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BUSINESS THEME 1 - Coggle Diagram
BUSINESS THEME 1
THE MARKET
NICHE MARKETS: more specialized/ High average costs due to small scale production (do not benefit from economies of scale)/ higher profit margin/ lower sales volume
- The size of a market can be measured through sales volume (Sales volume is the number of products)
- Sales revenue = price x quantity
- Market share = sales of a business/total sales in a market x 100
- A brand is a name, image, or logo - Brands are unique and protected by law
- Branding helps achieve product differentiation
- Brands add value and allows them to increase the price
- Brands influence the position of the business within its market
MASS MARKETS: less unique/ low average costs due large scale production/ economies of scale/ greater affordability/ lower profit margin
- Competition occurs when at least two businesses have the same target market
- Competition can be direct or indirect
- Benefits the customers
- The absence of competition reduces incentives for businesses to innovate
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Innovation and market growth (Product innovation involves the adaptation or improvement of existing products/ Market growth can be caused by population/ income/ Changing tastes)
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MARKET RESEARCH
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Product orientation focuses on the characteristics of a product rather than the needs of the clients
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Secondary research involves the collection, compilation, and analysis of data that already exists
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Market segmentation is the process in which a single market is divided into submarkets e.g the crisp market is divided into dinner party snack, health conscious, lunch box value
MARKET POSITIONING
Market positioning refers to the process a business goes through when launching a new product or service
market mapping is a tool to identify any product within the market which allow market gaps to be identified but the primary research can be expensive
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main sources of competitive advantage - innovation/ building strong relationship with stakeholders/ price leadership
product differentiation allows businesses to distinguish itself from their competitors which creates a unique selling point
YED/PED/DEMAND AND SUPPY
PED = %change in quantity demanded/ %change in price
- %change = new value - old value/ old value x 100
- Interpretation of PED :> 1 is elastic so demand is more responsive and between 0 & 1 is inelastic so demand is less responsive to price
Non-price Factors Affecting Demand - Change in the price of complementary goods/ Change in consumer incomes/ Fashions, tastes & preferences/ Advertising & branding/ Seasonality/ external shocks
Factors Influencing the Price Elasticity of Demand: brand loyalty/ time/ luxury or necessity/ proportion of income spent
YED =%change in quantity demanded/ %change in income - Interpretation of PED Values:> 1 is when demand rises e.g luxury items, 0 - 1 is demand is not responsive e.g staple food items and <0 is when demand falls e.g public transport
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Significance of YED to Businesses: production planning as they need to see how much to produce and number of resources. during a recession the economy can go through different stage of time E.g. Tesco has its Finest, Standard, and Value range to appeal to all income segments of the market
PRODUCT/ SERVICE DESIGNS
Marketing mix is the framework for a successful marketing strategy which includes price/ promotion/ place/ product
Function: A product's function is the most important aspect of its design because it determines how well the product will meet the needs of its intended users
Aesthetics: they play an important role in attracting customers, creating brand loyalty, and generating word of mouth recommendations
Costs: directly affects the price point at which it can be sold e.g Asda own brand of ginger beer is very cheap to produce and is sold at a very low price
Changes in the Design Mix to Reflect Social Trends: Concerns about Resource Depletion so business need to reduce waste and conserve natural resources and concerns about Ethical Sourcing so that the products are produced without exploitation of workers or environmental damage
BRANDING/PROMOTION
Types of branding : Product branding which can help differentiate from competitors but expensive. Corporate branding e.g Nike which can build a strong reputation but affects sales of all products
Types of Promotion: Advertising through paid channels, Direct emailing through emails text messages, sales promotion like buy one get one free, sponsorships
Benefits of Branding: add value with quality, reliability and trust/ ability to charge premium prices/ reduce price elasticity of demand
Businesses respond quickly to changing social trends and use social media, viral marketing and emotional branding to build awareness
PRICING STRATEGY
COST PLUS: to set prices based on the cost of producing the product or service, plus an added markup to cover expenses and generate a profit
PRICE SKIMMING: sets a high price for a new product/service when it is first introduced to the market
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PYSCHOLOGICAL: takes into account the customer's emotions, beliefs, and attitudes e.g 1.99
LEADERHSIP STYLES
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democratic: when business need creativity, innovation and employee agreement
ORAGNISATION/ THEORIES
Organisational structures: tall organisational structures is a hierarchy/ flat organisational structure is a short chain of command (fewer levels of management)/ matrix organisational structure is build around specific projects
Developing a Flexible Workforce: Multi-skilling which is workers fulfilling multiple job roles/ part-time or temporary workers/ outsourcing/ flexible workers
Taylor's scientific management: focuses on breaking down complex tasks into simpler ones, giving detailed instructions, and training workers to achieve maximum efficiency
Mayo's human relations theory: focuses on the importance of social factors in the workplace e.g communication, job satisfaction and motivation. this allow businesses to create a positive environment, empower employees, provide feedback and employee development.
Maslows hierarchy of needs: At the bottom is physiological needs which include basic necessities, then is safety needs like job security and fair pay, after it is love and belonging which generate a sense of community. Then it is esteem needs like accomplishments employees have done and the first one is self actualisation needs which is for employees to pursue their passions
SETTING UP A BUSINESS
Non-Financial reasons for setting up a business: ethical stance (social justice and environmental sustainability)/ social entrepreneurship (seeks to address social or environmental justice)/ independence (dissatisfied with traditional employment structure
Financial reasons for setting up a business: profit maximisation (generates a substantial revenue and profit)/ profit satisfactory(achieving a satisfactory level of profits)
Business objectives: sales maximisation (generating the maximum revenue possible)/ market shares (percentage of total sales)/ cost efficiency (sold at the lowest possible costs)/ employee welfare/ customer satisfaction
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BUSINESS OBJECTIVES
FORMS OF BUSINESS:
- sole trader: has a single owner which means the owner has complete control but has a limited skill set
- partnership: 2 or more owners which means more skills and knowledge available but potential for dispute
- private limited company: the ownership is broken down into a number of shares between friends and family as they are not sold to the public which means better finance but more expensive and time-consuming to set up
- public limited company: Can sell shares to the public which is owned by shareholders to help its expansion and public profile but there could be pressure from shareholders
Transitioning from an Entrepreneur to Leader can be challenging as leaders need to have an open ind and delegate tasks and responsibilities to others.