All of business P1

• Enterprise


  Identifying a gap in the market & filling it by creating a new business or product
• Purposes of businesses

  • Providing a good
  • Providing a service
  • Meeting customer needs
  • Adding value to existing goods to differentiate them
• Dynamic markets


  • Markets (thus products) change due to: Technology
  • Customer needs
  • Obsolete: product is outdated
• Entrepreneurship


  Entrepreneurs take risks by filling a gap in the market by establishing a new business
• Roles of entrepreneurs


  • Organising resources (procurement of raw materials, hiring new staff, merging ect)
  • Taking risks
  • Making decisions
• Risks of entrepreneurship


  • Start-ups finance
  • Lack of job security = no money to pay mortgages
  • Failure entails loosing capital & time
• Rewards of entrepreneurship


  • Success
  • Profit increases owner's income
  • Independence to take holidays & own working hours
• SWOT analysis


  Identifying: strengths, weaknesses, opportunities & threats of a business
• Internal factors in SWOT analysis

  • Strengths: skilled employees, good brand image, high capital
  • Weaknesses: bad management, poor finances
• External factors in SWOT analysis


  • Threats: competitors, recessions, takeovers, saturated markets, legislation, pressure groups
  • Opportunity: boom, merger, new markets
• Competition


  Competitors sell products in the same market so compete for customers
• Ways businesses differentiate themselves

  • Price
  • Customer service
  • Quality
  • Product range
  • Location
• Market research


  Identifies target market's needs & competitors
• Purposes of market research

  • Make informed decisions about the marketing mix
  • Reduce risk by analysing the market mix to avoid financial loss
  • Spotting market gaps to meet customer needs
• Types of market research

  • Primary research: directly obtaining data about customers (questionaries, surveys, focus groups & observation)
  • Secondary research: external reports (government reports, market reports)
• Social media market research

  Businesses can create polls/stories/dms/comments/likes to obtain data from customers (new trends)
• Advantages and disadvantages of market research types

  • Primary research: Pros - specific, relevant = can implement direct findings to meet customer needs, Cons - costly, time consuming, only small sample size = not representative
  • Secondary research: Pros - instant via the internet, lens on the whole market & reliable (reproducible), minimises investment risk as trustworthy, Cons - out dated, not relevant to specific needs
• Uses of market research data

  • Quantitative data: numerical so quick to analyse but not thorough
  • Qualitative data: opinions so relevant but very time consuming & costly
• Market segmentation


  Dividing the market by demographics to identify your target market (+employ a targeted marketing strategy)
• Demographic factors for market segmentation


  • Age
  • Income
  • Culture
  • Location
  • Lifestyle
• Market mapping


  Identifies gaps in the market relative to competitors
• Market research confirms a demand for market gaps so businesses exploit the gap to differentiate themselves
• Market types


  • Monopoly: a business with no competition
  • Oligopoly: a market with only a few competitors
  • Monopolistic: many competing firms whose products differ only slightly
• Objectives


  How to achieve the goal
• Financial aims


  • Survival: having enough £££ to pay fixed & variable costs to avoid failure
  • Increasing market share: capturing a high share of the market by stealing customers from competitors
  • Maximising sales
  • Maximising profit
  • Financial security
• Non-financial aims


  • Personal satisfaction: catering the business around your own interests
  • Independence & control: taking holidays (flexible working hours) & organising resources yourself
  • Social aims: having a net benefit on society
• SMART objectives


  Specific, measurable, achievable, relevant, time-bound
• Factors affecting business aims and objectives


  • Size: established firms will grow (via merger/takeover), start-ups will survive
  • Ownership: LTDs & PLCs have aims dictated by shareholders, sole traders have personal (e.g social) aims
  • Market: to be competitive in a saturated market, maximise sales
• Sources of finance


  Need to set-up the business, cover fixed costs, cover customer shortfalls, expand the business
• Short-term start-up finance


  • Overdraft: borrowing more money from the bank than is paid into an account
  • Trade credit: supplier gives 1-2 months to pay for raw materials after delivery
• Long-term start-up finance


  • Loans: borrow from the bank
  • Personal savings: owner puts money in
  • Share capital: investors buy shares
  • Venture capitalist: high risk investment
  • Retained profit: money reinvested after owner takes a dividend
  • Crowd funding: via social media asking the public for £££
• Ownership structures


  • Sole trader: 1 owner
  • Partnership: >1 owner
  • PLC: public buys shares on the stock exchange
  • LTD: invite-only to buy shares
• Franchising


  Franchisees buy the trademark of an already established firm from a franchisor & set up franchises, trading (selling goods) under them (franchisors take a cut of the profits)
• Advantages and disadvantages of franchising

  • Pros: loyal customer base as established brand so quick growth, less risk as easier to get start-up loans, franchisor provides: products, advertising, training so they deal with procurement
  • Cons: limits franchisees' freedom (franchisor dictates products & ads), high costs e.g. the lump sum & % of profits go to the franchisor from the franchisee
• The 4Ps of the marketing mix


  • Product
  • Price
  • Promotion
  • Place
• Factors affecting the 4Ps

  • Changes in technology: e-commerce & social media = promoting/selling digitally
  • Customer needs: e.g. innovation to update technology
  • Market climate: saturated market = need to utilise one of the 4ps as a USP to differentiate from competitors for a higher market share
• Marketing mix for small businesses


  • Price: no economies of scale so higher prices (to cover start-up machinery costs)
  • Products: small ranges so use job production to maintain quality
  • Promotion: targets locals via flyers, newspapers & social media (cheap) to establish the firm
  • Place: sell directly to customers (lack credibility to sell in big retailers) so have to situate near target market (need transport links)
• Factors affecting business location

  • Proximity to suppliers
  • Proximity to staff
  • Proximity to competitors
  • Proximity to target market
  • Internet
  • Footfall
• Business plans


  Helps make informed decisions (aims & objectives), organise resources (sales forecasts give insight into stock needed to meet demand), minimises risk (risks are calculated) & inspires confidence in investors (can show banks cash flow forecasts for start-up loans)
• Features of a business plan


  • Idea: product & USP
  • Aims & objectives: have to be SMART
  • Target market: application of market research
  • Marking mix: outline the 4ps
  • Location: near target market & suppliers
  • Finance: cash flow forecasts & ratios displaying potential returns on investments