Business

• Dynamic nature of business

  Businesses operate in dynamic markets, meaning that they have to cope with an ever-changing environment. These changes occur because customers are constantly evolving, often driven by changes in technology.
• Why new business ideas come about

  • Original ideas
  • Obsolete products and services
  • Changes in technology
  • Changes in what consumers want
• Demand curve shifting right

  Increases the equilibrium price and quantity
• Risk


  • Business failure
  • Financial loss
  • Lack of security
• Reward


  • Profit
  • Business success
  • Independence
• Purpose of a business

  To provide goods or services that customers want or need
• Adding value


  • Convenience
  • Quality
  • Branding
  • Design
• Unique selling point (USP)

  A characteristic or feature of a product that makes it different from all other products in the market
• Purpose of a business

  To produce goods or services themselves, or by buying them from a supplier in order to sell on to customers
• A business must provide what its customers want or need. A business will do this by producing these must be products that customers are willing to buy.
• Added value


  The difference between the variable cost of the product and the price that customers are willing to pay for it
• Ways to achieve added value

  • Convenience
  • Quality
  • Branding
  • Design
• Convenience


  A product that saves a customer time is one that may meet their needs better. Therefore, they will be willing to pay more for it
• Quality


  A product that is of high quality, whether it be more durable or have superior function, will be able to be sold at a higher price. Customers will be willing to pay more for something that performs better
• Branding


  Building a strong brand name will give a business a good reputation and make its products more sought after. This allows the business to increase the price. Customers will pay a premium so they can have that branded product
• Design


  A product that is more aesthetically pleasing will help it stand out from rival products
• Unique Selling Point (USP)

  A characteristic or feature of a product that makes it different from all other products in the market. A USP can also be gained from having unique packaging or outstanding customer service compared to rivals. Customers are likely to pay more for something that is unique
• By adding value, a business is able to charge more for its products therefore they may see an increase in revenue allowing a business to potentially increase its profits
• Entrepreneur


  Someone who starts and runs their own business
• Skills an entrepreneur needs

  • Organise resources
  • Make business decisions
  • Take risks
• An entrepreneur must be able to make risky decisions as a decision may involve the possibility of financial loss. Without having the ability to take the initiative, an entrepreneur may not be able to make a decision and as a result will miss out on potentially profitable opportunities
• There are about three million active businesses in the UK. Of these, between 10% and 12% of businesses fail each year. There are about 350,000 new businesses registered in the UK each year. Half of these are likely to fail within three years.
• Businesses must meet customer needs if they are to be successful. In providing products that customers find desirable, businesses will be meeting these needs
• Factors that influence customer choice

  • Price
  • Quality
  • Choice
  • Convenience
• Price


  Customers will demand value for money. 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. The business has to decide whether their customers are willing to pay when setting the price
• Quality


  Customers will expect the product to be of a sufficient standard and the business must match these expectations. Whether the product is of a very high quality will be dependent on the expectations of the target market
• Choice


  Customers will expect to be able to choose from a range of different products. The more choice they have, the more likely it is that their needs will be met
• Aim


  What a business hopes to achieve in the long term; the reason the business exists
• Convenience


  If businesses can make it easier for customers, then they are more likely to be able to meet their needs. For instance, the business could choose a location that is really accessible for customers
• Objective


  A short-term target that a business seeks in order to fulfil their aim
• Financial aims and objectives

  • Survival
  • Profit
  • Sales
  • Market share
  • Financial security
• By satisfying the needs of customers, a business will make customers happy. Therefore they may be more likely to return and buy from the business again
• Businesses must bring in enough cash to pay for all their bills so that they can continue to trade
• Market research


  The process of gathering information about customers, the market, and competitors to inform business decisions
• Business revenue that exceeds its costs creates profit, which is the main objective for many businesses, particularly those in the private sector
• Businesses set themselves a goal to increase the number of products or services they sell
• Purposes of market research

  • Identify and understand customer needs
  • Identify gaps in the market
  • Reduce risk
  • Inform business decisions
• Market share is the percentage of the total sales in a market made by one business. Sometimes a business will prioritise increasing their market share so that they can become the dominant firm
• Financial security is ensuring that a business generates enough revenue so that the business becomes self-sufficient. An entrepreneur may also want to have enough personal wealth so that they live comfortably without financial worry
• Primary market research


  New information that is collected first-hand by the business through methods like surveys, focus groups, and observations