Business Studies Paper 1

• Why do new business ideas come out?

  -Changes in technology -Changes in what consumers want -Products/Services becoming obsolete
• Why do new business ideas come about when there is a change in technology?

  -As technology develops, new opportunities arise that businesses can take advantage of -Business that are willing to try out new ideas can gain a competitive advantage as technologically advances products will be more sought after -Can also help a business to become more efficient in terms of production (products can be manufactured more quickly for a lower price)
• Why do new business ideas come about when there is a change in what consumers want?

  -The needs of customers are constantly changing -Must adapt their products in line with demand to ensure they are meeting these needs - prevents customers going to competitors
• Why do new business ideas come about when products/services become obsolete? (Define obsolete.)

  -A product that ceases to meet customer needs -May be due to advancements in technology -Must be able to keep a product up to date with customer needs if the business wants to continue to be sucessful
• How do new business ideas come about?

  -Original ideas -Adapting existing products/services
• How do new business ideas come out with original ideas?

  -Successful businesses emerge when the entrpeneur comes up with an original product that meets a need that is not services by any existing business - Innotative products
• What are the 3 business risks?

  -Business failure -Financial loss -Lack of security
• How do businesses fall into business failure?

  -Businesses will fail if they run out of funds and therefore cannot pay for everything they need to eg. bills
• How do businesses risk financial loss? What is also at risk (if)?

  -Risk losing any capital investment that the business has put in personally if it were to fail -If the business has unlimited liability - owner's personal assests will also be at risk if the business cannot pay all its debts
• What does having a lack of security involve?

  -When an individual sets up a business- do not have a guranteed regular income -Will not benefit from sick, holiday or maternity pay -Could make paying their own bills eg mortgage very difficult with severe consequences for missing payments
• What are the 3 business rewards?

  -Profit -Business success -Independance
• What is the reward profit?

  -Business will make a profit if its total revenue exceeds its total costs over a period of time -Financial reward that most entrepreneurs will seek for the risks they take
• What ways can business success come for business as a reward?

  -For many, success may be financial -However there are huge non-financial rewards - personal satisfasction in running a business that is performing well, doing good for society etc
• What does the reward of independence involve? What does it allow entrepreneurs to do?

  -Will value working for themselves and benefiting from the freedoms that it may bring -Do not have to work for someone who may dictate their working hours -Allows the entreprenuer to make all the key decisions- very rewarding
• What is the purpose of a business?

  -To provide what its customers want or need -Provide goods or services (that customers are willing to buy) -To add value
• What is adding value? What 2 ways is it achieved? What 5 methods can added value be done?

  -The difference between the variable cost of the product and the price that customers are willing to pay -By reducing the cost -Giving the customer a reason to accept a higher price -Convenience -Branding -Quality -USP -Design
• How can convenience add value?


  -A product that saves a customer time is one that may meet their needs better -Make them willing to pay more for it
• How can Branding add value?

  -By building a strong brand name, a business will gain a good reputation making its products more sought after -Allows the business to increase the price -Customers will be more willing to pay a premium price for a branded product
• How can quality add value?

  -A product that is of high quality will be able to be sold at a higher price -Customers will be willing to pay more for something that performs better
• How can a USP add value? (Define USP.)

  -Unique sellling point - A characteristic or feature of a product that makes it different from all of the other products in the market -USP can also be gained from having unique packaging or outstanding customer service compared to rivals -Customers will be likely to pay more for something that is unique
• How can design add value?

  -A product that is more aesthetically pleasing will help it stand out from rival products
• What are the 3 roles of entrepreneurers?

  -Organise resources -Make business decisions -Take risks
• What resources must entrepreneurers organise?

  -Must manage human resourses - ensuring that they get the best out of their employees -Also organise capital - managing the businesses finances as well as the resources used to research and develop the product/ to provide the service
• What decisions will entrepreneurers need to make? Why is it important?

  -Will need to decide what the aims of the business are, whether they need to employ people and what products to sell -If they are not decisive- may miss opportunities -Showing initiative is a key skill- allows entrepreneur to stay ahead of competition
• What does entrepreneurs taking risks involve?

  -Must be able to acknowledge and evaluate risks in order to be successful -Risks can be managed and steps can be taken to reduce them -Cannot plan for every eventuality- must be prepared to accept the outcomes of their actions/ decisions
• What do customers want? What are the 4 customer needs?

  -A product that satisfies their needs -Choice -Price -Quality -Convenience
• How does price influence customers decision on choosing which product to purchase?

  -Some customers will be prepared to pay a higher price if they feel the product is worth it -Other customers will purchase the product that has the lowest price -Business has to decide what their customers are willing to pay when setting the price
• How does choice influence customers decision on choosing which product to purchase?

  -Will expect to be able to choose from a range of different products -The more choice customers have, the more likely it is that their needs will be met
• How does quality influence customers on which product to purchase?

  -Will expect the product to be of a sufficient standard -Whether the product is of a very high quality will be dependent on the expectations of the target market
• How does convenience influence customers on which product to purchase?


  -If a business can make life easier for customers, then they are more likely to be able to meet their needs -eg. The business could choose a location that is really accessible for customers
• What are the 4 purposes of market research?

  -To identify and understand customer needs -To identify gaps in the market -To reduce risk -To inform business decisions
• How does market research allow businesses to identify and understand customer needs?

  -A business can find out exactly what the customer wants by undergoing market research
• How does market research allow businesses to identify gaps in the market?

  -A business can find out if there are other businesses who are selling similar products by looking at what else is available in the market -If not, then there may be a gap in the market
• How does market research allow businesses to reduce risk?

  -Can help establish whether there will be sufficient demand for a product -Without finding this information, a business may produce and sell a product that nobody wants
• How does market research inform business decisions?

  -Allows businesses to have a better understanding as to what products to sell, how it should promote them, where to sell them and at what price
• What is primary market research? Give 4 methods.

  -New information that is collected first hand by the business -Survey -Questionnaires -Focus groups -Observations
• What are the advantages of primary market research?

  -The information collected will be up to date -The questiones asked can be tailored to ask specific questions relevant to the business -Allows the business to have direct contact with existing/potential customers
• What are the disadvantages of primary market research?

  -Can be time consuming to collect -Research is open to potential bias -Often more expensive
• What is secondary market research? Give the 3 methods.

  -When a business gathers data that already exists that has been collected by someone else -Internet -Market reports -Government reports
• What are the advantages of secondary market research?

  -Usually cheaper -Less time consuming as information is easily found