Responding to Changing Market Conditions (Edexcel IGCSE Business)

Revision Note

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

The Impact of Changing Customer Needs & Spending Patterns

  • Markets and marketing strategies are constantly changing as a direct result of the changing wants/needs of customers, which affect their spending patterns

    • There are many different reasons for changes in customer spending habits and patterns
       

  • Businesses that conduct ongoing market research are able to identify and interpret the changes that are happening in markets
     

Diagram: Reasons for Changes in Spending Patterns

Z1K8pmmt_changing-customer-spending-patterns-cie-igcse-business-rn

If businesses fail to respond to changing customer needs, then they are likely to fail

Changes in tastes and fashions

  • Trends in some markets can change very quickly

    • E.g. Wide-leg jeans are now more fashionable with Gen-Z customers than 'skinny' jeans worn by Millennials

Change in disposable incomes

  • High unemployment or inflation may lead to customers to buy cheaper products, e.g own brand breakfast cereal

Demographic changes

  • Populations in most developed countries are becoming older

  • Demand for products that meet their needs has driven many market changes

    • E.g. Sales of specialist travel insurance for mature holidaymakers has increased

Global influences

  • The arrival of well-known international brands can change demand and purchasing patterns in a market

  • Increased travel, support from celebrities and extensive promotional activity drive demand

    • E.g. American fast food chains now dominate the market for fast food across Europe

Changes in technology

  • New technology makes old technology less desirable or obsolete

    • E.g. Products such as smart speakers are replacing sales of radios

The Impact of Increased Competition

  • 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 results in many benefits for the customer, such as

    • Lower prices

    • Better-quality products

    • Better customer service

  • However, the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices

  • Some markets have become more competitive in recent years as a result of

    • Globalisation of markets has meant that products are increasingly sold all over the world

    • Transportation improvements have meant that it is easier and cheaper to transport products from one part of the world to another

    • Internet and e-commerce have meant that consumers can search for products and buy from overseas markets

    • Increased consumer information about products and the different international businesses that produce them makes the market much more competitive

Responding to Changing Spending Patterns and Increased Competition

  • Whenever there are changes to spending patterns or competition, a business will need to take action to maintain its market position
     

Steps a Business can take to Remain Competitive

Step

Explanation

New product development

  • The development of new and innovative products encourages customer loyalty and also attracts new customers

    • E.g. Apple identified changing trends in the way people consumed music and switched their focus from iPods to digital downloads via the Apple Music App

Customer focus

  • Provide outstanding customer service ensures customer loyalty for longer periods of time

Improve products

  • Customers will compare products and services to competitors so improving the product allows the firm to maintain market share and stay competitive

    • E.g. Google software developments (e.g. Google Meet) differentiate Google from other search engine software

Minimise costs

  • Lower costs can sometimes be passed onto the consumer in the form of lower prices

  • Increased retained profit can be used to fund promotion to raise awareness of a brand/its products or expansion which allows a business to operate on a larger scale

Examiner Tips and Tricks

In the exam you may be asked to evaluate how changes in consumer spending patterns and competition may affect a particular business. You might want to consider factors such as

  • Whether the products the business sells are luxuries or necessities

  • The strength of the businesses brand and how effectively it is differentiated

  • How long-lived changes are expected to be

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Lisa Eades

Author: Lisa Eades

Expertise: Business Content Creator

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.