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MN101_Lecture_4_-_handoutl - MN 101 Business Analysis and...

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MN 101: Business Analysis and Decision Making Lecture 4 : M ARKETS: USING COST RECOVERY The price mechanism acts as a signalling device and markets clear. Economics provides a basis for understanding how firms operate. But industrial markets are complex where manufacturing firms produce more than one product. Note: You must read chapter on supply and demand in any economics textbook. Often there is a basic market e.g. Cars. But there are several markets within this basic market e.g. Sub B Fiesta class, Escort class, Premium brands, Luxury. Grocery market, Corner shops, Sainsburys or Somerfield, freezer store such as Iceland all of which provide service for a particular clientele. Modern Consumers and producers consider a range of non-price objectives e.g. * Quality * Features * Reliability * Brand Image * Design *After-sales services A framework for understanding complex markets: The concepts of MARKET SEGMENTATION , MARKET FRAGMENTATION and MARKET MATURITY Market Segmentation Def: A range of model variants within a product market Characteristics include: 1. Initially basic product market; 2. Rapid market growth; 3. Increasing number of variants to increase overall market size and market share; 4. market matures. Generally, a basic product quickly satisfies a basic, unsophisticated market. To increase sales model proliferation occurs e.g. Televisions. Market Fragmentation Definition: Many producers selling into a product segment Characteristics include: 1. Increase in the number of manufactures; 2. Stagnating sales requiring new markets; 3.
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