Business Studies

• Motivation to set up in business


  make money, take advantage of opportunities, create their own job being their own boss, and ethical, eco friendly and green motives.
• Entrepreneurial characteristics


  Vison - Able to see how plans/ideas come together

  Hard Working/Commited - Especially in early years

  Determined - Wont be a smooth ride.

  Risk Taker - Money and time are on the line, taking calculated risks is the key.

  Innovative - Come up with unique ideas.

  A genuine passion/interest in the business.
• Central purposes of business activity.


  Adding Value

  Competitive Advantage
• Types of Competitive Advantage


  Cost Advantage

  Differentiation Advantage
• Cost Advantage


  Refers to a business being able to lower it's costs.
• Advantages of cost advantage


  Businesses can undercut their competitors prices, increasing sales.

  Businesses can charge the same price as always but with an improved profit margin.
• Methods of lowering costs for a business


  Economies of scale

  Using money/labour saving machines

  Cheaper advertising

  Sourcing cheaper supplies or labour
• Disadvantages of cost advantage


  Reputation, Cheaper = Worse Quality?

  Balancing low prices and high profit

  Competitors can also do cost advantage

  Foreign Product = Ethical questions
• Differentiation Advantage


  A business creating a perception that it is superior to competitors.
• Methods of differentiation advantage


  Unique Selling Point (USP)

  Branding
• Differentiation - USP


  Something that makes your product/service better than competitors. This USP must be truthful, distinctive and attractive to customers.
• Methods of Differentiation - USP


  Product Quality

  Design

  Staff Ability/Customer Service

  Price

  Trademarked Technology
• Methods of Differentiation - Branding


  Name/Logo/Symbol which distinguishes your product.
• Advantages of Differentiation


  Charge a higher price

  Launch new products effectively

  Create brand loyalty

  Sell Similar products to competitors but appear premium/better.
• Differentiation Analysis (GOOD)


  - Many customers attracted to branded products

  - Profitability should be maximised through high prices

  - Can attract investors

  - Can motivate employees

  - Brand loyalty means long term security
• Differentiation Analysis (BAD)


  - Huge costs in building brands

  - No guarantee of success to pay costs

  - Difficult to trademark USP

  - Brand reputation can be damaged
• What affects demand?


  PASIFICS

  - Population

  - Advertising

  - Substitutes

  - Income

  - Fashion

  - Interest Rates

  - Complimentary Products

  - Seasonal
• Population

  - Demographic of a market, age, gender, culture etc
• Advertising

  Effective campaign = Higher demand/sales
• Substitutes

  - Existence and price of substitute products

  - More substitutes = Less demand

  - Monopoly Market = More Demand
• Income

  - High employment rates = More demand/income

  - Luxury products = More valuable
• Fashion

  - Trends, taste changing

  - On trend = More demand
• Interest Rates

  - Increasing interest rates = Less demand

  - Borrowing cost is higher
• Complimentary Products

  - When demand for one product increases, demand for a related one also increases.

  - PlayStations and games, electric cars and chargers
• Seasonal

  - Applies only to seasonal businesses

  - Hotels, Holidays, Fashion
• What affects Supply


  PINTS of Whiskey Cocktails

  - Productivity

  - Indirect Taxes

  - Number of Firms

  - Technology

  - Subsidies

  - Weather

  - Cost of Production
• Productivity

  - Business may be able to increase the rate of production (better staff/machines)

  - Makes line move to the RIGHT
• Indirect Taxes


  - Higher Taxes = More Costs = Less Supply

  - Line moves to the LEFT

  - Lower taxes = Less Costs = More Supply

  - Line moves to the RIGHT
• Number of Firms

  - More businesses entering the market

  - More Supply = Line moves to the RIGHT
• Techology

  - New technology can speed up production

  - New technology can ease selling products/services

  - More Supply

  - Line moves to the RIGHT
• Subsidies

  - Government offering grants for production of goods e.g Farming

  - More Supply

  - Line moves to the RIGHT
• Weather

  - Only applicable to some industries

  - Good weather = Increased production

  - Line moves to the RIGHT

  - Bad weather = Decreased production

  - Line moves to the LEFT
• Cost of Production

  - Major current issues (Cost of Fuel and Raw Materials)

  - Production can be reduced, Less Supply

  - Line moves to the LEFT
• LINE TO THE LEFT

  Price goes UP
• LINE TO THE RIGHT

  Price goes DOWN
• Quality


  When a product/service meets or exceeds the expectation of customers and stakeholders. Can be used as a USP
• Quality Management


  Policies and procedures which ensures quality is achieved.
• What is the importance of Quality Management?


  - Performance

  - Reliability

  - Boosts Brand Loyalty

  - Cost Effective (Saves in long term, expensive in short term)

  - Customer Retention

  - Staff Benefits
• Quality Management - Difficulties


  - Costs lots of money

  Staff Training, Market research, High Quality Tech/Machines, HR Required

  - Can be difficult to judge success
• How is Success judged? (Quality Management)

  - Sales, Profit, Market Share

  - Complaint Rate

  - Price Achieved

  - Returns from Customers

  - Comparison to Competitors