N5 Business

• Factors of production


  • Land (natural resources e.g. Water, coal, fish)
  • Labour (workforce)
  • Capital (man-made resources e.g. Machinery)
  • Enterprise (the managerial decisions of a business)
• Sectors of Industry


  • Primary
  • Secondary
  • Tertiary
• Sectors of Economy


  • Private
  • Public
  • Third
• Benefits of providing good customer service

  • Increased customer loyalty
  • Improved reputation
  • Increased employee satisfaction
• Consequences of poor customer service

  • Decreased profits
  • Bad reputation
  • Loss of market share
  • Low staff morale
• To maximise customer satisfaction

  1. Market research

  2. Staff training

  3. After-sales service

  4. Customer care strategy

  5. Handling customer complaints

  6. Providing quality products
• Sole trade

  Owned by one person, they keep all their profits and run the business on their own, easy to start up but have unlimited liability and heavy workload
• Partnership

  1. 2-20 people, can raise more finance than sole trades, different partners bring different skills and workload is shared, but have unlimited liability and profit decisions can be hard
• Private limited company

  Ownership is divided into equal parts called shares, owners can retain control, can raise more money, have limited liability but have high set up costs, must be registered with the companies register
• Business objectives

  • Survival
  • Profit
  • Provision of service
  • Social responsibility
  • Customer satisfaction
  • Market share
  • Enterprise
• PESTEC

  • Political - new laws, tax
  • Economic - inflation etc.
  • Social - tastes, lifestyles
  • Technological - ICT, e-commerce, automation
  • Environmental - climate, pollution
  • Competitive - price wars, product differentiation
• Human resources


  • Managers
  • Employees
• Finance uses

  • Developing new products
  • Upgrading software
  • Wage increases
  • Hiring new staff
  • Advertising
  • Extending premises
  • Opening new branches
  • Buying machinery
• Technology examples

  • Specialist software
  • Top of the range hardware
  • Access and control of social media
• Internal stakeholders


  • Owners/shareholders
  • Managers
  • Employees
• External stakeholders


  • Customers
  • Banks
  • Government
  • Suppliers
  • Local community
• Market segmentation


  Grouping customers together due to characteristics like age, gender, location, occupation, lifestyle, religion
• Benefits of targeting market segments


  • Tailoring products
  • Selling products in the most appropriate places
  • Setting prices to target market
  • Tailoring marketing and promotion techniques
• Market research methods

  • Field research - interviews, surveys, focus groups, observations
  • Desk research - sales figures, newspapers, websites, government publications, commercial publications
• Product development

  1. Idea generation

  2. Development

  3. Testing

  4. Launch to market

  5. Modifications
• Product life cycle


  • Development
  • Introduction
  • Growth
  • Maturity
  • Decline
• Ways to extend product life cycle

  • Change product
  • Change price
  • Change place
  • Change promotion
  • Change packaging
  • Change usage
  • Change name
• Branding

  Businesses brand products so they have a good identity, normally associated with high quality
• Brand examples

  • Gucci
  • Rolls Royce
• Pricing considerations

  • Competition's pricing
  • Product quality
  • Brand image
  • Production cost
  • Profit per unit
• Long-term pricing strategies


  • High/premium pricing
  • Market penetration pricing
• Short-term pricing strategies


  • Low/value pricing
  • Promotional pricing
  • Destroyer pricing
  • Market skimming
• Factors to consider when choosing business location

  • Type of business
  • Availability of resources
  • Availability of labour
  • Footfall
  • Finances
  • Competitors
  • Exclusivity
  • Infrastructure (e.g. wifi)
• Distribution methods

  • Road
  • Rail
  • Air
  • Sea
• Traditional advertising


  TV, radio, cinema, newspapers, billboards
• Digital advertising


  Online, in-app, email, SMS text
• Promotional techniques

  • Celebrity endorsements
  • Discounts
  • Special offers
  • Free samples
  • BOGOF
  • Point of sale displays
  • Loyalty cards
  • Free gifts
• Supplier selection factors

  • Price
  • Location and transport costs
  • Lead time (order placed to order received)
  • Raw material quality
  • Reliability
  • Reputation
• Inventory types


  • Raw materials
  • Work in progress
  • Finished goods
• Overstocking


  • Money could be invested elsewhere
  • May go out of fashion or spoil
  • Results in high storage and security costs
• Understocking

  • Businesses can't fulfil orders
  • Production may stop due to lack of materials
  • Can't meet unexpected large orders
  • Viewed as unreliable and reputation is damaged
• Production methods


  • Job
  • Batch
  • Flow
  • Labour intensive
  • Capital intensive
• Quality raw materials

  • If good quality materials are used from the start, the final product should be good quality
• Quality control


  Products are checked at the end of production
• Quality managementand Staff Training


  • A chain of members inspecting each stage of production, where each member can either pass on or return the item
  • Training ensures workers are up to the standard of the organisation