Business:PAPER 1
Topic 1.1
Enterprise
Involve starting up a new business or expanding and existing one by coming up with new ideas
Identifying new business opportunities
All business activity has a purpose:
Provide people with a good or service
Meet customer needs
Add value to existing product to make customers want to pay more by:
Making it more convenient for customer
Build a good brand image- makes it more trustworthy
Improve products design or quality
Give the product a USP
New business Ideas
Changes in technology, e.g invention of tablets mean apps can be used
Changes in what customers want, e.g people are becoming more environmentally aware so a business may use environmentally friendly products
Good or service becomes obsolete (no longer used) so it may be replaced by new ideas so the business survives, e.g. video tapes = obsolete, so video rental stores are stocking DVDs instead
Will either be:
Original (nothing like it before)
Adaptation (of existing product as the business has found a way to improve it
Entrepreneurs
Someone who takes risks, without them there would be no new businesses.
To successfully run a business they must
Take risks
Make business decisions
Organise Resources
Have to have good organisational skills to keep on top of day-to-day tasks, as well as planning for the future
Will probably have to give up their current job and invest money into the business that they will lose if it fails. To help lessen risks they can write a business plan to work out if the business is a good idea, but this isn't a definite way of knowing if it will be successful.
For example, the entreprenuer needs to be able to decide on the business's aims, its structure, who to employ, and how to grow the business
Risks
Will need money to buy equipment and pay workers, they can use their own or riase funds through banks or investors. However if they can't pay it back they may struggle to survive.
Don't have much security when starting a new business as they probably have just given up their job to focus on their company. If things go wrong they could lose money and be wothout a job which could have a big impact on quality of life.
Always the risk that the business will fail, so entreprenuer risks time, money and effort they put in to try to make the business work
Rewards
Main reward is the business succeeding
If the business makes lots of profit they can earn alot of money which gives them a better quality of life
Gives the entreprenuer independence to choose what they day-to-day, and what direction the business goes
Topic 2.2
Competition
Affects business decisions
Price
Customers will often want to pay less for a product. If all products in the market are the same then a business stands out from competitors by having a lower price. However, this means they won't make as big a profit margin
Location
Customers are more likely to buy products if they are convenient to get to, so they won't have to travel or wait as much. Therefore a business will want to open a store in a convenient location or sell online
Quality
Better quality means the customer is more satisfied and will be willing to pay more. This is a way to make their products seem better than the competition, but it will be costly
Customer service
Product range
Having a large range of products will make a business look more attractive to customers. A business may want to fill a gap in the market with a new product, which won't have any competition
Will add value to the product and allow you to stand out from the competition. Therefore a business may wish to train staff in customer service and to maybe offer extra services
Market research
Markets
A market can be a place, product or group of people
Will want to market size (number of individuals who are buying/selling a prodcut) and market share (proportion of sales that market by the business
Helps to improve a business by:
.
Used to identify who customers are, then can give the business an understanding of customers needs and how to satisfy them. Needs include:
Choice of products
Convinience
Price of product
Quality of product
Type of product
Making informed decisions
What products to sell, where to sell them, how to promote them, what price to sell them for
Reduce Risks
Spot gap in the market
Tailor a product to a need that isnt being met before comeptititors do, may mean developing a new product or selling a new product at a new place, price or promoting it differently
Ensure they aren't selling anunwanted prodcut at a too high price or at the worng location
Primary research
Getting your own information from customers/potential customers. Usually involve asking customers for opinions. Useful for finding out new information and getting customer's views.
Survey
Questionnaires
Collecting information from people
Documents with questions that are given to people
Focus groups
Where a small group of people discuss their attitudes to a product
A business can't ask everyone so it takes a sample instead. The larger the sample the more accurate but also the most expensive, so small businesses may have to compromise and use a smaller amount
Provides up to date, relevant, specific information that is tailored to a target market.
However does have downsides. It is both expensive and possibly time consuming. Furthermore different types of primary research has different pros and cons
PRO: observations are cheap to use and will provide accurate information CON: doesnt allow the customer to give their opinion, and therefore wont know why they are doing certain things
PRO: Questionnaires are cheap and can be used to sample a wide area CON: unlikely that people will respond
PRO: Phone surveys have more of a chance at getting a response CON: they can be expensive
Secondary research
Looking at other people's work. it allows access to a wide range of date, and is useful for looking at the whole market and past trends
Market research reports
Government reports
Newspapers
Magazines
The Internet
Social Media can be used for market research.
Businesses can collect information from people's profiles as they typically include what people enjoy.
Often used by small businesses as it is cheaper than primary research, data is more easily found, and are instantly available.
Disadvantages
They aren't always relevant to the business's needs
It's not specifically about your products
It's often out of date
Quantitative
Information that you can measure or reduce to a number, easier to compare quantitative data
Qualitative
Information about people's feelings and opinions. It is tricky to analyse because it's hard to compare two opinions, but allowing customers to express their views gives a greater depth of information
Good market research will use both primary and secondary info. It needs to be reliable, meaning they can be repeated. The more reliable, the more useful it is to a business
Market segmentation
Separated by demographics (identifiable characteristics)
Age
Income
OR
Location
Lifestyle
Market Mapping
Help a business to understand its location within the market, and see its key features
Will show any two variables, for example it will compare price with quantity
Can help a business find out two pieces of information
Competitors selling similar products
Any gaps in the market
Once they find a gap, the business will have to use market research to see if there is actually a demand for the product. If there is the business can focus on creating products with the features needed to fill the gap, helping them to stand out from competitors