REVISION BOOKLET SECTION 1 WHAT IS BUSINESS What Is a Business: A business or establishment that aims to fulfil a purpose; •Make profits –producing high quality services and goods •Increase brand image/reputation •Try to survive against competitors •Increase market share •Good customer service •Be environmentally sustainable NEEDS – e. g to survive- shelter, water, food – PROBLEM: needs are limited WANTS – e. g luxuries – such as cars, houses, phones – POSITIVE: unlimited
Businesses provide GOODS (tangible product) and SERVICES (intangible). They provide them LOCALLY (e. g corner shop) or NATIONALLY (e. g Britsh Gas) or INTERNTIONALLY (e. g McDonalds) Scarcity- When you have low amount of stock to meet demands. Opportunity Cost – the benefits of a decision that you give up when chosing another decision (the next best thing) There are types of businesses: PUBLIC SECTOR- Businesses owned and funded by govt (e. g post office) Aim to not make profits, provide a service, benefit citizens They provide:
MERIT GOODS – Goods/services which not enough people would benefit from if it was in the private sector (e. g museums, leisure center) REASONS: too expensive PUBLIC GOODS- Goods that can be benefited by everyone. Things that can’t be in the private sector because it is impossible to stop people from using them even without paying (e. g lampposts, police) PRIVATE SECTOR- Businesses owned and run by individuals/ group of individuals Aims to make profits, surviving and increasing market share. (Sole Traders, Partnerships ETC) Different Types of Businesses:
In Private Sector LIMITED LIABILIY: If the business goes bankrupt the owners do not risk losing their possesions to fund outstanding liabilities. •Private Limited Company( LTD)- Shareholders(familys/friends), Board of Directors, Memorandum of Association & Articles of Association, Mortage/Bankloans/shares, Limited Liability POSITIVES: -Limited liability –Accounts are private –Tight relationship of owners NEGATIVES: -Cannot sell shares on stock exchange (limited funds) –disagreement among directors (e. resturaunts, shops) •Public Limited Company(PLC) Shareholders buy shares, board of directors,loans/mortages/selling shares, Limited Liability POSITIVES: Raise loads of finance on stock exchange –more publicity –more opportunity to maximise profits NEGATIVES: -Threat of takeover –profits/accounts are public (e. g Facebook, youtube, M&S) •Franchises- Agreement of a franchisor sells rights to franchisors allowing them to sell their franchise (product/brand) (e. McDonalds, Nando’s) •Social Enterprise- Business to has a social objective and uses profits to restore back into the business to achieve this. (e. g aims: providing for homeless, helping environment) (E. g The Big Issue) Type of social Enterprise: Workers Co-operative- Business set up and run by workers UNLIMITED LIABILITY: If the business goes bankrupt the owners DO RISK losing their possesions to fund outstanding liabilities. Sole Trader – 1 person, no legal docs needed, personal savings/ loans/inheritance, unlimited liability POSITIVES:-keep all profits –make all decisions
NEGATIVES: -limited sources of funding –risk of losing possessions (unlimited liability) •Partnership – 2-20 partners, Deed of Partnership, partner savings/bank loan/mortgage, unlimited liability POSITIVES: -more sources of finance/cost spread –new ideas/more ideas for business –partners can specialise (e. solicitors crime/family/music) NEGATIVES: -limited finance -disagreements between partners –hard to end contracts/disputes over who take what(e. g Solitiors, Surgerys) SECTION 2 MARKETING What is a Marketing? The management process in identifying, anticipating and satisfying consumer requirements profitably. 3 Different Approaches: •PRODUCT ORIENTATED APPROACH- When business starts deciding on what they can produce. They put the product before customer needs on a budget. POSITIVE: Produces high quality products NEGATIVE: Not exactly meeting the want/need of the customer- might not sell. MARKET ORIENTATED APPROACH – When the business is more likely to succeed but it requires more extensive market research as they produce goods and services based on what consumers/customers want. POSITIVE: Meets demand of consumers •ASSET LED APPROACH – Considers users wants but considers its own strengths and weaknesses before doing so. POSITIVE: They balance both what customer want and want they can satisfactionally provide – less risk of failing NEGATIVE: Limits product range as they can only make what theyre capable of.
What is Market Research? When you collect and identify data (qualitative data and quantiative) about customers, the market and competitors. BENEFITS: -better decisions –reduce risk of failure NEGATIVES: -may be misleading data –some products still can fail •PRIMARY RESEARCH (e. g questionnaires, surveys), SECONDARY RESEARCH (e. g Inside Business: sales records, stock records) (e. g Outside Business: gov stats, media) •QUALATATIVE RESEARCH (about attitudes and beleifs), QUANTATIVE RESEARCH (measured in figures that can be measured)
What Is Market Segmentation? Market segmentation is a way of dividing the market into groups of consumers/customers which share similar features (Examples: -age –gender –lifestyle –income –geographical region ) After doing market research businesses can discover facts about customers. POSITIVES: -get to know customers in depth (lifestyle,likes,dislikes) -avoids wasteful marketing and advertising -helps to identify new products to specific customers (e. g special diets) NEGATIVES: -can narrow down market segmentation relies on accurate data or it can damage the business -more costly to do specific advertising for each segement MASS MARKET vs NICHE MARKET Mass- When a business sells almost the same product to all consumers and markets in almost the same way (e. g coca cola, ford) POSITIVES: -Benefit from ecomonies of scale (mass production) –Higher sales and profits than niche –consumer loyalty, well known NEGATIVES: -high set up and advertising costs –more diverse society needs different products created in niche markets –lose contact with individual customers Niche- 1.
Geographical Niche Market (corner shop serving local area) 2. Product Niche Market (e. g specific segement – anti ageing cream) POSITIVES: -less competition (not targeting/seen as comp. by larger firms) –better relationship with customers –meet specific customer wants better NEGATIVES: -don’t benefit from economies of scale –less potential for high sales and profits –smaller product range MARKET GROWTH, SHARE AND SIZE •Market size- Total sales of all businesses in the market. Measured in 2 ways: 1. Value- Total amount spent by customers buying products (sales in ? s) 2. Volume- Physical quantity of products sold (e. g steel in tonnes) •Market Growth- how a market is changing from one year to the next. It is calculated as a % change FORMULA: (New market size (e. g 2013) / Old market size (e. g 2012) x 100) (Examples of DECLINING MARKETS: Cd’s and Radio’s INCREASING MARKETS: Smartphones) •Market Share- Refers to the amount of sales by one business in relation to the total market. FORMULA: Sales of business / sales in total market x 100. It’s important in identifying who the leading company in a market is.