Responding to Changing Market Conditions (Edexcel IGCSE Business)
Revision Note
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
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 |
|
Customer focus |
|
Improve products |
|
Minimise costs |
|
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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