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Business Prelim Topics Aside from Understanding Business - Coggle Diagram
Business Prelim Topics Aside from Understanding Business
Marketing
Customers
Market-Led Businesses
Market-Led businesses find out what the customer wants through intensive market research and then create a product that will satisfy those needs
Very customer focused
More responsive to changes in the market
Reliant on market research to inform their product development
Often in competitive markets such as make-up and clothing
Product-Led Businesses
Product-Led businesses develop a product first and then try to sell it to the customer through intensive advertising. Little or no market research is carried out before production begins, instead time and money is spent on researching and developing the product
Often operates in high-tech markets with few competitors
Products have a strong USP
Products are unresponsive to changing markets
Consumer Behaviour
Routine/Habitual Purchases
Person purchasing has had an experience with purchasing the product before and automatically does it again. Brand recognition plays plays a big part in routine response behaviour
Informed Purchases
Someone who spends around 10 hours researching online and visiting several websites before buying
Impulsive Purchases
Spur of the moment, unplanned, triggered by seeing the product or promotion
Market Research
Product Life Cycle
A) Development - The research and design stage where the product is planned, developed and tested. Prototypes may be created and modified. No sales are made at this stage, and costs are high due to product development and market research. Some products never leave this stage if they are too costly or fail during testing
B) Introduction - The product is launched into the market. Heavy advertising and promotional pricing are often used to raise awareness. Sales grow slowly, costs remain high and profits are unlikely at this stage, especially if launch costs are significant
C) Growth - Sales increase rapidly as customers become aware of the product. Profits begin to rise as revenue grows and costs per unit fall (economies of scale). Competitors may start entering the market, increasing the need for strong promotion
D) Maturity - Sales reach their peak, and growth slows. The product is well-established, and profits are at their highest. Competition is strong, so businesses may introduce variations, updates or price adjustments to maintain market share
E) Decline - Sales begin to fall due to new technology, changing customer preferences or competing products. Profits decrease, and the product may become unprofitable. Businesses must decide whether to withdraw the product, reduce prices to clear stock or use extension strategies to boost sales.
Price
Cost-Plus Pricing
Calculate the cost of producing the item then add on the percentage profit required by the company
Market Skimming Pricing
An initial high price is charged for the product. As competition in the market increases, the price will fall to be in line with competitors
Penetration Pricing
A price lower than its competitors is set to tempt customers away from competitors. Once the product becomes popular the price will be raised in line with competitors
Price Discrimination
Different prices are charged for the same product at different times of the day/year, location or customer.
Psychological Pricing
Used to make customers perceive the price of a product to be lower than it actually is
Loss Leader Pricing
A range of products are advertised at a low , unprofitable price to attract customers into the organisation in the hope they will buy full priced products
Promotional Pricing
Prices are reduced for a short period of time
Destroyer Pricing
Prices are lowered in order to force competitors to lower prices or out of the market completely. Prices then will return to the normal level or increase to a higher level
Place
Channels of Distribution
Direct Selling
Manufacturer
Customer
Retailing
Manufacturer
Retailer
Customer
Wholesaling
Manufacturer
Wholesaler
Customer
Manufacturer
Wholesaler
Retailer
Customer
Definitions
A MANUFACTURER is the company that makes the product
A RETAILER is a business that sells smaller quantities of products directly to customers. They can either buy products from the manufacturer or from a wholesaler
A WHOLESALER is a business that buys products in bulk from the manufacturer that they then sell in smaller quantities
Reasons for Choosing Each Channel
Finance available
Legal restrictions
Size of product
Image
Type of Product
Stage of Product Life Cycle
Operations
Inventory Management Systems
Reorder Level - The amount of inventory the firm will have when it makes an order for new inventory
Reorder quantity - The amount of new inventory the firm will order
Minimum Inventory Level - The lowest amount of inventory that the firm wants to have
Maximum Inventory Level - The highest amount of inventory that the firm wants to have
Buffer Inventory - The inventory held "in case of emergency"
Lead Time- The time between making and order and receiving the goods
Just-In-Time (JIT)
Inventory is order to arrive "just in time" to be used in production
Goods are not produced until orders for them are received (and therefore inventory of raw materials is not ordered either)
Depends on a reliable supplier, good quality control and access to a supply of skilled workers
Advantages
Less cash is tied up in inventory
Less storage and warehouse space is required
Wastage should be reduced as only inventory required is ordered
Changes in the external environment will have a reduced impact
Increase in cash flow
Closer relationship with supplier
Disadvantages
Suppliers who are reliable are required so that inventory is delivered on time
Production can stop if if inventory is not delivered when required
Less environmentally friendly as more journeys will be made
Delivery costs might be higher as there are more journeys
Discounts for bulk buying (economies of scale) might be lost
Mystery Shoppers
Mystery shoppers are employed by the company to act as customers
They will then report back to the company on their experience
This feedback is used by the company to help improve their service or product
Mystery shoppers do not identify themselves to the staff therefore they are gaining an accurate reflection on the service provided to customers
One drawback of using mystery shoppers is that they only see a limited example of the company's customer service on which to base their judgement
Advantages
Areas of weakness can be identified which allows training needs to be identified
Areas of strength can be identified which allows staff to be praised or given an award/bonus
Can pay for mystery shopper to go to competitors' store to assess their customer service
Fairtrade
Fairtrade involves suppliers of raw materials receiving a fair price for their goods
Fairtrade also ensures that employees in the supply chain are treated fairly and that their welfare and health and safety are considered
Advantages
Businesses are awarded the Fairtrade mark on their products, which can appeal to customers
Socking Fairtrade goods demonstrates the retailer's ethical commitment to its cusomter
Businesses that are Fairtrade have a positive impact on the producers of the raw material which they work with and have a better relationship with the supply chain
Disadvantages
Losing a Fairtrade mark after gaining one will result in bad publicity
Fairtrade products are often more expensive
The business has a more limited choice of suppliers
People
Workforce Planning
Workforce planning is a constant process where a business strives to ensure it has sufficient people and skills available in the right place to achieve its objectives
Internal and External Recruitment
Internal
Internal recruitment is when the job vacancy is only advertised within the organisation and therefore only people within the organisation can apply for it. The vacancy may be circulated via email, advertised on the intranet site or an advert put up on the noticeboard
Benefits
Job vacancies can be filled quickly
Employees are already known by the organisation
Employees feel more valued
Money can be saved by not advertising, recruiting, selecting and training costs will be reduced.
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External
External recruitment is when the job vacancy is advertised both within AND outwith the organisation and anyone can apply. The job vacancy may be advertised in the recruitment section of magazines, on recruitment websites, in a jobcentre or via specialist recruitment organisations, on websites designed for networking and professional purposes or on the website of the organisation
Benefits
New people bring new ideas which can enhance the efforts of the organisation
May attract a large number of applicants - so lots of choice - however this can also be a disadvantage as sifting through lots of applications are time consuming
Vacancies can be filled quickly using agencies
Conflict between employees may be avoided
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Methods of Motivation
Maslow's Hierarchy of Needs
Physiological - The basic needs for bodily functioning and staying alive fulfilled by eating, drinking and going to the toilet
Safety & Security - To feel safe at work, at home, financially and physically
Social - To fulfil social needs such as friendship and familly
Self-Esteem - To feel worthy and repected
Self-Actualisation - To realise potential and have status in life
Herzeberg's Theory of Motivation
Hygiene Factors
Hygiene factors will not motivate employees, but if they are not there, they can lower motivation
These factors could be anything from clean toilets and comfortable chairs, to a reasonable pay and job security and supervision, procedures and policies that employees are happy with
PREVENT DISSATISFACTION
Motivation Factors
Motivation factors will not necessarily lower motivation if they are not present but can be responsible for increasing motivation
These factors are also linked to the needs at the top of Maslow's hierarchy and could involve awarding employees with status, recognition, potential for promotion and delegating responsibility
INCREASE MOTIVATION
Finance
