Paper 1

• Primary market research


  Gather via interviews, focus groups, observation
• Primary market research


  Research conducted by a firm to gather information for its intended purpose
• Primary market research improves customer understanding
• Primary market research requires a large sample size to be reliable, leading to it being very costly</b>
• Undertaking primary market research

  1. Improves understanding of customer needs

  2. Leads to improved customer satisfaction

  3. Leads to increased customer loyalty

  4. Consequently increases sales
• Secondary market research


  Research obtained from existing sources like the internet, newspapers, journals
• Secondary market research may be free to obtain from the internet, leading to lower costs for the business
• Secondary market research can be unreliable, so the business must be aware of the accuracy of the information
• Market segmentation


  Dividing the overall market into customers with similar characteristics
• Market segmentation allows products to be designed specifically for particular customers, leading to greater understanding of customer needs and better product differentiation
• Competitive environment


  Firms will try to achieve cost advantage or differentiation advantage
• Operating in a competitive environment leads firms to need clear sources of differentiation, giving them a clear USP
• Cash flow


  The movement of money in and out of a business
• Good cash flow management ensures money is available to cover running costs, allowing the business to continue trading
• Improving cash flow by using trade credit, where suppliers are paid later, can improve the business's cash position before bills are due
• Sources of finance

  • Owner's capital
  • Family and friends
  • Banks
  • Debt
  • Trade credit
  • Private equity
  • Venture capital
  • Crowdfunding
• Debt finance can provide affordable monthly repayments, helping with budgeting expenses
• Crowdfunding may lead to a loss of equity and control for the business owners
• Retaining profits is an appropriate financing method for a delivery van as there is no interest to pay, though it does mean taking on debt
• Unlimited liability


  No separation between the business and the owners, so personal possessions are at risk if the business fails
• Unlimited liability may make businesses unwilling to take calculated risks
• A private limited company can raise more capital by selling shares
• Running a partnership business

  1. A deed of partnership is drawn up to decide how profits and tasks will be divided

  2. This leads to less chance of arguments and the business is more likely to operate efficiently

  3. Partners can specialize in their areas of expertise, allowing them to better respond to customer needs
• Franchise


  The franchisor provides training and support, improving the franchisee's chance of success
• Setting up as a franchisor


  1. Enables rapid expansion by using franchisees to raise capital

  2. Leads to greater royalty payments

  3. Strengthens the business's net cash flow

  4. Consequently increases market share
• Locating away from the main high street can lead to lower fixed costs and a lower break-even point
• Business plan


  Helps plan finances by better considering costs and likely revenues, making the business more likely to survive
• Inflation leads to rising costs


  This results in lower profit margins and may lead to price increases
• Inflation leads to rising prices

  This results in lower disposable income for consumers, potentially reducing sales
• A falling exchange rate

  Makes imports more expensive, leading to rising import costs and potentially higher prices
• A falling exchange rate

  Makes exports cheaper, leading to rising export sales and potentially higher profits
• Rising interest rates

  Make expanding more difficult, as the business may be unable to buy more efficient equipment
• Rising interest rates

  Lead to consumers being more willing to save, resulting in less spending and falling sales