Analysing the Market

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Analysing the Market

• Market share

2
Aims

• To understand the nature and type of markets
• To understand the meaning of market share
• To be able to calculate market size, growth and
  share.

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What is a market?

• Market any place or process that brings
  together buyers and sellers with a view to
  agreeing a price

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Defining a market
Local markets
A market is anywhere where buyers and sellers
come together to transact with each other
National markets
Physical markets
Electronic markets
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Local Markets

• Where customers are a short distance from
  suppliers
• Common for the sale of fresh and locally-sourced
  products and the delivery of locally-supplied
  services

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National Markets

• The same product or service is offered to
  customers who are spread around the country
• A business may have several (or many) locations
  in the country in order to reach those customers
• A start-up or small business can be focused on a
  national market, although it is likely that it
  will have a very small share of the market

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Physical markets

• A physical market brings buyers and sellers
  together in the same location
• Prices are often negotiated by customers
• Examples
• Farmers market
• Car boot sale
• High street retail
• Auction houses

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Electronic markets

• Transactions are completed electronically with
  the delivery method depending on the nature of
  the product sold
• Examples
• E-commerce
• Online auctions

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An Invisible Market?

• Markets can exist
• over telephone lines
• online
• in emails
• As long as what happens involves buyers and
  sellers in a business transaction

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B2B B2C

• Business 2 Business
• Business 2 Consumers

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You need a set of mini case studies

• In small groups
• Sort out the business case studies into 3 groups
• B2B
• B2C
• B2B B2C

Answers on following slide
12
Different types of market focus
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Answers.
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Analysing the market
There are three key calculations you need to be
able to complete in order to analyse market data
in BUSS1

• Market size (volume and value measures)
• Market growth (percentage growth)
• Market share (percentage of the market owned by
  each competitor)

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Market Size

• Need to have calculators!

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Market size

• Market size measures the sales by all companies
  within the market place.
• It can be measured in 2 ways
• By volume (quantity sold
• e.g tonnes or units)
• By sales (value of sales
• e.g price x quantity sold)

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Market size

• What measure could be used to show the volume of
  the following market places
• Cars?
• Yogurt?
• Daffodils?
• Hair cuts?
• Footballers?
• Bank service?
• Schools e.g Ashcombe market size?

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Example
The total value of sales (market size) can be
found by adding up the sales of each company
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Market size by value

• Soft drink 2,481,544,000
• trend 4.9
• Crisps 1,836,016,000
• trend 2.1
• Hot drinks 1,049,619,000
• trend -4

What does the trend mean?
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Trends

• It tells us whether the market is growing or
  declining.
• It tells companies that there are possible
  opportunities to increase their market share
  using marketing!

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A few quick calculations for you to do!
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Do volume and value change in the same direction?

• If you sell 5m units pa and the average price is
  4, what is the value of the sales?
• If you sell 6m units pa and the average price is
  4, what is the value of the sales?

• If you sell 6m units pa and the average price is
  3, what is the value of the sales?

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Do volume and value change in the same direction?

• If you sell 5m units pa and the average price is
  4, what is the value of the sales?
• 20m
• If you sell 6m units pa and the average price is
  4, what is the value of the sales?
• 24m

• If you sell 6m units pa and the average price is
  3, what is the value of the sales?
• 18m
• The value has fallen compared to previous figures

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What effect of a trend?

• If a market value is 10,000 and the trend is
  2. What will be the market size next year?

• If a market value is 10,000 and the trend is
  -2. What will be the market size next year?

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What effect of a trend?

• If a market value is 10,000 and the trend is
  2. What will be the market size next year?
• 10,000 x 0.02 200
• So next year value will be 10,200

• If a market value is 10,000 and the trend is
  -2. What will be the market size next year?
• 10,000 x 0.02 200
• So next year value will be 9,800

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Market Growth
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Market Growth calculations

• If a market is worth 20m and next year it
  increases to 22m, it has grown in size
• But by how much?
• 22-20 2 / 20 x 100 10

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Formula

• Market Growth change in size x 100
• Original market size

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A few quick calculations for you to do!
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Market Growth

• Market was 40m now is 60 market growth is?
• Market was 40m now is 30 market growth is?

• Market is worth 2m and its expected to grow by
  20. What will the size of the market be next
  year?

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Market Growth

• Market was 40m now is 60 market growth is?
• 50
• Market was 40m now is 30 market growth is?
• - 25

• Market is worth 2m and its expected to grow by
  20. What will the size of the market be next
  year?
• 2.4m

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Market share
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Example
The total value of sales (market size) can be
found by adding up the sales of each company
Market share is calculated by taking the sales of
one company and dividing by the market size
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Market Share

• Market share
• Sales of the business X 100
• Total sales in the market

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Does size matter?

• It is used to work out how big each company is
  whats its market share?
• Market share can tell us if the company is a
  market leader, monopoly or a niche business.
• It can also tell us if the market is growing or
  declining.

Your go
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Interpreting market share
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Interpreting market share
Fill in the gaps
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Interpreting market share
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Now for something harder

• Felix has 106m sales and 19.6
• How do you calculate the market size?

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Now for something harder

• Felix has 106m sales and 19.6
• How do you calculate the market size?

• If Felix has 19.6
• Then how big is 1 of 106m sales?
• 106/19.6 ?
• Multiply this by 100 to get the answer

Should get an answer close to 541m
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Brain strain.

• Kit kat has 7 market share with sales of 179m.
  How big is the market size?
• Heinz soup has 35.7 market share and 133m sales
  . How big is the market size?

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Brain strain.

• Kit kat has 7 market share with sales of 179m.
  How big is the market size?
• Heinz soup has 35.7 market share and 133m sales
  . How big is the market size?

179 / 7 x 100 AND 133 / 35.7 X 100
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Market Leader or Market dominator?
Walkers dominates the market with 26.3 share
(the nearest competitor has 7.1)
Kitkat leads the market with 1 more share
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Homework follow on from assessment

• The idea to open up their own coffee shop was met
  with overwhelming approval from their friends and
  family. This enthusiasm seemed justified when Jan
  carried out some market research which confirmed
  a growing market for their product/ service. The
  value of UK coffee shop sales grew from 6.3
  million in 2001 to 34 million in 2006.
• Although there was no competition in the village,
  the local town (10 miles away) had a coffee shop
  in the form of Costra Nova Coffee. In 2006,
  Costras UK sales were 5m, making them without
  doubt the market leader.

• Define the term, market size (2 marks)
• Calculate the percentage growth in the UK market
  for Coffee shops between 2001 and 2006 (4 marks)
• Calculate Costra Novas market share in 2006 (4
  marks)

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Plenary

• What are the 2 methods of measuring market size?
• What is the formula for calculating market share?
  Why is important to know a products market share?
• What is the difference between a market leader
  and a market dominator?

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Notes on Markets

• What are the FOUR different market categories.
• What is B2B and B2C stand for?
• How do you calculate market size?

• How do you calculate market growth?
• What is the formula for calculating market share?
• What is the difference between a market leader
  and a market dominator?