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Analysing the Market Market share. Aims: To understand the nature and type of markets To understand the meaning of market share To be able to calculate.

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Presentation on theme: "Analysing the Market Market share. Aims: To understand the nature and type of markets To understand the meaning of market share To be able to calculate."— Presentation transcript:

1 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.

3 What is a market? Market – any place or process that brings together buyers and sellers with a view to agreeing a price

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

5 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

6 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

7 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

8 Electronic markets Transactions are completed electronically with the delivery method depending on the nature of the product sold Examples: –E-commerce –Online auctions

9 An Invisible Market? Markets can exist: over telephone lines online in s As long as what happens involves buyers and sellers in a business transaction

10 B2B & B2C Business 2 Business Business 2 Consumers

11 You need a set of mini case studies Answers on following slide… In small groups Sort out the business case studies into 3 groups B2B B2C B2B & B2C

12 Different types of market focus B2B onlyB2C onlyBoth….

13 Answers…. B2B onlyB2C onlyBoth…. Premier water coolers (1) Beautiful Vending (3) Rock & Ruby (7) Events Northern (15) Sports Stars (2) Jo Jingles (4) Fly Fishing (8) Daisy Coffins (10) Curries made Simple(12) Innovations (13) Pet Pavilion (16) Tea on the Green (20) Mozzo (5) ChemDry (6) Artichoke Ltd (9) Fivez (11) Little Ironies (14) Tutor2U (17) Lynches Direct (18) Links Putt (19)

14 Analysing the market Market size (volume and value measures) Market growth (percentage growth) Market share (percentage of the market owned by each competitor) There are three key calculations you need to be able to complete in order to analyse market data in BUSS1

15 Market Size Need to have calculators!

16 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)

17 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?

18 Example Car Valeting Market Sales (£) Cleanstyle£65,000 WorcesterValet£45,000 AutoFresh£30,000 Others£110,000 Total£250,000 The total value of sales (market size) can be found by adding up the sales of each company

19 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?

20 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!

21 A few quick calculations for you to do!

22 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?

23 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

24 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?

25 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

26 Market Growth

27 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? = 2 / 20 x 100 = 10%

28 Formula Market Growth = change in size x 100 Original market size

29 A few quick calculations for you to do!

30 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?

31 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

32 Market share

33 Example Car Valeting Market Sales (£)Share (%) Cleanstyle£65,00026% WorcesterValet£45,00018% AutoFresh£30,00012% Others£110,00044% Total£250,000100% 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

34 Market Share Market share = Sales of the business X 100 = % Total sales in the market

35 Does size matter? It is used to work out how big each company is… what’s 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…

36 Interpreting market share Leading brand Sales of leading brand Market size (value) Market share Walkers crisp £447m£1,702m Nescafe£226m£535m Kitkat£163m£3,354m Felix cat food £541m 19.6% Walls Magnum £709m 6.3%

37 Interpreting market share Leading brand Sales of leading brand Market size (value) Market share Walkers crisp £447m£1,702m Nescafe£226m£535m Kitkat£163m£3,354m Felix cat food £541m 19.6% Walls Magnum £709m 6.3% Fill in the gaps

38 Interpreting market share Leading brand Sales of leading brand Market size (value) Market share Walkers crisp £447m£1,702m 26.3% Nescafe£226m£535m 42.2% Kitkat£163m£3,354m 4.9% Felix cat food £106m £541m19.6% Walls Magnum £45m £709m6.3%

39 Now for something harder Felix has 106m sales and 19.6% How do you calculate the market size?

40 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

41 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?

42 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

43 Market Leader or Market dominator? Leading brand Sales of leading brand Market size (value) Market share Share of nearest competitor Walkers crisp £447m£1,702m 26.3% 7.1% Nescafe£226m£535m 42.2% 15.3% Kitkat£163m£3,354m 4.9% 3.9% Felix cat food £106m £541m19.6%18.3% Walls Magnum £45m £709m6.3%5.1% Kitkat leads the market with 1% more share Walker’s dominates the market with 26.3% share (the nearest competitor has 7.1%)

44 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 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, Costra’s UK sales were £5m, making them without doubt the market leader. 1.Define the term, market size (2 marks) 2.Calculate the percentage growth in the UK market for Coffee shops between 2001 and 2006 (4 marks) 3.Calculate Costra Nova’s market share in 2006 (4 marks)

45 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?

46 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?


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