Which Scenario Is An Example Of Market Saturation?
März 24, 2024
Scenario 1: A bustling new bakery opens in a growing suburb. There are a few other bakeries around, but this one offers unique sourdough bread and delicious pastries, quickly gaining a loyal following. Lines are out the door, and the bakery struggles to keep up with demand.
Scenario 2: In a small town, there are four pizza chains all within a few blocks of each other. They offer similar menus, promotions, and prices. Business is steady, but none of the pizza places are particularly busy.
Which scenario is an example of market saturation?
Scenario 2 is the example of market saturation. Here’s why:
Supply outweighs demand: In the small town, there are more pizza places than customers can support. People are likely to choose their favorite or the one with the best deals, and the other places are stuck competing for a limited customer base.
- Stagnant growth: The pizza chains probably aren’t experiencing much growth in sales. They might even be taking customers away from each other without really expanding the overall market for pizza.
The bakery in scenario 1, however, is in a growing market. There’s still room for it to attract new customers and increase its sales.
Market saturation isn’t always bad news. For established businesses, it can mean facing tougher competition and needing to find ways to innovate or stand out. But for new businesses, entering a saturated market can be an uphill battle.