GCSE Business paper 1

• Why new business ideas come about?

  • Changes in technology -e.g. idea of apps from devices
  • Changes in what consumer wants -e.g. Business offer environmentally friendly products
  • Products or service becomes obsolete -e.g. dvd became outdated and replaced
• A purpose of a business?

  • Provide people with a good or service - e.g. Furniture and hairdressing
  • Meet customer needs
  • Add value to an existing product - e.g. convenience, branding, quality, design, USP
• How to add value to a product?

  • make the product more convenient to get or use - e.g. A mobile hairdresser instead of customer visiting irl
  • Building a good brand image - e.g. Customers willing to spend if they recognise, they know it is trust worthy
  • Improve products quality or design
  • Give product USP feature different from competitors
• How new business ideas come about?

  • Could be completely original idea
  • Adapting an existing product/service/idea to make more relevant to customer
• What is business enterprise?

  Process of identifying new business opportunities and taking advantage of them.
• What is an entrepreneur?

  someone who takes on the risk of enterprise activity
• Role of entrepreneurship ?

  • Organise resources - keep on top of day to day tasks and ensures business has the right resources (money and supplies) at the right time
  • Take risks - they would give up current job and invest money in business that could fail.
  • Make business decisions - they must decide business aims, who to employ and how to grow
• Risks in running a business:

  • business failure - entrepreneurs risk money, time and effort they put into trying to make business work
  • Financial loss - Entrepreneur needs money e.g. for equipment, pay workers. They may use their own money or get a raise from banks, investors. If they make loss they can’t pay back borrowed money
  • Lack of security - they gave up other job so if it goes wrong they would have lost money and end up with no job, impact quality of life
• Rewards in running a business:

  • Business success - reward for the entrepreneur
  • Profit - entrepreneur could earn more money than before which gives them a better quality of life
  • Independence - they can choose what to do day to day and what direction business goes in
• What are customer needs:

  • Price
  • quality
  • Choice
  • Convenience
• Identifying and understanding customers:

  • Generating sales - customers would buy if they are satisfied
  • Business survival - product meets needs so more sales less risk of failure
• Purpose of market research:

  • Make informed decisions - about product, price, promotion and where to sell
  • Reduce risks - if a business sells product too high or doesn’t meet customer needs it could lose money so it can reduce costly mistakes
  • Spot gaps in the market - a gap would be found if customer needs aren’t met, so business needs to meet them before competitors do e.g. Make new product, price or place
• Methods of market research:

  • primary research
  • Secondary research
• Primary research:

  Research you collect yourself

  • Observation - watching what people do or say instead of asking
  • Survey
  • Questionnaire
  • Focus group
• Advantages of primary research:

  • Useful for getting customer views
  • It provides up to date, relevant and specific info to your business.
  • Research is specific to the target market
• Disadvantages of primary research:

  • Business can’t ask every person so they ask a sample (large samples are accurate but expensive)
  • Expensive
  • Time consuming
• Secondary research:

  Already existing data collected from someone else

  • Internet
  • Market reports
  • Government reports
• Advantages of secondary research:

  • Cheaper than primary research
  • Easily found
  • Instantly available
• Disadvantages of secondary research:

  • Not always relevant
  • Not specific to your product
  • Often out of date
• 2 types of data:

  Qualitative - info that is a measurement

  Quantitative - info that is peoples feelings/opinions
• Use of social media in market research:

  businesses can collect info and use in market research

  They can see trends, popular or what is increasing in popularity

  Business can track users with their online content - see how many times they looked at a product
• Importance of reliability of market research data:

  This means that results must be repeatable by another researcher

  Reliable market research represents the people that the business is interested in accurately

  The more reliable the data is, the more useful it is to the business
• What can market segments do?

  Allow businesses to identify their target market and the specific group of people the product is aimed at.

  They can then create a market strategy aimed at their target market
• Identifying market segments:

  • Age - e.g. teenage market
  • Income - how much they earn affects if they are willing to buy
  • Location - close to customers
  • Lifestyle - activities people enjoy
  • Demographics - identifiable characteristics that people within one population may have
• Why is market mapping useful?

  
  

  • Helps a business understand its location within the market and its key features
  • Can be used to identify gaps in the market
  • See competitors that are selling similar products and how customers perceive them
  • Market mapping is the square in quarters diagram
• What is a market?

  
  

  • Place - where goods are traded between customers and suppliers
  • Product - trade in particular type of product e.g. Oil market
  • Customers - potential people for a product
• What does competition affect on a business?

  • It affects decisions as the business would need to persuade customers to buy from them and not their competitors
• What are the strength and weaknesses of competitors based on:

  • Price
  • Quality
  • Location
  • Product range
  • Customer service
• How does competition affect price?

  
  

  • customers want to pay less for a product
  • If all the products in the market are the same, the price is important
  • Firms may charge lower prices so customers don’t go elsewhere
  • However, the firm may not earn as much profit per product sold
• How does competition affect customer service?

  
  

  • It can attract customers and they are willing to pay more for a product
  • Having a bad reputation for customer service puts customers off
  • To stand out from competitors a business may train its staff in good customer service or provide extra service when customers come
• How does competition affect quality?

  • Offering a better quality product means that customers are more satisfied
  • The business would be more competitive even if products are more expensive
  • To convince customers their products are better a business may need to spend money on developing the quality of the product or on promotional material that emphasises quality. It could be costly for the firm.
• How does competition affect product range?

  • Having a large range of products makes a business more attractive to customers
  • A business may try to fill gaps on the market by developing new products
  • There won’t be any competition for new products, the firm may appear more innovative than its competitors and so more attractive for customers
• How does competition affect location?

  • Customers are likely to buy from a business if the products are sold in a convenient so they won’t have the inconvenience of travelling or waiting for the product
  • Business may decide to open stores in particular locations or sell items online to offer greatest convenience
• What is an aim?

  An overall goal they want to achieve
• What is an objective?

  Help business achieve aims
• What are financial aims and objectives:

  • Survival
  • Profit
  • Sales
  • Market share
  • Financial security
• What are non financial aims and objectives:

  • Social objectives
  • Personal satisfaction
  • Challenge
  • Independence
  • Control
• Explain the financial aim survival:

  
  

  • Around 60% of firms close within 5 years of starting so surviving is the main short term aim for all new business es
  • The business needs to have enough money to stay open e.g. to buy stock and supplies
• Explain the financial aim to maximise profit:

  • Majority of firms will aim to maximise profit
  • It may take a few years for firms to make any profit at all
• Explain the financial aim increase market share:

  • Market share tells you what percentage of a markets total sales a particular product or company has made
  • When a business first starts up it has zero market share so its first aim is to establish itself
  • It then aims to increase market share by taking sales away from competition or persuading customers to enter the market and buy its products