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1.4 Making the business effective - Coggle Diagram
1.4 Making the business effective
1.4.1 Options for start up and small businesses
Limited and Unlimited Liability
Unlimited liability is when the business and the owner are the same legal entity so the businesses debts are their debts
Limited liability is when the business and the owner are two separate legal entities
Types of business ownerships
Sole Trader
A business only has one owner
Pros - Easy to set up and all profit goes to the owners
Cons - Owner is personally responsible for all the debts
Partnership
Pros - Easy to set up and more skills are available
Two or more people join together to from a business
Cons - Unlimited liability and profits are shared equally
Private Limited Company
Ownership of the business is broken down into a specific number of shares that are sold by the owner
Pros - Limited liability and access to greater finance
Cons - More time consuming and more complex requirements rather than a sole trader
Franchising
Gives and individual the rights to start a company in their companies image
Pros - Training and supplies are provided to the company
Cons - Startup costs are very high and overall costs are quite high
1.4.2 Factors influencing business location
Proximity to work
Proximity to materials
Proximity to competitors
Impact of the internet
Nature of the business
Proximity to the market
1.4.3 The Marketing Mix
The four elements are:
Place
Definition: Where products are sold and how they reach customers.
Increases profits.
Lowers costs.
Improves convenience.
Promotion
Definition: How businesses communicate with customers.
Purpose:
Increase sales.
Build customer loyalty.
Raise awareness.
Methods include:
Advertising
Social media
PR
Direct selling
Product
Definition: The goods or services a business sells.
Price
Definition: The amount customers pay.
Marketing Mix in a Competitive Environment
Businesses may change the 4Ps to compete.
Place: Better locations or online selling.
Promotion: Increase advertising.
Product: Improve quality or features.
Price: Lower prices or offer discounts.
Changing Consumer Needs
Businesses adapt the marketing mix as customer needs change.
Price: Lower prices during recessions.
Product: Create products for new trends (e.g. plant-based food).
Promotion: Use more digital and social media marketing.
Place: Expand online shopping and delivery.
Technology and the marketing mix
Technology affects every element.
Price: Dynamic pricing and lower costs.
Product: Customer feedback improves products.
Promotion: Targeted online advertising.
Place: E-commerce and worldwide selling.
Definition
The marketing mix (4Ps of marketing) provides a framework for businesses to create and implement successful marketing strategies
Why is the marketing mix important?
Helps businesses satisfy customer needs and wants.
Helps achieve business objectives (e.g. sales and profit).
Helps businesses maximise long-term success.
Allows businesses to compete with rivals.
When making the marketing mix, Businesses consider:
Customer demand.
Competitors’ prices.
Costs.
Businesses balance:
Function – How well it works.
Aesthetics – Appearance and packaging.
Cost – Affordable to make and buy.
1.4.4 Business Plans
Definition
What is a Business Plan?
A business plan is a document created before a business starts.
Elements - It Includes
Business idea
Aims and objectives
Target market
Revenue, costs and profit forecasts
Cash-flow forecast
Sources of finance
Location
Marketing mix
Why is it Important?
Reduces risk.
Helps plan the business.
Identifies problems.
Chooses the best finance.
Gives the business direction.