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Explain the term niche market with reference to Fantasia Clothing Ltd - Leaving Cert Business - Question 7(A) - 2017
Question 7(A)
Explain the term niche market with reference to Fantasia Clothing Ltd. Illustrate the implications for a business operating in a niche market.
Worked Solution & Example Answer:Explain the term niche market with reference to Fantasia Clothing Ltd - Leaving Cert Business - Question 7(A) - 2017
Step 1
Explain the term niche market with reference to Fantasia Clothing Ltd.
Answer
A niche market refers to a small segment within a larger market that focuses on a specific product or service tailored to a distinct customer need. In the case of Fantasia Clothing Ltd., Amy Carroll identified a gap in the market for children's clothing that is not just a smaller version of adult clothing. Instead, her designs are bright, colorful, and uniquely created to resonate with children and their parents. This specialization allows Fantasia to cater to a targeted audience, differentiating itself from larger companies that may not focus on such specific requirements.
Step 2
Illustrate the implications for a business operating in a niche market.
Answer
Operating in a niche market brings several implications:
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Little or no competition: Fantasia Clothing Ltd. can face less competition, allowing it to dominate its specialized segment. This environment reduces the pressure to constantly innovate and compete against numerous rivals.
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Investment Requirements: Since Fantasia produces a limited range of products, the initial investment may be lower than in broader markets. They can focus resources on quality rather than quantity.
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High cost base: Due to the unique nature of their products, the costs of materials and production may be higher. Consequently, they might need to price their clothing at a premium to cover these costs.
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Brand Loyalty: By offering unique designs, Fantasia can create a loyal customer base who appreciate the distinctive qualities of the clothing, likely leading to repeat purchases.
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Survival Risks: The survival of niche businesses like Fantasia may be at risk if consumer preferences shift dramatically or if competition arises from bigger brands entering the niche space. This situation makes flexibility and customer understanding crucial.