Paper 1

• Business


  An organisation that provides goods or services to meet customer needs
• Goods


  Physical tangible products
• Services


  Non physical intangible products
• Obsolete


  A product which is outdated and no longer used this is because it's been replaced by a product that better meets customer needs
• Entrepreneur


  An individual who sets up and runs their own business. They will organise resources, make business decisions and take risks
• Customer


  Any person or organisation which buys a product from a business
• Consumer


  The person who ultimately uses or consumes the product
• Why do new business ideas come about

  1. Changes in technology - create opportunities and increase likelihood of products becoming obsolete

  2. Change in what consumers want - can also be affected by technology

  3. Products and services becoming obsolete
• Two ways to come up with new business ideas


  1. Adapt an existing product to keep up with changes in consumer trends

  2. Create a completely original product to satisfy new or previously unknown customer trend although this can be riskier it gives firms a competitive advantage as they have a unique product
• Risk


  • Business failure - there are many reasons for this including cash flow problems, too few sales as a result of tough competition or even a problem with suppliers
  • Financial loss - they could lose money they invested in the start up and or damage their reputation which may affect ability to raise finance in the future
  • Lack of security - launching your own business gives up the safety of working for someone else as you have a guaranteed pay slip at the end of the month
• Reward


  • Business success - many entrepreneurs are motivated by the thought of building a business from nothing and creating a great product
  • Profit and wealth - if revenue exceeds cost the business will make profit
  • Independence - running your own business comes with the benefits of being your own boss so you can decide how and when you work mostly
• Typical customer needs


  • Reasonable price
  • High quality
  • Good product range
  • Effective customer service
  • After sales care
  • Convenience
  • Efficiency
• Methods of adding value

  • Convenience
  • Branding
  • Quality
  • Design
  • USP
• Market research


  The process of gaining information about customers, competitors and market trends through primary and secondary data
• Primary (or field) research

  Gathering new data first-hand which is tailored to find out the specific information you require
• Secondary (or desk) research


  Gathering data or information that has already been collected for a different purpose
• Quantitative data


  Data that can be expressed as numbers and can be statistically analysed
• Qualitative data


  Information about opinions, judgments and attitudes
• Gap in the market


  This occurs when no business is currently serving the needs of customers for a particular product
• Market segmentation


  The process of splitting a market into smaller sub-groups of consumers with similar buying habits
• It is crucial for businesses to identify their target market and then to understand them and their needs if business identify and understand their customer then they should experience higher sales and be more likely to survive
• Examples of primary market research

  • Survey/questionnaire - research involving asking a list of questions, designed to gather information about customer needs
  • Focus groups - a group of people brought together for market research to answer questions and discuss a product, brand or issue
• Respondents


  The people who provide data during market research
• Examples of secondary market research

  • Internet research
  • Market research reports e.g. Mintel
  • Government reports/statistics
• Purposes of market research

  • To identify customer needs
  • To identify gaps in the market
  • To reduce risk
  • To inform business decisions
• Business can study visitor ratings and qualitative reviews to gain a useful insight into what their customers are thinking
• They can also use socials to identify trends and it is much faster and cheaper way of understanding customers
• When a business uses market research data they must be confident that the information is accurate
• For results to be valid the design of the research and methods should be good
• Research will be more reliable if it is based on a large representative sample
• Market segment


  A part of a market which contains a group of buyers with similar buying habits
• Ways to segment a market

  • Location
  • Income
  • Lifestyle
  • Age
  • Other demographic factors
• Market map


  A diagram that shows the range of possible positions for two features of a product e.g. quality and price. It allows businesses to identify where the market is crowded and where a gap in the market may be allowing them to position their product accordingly
• Factors businesses need to assess about competitors

  • Price
  • Quality
  • Location
  • Product range
  • Customer service
• Competition can affect business decisions such as the prices they decide to charge, promotions that are implemented, their product range, how innovative they are, and how hard they try to keep costs under control
• Cash


  Notes, coins and money in the bank - money available to the business immediately for day to day spending
• Cash flow


  The flow of cash into and out of the business
• Opening balance


  The amount of cash in a business at the start of the time period. This will be the same as the closing balance of the previous time period
• Closing balance


  The amount of cash in a business at the end of the time period
• Aims


  Broad long term goals for a business