Lesson nine

9.1       THE MARKET 

This refers to the group of people, institutions or businesses that are in need, able and willing to buy a product at a given price. 

An entrepreneur is expected to take up a business idea that has market opportunities so as to get enough profits.  

9.2       FEATURES OR CHARACTERISTICS OF A MARKET. 

  • It should have the need for the product
  • There must be willingness to buy the product
  • There must be ability to buy the products 

9.3       TYPES OF MARKET 

  • Potential market
  • Real market 

Potential marktet

It refers to a group of people or institutions or businesses in need or having the ability to pay for it but not yet willing to buy the product.   

Real market 

It refers to a group of people or institutions or business in need of the product and are able and willing to buy the product at a given price. 

9.4       FACTORS CONSIDERED WHEN ASSESSING A POTENTIAL MARKET 

This is the process of determining the market of a product of a business. The following are the factors considered when determining a potential market. 

  • The demand level of the product: demand is the amount of the business product that people are willing to buy at a given price. High demand on the business product leads to a high potential market but low demand, leads to low potential market.
  • The price level: High prices for the business products leads to low potential market but low prices encourage people to buy business products hence leading to high potential market.
  • The price level: high prices of the business products leads to low potential market but low prices encourage people to buy business products hence leading to high potential market. 
  • Income level. An area which has high income earners leads to a high potential market while an area which has low income earners leads to a low potential market
  • Availability of substitute goods. Substitutes are alternative products that buyers can go for to satisfy the same need e.g. Coca-Cola and Pepsi. A business producing without substitutes has a higher potential market than a business with many substitutes which has a potential market since customers have many products to choose from.
  • Level of sub competition: A business with many competitors have a low potential market since customers have more businesses among which they choose from but a few or no competitors have a high potential market.
  • Location of the businesses. A business which is strategically located near its customers has a high potential market but a business located in un inaccessible place for customers has a low potential market.
  • The number of people. Or business operating form the target area. A business that operates in an area with a large number of people or other businesses or institutions has a high potential market but a business in an area with a small number of people or other businesses or institutions has a low potential market.
  • Government policies in relation to business operations: favourable government policies towards the business e.g. working hours low taxes etc. lead to high potential market but unfavourable government policies e.g. discouraging business activities, unfavourable working, high taxes etc. lead to low potential market. 

9.5       Revision question

  • Explain the factors that lead to low potential market.
  • Present the factors that lead to high potential market 

The following are the factors that lead to low potential market; 

  • Low demand for the product: This means that there are a few people who need the product hence leading to low potential market.
  • Unfavourable government policy: these limit the activities done e.g. high taxes, unfavourable working hours hence leading to the low demand which leads to low potential market.
  • Low level of income of the customers. This leads to the low demand of the products hence leading to a low potential market.
  • Low demand for the product: this means that there are a few people interested in the business products leading to low potential market.
  • Unfavorable government policies: These limit activities of the business products which are unfavourable during.
  • Low level of income products of the customers. This limits the customer’s business products leading to low potential market
  • Poor location of businesses: It makes it difficult for the customers to access business products.
  • High degree of competition: Many competitors reduce the number as customers for a particular business leading to low potential market.
  • Existence of many substitutes. These reduce the potential of customers to demand for certain goods hence leading to low potential market.
  • High prices for the products: High prices reduce the purchasing power of customers or scare the would be potential buyers leading to low potential market.

Factors leading to high potential market.

  • High level of demand for the products: if the demand for the product is high, it leads to high potential market.
  • Low price level for the products: If the price of the products is low, they will be able to buy them in large quantities hence leading to high potential market.
  • High income levels of the customers: If the customer receives high income, they will be able to buy goods at any price hence leading to high potential market.
  • Low substitute goods: If there are fewer businesses producing the similar goods to your business, products, the potential market will be high.
  • Low number of competitors: If the business has less number of competitors, there will be a high potential market.
  • Strategic location of the business: If the business is strategically located in a place where the customers can access it easily, there will be a high potential market.
  • Favorable government policies: If there are favorable government policies towards the business, like low taxes on its protects, it will lead to a high potential market.