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After reading this page you should turn to your notes and:
- Write out, in your own words, a definition of capital good market, without looking at the computer screen
- Make a note of at least two more examples of a capital good market
- Think of at least one other problem that a business operating in a capital good market might face
Definition:
Capital goods markets deal with durable goods bought by other businesses: each business buyer intends to use the capital good to help their business make more goods or provide a service; the good bought is one that will be used over a period of time.
Examples:
- The market for cars can be a capital good market – if a business buys a number of cars for use by its sales force, then the car is a capital good
- The market for CD players can be a capital good market – if an owner of a club buys a CD player for use in his/her sound system, then the CD player is a capital good
Relevance to Business:
So, put simply, the capital good market is where machines are sold to businesses. If your business is in this market then at least you will probably have a reasonable idea of what your customers want – high quality at a low price with a high level of after sales service! If you can deliver this then you will probably be successful in the capital good market. However, what happens if the businesses you sell to start to face problems – they won’t want to buy new machinery and that puts you out of business.
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