EDEXCEL GCSE BUSINESS · PAPER 1
Market mapping
Spotting a business opportunity · Lesson 4 of 5
Teacher copy - includes the notes for whoever is teaching from it.
Last Lesson
Answer from memory before the answers appear.
1. What is market segmentation?
Dividing a market into groups of customers with similar needs.
2. Name the five ways to segment a market.
Location, demographics, lifestyle, income and age.
3. What is a target market?
The segment a business aims its product and marketing at.
4. Give one benefit of segmentation.
Better meets needs, targeted marketing, spots gaps, or higher sales.
Learning Objectives
1. Explain what a market map is.
2. Construct and interpret a market map.
3. Explain how a market map can identify a gap in the market and the competition.
4. Evaluate the benefits and limitations of market mapping.
What Is a Market Map?
A market map is a diagram that shows where the products or businesses in a market are positioned.
▸ Two axes. The map has two lines crossing in the middle, each showing a feature customers care about - for example low to high price, and low to high quality.
▸ Plotting competitors. Each business or product is placed on the map according to how customers see it on both features.
▸ Four areas. The axes split the map into four areas, such as high price and high quality, or low price and low quality.
▸ The purpose. To see where competitors are crowded together, and where there is space that nobody is filling.
How to Draw a Market Map
Five steps, from a blank page to a possible opportunity.
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1 Choose two features Pick two things customers care about, such as price and quality, or healthy and unhealthy. |
2 Draw the axes Draw two lines crossing in the middle and label each end, such as Low price and High price. |
3 Research competitors Use market research to find out how customers see each business on both features. |
4 Plot each business Place each competitor on the map where it belongs. |
5 Look for gaps Find areas of the map with few or no businesses in them. |
A Market Map in Action
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This market map shows six places to buy lunch in a town centre. The cheap places are all unhealthy, and the healthy places are all expensive. Nobody is selling healthy food at a low price - so there may be a gap in the market for a new business. |
Six lunch places plotted on price and healthiness. The low price, healthy corner is empty. |
Reading the Map
What the lunch map tells an entrepreneur.
▸ Crowded areas. Two businesses sit in the low price, less healthy corner, so competition there is strong - a new business there would have to fight for customers.
▸ The gap. The low price, healthy corner is empty. No business is meeting the needs of customers who want healthy food they can afford.
▸ Nearest competitors. The Salad Room and Juice & Co are the closest to the gap, so they are the rivals a new business would need to beat.
▸ The next step. Before opening, the entrepreneur must research whether enough customers actually want cheap healthy food - and whether it can be made cheaply enough to make a profit.
PART TWO
Benefits and Limitations
A market map is a starting point, not an answer.
Market Mapping: For and Against
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BENEFITS |
LIMITATIONS |
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▸ Shows gaps in the market that a new business could fill. ▸ Shows where competitors are and how crowded each area is. ▸ Helps a business decide how to position its product. ▸ Simple, quick and cheap to draw. ▸ Easy for owners and investors to understand. |
▸ A gap may exist because there is no demand for it. ▸ Only two features can be shown at once. ▸ Where competitors sit is often based on opinion, not fact. ▸ Markets change, so the map soon goes out of date. ▸ It does not show how big each competitor is. |
Is Every Gap an Opportunity?
Not always. Before filling a gap, a business must ask why it is empty.
▸ No demand. Nobody may want a product in that part of the map - for example very expensive, very low-quality food.
▸ Too costly. It may be impossible to make the product cheaply enough to sell at that price and still make a profit.
▸ Others have tried. Businesses may have filled the gap before and failed.
▸ The test. Use market research to check there are enough customers who want the product before spending money.
Key Terms
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Market map A diagram that plots the businesses or products in a market against two features, such as price and quality. |
Axis One of the two lines on a market map, each showing a feature from low to high. |
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Gap in the market An area of a market where customers' needs are not being met by any business. |
Positioning Where a business places its product in the market compared with competitors. |
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Competitor Another business selling similar products to the same customers. |
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Your Task: Map Your Own Market
15 minutes
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Draw a market map for places to buy coffee or snacks in your local area. Choose two features customers care about, draw and label the axes, then plot at least five businesses. Circle any gap you find and write two sentences on whether it is a real opportunity. 1. Choose two features and label both ends of each axis. 2. Plot at least five businesses. 3. Circle a gap. 4. Decide whether it is a real opportunity, and explain why. |
A good answer shows: A correctly labelled map with at least five businesses plotted, a gap identified, and a judgement about whether customers would actually want it.
Note: The judgement is the evaluation marks: push them to say why the gap might be empty, not just that it exists.
Can I...?
☐ Explain what a market map is.
☐ Draw and label a market map.
☐ Use a market map to identify a gap in the market.
☐ Use a market map to identify competitors.
☐ Explain the benefits of market mapping.
☐ Explain the limitations of market mapping.
Summary
✓ A market map plots competitors against two features customers care about.
✓ It shows where competition is crowded and where there may be a gap.
✓ It is simple and cheap, and helps a business position its product.
✓ But a gap may have no demand, only two features are shown, and positions are based on opinion.
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EXAM FOCUS Explain one limitation to a business of using a market map. (3 marks) The strongest limitation answers explain what could go wrong for the business - a gap that has no demand leads to low sales and possible failure. |
Exam Practice: Market Mapping
Answer all questions. Use the market map where it is referred to. · 20 minutes
▸ Question 1 · 1 mark · Define. Define the term 'gap in the market'.
▸ Question 2 · 1 mark · State. State one feature that could be used as an axis on a market map.
▸ Question 3 · 2 marks · Outline. Outline one benefit to a business of using a market map.
▸ Question 4 · 3 marks · Explain. Explain one limitation to a business of using a market map.
▸ Question 5 · 9 marks · Justify. Justify which one of these two options Sam should choose.
Question 1 · 1 mark · Define
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“Define the term 'gap in the market'.” |
HOW TO ANSWER IT Command word: Define. Worth 1 mark, so plan before writing.
Question 1 · mark scheme
1 mark available. Award a mark for each point made.
▸ Customer needs not met / no products in that part of the market. 1 mark
▸ Model answer. An area of a market where customers' needs are not being met by any existing product or business.
Question 2 · 1 mark · State
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“State one feature that could be used as an axis on a market map.” |
HOW TO ANSWER IT Command word: State. Worth 1 mark, so plan before writing.
Question 2 · mark scheme
1 mark available. Award a mark for each point made.
▸ Any valid feature, e.g. price; quality; healthy/unhealthy; luxury/basic; modern/traditional. 1 mark
▸ Model answer. Price.
Question 3 · 2 marks · Outline
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“Outline one benefit to a business of using a market map.” |
HOW TO ANSWER IT Command word: Outline. Worth 2 marks, so plan before writing.
Question 3 · mark scheme
2 marks available. Award a mark for each point made.
▸ A benefit identified, e.g. identifies gaps / shows competitors / helps positioning. 1 mark
▸ Developed: how this helps the business. 1 mark
▸ Model answer. It can identify a gap in the market (1), showing an area where no competitor is meeting customer needs, which the business could fill with a new product (1).
Question 4 · 3 marks · Explain
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“Explain one limitation to a business of using a market map.” |
HOW TO ANSWER IT Command word: Explain. Worth 3 marks, so plan before writing.
Question 4 · mark scheme
3 marks available. Award a mark for each point made.
▸ A limitation identified, e.g. gap may have no demand / only two features / based on opinion / goes out of date. 1 mark
▸ First linked point of explanation. 1 mark
▸ Second linked point of explanation. 1 mark
▸ Model answer. A gap on the map may exist because there is no demand for that type of product (1). If the business fills the gap without further research, few customers may buy its product (1). This could lead to low sales and losses, and the business may fail (1).
Question 5 · 9 marks · Justify
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“Justify which one of these two options Sam should choose.” — Sam wants to open a lunch bar in a town centre. A market map of the town's six lunch places shows that all the cheap places sell unhealthy food, and all the healthy places are… |
HOW TO ANSWER IT Command word: Justify. Worth 9 marks, so plan before writing.
Question 5 · mark scheme
9 marks available. Award a mark for each point made.
▸ AO2 (Application, 3 marks): uses Sam's context - the market map, students, the two existing burger and chicken shops. Level 1-3
▸ AO3a (Analysis, 3 marks): chains of reasoning about each option. Level 1-3
▸ AO3b (Evaluation, 3 marks): a justified choice with a supported judgement, e.g. "it depends on". Level 1-3
▸ Model answer. Option 1 fills the gap on the market map. With no direct competitors, Sam could attract customers who want healthy food but cannot afford The Salad Room, which means he would not have to compete on price with established rivals. However, the gap may exist because there is not enough demand, or because healthy ingredients are too expensive to sell cheaply and still make a profit. Option 2 has proven demand, because most students already buy lunch there. But Sam would face two established competitors with loyal customers, so he might have to cut prices to win sales, reducing his profit. On balance Sam should choose Option 1, because it gives him a unique position rather than a price war with two rivals - but only if his market research shows that enough customers would buy cheap healthy food, and that he can make it at a low enough cost.