it is uncontrollable and can't be managed.