What is a Market? Also explain various types of markets?
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Market is an institution or a mechanism allowing buyers and sellers to make exchanges. The term Market holds different meaning for different people. It originates from the Latin word “Marcatus” which means “a place where business is conducted.” For an average person it is a place where buyers and sellers meet and make exchanges. These exchanges can be done by a personal meet between the two or via intermediaries involved.
Types of Markets-
1. Consumer Market –
The buyers buy products and services for their personal consumption. For example, soaps, office stationary, bread, etc., which fall under the category of Fast Moving Consumer Goods. And the other category in this market is Durable Goods – the products or services utilised over a long period. For example, Refrigerators, cars, insurance products, banking services, etc.
2. Industrial/Business market –
In this market business buyers buy products on large scale either for production of another product or for their own use. They buy products and add value to the same for selling to Consumers. For example, raw material (crude oil, steel, etc.), final products for company use (generators, printing machines, etc.), office stationary, etc. Due to companies operating on large scale in global markets, they also utilise services of banks for life insurance of its employees, security services, legal services, etc. from other organisations which provide such offerings.
The key features which differentiate the Consumer Markets from Business markets are –
| Business Markets | Consumer Markets | |
| 1 | Large number of buyers (intermediaries) | Relatively fewer buyers distributed in clusters (no intermediaries) |
| 2 | Close Supplier – customer relationship | Because of large customer base, relationship is not so close (professional) |
| 3 | Derived demand – Demand that derives from the demand of consumers | Direct demand |
| 4 | Geographically concentrated | Geographically spread out |
| 5 | Demand for many goods and services is inelastic. It doesn’t changes with change in price in the short run | Demand is elastic |
| 6 | Fluctuating demand. For example, a percentage increase in consumer demand requires much larger percentage increase in demand of plant, machinery and resources. | Demand is less fluctuating |
| 7 | Organised behaviour- knowledgeable buyers, structured buying process | Complex behaviour – Driven by social, cultural and individual needs |
| 8 | Written contract important and necessary | Written contract not always necessary |
| 9 | Post purchase satisfaction more dominant | It is mostly done by third party. Surveys conducted by third party or a dedicated department of the manufacturer takes feedback |
| 10 | Complicated and professional decision making done by research, etc. by inputs from many teams of the manufacturer | Decision making process in less complicated |
| 11 | Mostly Capital goods and raw materials | Finished products – FMCG and durable goods |
| 12 | Promotion done via Business magazines, Trade journals, Business Development Executives, etc. | Promotion done via mass media – Television, newspapers, hoardings, etc. |
| 13 | Most of the buying is on credits as purchases are in large quantities or at high price. | Mostly via cash transaction but advent of technology has resulted in EMI payments via auto payments. |
3. Global Market-
Globalisation as they say has turned the entire planet into a global village. Most of the companies after been successful in selling its offerings in the target market often move towards global presence to increase their profits. The organisations rely on their expertise from the past and it is easy for the organisation to implement the same strategies with some changes in the new international market. The organisations immensely invest in promotion activities highlighting their market share and success from the existing markets. Apart from these companies realising their vision the consumers are also greatly benefitted by buying world class products. For example, Vodafone, Coalgate, Nestle, TATA, Levi’s, Sony, Samsung, etc.
4. Non Profit and Government markets-
In most of the countries Government is the largest buyer of goods and services which are used for public welfare, and to ensure the offerings are provided at a reasonable prices. In developing countries most of the transport, post office services are provided by the government owned enterprises. The governments decide by way of tenders, etc. about the requirement of raw material etc. For example – crude oil, etc.