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Demand and Supply
Demand and Supply
• Demand - The Quantity of a product that consumers
are willing and able to buy at a given price in a period
of time.
• Supply – the quantity of a product that firms are
prepared to supply at a given price in a time period.
• Marketing managers need to understand free
markets to ensure there product meets the market
price.
Demand
• The law of demand states as the price increase the quantity
demanded will decrease and vice versa. In commodity
markets such as steel and some foods the price is generally
the determining factor, other products such as clothing there
are other factors that will determine what a consumer
purchases.
• What are the determinants of demand?
- Changes in Consumer incomes
- Changes in the price of substitutes and compliments.
- Changes in population size and structure
- Fashion and taste changes
- advertising and promotion spending.
Supply
• The Law of Supply states that as the price of commodities
increase the quantity supplied increases and vice versa.
Producers will supply less as the price for a product decreases
because they will choose to use their resources in another
way.
• What other factors could change supply?
- costs of production ie change in labor or raw material
costs
- taxes
- Subsidies
- weather conditions and other natural factors
- advances in technology
Equilibrium Price
• The market price that equates supply and demand
for a product.
• This is at the point where demand = Supply.
• If the price is higher than the equilibrium point then
there will be excess supply and the producers will
have to lower there price. If the price is lower than
the equilibrium price then there will be excess
demand, producers can make a higher profit by
increasing there price.
Market Location, Size, Growth
and Share
DO NOW
• Activity 14.1 page 249 The Classic Watch Co
Q1 and 2
Market Location
• Put simply this is where the business operates, which
is usually close to there target market.
• In most cases businesses such as hairdressers and
florists will operate in shopping centers and shopping
complexes as this is where there target market will
be.
• If your marketing doesn’t cater for the market they
are likely to be unsuccessful.
Market Location
• Businesses who want to expand will go beyond there
local market (ie Auckland) and sell to the whole of
NZ. This will result in increased sales and greater
exposure. Ie Living Earth, DE Group and Euro
Corporation.
• The greatest sales potential comes from the
international markets. Being strategic and picking the
right international market is important. Be aware
new countries mean different cultures and tastes.
Market Size
• The total level of sales of all products within a
market.
• This can be very hard to determine and does
generally take research and some calculated guessing
as competitor information can be hard to obtain.
• Measured in two ways volume of sales and value of
goods sold.
• Important to marketing managers as it will
determine wether the market it is worth entering
and can give you an indication of your market share.
Market Growth
• The percentage change in the total size of a market
over a period of time.
• Markets grow and shrink at different rates this is
normally related to consumer tastes and
preferences, technology changes and economic
growth. I.e. cell phone market was non existent and
then grew rapidly but has leveled out now, it is
enhanced by new innovations such as the iphone.
• Do you think it is always better to be operating in a
rapidly growing market?
Market Share
• The percentage of sales in the total market sold by
one business.
• Market share is the best way to measure the success
of a marketing department, if your market share is
increasing then the marketing of the products has
been more successful then there competitors and
can be considered the brand leader.
Market Share
• Market Share can be difficult to determine especially
for a small business as accurate stats on market sales
can be hard to come across, unless you operate with
in a substantial market such as the FMCG market
where statistic companies such as AC nielson do
consumer surveys and track the information for
these companies.
• Don’t forget Market Share can fall even if sales are
increasing, because market sales could be increasing
at a faster rate then one firms sales.
Benefits of Being
the Brand Leader
• Sales are higher which will lead to higher profits
• Greater exposure through retail stores as they are
more willing to stock your product due to consumer
demand, they will also give you the most prominent
stock positions.
• Because of the greater demand for your product the
rebate rate for the retailer may be less which will
lead to higher profits.
• Being the brand leader leads to greater visibility and
consumers want the most popular products so they
will purchase yours such as the Iphone.