Download Market Share and Global Marketing: Importance, Profitability, and Market Segmentation and more Lecture notes Marketing in PDF only on Docsity!
A meeting place between buyers and sellers where goods and services are exchanged, usually for money.
MARKETS
MARKET SHARE
Definition: This measures the sales of a firm relative to the market size. It is calculated using:
The sales can be measured either in financial terms or volume (the number of items).
Market share is important as it might indicate that a firm is the market leader. This might influence the strategy or objectives of the business. A firm with a small market share may set a target of increasing its share by a certain amount over a fixed period of time. Market share might be an indication of the success or failure of a business or its strategy.
Importance or having a high market share:
- Helps business to meet business objectives, e.g. survival, growth, profit maximisation, increased market share. - Increases businesses overall profitability. Link between market share and profitability. - Able to benefit from economies of scale. - Can become the brand leader. - Edge over competitors. - Attract new shareholders. - Investment into research.
Definition: Global marketing is all about selling goods or services to overseas markets. Different marketing strategies are implemented, based on the region or country the company is marketing to.
Advantages: Higher earnings – likely to be higher earnings, if margins in overseas markets exceed those at home. Spread risks – by moving into new markets risks are now spread. Economies of scale – this move into global markets is likely to lead to increased economies of scale. Survival – some businesses need to be global to survive. Saturation of the home market – the business may have the finance to expand, but be unable to do so because of competition so they take advantage of entering a new market.
GLOBAL MARKETS
Sales of a business
x 100
Total sales in a market
Many markets have large seasonable variations. Classic examples are ice cream (during the pre- summer period), fireworks and diet plans (in January).
Seasonal marketing will have a huge influence on the activities of businesses involved in these industries as each will have a critical sales period, which can make or break a business.
Few businesses are totally immune to seasonality of sales. Lines of stock are adapted and changed
- the big supermarkets have titled seasonal aisles.
All of these seasonal changes have to be thought about and planned several months in advance to ensure that all aspects of the marketing mix are in place when required.
SEASONAL MARKETS
- Trade marketing is the marketing role that focuses on selling and supplying to distributors, retailers, wholesalers, and other supply chain businesses instead of the consumer. - Objective of trade marketing is to increase demand for products/services supplied within the supply chain. - Trade marketing is not an alternative to brand and consumer marketing, but rather acts as a support to traditional consumer-focused marketing strategies.
TRADE [B2B] MARKETS
Definition: Mass marketing involves a business aiming products at a whole market, rather than particular parts of them, for example, tomato ketchup, tea bags, ITV, Vauxhall Astra, washing powder.
Advantages: A company can produce large numbers of relatively standardised products – the cost per unit should be low so can benefit from economies of scale. Untargeted marketing can be used , such as in national newspapers and on national television. Low-cost operations , heavy promotion, widespread distribution and the development of market-leading brands are key features.
Disadvantages: A firm must be able to produce goods on a large scale – this is expensive to set up. If demand should fall, the firm will be left with unused resources. Products need to be heavily differentiated from the competition as can be very fierce, as Coca Cola and Pepsi Cola clearly show.
MASS MARKETING
☑ ☑ ☑
☑
☑
☑
☑
☑
Definition: A niche market is a specialized market segment where you cater for the demand for products/services that are not currently being supplied by the main suppliers. It is essentially a narrowly defined market segment.
Advantages: Businesses can charge higher prices /premium prices that customers are prepared to pay. Therefore, profit margins may be larger. Able to sell to markets that have been overlooked or ignored by other firms – can avoid competition, at least in the short run. The great advantage of being the sole supplier in your target market. By targeting specific market segments a business can focus on needs of their customers in these segments, thereby is providing a better product or service – can get ‘closer’ to the customers. Promotion costs can be kept lower as the business can focus on a specific target group, unlike other forms of promotion which tends to aim at a broader segment of the population. In a recession, niche markets may have characteristics which enable them to weather difficult trading conditions.
Disadvantages: Firms that successfully exploit a niche market often attract competition. By their nature, niche markets are small and are often unable to sustain two or more competing firms. Cannot benefit from economies of scale. Large businesses joining the market may benefit from economies of scale which small firm are unable to achieve. Does not allow the spreading of risks – are often over-reliant on one product and so are vulnerable to changes in taste, fashion, economic downturn. As they have a small number of customers, they tend to face bigger and more frequent swings in consumer spending. Rapid growth in sales can often be followed by rapid decline in sales. Can be volatile. High prices charged in current economic climate could lead to switching purchases. Hard to expand. Smaller market/limited profit. Harder to raise finance – by the very nature of a niche market they are considered a high-risk business.
NICHE MARKETING
☑ ☑ ☑ ☑ ☑
Mass Market
Market Segment
Niche Market
Individual
Attack established markets with special advantages
Niche Marketing
Get products to the market before competition
Seize segments that competitors have overlooked
Customize products to satisfy customers
Make your own product obsolete before the competition
Identify new needs
Be a big fish in a small pond
Use innovative distribution channels to bypass competitors
Characteristics:
- A single producer within a market – one business has 100% of the marketplace. This is known as a pure monopoly. - Likely to erect barriers to prevent others from entering their market. - Monopolists are called price makers as they have a significant influence on price. - UK and EU regard any business with over 25% of the market as having potential monopoly power.
What could be the impact in the removal on a monopoly?
- may be greater choice of provider - increased competition may force prices down - greater efficiency may result as a result of competition - isolated or non-profitable inaccessible locations may be denied a service - prices may rise, the businesses previous economies of scale may no longer apply.
MONOPOLY
Characteristics:
- There are many businesses but only a few dominate the market. - Each business tends to have differentiated products with a strong brand identity. - Brand loyalty encouraged by the use of advertising and promotion. - Prices can be stable for long periods, short price wars do occur. - Some barriers to entry do exist. For example, high start-up costs in relation to manufacturing.
Many of our largest industries are oligopolistic in nature.
- In retailing, the grocery market is dominated by Tesco, Sainsbury’s, Morrisons and Asda. - In clothing retailing, each age group have just three or four major chain stores that dominate their marketplace.
Cartels: When businesses in an oligopolistic market act together (collude), a cartel is formed. Cartels try to keep prices high, whilst the businesses involved share the market between themselves. This type of collusion has occurred in a wide range of industries. For example, the airline industry and the sports clothing industry. This formal collusion is illegal.
Advantages of an oligopoly to consumers: large size leads to economies of scale high profits means money for innovation and investment oligopolies targeting a wide range of market segments provide variety and choice.
OLIGOPOLY
Definition: a market in which many small firms produce virtually identical products at similar prices. With the ability to enter and leave the market freely. They don’t earn excessive profits.
Characteristics:
- There are a large number of businesses competing and no one business is large enough to influence the activities of others. - There are no market leaders and no price leaders , so each business must accept the going price on the marketplace – they are price takers. - The goods sold are homogenous – there is no difference between the goods sold by one business or any other business. This means that there is no branding, no product differentiation , no way of telling goods apart. - Businesses have equal access to technology , meaning that they have equal levels of productivity and each business will benefit in the same way from any economies of scale that are available. - Consumers in a perfectly competitive market have full market information , they know what is being sold and the price the goods are sold at. They can access a wide number of suppliers to the market. - Businesses are free to leave or enter the market at any time: there are no barriers to entry or exit.
Note to remember: These unrealistic conditions mean that perfect competition is merely a model. In reality, there is always some sort of branding or differentiation – whether it is the quality of products, price of products or the location of where products are sold. It has some use as the starting point to analyse the behaviour of other market structures in the real world.
Definition: the situation in a market in which elements of monopoly allow individual producers or consumers to exercise some control over market prices. Characteristics:
- A large number of relatively small businesses in competiton with each other. - There are few barriers to entry. - Products are similar but differentiated from each other. - Brand identity is relatively weak. - Businesses are not price takers, however they only have a limited degree of control over the prices they charge. Within every monopolistic market sector each business tries to offer something different and possess an element of uniqueness, but all are essentially competing for the same customers.
MONOPOLY COMPETITION
☑ ☑
☑
PERFECT COMPETITION
- Industry/market where supply is concentrated in hands of relatively few suppliers - grocery retail trade dominated by four large players – Tesco/Asda/Sainsbury/Morrison. - Alongside a few large suppliers, there may be large numbers of very small firms – there are thousand of small retail grocery stores. - Businesses are interdependent – the actions of one will affect another. If Tesco cut its price of petrol how will the other supermarkets react? - Differentiated products - each of the dominant firms have strong brand identity that differentiates their products from their customers. - Indulge in non-price competition – the large grocery retailers do this – note the amount of television advertising carried out by the large retail chains. - Tend to have high barriers to entry due to high set-up costs – in the retail trade there is freedom of entry for retailers, however, the economies of scale (bulk buying enjoyed by Tesco, etc.) constitute a real barrier. - Could argue the idea that a monopoly is defined as a business that has 25% of the market therefore is Tesco a monopoly?
TO WHAT EXTENT CAN THE
GROCERY MARKET IN THE UK BE
REGARDED AS OLIGOPOLISTIC?
Competition increases as the number of businesses in the market increases:
Monopoly Oligopoly
Monopolistic
competition
Perfect
competition
Number of Independent Sellers
Seller Concentration
Product Differentiation
Barriers to Entry
Pricing Power
Non-price competition
Examples
One
Very High
No close substitutes available
Impossible entry or barred
Price maker – constrained by demand curve and possible regulation
Not needed therefore large firms are able to afford to undertake costly research and development
Local utilities
Few
Medium or High Medium or High
Substitute may or may not be available
Very difficult to enter
Price maker but interdependent behaviour
Very important – Firms try to differentiate and compete through advertising, offers, product quality
Petrol retailing, TV broadcasting, chocolate manufactures, steel
Many
Non – existent or low
Products are close substitutes
Relatively free or easy entry
Price maker – but actual and potential competition limit is pricing power
Considerable emphasis on advertising, brand names, trademarks
Retail trade, dresses, shoes
Many
Non-existent
Homogeneous product
Free or easy entry
Price taker (passive)
None
Agriculture
Characteristic Monopoly Oligopoly
Monopolistic Competition
Perfect Competition
Market Control
Number of Competitors
None
Many
Total
One
Greater
More
Perfect Competition
Monopsonistic Competition Oligopsony^ Monopsony
Consumer protection legislation is fully enforced by the courts, but to further assist the consumer there are various organisations to help ensure that the law is abided by.
- On a national basis , the CMA works to encourage the establishment of voluntary codes of practice within industries. For example, ABTA (Association of British Travel Agents) and ATOL (Air Travel Organisers’ Licensing) protect and reimburse holidaymakers if their travel company ceases trading (if the company is a member). - On a local basis , Trading Standards Departments and Environmental Health Departments work to help ensure obedience to the legislation. For example, Trading Standards officers are often found touring markets and car boot sales checking for sales of counterfeit goods.
Legislation with regard to competition policy: Controlling the power of big businesses. If businesses in a monopoly or near monopoly are able to hold a dominant market position, then they are likely to have control over price or the amount produced within the market. Governments will put in place laws and regulators to limit the potential abuse of market power thus protecting consumers.
One role of the CMA is to examine situations where companies act together, forming an illegal cartel to limit the competition within an industry. Businesses, if they have a choice, will not compete on price and they may take the view that by creating a dominant market position by working with other large businesses, they can limit price competition. Because of the potential of cartels and collusion between businesses, legislation allows for guilty parties to be fined up to 10% of turnover for each year of illegal activity.
THE COMPETITION AND MARKETS AUTHORITY (CMA)
- If a customer has a complaint that in their view has not been satisfactorily dealt with by the business concerned, the next step in finding redress might be the Ombudsman Service. - The Ombudsman Service can be used to complain if consumers have an issue with pricing, quality of service, quality of goods or mistreatment. - In a number of industries, including financial services, communications (e.g. phones and the internet), energy (e.g. gas and electricity) and property (e.g. estate agents and surveyors), the ombudsman findings are binding and the business concerned must comply with the ruling.
THE ROLE OF THE OMBUDSMAN
Businesses also need to consider the ethics of their relationships with customers. Consumers can be manipulated by businesses and their marketing professionals. Subliminal advertising (placing fleeting or hidden images in films or TV programmes in the hope that viewers will process them unconsciously) was banned in the 1970s, but that does not stop the unscrupulous from taking advantage of natural human reactions.
Product placement is when a company pays a TV channel or a programme- maker to include its products or brands in a programme. This is allowed but there are rules from Ofcom (the broadcasting regulator) on how this is done. For example:
- no product placement can be carried out on children’s TV programmes and certain products such as cigarettes and alcohol are not allowed. - it used to be standard for all supermarkets to have displays of sweets and chocolates next to checkouts: children would use ‘pester power’ to get their parents to buy sweets whilst they queued.
Being ethical in marketing is always a problem area for those businesses producing and marketing consumer products. It can be a difficult balancing act for businesses to try to maximise sales whilst, at the same time, marketing their products in a way that does not encourage overconsumption or excessive behaviour by customers.
Some businesses have had to try to reinvent themselves because their marketing has been seen as unethical. McDonalds ‘supersize’ was once a marketing winner, but with increased worries about people’s weight problems, the campaign was dropped. McDonalds now focus a large part of their advertising and product development on healthier meals.
ETHICAL ISSUES RELATED TO CONSUMER PROTECTION
Definition: the amount of a product that consumers are willing and able to purchase at any given price.
The law of demand states: the higher the price, the lower the quantity demanded, and the lower the price, the higher the quantity demanded.
Population
Advertising
Substitutes (price of)
Income – general level
Fashion and Taste
Interest Rates
Complements (price of)
EQUILIBRIUM PRICE
Definition: In a free market, demand and supply equal the equilibrium price. This is the price where quantity demanded is equal to quantity supplied.
DEMAND
The earthquake on 28 February 2010 destroyed major parts of Chile’s Central Valley. Southern ports were closed and, inside dozens of wine stores, a river of wine soaked into the soil. The big wine storage vats toppled over and wine stored in barrels rolled off the racks, cracked open or popped their seals. Initial estimates put the quantity of lost wine at 12% of wine production and 20% of Chile’s stored wine, but the true figure is likely to be much higher than this.
Adapt the diagram below and explain why the price of Chilean wine might rise.
EXAMPLE QUESTION OF SUPPLY
AND DEMAND
FACTORS THAT CAUSE THE DEMAND CURVE TO SHIFT - PASIFIC
P A S I F I C
DEMAND CURVE SUPPLY CURVE
Price
Quantity
Demand
Price
Quantity
supply
Definition: the amount of a product that suppliers will offer to the market at a given price.
The law of supply states: all else equal, an increase in price results in an increase in quantity supplied.
SUPPLY
Productivity
Indirect Taxes
Number of Firms
Technology
Subsidies
Weather
Cost of Production
FACTORS THAT CAUSE THE SUPPLY CURVE TO SHIFT - PINTSWC
P I N T S W C
0 10 20 30 40 50 60
1
2
3
4
5
6
Q*
P*
Supply and Demand
PRICE
QUANTITY
Demand Supply
Surplus
Shortage
Equilibrium
CHILE’S WINE INDUSTRY DEVASTATED BY QUAKE
- a leftward shift in supply curve - marking of new equilibrium price and equilibrium quantity - the evidence, i.e. earthquake destroys large percentage of wine, suggests that the supply curve shifts to the left – this will lead to an increase in price to P2 because at price of p demand exceeds supply. - new equilibrium formed where ‘New Supply’ cuts original demand curve.
