Business P1

• Why new business ideas come about?

  changes in technology , change in what consumers want , product / services becoming obsolete .
• How new business ideas come about?

  original ideas and adapting existing products.
• Benefits and drawbacks of creating new products?

  benefits : have unique selling point , less competition

  drawbacks : expensive to conduct research and development , may not be successful as it hasn’t been tested in the market.
• Benefits and drawbacks of adapting existing products?

  benefits : cheaper , can judge success as its already been in the market

  drawbacks : more competition and more difficult to differentiate.
• Risks of a business?

  business failure , financial loss and lack of security
• rewards of a business?

  business success , profit and independence
• how can risk be reduced?

  carrying out market research , producing a business plan , raising sufficient finance
• The role of business enterprise?

  to produce goods / services , to meet customer needs and to add value
• The role of entrepreneurship?

  to organise resources , make business decisions , take risks
• Methods to add value?

  convenience , branding , quality , design , USP
• What are the customer needs?

  price , quality , choice , convenience
• The purpose of market research?

  identify and understand customer needs , identify gaps in the market , reduce risk , inform business decisions
• Methods of market research?

  Primary : research the business collects. e.g survey , questionnaire , focus group , observation

  Secondary : research thats already been collected. e.g internet , market reports , government reports
• Benefits of primary market research?

  fit for purpose , more up to date , more detailed data
• benefits of secondary market research?

  less time consuming , cheaper , useful for collecting quantitative data
• purpose of market research ?

  identify gaps in the market , identify and understand competitors , understand trends , inform business decisions , understand customer opinions.
• what is an efficient way of collecting market research?

  social media
• how can a market be segmented?

  demographics , location , lifestyle , age , income
• what features can be used to produce a market map?

  price , quality
• what does market mapping allow a business to do?

  see all products in market , identify gaps in the market , identify competitors
• what are the limitations of a market map?

  based on opinions , simplistic (only compares businesses on two variables) , difficult to identify variables
• what is a direct and indirect competitior?


  a direct competitor sells the same type of product / service

  a indirect competitor provides competition because it sells a substitute product
• how can a business differentiate?


  providing better customer service , having stronger brand image , being more convenient , having higher quality product , having lower prices and wider product range
• what do businesses need to find ways to do?

  improve efficiency , improve competitiveness , lowering prices and costs
• what are the non financial aims ?

  personal satisfaction , challenge , independence , control , social objectives
• what are the financial aims?

  profit , market share , survival
• what are the fixed costs ?

  rent , advertisement , insurance , loan repayment , salaries
• what are the variable costs?

  wages , raw materials and packaging
• how to calculate revenue?

  selling price x quantity sold
• How to calculate total variable costs?

  variable costs per unit x quantity sold (units)
• how to calculate profit?

  total revenue - total costs
• how to calculate total costs?

  total variable costs + total fixed costs
• how to calculate BEP?

  fixed costs / selling price - variable costs per unit
• how to reduce BEP?

  increase selling price or reduce costs
• how to find BEP on graph?

  intersection
• how to calculate margin of safety?

  actual sales - BEP
• The importance of cash to a business?

  pay suppliers , pay employees , prevent insolvency
• how to improve inflows?

  increase revenue , use short term sources of finance
• how to improve outflows?

  delay paying bills , use cheaper suppliers
• how to calculate net cash flows?

  inflows - outflows