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HL IB Business Management Your notes

4.1 Introduction to Marketing

Contents
Marketing & Markets
Market Share & Growth

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Marketing & Markets

Your notes
An Introduction to Marketing
A market is any place where buyers and sellers can meet to conclude a transaction e.g. amazon.co.uk
or a shopping mall

The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants profitably
Needs are considered to be 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/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 used
to influence the business decisions

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Market Orientation Versus Product Orientation

Product orientation is an approach to marketing that focuses on the characteristics of the product Your notes
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 classed as a product oriented business as the business focuses 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

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Market orientation aims to develop products to meet consumer needs identified during the market
research process
Your notes

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Niche Markets & Mass Markets

In niche markets, products are aimed at a subset of the larger market e.g. gluten free products Your notes
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

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

Characteristics of Niche Markets & Mass Markets

Niche Markets Mass Markets

Products are more specialized and unique as Products are less unique as they are aimed at
they are aimed at narrow market segments broad market segments

High average costs due to small scale Low average costs due large scale production
production economies of scale
They do not benefit from economies of
scale Low prices lead to greater affordability and
higher sales volumes
High prices make products less affordable and
lead to lower sales volumes Low prices lead to lower profit margins

High prices can allow businesses to earn higher Primark is an example of a clothing company
profit margin that focuses its product on the mass market

Louis Vuitton is an example of a fashion

company that aims its products at a niche
market

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Exam Tip
Your notes
Profitable niche markets rarely remain small for long - their potential attracts competition which
increases sales volumes
The market for energy drinks is a good example of this - initially targeted at sports-enthusiasts, it is
now one of the largest soft drinks segments in the world

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Market Share & Growth

Your notes
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 as a
proportion of the size of the market as a whole
E.g. Tesco has 26% of the UK grocery market

Market share can be calculated using the formula

Sales of a business ( volume or value )

× 100
Market size (volume or value )

An increase in market share can indicate that a business has made effective use of marketing
strategies to increase sales and gain customers from competitors

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Worked example
Your notes
In 2022 the UK coffee shop/cafe market was worth £4.6bn. Sales of Starbucks Coffee were £328m in
2022.
Using the data calculate, to 2 decimal places, the market share of Starbucks Coffee in the coffee
shop/café market. You are advised to show your workings.
[4 marks]

Step 1: Identify annual sales of Starbucks Coffee

£328m
[1 mark]
Step 2: Identify the total size of the coffee shop/cafe market
£4.6bn
[1 mark]
Step 3: Substitute figures into the formula

Sales of a business
× 100
Market size

£ 328 m
= × 100
£ 4. 6 bn

[1 mark]

Step 4: Present the answer to two decimal places

7.13%
[1 mark]

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Exam Tip
Your notes
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.

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Market Growth
Market growth is the increase in the overall size, value or volume of a market over a period of time Your notes
usually expressed as a percentage
This metric considers the size of the whole market/industry as opposed to a single firm's share of
the market

Some common ways to measure market growth include sales revenue, sales volume or the number of
customers
Market growth is calculated using the formula

This year 's market sales − Last year 's market sales
Market growth = x 100
Last year 's market sales

If the growth rate is positive the market is getting bigger (expanding)

If the growth rate is negative the market is getting smaller (contracting)

Worked example
In 2021 worldwide sales of plug-in hybrid vehicles was 1.94 million units. By 2022 sales had increased to
2.84 million units.
Calculate the rate of market growth in the plug-in hybrid vehicles market.
[2 marks]
Step 1 - Deduct 2021's sales from 2022's sales

2. 84 million − 1. 94 million = 0. 90 million

Step 2 - Divide the outcome by 2021's sales

0. 90 million
= 0. 4639
1. 94 million

[1 mark]
Step 3 - Multiply the outcome by 100 to find the percentage growth rate

0. 4639 × 100 = 46 . 39 %

[1 mark]

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Market growth provides an incentive for businesses looking to expand, increase sales and generate
higher revenue
Businesses are often attracted to the potential of growing markets - and they can become Your notes
increasingly competitive quite rapidly

Diagram with Reasons for Market Growth

Market growth can vary significantly across industries and can occur for a range of reasons

Exam Tip
You may be asked to calculate the sales in a market given a certain growth rate. In simple terms you are
being asked to calculate a percentage increase.
For example, in 2022 a niche market had total sales of $850,000. This was expected to grow by 15% in
2023.
To calculate expected market sales in 2023 you must first find 15% of $850,000:

Then add this amount to 2022's sales:

So, with a market growth rate of 15%, market sales in 2023 are predicted to be $977,500.

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Market Leadership
Market leadership is a businesses ability to maintain the largest share of a specific market or industry Your notes
It can refer to a product, brand or organisation
It is a key way to measure business success

Most industries are dominated by a small number of large businesses that control a large proportion
of market share
These markets are called oligopolies
Market concentration measures how competitive these markets are
A high market concentration is where market leaders have a very high combined market
share
These markets are not very competitive
Examples include energy supply and textbook publishing
A low market concentration is where market share is spread across market leaders and
smaller competitors
These markets tend to be more competitive
Examples include UK supermarkets and travel agencies

Market leadership has several important advantages

Advantages of Market Leadership

Advantage Explanation

Brand Recognition Market leaders are often the most recognised and trusted brands in their
industry
This can lead to customer loyalty, being the buying preference and long
product life cycles
It also provides opportunities for upselling
In 2022 three out of ten of the the UK's top confectionery products were
sold by market leader Cadbury

Economies of Scale Market leaders usually make and sell greater quantities than rivals
Greater scale lowers production costs and can lead to higher profit margins
Economies of scale allow Swedish furniture retailer IKEA to sell its vast
range of homeware and lifestyle products at significantly lower pricers than
competitors

Market leaders typically have finance to invest in research and development

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Innovation and This allows them to innovate to stay ahead of competitors

Resources In 2022 Apple spent around $3bn more than its closest rival Huawei on
research and development Your notes

Distribution Channels Leading companies usually have significant presence in major retailers
This makes it easier for to reach customers and expand their market
presence
In November 2023 Heinz's new pickle-flavoured ketchup was launched in
more than 4,000 Tesco stores across the UK

Competitive Advantage Market leaders may have a competitive advantage in terms of cost, quality
or technology
This makes it difficult for competitors to catch up
Amazon is expanding its Prime Air drone delivery service to the UK and Italy
in 2014, allowing some customers to receive orders within one hour

Attractive to highly- Employees feel proud to be associated with the brand

qualified job applicants High quality Human Resources can provide a competitive advantage
Large, market-leading businesses such as Google often rank highly in
employee satisfaction surveys

Market leaders often face significant pressure

To maintain high market share by repeating successes
As a leading high street retailer M&S's progress is keenly watched by the media and
shareholders
To see off challenges from competitors

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