Understanding The Market Class 11 Notes Entrepreneurship Chapter 5 - CBSE

Chapter : 5

What Are Understanding The Market ?


Market is the place where buying and selling takes place.

Types Of Market

Traditional Market

(Corresponds to early production phase)

Modernised Market

(Market of Seventies and Eighties)

Emerging Market



It refers to carrying on the business activities both industrial and commercial through computer network i.e. Internet.

Roles of E-business

  • Quick solution to doubts
  • Updated information
  • Extending markets
  • Shortening of distribution channel
  • Saving of time and cost
  • Less risk in payments
  • Easy to launch new products
  • Lower personnel cost


The interaction of the firm its customers and suppliers over the internet.

Market Environment

It refers to factors and forces that affect a firm’s ability to build and maintain successful relationship with customers. Factors governing market are:

Micro Environment (Primary forces)
  • Producer/seller
  • Competitors
  • Marketing intermediaries
  • Customers
  • Suppliers
Macro Environment (Secondary forces)
  • Demographic
  • Economic
  • Technological
  • Political
  • Natural
  • Cultural

Market Research

Market research is referred as the systematic study and evaluation of all factors bearing on any business operations which involves the transfer of goods from a producer to consumer.

Research Instrument

Research instrument means the instruments, tools, methods or techniques employed in research for gathering the information. One of the most commonly used instrument use for research is market survey.

Methods Used For Market Survey

  • Personal interview
  • Telephonic interview
  • Direct mail interview
  • Email interview
  • Online interview
  • Questionnaire Development
  • Field work

Process of Conducting Market Survey

  • Step-1: Planning the survey
  • Step-2: Field work
  • Step-3: Analysis and Interpretation of data
  • Step-4: Report making

Importance of Market Survey

  • Customer is a king
  • Risk reduction
  • Helps attaining objectives
  • Market overview
  • Forecast
  • Facilitates decision making

Strategic Alternatives Before An Enterprise

Grand Strategies

  • Stability (maintain)
  • Expansion (growth)
    • Intensification
      • Penetration Strategies
      • Market Development Strategies
      • Product Development Strategies
    • Integration
      • Vertical Expansion
      • Horizontal Expansion
    • Diversification
      • A new lines of business may be added which is either related to the current business or may be unrelated.
  • Retrenchment Divestment strategies
  • Combination Strategies


Business is an economic activity which involves production or processing and sales or exchange of goods and services at regular basis components of business an aim of earning profit.

Components of Business

  • Industry
  • Commerce


Industry refers to all the economic activities involved in converting raw material into finished goods, which are ultimately consumed by consumers.

Types of Industry

Primary Industry
  • Extractive
  • Genetic
Secondary Industry
  • Manufacturing
    • Analytical
    • Synthetic
    • Processing
    • Integration or Assembling
  • Construction
  • Tertiary or Service


It is concern with all those activities which facilitate exchange of goods/services or relates to the transfer of goods from one place of production to ultimate consumers.


Internal or Home

  • Wholesale trade
  • Retail trade

External or Foreign

  • Import trade
  • Export trade
  • Enterpot trade

Auxiliaries or Aids to trade

  • Transportation
  • Banking
  • Insurance
  • Warehousing
  • Advertisement and Salesmanship

Marketing Mix

It is the combination of Product, Price, Promotion and Place activities needed to meet the marketing objectives in the target market.

Marketing Mix Variables

  • Product
  • Price
  • Place
  • Promotion

Product Mix


A Product is anything that can be offered to a market for attention acquisition, use or consumption. It is tangible in nature having definite size, shape, colour, etc.

Classification of Product

  • Perishable
  • Durable
  • Non-durable


  • Capital/Producer goods
  • Consumer goods
  • Intermediary goods


  • Heavy and bulky goods
  • Voluminous goods

Place Mix

It involves all the activities that are needed to make the product available to the target customers.

Elements of Place mix

Channel of Distribution

Direct Channel

  • Producer
    • Consumer

Indirect Channel

  • Producer
    • (One-level channel) Retailer
      • Consumer
    • (Two-level channel) Wholesaler
      • Retailer
        • Consumer
    • (Three-level channel) Wholesaler
      • Wholesaler
        • Retailer
          • Consumer
Modes of Distribution
  • Transportation
  • Insurance
  • Warehousing
  • Inventory management

Promotion Mix

It refers to all such activities which intend to inform customer about the products of the company and persuade them to buy these products.

Elements of Promotion Mix

  • Advertising
  • Personal selling
  • Sales promotion
  • Publicity

Price Mix

Price refers to the amount of money which a customer has to pay to buy the product.

Factors affecting Price Determination

  • Product cost
  • Utility and demand for the product
  • Extent of competition in the market
  • Government and legal regulations
  • Pricing objectives
  • Marketing methods used
  • Term of credit

Methods used for pricing

  • Cost plus pricing
  • Variable price method
  • Base price and discount method
  • Market rate method
  • Skimming price method
  • Penetrating pricing method