business

• entrepreneur


  a person who sets up a business in the hopes of making a profit
• entrepreneur characteristics

  1. creativity
  2. communication - need to convey messages to others effectively
  3. innovation - they often see options to improve existing ideas or methods
  4. negotiation - need to be able to reach agreements with others
  5. confidence
  6. risk-taking
  7. determination
• rewards of starting a business

  • financial increase
  • independence
  • self-satisfaction
• risks of starting a new business

  • financial loss
  • health and wellbeing decline
  • bad work-life balance
  • suffering personal relationships
• businesses carry out market research to:

  • reduce risk
  • understand the market
  • inform product development
  • aid decision making
  • gain customer views
  • understand where they fit in the market
• primary research

  business using its own methods to generate data

  methods:

  • questionnaires
  • surveys
  • interviews
  • focus groups
  • consumer trials
  • test marketing
• primary research: advantages + disadvantages

  advantages

  • the data generated will suit the business's needs
  • data cannot be seen by others

  disadvantages:

  • data will take longer to generate
  • methods are usually more expensive
• secondary research

  business using data that already exists

  sources:

  • internal data
  • books
  • newspapers
  • magazines
  • competitors data
  • government publications
  • purchases materials (mintel)
• secondary research: advantages + disadvantages


  advantages:

  • quicker
  • cheaper

  disadvantages:

  • data may not be specific to your business
  • data may be out of date
• quantitative data


  presented as numbers and values. this data is easy to analyse and present in graphs but will provide less detail
• qualitative data


  presented as text. it is descriptive (opinions) but cannot be counted, measured, or analysed easily
• market segmentation


  customers can be segmented by:

  • age
  • occupation
  • income
  • gender
  • location
  • lifestyle

  benefits:

  • meeting customer needs
  • targeted marketing
  • increased customer retention
  • increase market share
• fixed costs

  • rent
  • insurance
  • salaries
  • advertising
  • loan interest
  • utilities
• variable costs

  • raw materials
  • components
  • packaging
  • wages
• total costs


  fixed costs + total variable costs
• revenue


  the money generated from sales

  selling price x number sold
• profit (or loss)


  profit is the money left over from the revenue once costs have been made

  revenue - total costs
• break-even

  the point at which a business has covered its costs but is not yet making a profit

  fixed costs/selling price - variable cost per unit
• cash

  the money the business has physically e.g. notes and coins, plus the money in their bank account. it is used on a daily basis to run a business e.g. paying employees and suppliers.

  a lack of cash can mean a business:

  • may not be able to pay employees + suppliers
  • may not be able to cover production costs
  • may need to borrow money/get a loan
• the marketing mix

  the 4 P's

  Product

  Price

  Place

  Promotion
• non-digital advertising

  • leaflets
  • newspapers
  • magazines
  • radio
  • posters/billboards
  • cinema
• digital advertising

  • social media
  • websites
  • banners/pop-ups
  • SMS texts
  • podcasts
  • vlogs/blogs
• sales promotion techniques

  • discounts
  • competitions
  • BOGOF (buy one get one free)
  • point of sales advertising - display stands or posters around a product within a shop
  • free gifts/product trials
  • loyalty schemes - e.g. earning points for every purchase
  • sponsorships
• public relations


  Businesses often try to influence what people think about them or their products. examples:

  • product placement
  • celebrity endorsements
  • Press and media releases
• physical sales


  advantages:

  • gives greater opportunities for customer engagement
  • products can be seen by customers

  disadvantage:

  • often cost more to provide a suitable location
• digital sales


  advantages:

  • sales can be made at any time of the day and at any time of the year
  • less reliance on location

  disadvantage:

  • costs include payment processing and potential delivery charges
• the product life cycle

  1. development - designing, planning
  2. introduction - product launched, no competition, steady sales
  3. growth - rapid increase in sales
  4. maturity - sales reach peak, lots of competition
  5. decline - rapid decline in sales
• extension strategies

  to prolong the products life

  • advertising - to raise awareness of the product
  • price changes - reducing price may increase sales
  • adding value - by improving the product's specification
  • new markets - aim at different segments/sell in new places
  • new packaging - to stand out
• things to consider when thinking of price

  • income levels of target customers
  • price of competitors products
  • cost of production
• pricing strategies

  • competitive pricing
  • psychological pricing - e.g. £19.99
  • price skimming - high price to low price
  • price penetration - low price to high price
• unlimited liability


  means that if a business has debts it cannot pay, the owners are responsible for them.
• limited liability


  means that owners only lose what they have invested in the business
• business ownerships: sole traders


  business that is owned by one person

  advantages:

  • makes all of their own decisions
  • chooses what to do with any profits

  disadvantages:

  • struggles to take time off
  • has unlimited liability
• business ownerships: partnership


  a business owned by two or more people

  advantages:

  • have more than one persons skills
  • can share the business workloadperson's

  disadvantages:

  • can fall out with other owners
  • have unlimited liability
• business ownership: limited companies


  company is divided and sold to shareholders (these are the owners)

  advantages:

  • can raise capital through the sales of shares
  • have owners with limited liability

  disadvantages:

  • have to publish their accounts
  • have a longer decision-making process
• franchises

  when an existing business sells the right to its name and how the business operates to someone else to run a business in exactly the same way (franchisee)

  franchisee advantages:

  • franchisor will offer advice
  • business is a proven format

  disadvantages

  • cannot change the format
  • have to pay royalties to franchisor

  franchisor advantages:

  • their business grows
  • they receive royalty payments

  disadvantage:

  • can lead to a bad reputation if the franchisee runs their business poorly
• sources of capital

  • own savings - money that the owner has saved up
  • friends and family - money loaned by people you know
  • loans - from the bank
  • crowdfunding - money donated online by sponsors on a website
  • small business grants - financial support given by the government
  • business angels - wealthy business people who invest in other people's business ideas
• support for enterprise

  • finance providers
  • local council
  • accountants
  • solicitors
  • friends and family
  • chamber of commerce
  • government
  • charities