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