Study Global niche markets in the Pearson Edexcel A Level Business specification, including the knowledge, application and evaluation needed for exam questions and mark-scheme…
Source for use with Extract D Australian farmers turn to global niche markets From banana flour to organic milk, innovative Australian farmers are taking advantage of the rise of valuable global niche markets due to more health-conscious shoppers. In the north of Australia, banana grower Krista Watkins was concerned with the 500 tonnes of wasted green bananas being dumped from local farms every week. Then came the idea to establish the world’s first green banana processing facility which has now grown to three factories producing 50 different products. “We’re the first people in the world to commercialise banana flour,” Krista said. “We are gluten-free, vegan and Australian-made.” Other farmers’ waste products including sweet potatoes and broccoli are also being converted to powder as the processing operation grows. More than 3,000km further south, dairy farmers Graham and Melissa Clay have recently secured organic certification. The family farm has undergone a major change in the past three years as it gets rid of pesticides and herbicides once thought essential to dairy production. Australian Consolidated Milk general manager, Peter Jones, said that while organic dairy was once thought to be unprofitable, farmers could convert and take advantage of premium prices. “It is a niche market, but it is a niche market that’s growing not just in Australia, but globally,” he said. Converting to organic production can be expensive but organic milk offers a more stable price, with consumers happy to pay extra. About 0.7% (80,000,000 litres) of Australia’s milk is organic.
Evaluate whether or not a business benefits by operating in a global niche market.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- A global niche market is a smaller segment of a larger global market
with special characteristics such as specialised products/services often
commanding premium prices and having a low PED
- Products/services such as banana flour and organic milk are likely to
have a high degree of added value and therefore command a
premium price increasing profitability
- Consumer demand in a niche market, particularly by health-conscious
customers, can be more price inelastic, which may enable a higher
price to be charged
- Competition in niche markets is usually low, only 0.7% of milk in
Australia is organic, with brand loyalty and product differentiation
reducing direct competition
- Targeting very specific tastes and cultures is more likely to gain
customer satisfaction and loyalty and gain a competitive advantage
- Smaller markets allow a business to develop more effective marketing
and sales strategies, thereby boosting sales and profitability
- Closer relationships with customers are possible increasing brand
loyalty and enabling products/services to be more precisely targeted to
customers
- However, businesses in niche markets can rely too much on one
area/product/service which can be adversely affected by changes in
tastes
- Some niche markets are based on fads or the latest trends, although
demand is increasing it may not last
- Although niche markets have less competition, they are not
monopolies and competition may increase as other producers see the
advantages of producing banana flour and organic milk
- Global niche markets are limited in size and may not permit expansion
or the ability to reap the full benefits of economies of scale
- If a business becomes too successful, it may run the risk of being taken
over by a larger company - such as Green & Blacks and Cadbury
- Over time, niche markets can expand and become mass markets and
so a business can lose the advantages of being a niche producer
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-4
Isolated elements of knowledge and understanding.
Weak or no relevant application of business examples.
An argument may be attempted, but will be generic and fail to connect causes and/or consequences.
Level 2
5-8
Elements of knowledge and understanding, which are applied to the business example.
Arguments and chains of reasoning are presented but connections between causes and/or consequences are incomplete. Attempts to address the question.
A comparison or judgement may be attempted but it will not successfully show an awareness of the key features of business behaviour or business situation.
Level 3
9-14
Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.
Uses developed chains of reasoning, so that causes and/or consequences are complete, showing an understanding of the question.
Arguments are well-developed.
Quantitative and/or qualitative information is introduced in an attempt to support judgements, a partial awareness of the validity and/or significance of competing arguments and may lead to a conclusion.
Level 4
15-20
Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.
Uses well-developed and logical, coherent chains of reasoning, showing a range of cause and/or effect(s).
Arguments are fully developed.
Quantitative and/or qualitative information is/are used well to support judgements. A full awareness of the validity and significance of competing arguments/factors, leading to balanced comparisons, judgements and an effective conclusion that proposes a solution and/or recommendations.
Question
Number
Evaluate the potential impact of skill shortages on the international competitiveness of businesses in a country such as Hungary
Indicative content