Characteristics of Mass and Niche Markets

Mass Markets

• Businesses in mass markets sell identical products to a wide consumer base, using uniform marketing strategies.
• Common examples include fast-moving consumer goods (FMCG) such as crisps, breakfast cereals, computer software, and soft drinks.
• Mass markets can potentially reach billions of customers globally.
• Large-scale production leads to lower unit costs, maximizing profits through economies of scale.
• High competition in mass markets often necessitates significant marketing expenditures; Coca-Cola's advertising budget reached US$4 billion in 2016.

Niche Markets

• Niche markets consist of specialized segments often overlooked by larger companies, focusing on specific customer needs.
• Niche marketing is distinct from mass marketing, targeting smaller groups of consumers.
• Small firms can thrive in niche markets by catering to unique consumer demands, allowing them to circumvent intense competition.
• Businesses in niche markets may command premium prices due to reduced competition.
• An example of a niche market enterprise is Zumiez, specializing in products for surfing, skateboarding, and snowboarding.

Challenges and Vulnerabilities in Niche Markets

• Successful niche market exploitation can attract larger competitors, threatening smaller businesses.
• Niche markets are typically small, limiting the number of viable competitors.
• Large companies entering niche markets may easily dominate smaller firms due to their substantial resources.
• Businesses focusing solely on a specific niche may face increased risk and vulnerability if their market share declines, lacking diversification in products or markets.

Value

• Total customer expenditure on products is termed as value.
• In 2014, the global fast food market value was approximately US$495 billion.
• Expected growth of the fast food market to approximately US$645 billion by 2020.

Volume

• Volume refers to the physical quantity of products produced and sold.
• For example, domestic air travel in China recorded 487,960 million passengers in 2016.
• Volume measurements may involve user metrics like mobile phone users or television viewers.
• Different markets have varying sales volumes; e.g., savory snacks vs. footwear sales.

Market Share

• Market share indicates the proportion of a market held by a specific company or product, expressed as a percentage.
• Calculation formula: (Sales of a business / Total sales in the market) × 100%.
• Important for identifying market leaders, influencing competition and business strategies.
• Samsung holds the largest market share in the smartphone sector at 23.2%.
• The top five smartphone suppliers collectively dominate over half of the market.

Brands

• Branding helps distinguish products in competitive markets and creates customer loyalty.
• Recognizable brands include Google®, BBC, Toyota, Nike®, and Apple®.
• Key branding purposes:
  • Differentiate from rivals
  • Foster customer loyalty
  • Aid in product recognition
  • Establish a brand image
  • Support premium pricing for strong brands.

Dynamic Markets

• Markets are dynamic and can change over time; they may grow, decline, fragment, or vanish.
• Example: The cassette market has largely disappeared due to digital downloads and streaming services.

Impact of Competition on Businesses

• Competition is the rivalry between businesses in a market, which is crucial for survival.
• Businesses must employ various strategies to attract customers, including:
  • Lowering prices to become more competitive.
  • Differentiating products to stand out against rivals.
  • Offering higher quality to justify premium pricing.
  • Enhanced advertising and promotions to increase visibility.
  • Providing excellent customer service as an added value.
• While these strategies can reduce profits, they are essential for sustaining market presence.

Reducing Competition Strategies

• Companies may attempt to lessen competition by:
  • Acquiring rival businesses to consolidate market power.
  • Creating barriers to entry, such as significant investments in advertising that deter new competitors.

Legislation and Competition

• Laws exist to prohibit businesses from engaging in unfair practices that restrict competition and protect market integrity.

Benefits of Competition for Consumers

• Increased competition results in greater consumer choice and better product quality.
• Competitive pressures often lead to lower prices for consumers, enhancing market accessibility.

Risks of Lack of Competition

• Without competition, consumers face potential exploitation, including:
  • Higher prices and limited product options.
  • Reduced innovation as businesses lack motivation to improve.

Government's Role in Competition

• Governments are responsible for ensuring a competitive market environment to prevent monopolistic practices.

Understanding Risk in Business

• Business owners engage in risk-taking through decisions that involve uncertainty, such as:
  • Investing capital to launch a new business venture.
  • Committing funds to develop unproven products.
• Approximately 90% of new businesses fail within five years, highlighting the inherent risks involved.

Understanding Uncertainty in Markets

• Market dynamics are influenced by uncontrollable external factors, including:
  • New competitors with innovative products.
  • Shifts in consumer preferences.
  • Changes in government policies.
  • Technological advancements.
  • Natural disasters impacting operations.
  • Economic downturns leading to recessions.
• Uncertainty is unpredictable and requires businesses to be flexible and adaptive.

Effects of Uncertainty

• Uncertainty can negatively impact business operations by complicating decision-making processes, especially regarding future investments.
• It can also present opportunities, such as leveraging new technologies to gain competitive advantage.