Market Saturation

What is Market Saturation?

Market Saturation refers to a scenario in which corporations have produced a maximum level of output of goods and services assuming the demand remains constant and therefore, once the corporations achieve such saturation there will be no more demand for its product and service.

To survive in the market the companies will introduce new products and services. There are options at the disclosure of the companies to face the market saturation like to take over the peer competitor or update the existing goods and services in a way that will increase the subsequent consumption and demand of the same.

Explanation

Market-Saturation

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How It is Calculate?

As we already know the market saturation that is a situation where there is a declining trend in the volume of goods and services being produced by the companies. In this situation, the volume of goods and services is said to be levelled off exhibiting declining in subsequent sales.

This is being examined by the demand and economic environment in which business is operating at the same time including competition it faces from its peer’s competitors. For instance, the product or service is said to be at a market saturation level when the demand for the same has been reduced to the extent that it is hardly attracted to potential customers.

Examples of Market Saturation

It arise when the volume of goods and services reached a level where consumers are already satisfied with a given level of output. The demand for the same goods and services start declining due to their outdated nature and for other reasons.

Examples of Market Saturation

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  1. Brand in the Market: The existence of any particular brand with more than 70% of market share in a given product or service will not be expected to grow further. The reason being the growth of such products or services could be reduced due to a small number of brands which would create new products and services to meet the new demands of customers.
  2. Supply or Capacity: Let’s assume if any airline like British Airways buys additional aircraft which would increase the supply or capacity of passengers. Now if there is no increase in demand due to an increase in supply then market saturation is said to arrive at the airline.
  3. New Products and Services: It is common fact that when new products and services arrive in the market they will replace the old products which would subsequently reduce the demand for the same to a level where they are no more demanded by the consumers.

Causes

  1. Innovation: Innovation is considered a major cause of market saturation. When a new innovative product is being launched in the market the previous versions of the product start declining. For instance technology, automobiles, mobile phones, etc.
  2. Macroeconomic Factors: As already discussed in the above section that macroeconomic factors are also responsible for market saturation. For instance, for a given product it is possible that the entire demand of the customers is met and after that, there are no new demands once the market saturation level is reached.
  3. Microeconomic Factors: Like macroeconomic factors, microeconomicMicroeconomicMicroeconomics is a study in economics that involves everyday life, including what we see and experience. It studies individual behavioural patterns, households and corporates and their policies. It deals with supply and demand behaviours in different markets, consumer behaviour, spending patterns, wage-price behaviour, corporate policies.read more factors are also responsible for market saturation. For instance, the demand is completely absent in a specific market.

Advantages

  • New Product: Once this level is reached there will be a new product in the market.
  • Pricing: It also helps in correcting the price level of existing goods and services being produced by the companies. With effective pricing planning, the companies can either be a low-cost provider of the product or service or provide premium based options strategies.
  • Innovation: This assists businesses in generating new ideas and innovative ideas to create new products and services in the market.
  • Marketing: The companies can implement a number of marketing strategies to keep their product different from their peers.

Disadvantages

Conclusion

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This has been a guide to What is Market Saturation & its Meaning. Here we discuss how to calculate market saturation and causes, examples along with how it indicates, advantages and disadvantages. You can learn more about from the following article –

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