Edexcel A Level Business

1.1 Meeting Customer Needs

Contents
Your notes
The Market
Market Research
Market Positioning

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 1.1 - The Market

An Introduction to Marketing
A market is any place where buyers and sellers can meet, e.g. amazon.co.uk or a shopping mall
Your notes
Different markets have varying characteristics and are affected differently by changes
The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants profitably
Needs are considered essential, e.g. shelter or food
Wants are desires which are non-essential, even if consumers consider them to be essential, e.g.
Nike trainers
Market research is essential in helping businesses to identify products and services they can develop
in response to the needs and wants that their customers have
Market research is the process of systematically gathering data from consumers which can be

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used to influence business decisions

Mass Markets & Niche Markets

The characteristics of markets
In mass markets, products are aimed at broad market segments, e.g. Kellogg's Corn Flakes is an
example of a breakfast cereal aimed at the mass market
Market segments are groups of consumers who share similar characteristics, e.g. age, lifestyle,
etc.
Mass marketing occurs when businesses sell their products to most of the available market
Production usually happens on a large scale
In niche markets, products are aimed at a subset of the larger market, e.g. gluten free products
Niche marketing occurs when businesses identify and satisfy the demands of a small group of
consumers within the wider market
Production usually happens on a small scale

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 Characteristics of Mass Markets & Niche Markets

Mass Markets Niche Markets

Products are less unique as they are aimed at Products are more specialised and unique as
broad market segments they are aimed at narrow market segments
Low average costs due large scale High average costs due to small scale
production economies of scale production Your notes

Low prices lead to greater affordability and They do not benefit from economies of
higher sales volumes scale
Low prices lead to lower profit margins High prices make products less affordable and
lead to lower sales volumes
Primark is an example of a clothing company
that focuses its product on the mass market High prices can allow businesses to earn higher
profit margin
Louis Vuitton is an example of a fashion
company that aims its products at a niche

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market

Market Size & Market Share

The size of a market can be measured through sales volume or sales value
Sales volume is the number of products sold, i.e. the physical number of units sold
Sales revenue = price x quantity sold, i.e. the financial value of the units sold
The market share that a business enjoys is the proportion of the total sales of a product/service
compared to the market as a whole, e.g. Tesco has 26% of the UK grocery market
Market share can be calculated as follows:

Sales of a business
× 100
Total sales in the market

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 Worked Example
In 2022, the UK co ee shop market was worth £4.6bn. Sales of Starbucks Co ee were £328m in
2022. Using the data, calculate, to 2 decimal places, the market share of Starbucks Co ee in the
co ee shop/café market. You are advised to show your workings. (4 marks)
Step 1: Identify annual sales of Starbucks Co ee Your notes
= £ 328m [1]

Step 2: Identify total market sales in the coffee shop market

= £ 4 . 6bn
Step 3: Substitute figures into the formula

Sales of a business
= × 100 [1]
Total sales in the market

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£ 328m
= × 100 [1]
£ 4.6bn

Step 4: Present the answer to two decimal places

= 7 . 13% [1]

Examiner Tips and Tricks

By providing the formula and showing your working out, even if you do not get the right answer, you
will still be able to gain some marks.

Brands
A brand is a name, image, or logo which helps one product/service stand out from its competitors
Branding is one of the key ways businesses achieve product differentiation

Some famous brands

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 Brands are unique and protected by law
Brands add value, often making the product/service more desirable to consumers
Adding value is the process by which firms increase the price that the consumer is willing to pay Your notes

Brands influence the position of the business within its market

Businesses operating in mass markets use branding to stand out from the competition
Businesses operating in niche markets use branding to communicate their offering to a small, well
defined group of consumers
Strong brands are more likely to be able to charge higher prices for their products than weaker
brands
The perceived quality of a strong brands products is better than that of weaker brands

Dynamic Markets
A dynamic market is a market that is subject to rapid or continuous changes
Many markets are becoming more competitive and change is inevitable

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Those businesses which do not adapt are less likely to survive in the long run
The mobile phone market is a good example of a dynamic market
Businesses with monopoly power (e.g. Amazon) might not face the same dynamic pressures as
businesses in more competitive markets
Many markets are dynamic but others change very slowly, e.g. the market for eggs and milk has been
relatively stable for years

Changing technology ensures that the mobile phone market is dynamic

There are four areas to consider when examining dynamic markets

Online retailing
How markets change
Innovation and market growth
Adapting to change

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1. Online retailing Your notes
Online retailing involves selling products via the internet
The Advantages & Disadvantages of Online Retailing for Firms & Consumers

Advantages Disadvantages

Provides business access to more consumers, There may be high costs for website
including internationally development, maintenance, and
promotion
Enables longer trading hours as the business is
open 24/7 Online retailing is dominated by well-
known large businesses
Cheaper to run as it lowers fixed and variable
costs compared to bricks and mortar retailers High levels of competition mean that it will
be expensive to make a website stand out
Businesses can collect data by tracking consumer
behaviour, which helps with primary market There is a lack of personal contact with
research customers

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Consumers can receive offers that they are more Consumers may find it difficult to get the
likely to benefit from desired level of customer service
Consumers can shop at a time that suits them Consumers may find it difficult to return
unwanted products
Online purchasing opens consumers up to
credit card fraud

2. How markets change

Changing market conditions offer new opportunities for firms, but also pose threats
The following changes cause markets to be dynamic
Changing consumer tastes and preferences, e.g. consumers desiring electric vehicles in place of
traditional petrol/diesel
Changing demographics, e.g. many developed countries have an increasingly older population
who have di erent wants and needs to previous markets
The amount of competition, e.g. international trade means larger market sizes but also more
competition between an increasing number of rms
Competition can be direct, i.e. the sale of similar products or indirect, e.g. airlines compete
with each other but also with other forms of transport such as trains
Changing legislation, e.g. laws strengthening environmental standards often create new markets

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3. Innovation and market growth
Product innovation involves the adaptation or improvement of existing products, e.g. improved video
cameras on laptops
Process innovation involves the adaptation or improvement of existing processes, e.g. just in time
stock control
Market growth is the measurement of the change in the entire market, expressed as a percentage of
the original size
Your notes
The businesses market share does not necessarily increase automatically as the entire market
continues to grow
Market growth can be caused by numerous factors, e.g.
Increasing population sizes can increase demand in certain markets
Increasing incomes can increase demand in certain markets
Changing tastes and preferences can cause the market to grow e.g. the growth in the electric car
market

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Worked Example
Sales of electric vehicles were 267,203 in 2022. This was a 40% increase from the previous year.
How many electric vehicles were sold in the UK in 2021? Round your answer to the nearest whole car.
You are advised to show your workings. (4)
Step 1: Find the number of electric cars sold in 2021

= 267,203 [1]

Step 2: Reduce 267 203 by 40%

= 267,203 ÷ 140 = 1,908 . 59

[1]
= 1,908 . 59 × 100

= 190,859 [1]
Step 3: Express your answer to the nearest whole number of vehicles
2021 UK sales = 190,859 electric vehicles [1]

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4. Adapting to change
Recognising and adapting to market changes allows businesses to thrive in dynamic markets
Strategies to adapt to change include
Create flexible business structures, especially in terms of operations and people management
Meet customer needs by carrying out market research and communicating with customers
Invest in staff training, new products and processes Your notes
Innovate so as to gain the first mover advantage

How Competition Affects the Market

Competition occurs when at least two businesses are providing goods/services to the same target
market
The more businesses in the market, the more intense the competition
Competition can be direct or indirect
Direct competition occurs when the business is targeting customers with the same product as a

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competitor
Indirect competition occurs when firms sell different products but compete with each other for
the customers disposable income e.g. cinema and theatre companies are in indirect competition
Competition results in many benefits for the customer, such as
Businesses offer lower prices
Businesses produce better quality products
Businesses provide better customer service

However, the absence of competition reduces incentives for businesses to innovate, be e cient or
o er consumers lower prices

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The Difference Between Risk & Uncertainty

Your notes

The difference between risk and uncertainty

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Risk is the potential threat to business success
Risks can be from inside the business (internal) or from outside the business (external)
Risks can be measured and prepared for using risk management
Uncertainty is when outcomes are difficult to predict
Examples of Risk & Uncertainty

Risk Uncertainty

Technical failures due to the break down Businesses continue to face uncertainty after
of essential equipment Britain's exit from the European Union
Cyber security threats Will the economy go into recession?
Loss of key staff Will energy prices continue to rise?
What will happen to interest rates?
Currency uctuations for rms trading How will rivals react to a new product launch?
internationally

Examiner Tips and Tricks

You can make use of the concepts of risk and uncertainty in strategy focused questions. For
example, when evaluating a particular strategy, you could explain the possible risks as well as the
rewards associated with it. Moreover, there are no certainties in business and outlining potential
uncertainties before making a recommendation at the end of an essay is a good way to
demonstrate evaluation skills.

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 1.2 - Market Research

Your notes
Product & Market Orientation
A product orientation is an approach to marketing that focuses on the characteristics of the product
rather than the needs of the consumer
The emphasis will be on creating a product first and then finding a market
The business has a belief that the product is superior, i.e. it will sell itself
One problem with being too product orientated is that over time your business may move further
and further away from what the market is looking for, thus increasing the risk of business failure
E.g. Gillette's razors can be classified as a product-orientated business as the business focuses

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on the quality of its products and regular innovations aim to increase sales

A product orientation is an approach often used by inventors who research, test and produce a product
well before market research has taken place

Market orientation is an approach to marketing that focuses on the needs of consumers and uses this
information to design products that meet customer needs
Consumers are at the centre of marketing decisions
Products will be developed which respond to consumer needs
The result of market orientation is that the firm will benefit from increased demand, increased
profits, and a valued brand image as its products become more desirable
E.g. Universities often develop new courses based on the feedback they receive from students
and employers

Market orientation aims to develop products to meet needs identi ed by consumers during the market
research process
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Primary & Secondary Market Research Data
Market research is the objective collection, compilation and analysis of information about a market
Effective market research will help the business
To reduce risk when launching new products or entering new markets Your notes
Anticipate future needs and wants of consumers
To understand consumer behaviour
To identify potential consumer demand
To identify how much consumers are prepared to pay
To identify competitors and gauge their potential strengths and weaknesses
Market research data can be quantitative or qualitative
Both forms are useful and any data analysis should ideally include a combination of the two

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Primary research
Primary research is the process of gathering information directly from consumers in the target market
using field research methods such as surveys, interviews, etc
This gathers information that is new and does not necessarily exist in any format

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 Primary Research Methods

Method Explanation

Surveys The most widely used method of gathering primary research is to use sampling by
using surveys
This is where you would ask a series of questions to a certain number of people
(respondents) Your notes

The results from the ‘sample’ are used to make inferences in which the results of the
sample are extrapolated to be true for the wider population
A wide range of respondents can be reached using online survey tools such as
Survey Monkey

Observation This involves hiring someone to stand in an appropriate location and study
consumer behaviour in a store or perhaps judge the potential consumer traffic at a
particular location

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Researchers may observe the impact of packaging on consumer choice, or the
impact that the particular placement of a product in a store may have on
consumer choice

Interviews The questions may be set up in a very similar way to a survey, however, an interviewer
asks the questions
This method takes longer but does allow the interviewee to ask follow-up
questions and gather the information that can easily be missed when conducting
surveys

Test Free samples are provided for a limited period to the target market to gauge their
marketing response to the product

Focus Free range discussions, led by a marketing specialist, collect detailed feedback
groups from the target market
Usually limited to a small group of 12-15 people
The group typically meets for 90 minutes to 3 hours

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 The Advantages & Disadvantages of Primary Market Research

Advantages Disadvantages

Information gathering is focused on the The sample size may be too small and
needs of the business and will not be unrepresentative of all of the customers leading to
available to its rivals unreliable results
Your notes

The business can get in-depth Bias may mean that researchers can guide
information from respondents, for respondents to answer questions in a particular
example, reasons behind certain way
behaviour
Similarly, respondents may be influenced by
the responses of others, or not provide
accurate information

Primary market research is more up-to- A business may need to hire a specialist market
date and can be used to ask specific research agency to help and the process can be

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questions, so will be more relevant expensive and time-consuming

Secondary research
Secondary research involves the collection, compilation, and analysis of data that already exists
Typical methods include purchasing market reports from specialist companies or accessing
government statistical portals which provide useful information
The Advantages & Disadvantages of Secondary Market Research

Advantages Disadvantages

Information is already available and so is quicker to Information has been collected for other
collect than primary research, thereby saving time purposes and so may lack relevance or
may not be factually correct, e.g.
Wikipedia

Information is often free (e.g. government websites Can be expensive to purchase market
and internet sources such as Statista) and is cheaper specific secondary data from specialist
to collect, leading to lower costs compared to companies, e.g. MINTEL reports
primary research

Suitable for a small business that lacks a large Information may be out-of-date,
marketing budget and/or expertise especially in dynamic markets

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The use of ICT to Support Market Research
ICT refers to information and communications technology
It can be used to support market research in the following ways: Your notes

Company websites
Websites allow businesses to collect primary data cheaply, e.g. tracking consumer searches and
analysing customer reviews, as well as collecting secondary data about rivals, e.g. prices and special
offers
Pop-ups used on websites can also be an effective way of gathering information

Databases
These can be used to store large amounts of customer information, e.g. Tesco loyalty cards

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Databases are also effective in collating customer e-mail addresses so that targeted customers can
be surveyed later via e-mail

Social networking
Focuses on gathering information about consumers via online social channels such as Twitter and
Facebook
It is also useful as a method of running quick polls and surveys or tracking opinions about brands

Market Segmentation
Market segmentation is the process in which a single market is divided into submarkets, or 'segments'
Each segment represents a slightly different set of consumer characteristics
Firms often segment their markets according to factors such as income, geographical location,
religion, gender, or lifestyle
A market for a good such as crisps is not simply seen as one market e.g. the crisp market is divided up
into many market segments, such as
Dinner party snacks (Walkers Sensations, Pringles, Burts) are targeted at middle to upper
earners/professionals with a premium price
Health conscious crisps (Walker's lite, Walkers baked, Revita lite) are targeted at the health
conscious market
Lunch box value snacks (multipacks, hoola hoops, etc) are targeted at families and the mass
market

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 The Advantages & Disadvantages of Market Segmentation

Advantages Disadvantages

Recognises that consumers are not all identical Not everyone within a segment will behave
in the same way Your notes
Consumer groups do not all share the same
tastes and preferences

Products and marketing activities can be altered It may be difficult to identify a segment
to meet different needs of different groups of and consumers can belong to multiple
consumers and targeted more precisely segments at the same time

Less expensive and wasteful than marketing Segmentation requires more detailed
products at wide market segments market research, which can prove costly -
but beneficial - to the business

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May increase loyalty if the consumer feels that A segment may be identified but it may be
their needs are being met, which can lead to too small and unprofitable to cater for
repeat purchases

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 1.3 - Market Positioning

Market Positioning & Market Mapping Your notes

Market positioning refers to the process a business goes through when launching a new product or
service
The business decides where they want to position the product in the market with regard to price,
quality, branding, and customer perception
Market mapping is a tool for identifying the position of a product within a market
A market map refers to a two-dimensional diagram that shows the attributes or characteristics of
a product in comparison to rivals’ products

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Only two criteria can be chosen e.g. price and quality, age and income, etc.

M&M has positioned itself as low price and low quality in this example of a market map

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Market Map Analysis
If there were no spaces left on the market map, it indicates that the market is saturated
This means that there are no opportunities to exploit a market niche in the market
Competition is likely to be high and pro ts low

However, the existence of a space on the market map may indicate the existence of a market niche
Your notes
This needs to be researched carefully before the business commits e.g. it looks like there is a gap
in the market in high price / low quality area in the map above
This gap does not represent a worthwhile market as the business would find it impossible to build
and maintain a loyal customer base

The Usefulness & Limitations of Market Mapping

Usefulness Limitations

Market gaps can be identified which may enable a A gap in the market may exist

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business to come up with ideas for new products because it is not profitable to fill
Comparisons can be made between a business’ Mapping a market may require
products and those of its rivals - where are the primary research which can be
business’ products positioned about its rivals? expensive
Market maps are simple to construct and offer a visual Only two criteria can be chosen
illustration of the position of a product in the market which may prove too simplistic
Markets are often dynamic and a
market map only provides insight at a
specific point in time

Competitive Advantage of a Product or Service

Competitive advantage refers to the features of a business and its products that are perceived as
superior to its rivals by customers
It is how a firm’s product is made both distinctive and defensible
Distinctive means that it is different from the competitors
Defensible means that the business can prevent competitors from copying it

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 Your notes

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Some of the main sources of Competitive Advantage
There are many ways a firm can gain competitive advantage, including
innovation, reputation (branding)
building strong relationships with stakeholders
adding value
differentiation
market segmentation
price leadership
Examples of the source of businesses competitive advantage include:
Quality e.g. Audi is well known for the exceptional quality of the finishing inside their cars
Delivery times e.g. Amazon Prime delivers products within 24 hours of ordering
Low Price e.g. Primark is considered to provide the best value/low price combination
Reliability e.g. Apple Macs have an excellent reputation for long life and reliability
Ethical stance e.g. Tony's Chocolonely only uses cocoa in their chocolate, which is 100% free of
slave/child production
Design e.g. Dyson vacuum cleaners stand out from the crowd with their original design

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The Purpose of Product Differentiation
Product differentiation is an attempt by a business to distinguish its products from those of
competitors
This involves creating functions or features of the product (or firm) which help it to stand out from
its competitors Your notes
Strong product differentiation helps the firm develop its competitive advantage
The development of product differentiation often helps a firm to create a unique selling point for
its product, which can be used in marketing
Product differentiation may be tangible (clearly visible) or it may be a perception that is created
about the product in the consumer's mind
Successful product differentiation helps the business to increase demand for its products, increase
brand loyalty, and allow the business to charge higher prices
Examples of successful product differentiation include:

VIDHU LESSONS
In 2014, Hyundai Cars in Singapore introduced a three year warranty on all new cars when the
industry standard was one year
Green & Black use Fairtrade cocoa AND sugar in the production of their chocolate

Adding Value to Products/Services

Adding value is the difference between the price that is charged to the customer and the cost of
inputs required to create the product or service
E.g. customers are prepared to pay more for potatoes when they are packaged as oven chips than
they would be willing to pay for a bag of potatoes

Some of the methods of Adding Value

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 The methods of adding value overlap with some of the features of product differentiation
Marketing and branding
Building brand identification and customer loyalty to the brand allows the firm to charge a higher
price for its products, thus increasing the added value, e.g. Yeezy 350 V2 sneakers sell for $250 a
pair Your notes
Functions and features
Adding unique features allows the firm to charge a higher price for its products, thus increasing the
added value, e.g. Samsung Galaxy Watch 5 has robust health tracking tools built into it, along with
an amazing screen
Customer service
Businesses that ensure they have a good reputation for customer service can charge a higher price
for their products, thus increasing the added value, e.g. John Lewis is considered to provide the
best customer service amongst department stores in the UK
Customisation

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Allowing customers to design or create their products allows the firm to charge a higher price, thus
increasing the added value, e.g. MoonPig birthday cards can be completely customised
Packaging
Apple products are well known for their superior packaging, which creates an exciting opening
experience for the customer. This allows the rm to charge a higher price for its products, thus
increasing the added value

Examiner Tips and Tricks

Businesses may use several methods of adding value. It's important to understand that adding value
adds raises costs, but it is worth it if the increase in selling price outweighs the costs associated with
the method e.g. if improving the packaging costs £1 per unit and the rm can raise its selling price by
£1,40 per unit, then the rm can improve its pro tability by changing the packaging.

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