business cards

-Cost plus pricing is wherethe business bases the price of a product based on how much the item costs to make.

-A percentage is calculated and added to the price of the product. This percentage is called mark-up.

-E.g An item costs £50 to make. The business charges £100 for the customer to buy it. What is the mark up?

The market price (the price we pay) is based on the supply and the demand for the product or service. If supply is low and consumer demand is high then this will make the product more expensive. If there is a large supply of the produce and people do not want to buy it (low demand) then the price will be low. The equilibrium price is the price where supply and demand cross.

This is where you charge a high price to begin with as you expect there to be a high demand for this new product. This works well for established firms with a good customer base, who are will to pay more. Sometimes a higher price can make a product more desirable and improve the firms’ image.  After it’s established, the price is lowered to help it become a mass market product.

This is where you charge a very low price, as the product is new, to encourage customers to try it. This is a good way to gain a market share in a competitive market. Once the product is established the price rises as loyal customers continue to buy.

Psychological pricing is where the product is priced a figure that may appeal more to a consumer, for example 99p appears to be better value than £1.

The products price is set below the cost of producing it – there is no profit made on the product. This is usually used when the consumer will buy another product at the same time which makes a profit. For example, games consoles may not make a profit, however, there is profit in the actual games for the consoles.

This is where the business charges similar or the same prices for their products as their competitors. For example, petrol stations usually charge very similar prices.

Promotional pricing is usually time limited to create a surge in demand for a product. They can appear to be more valuable than similar products on the market. For example, buy one get one free or 50% discount.

An entrepreneur is a person who sets up a business or businesses, taking on financial risks in the hope of profit.

 an entrepreneur is someone with the foresight, drive and ambition to take a risk and solve business or consumer problems

The definition of characteristic is a distinguishing feature of a person or thing.

Characteristic is defined as a quality or trait. An example of characteristic is intelligence.

The definition of a skill is a talent or ability that comes from training or practice. For example, a skill could be knife skills as a chef.

Most entrepreneurs have some characteristics and skills in common:

• Confident 

• Motivated 

• Determined 

• Results focused 

• Initiative 

• Decision making 

An aim or objective is a statement of what a business is trying to achieve over a period of time.

The most likely objective for a start-up business is to survive.

The best types of objectives are SMART. SMART stands for:

• Specific: clearly state what is to be achieved e.g. increased profits.

• Measurable: the desired outcome is a number value that can be measured, e.g. increase profits by 10%.

• Agreed: all staff are involved in discussing and agreeing an aim.

• Realistic: the target is possible given the market conditions and the staff and financial resources available.

• Timed: the target will be met within a given period of time, e.g. 12 months.

If sales are low, a business may not be selling enough units for revenue to cover costs of the units and expenses to run the business. Therefore, a loss is made. As more units are sold, the total sales revenue increases and covers more of the costs. The breakeven point is reached when the total revenue exactly matches the total costs and the business is not making a profit or a loss. Once the firm can sell its units levels above this point, it will be making a profit.

Establishing the breakeven point helps a firm to plan the levels of production it needs to be profitable. Businesses aim to maximise profits by keeping costs low and sales revenue high.

-Customer satisfaction 

-Expansion

-Employee engagement

-Diversification

-Ethical responsibility

When businesses expand they need to consider the following:

•  Additional physical resource requirements – can they find suitable premises within the budget? Do they need to borrow more funds or use reserves? How long is the lease? 

• Improvements to the building? What are transport links like? Where will staff park?
• Additional human resource requirements- are there suitable employees? Will they require training? Are there suitable transport links to get them to your premises? What training is available locally to upskills your staff?
• Local cultural sensitivities – is there anything locally that the business should be aware of? Are local people against growth in an industrial area? Are local people complaining about large lorry congestion on their roads?
• Understanding of local legislation – is there any local legislation to be aware of? Are there incentives for new businesses coming to the area?

A sole trader is a business that is owned and run by one person.  The firms are usually small, and easy to set up. Usually, only a small amount of initial capital needs to be invested, which reduces the start-up cost. They may employ staff. However, wage bills are usually low, because there few or no employees.  Sole traders have overall control as they are usually running the business and have responsibility for decision making without needing to seek authority from anyone else.There are disadvantages of being a sole trader, it can be difficult to take holidays or arrange time off if you are sole responsible for your business. You may not have all the skills required to be successful at business.Sole traders do not have a separate legal existence from their owner. The sole traders are personally liable for their company’s debts, and may have to pay them out of their own money

Sole traders must register for’ Self Assessment’ and file a tax return every year. Sole traders that run their own business are self-employed. Profits that have been made by the sole trader can be kept after tax has been paid on them. Sole traders are personally responsible for any losses that their business makes. 

Partnerships are businesses owned by two or more people. The partnership usually has a contract called a deed of partnership. 

This describes:

• the type of partnership it is

• how much capital each partner has contributed

• how profits and losses will be shared. 

 Have unlimited liability also

Business partnerships must:

• choose a name

• choose a ‘nominated partner’

• register with HM Revenue and Customs (HMRC)

The ‘nominated partner’ is responsible for managing the partnership’s tax returns and keeping business records.

A franchise is a way of buying the right to use an existing business model. 

A franchise is a joint venture between:

• franchisee

• franchisor

There are many famous brands of franchises, for example, McDonalds and Costa. 

Many people choose this way of starting a new business venture as it can be seen as less high risk than starting from scratch:

• the business has a  good reputation and a recognised name 

• an existing customer base

• existing business model and financial planning 

• new franchises are given lots of help and support in the early stages

Advantages of owning a franchise

• Owners of the franchise have a level of independence

• There should be good brand recognition leading to a customer base

• Quality and consistency are determined by the franchiser (this could be a disadvantage too)

• Franchises offer support in setting up the franchise and ongoing support in marketing, operations and management

Disadvantages of owning a franchise

• The franchisee must operate their business to the procedures set by the franchiser which can limit creativity and innovation

• On-going royalties and advertising fees must be paid

• If the reputation of the brand is damaged then this can affect the franchise’s profits

• Terms of the franchise are set by the franchiser and are not usually negotiable

A limited company is incorporated at Companies House which means it has own legal identity. Therefore, it can own assets in its own right and potentially sue others.  The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of share is called a shareholder. 

As limited companies have their own legal identity, their owners are not personally liable for the business' debts. The shareholders have limited liability, which is the major advantage of this type of business legal structure.

A private limited company (ltd) is usually a smaller business such as an independent estate agent. Shares do not trade on the stock exchange. 

Every limited business will have at least one director or a board of directors who make the management decisions. Annually, financial accounts must be sent to Companies House and HMRC notified. Profits from the company are paid to shareholders in the form of dividends.

To set up a private limited company they need to register with Companies House. This is known as ‘incorporation’.

Private Limited Company’s will need:

• a suitable company name

• an address for the company 

• at least one director 

• details of the company’s shares - you need at least one shareholder

• to check what their SIC code is - this identifies what their company does

The shares of a private limited company are not available to the general public to buy and sell on a recognised stock exchange. The company is owned by shareholders.

Advantages

-Limited liability – this is the most important advantage of incorporation.  Limited liability protects the personal wealth of the shareholders

-Easier to raise finance – both through the sale of shares and also easier to raise debt

-Stable form of structure – business continues to exist even when shareholders change

-Provides more privacy of information than an public limited company

Disadvantages

-Greater admin costs (though much cheaper than being a public company)

-Public disclosure of company information (annual report & accounts + annual return)

-Directors’ legal duties (set out by Companies Act)

A public limited company (plc) is usually a large, well-known business.

Shares trade on the stock exchange.  PLC are the only business who can raise money from selling shares to the general public. The value of shares can go up and down affecting the value of the company and the dividends that are paid to shareholders.  A hostile takeover can happened to a plc when another company buys more shares giving them more control over the company.

• Gross Domestic Product  is total value of goods and services provided in a country during one year. Interest rates are set by the Bank of England and affect the interest paid on savings and borrowing 
• Changes in living wage. The national living wage is set by the Government for all worker 25 and older. This is the minimum that any employer can pay workers of this age.
• Changes in fashions and trends happen over time as new products and advances in technology come onto the market. Marketing and celebrity endorsements can also influence consumer behaviour, fashion and trends.
• Changes in the competitive environment. If more companies offer the same goods at different prices, or a wider range of the product, this can influence the market. If rawmaterial prices increase or transport or rent costs increase or decrease this can affect the competitive environment.
• Level of employment and availability of skills locally vary across the country depending on the populations and transport links. The number of skilled or experienced employees can also vary across regions depending on available training and transferable skills they may have. If a particular industry is based on a part of the country. 
• Changes to legislation must be applied to business or there can be financialor legal penalties.Health and safety legislation is crucial to the wellbeing of employees and customer and is highly regulated in the UK.

Advantages

• Better access to capital – i.e. raising money from existing and new investors

• Liquidity – shareholders are able to buy and sell their shares 

• Value of shares – the value of the business is based on the share price

• The opportunity to more easily make acquisitions

• To give a company a more prestigious profile

Disadvantages

• The company will have a much larger number of external shareholders, to whom company directors will have to explain their actions to

• There will be more public scrutiny of the company's financial performance and actions

• There is greater risk of a hostile takeover when another company buys more shares giving them more control

The impact of growth on customer service

 When a small business suddenly gets bigger they may not be able to meet the customer service levels they were previously offering.

• Staff may be overworked so their service may be rushed or appear rude
•  Delivers may be delayed or incorrect
• Goods may not be of the same high quality causing more complaints
•  Complaints may not be handled swiftly or effectively
• Telephone calls and emails may not be responded to in the same quick timeframe as before

<p dir="ltr">Organisations or individuals wishing to set up a social enterprise must choose a legal business structure.

<p dir="ltr">Organisations or individuals who set up a business that has social, charitable or community-based objectives can set up as a:

• <p dir="ltr">limited company
• <p dir="ltr">charity
• <p dir="ltr">co-operative
• <p dir="ltr">community interest company (CIC)
• <p dir="ltr">sole trader or business partnership

<p dir="ltr">Those setting up a small organisation and don’t plan to make a profit, can form an ‘unincorporated association’ instead of starting a business.

<p dir="ltr">A co-operative is owned by individual members and other co-ops, not big investors, and members get a chance to have a say in how they are run.
Profits mean members receive money, rewards and offers and a co-op can support its local community.

<p dir="ltr">Organisations or individuals wishing to set up a social enterprise must choose a legal business structure.

<p dir="ltr">Organisations or individuals who set up a business that has social, charitable or community-based objectives can set up as a:

• <p dir="ltr">limited company
• <p dir="ltr">charity
• <p dir="ltr">co-operative
• <p dir="ltr">community interest company (CIC)
• <p dir="ltr">sole trader or business partnership

<p dir="ltr">Those setting up a small organisation and don’t plan to make a profit, can form an ‘unincorporated association’ instead of starting a business.

<p dir="ltr">A co-operative is owned by individual members and other co-ops, not big investors, and members get a chance to have a say in how they are run.

Large firms often enjoy economies of scale. Larger businesses often benefit from economies of scale because they can buy their materials at lower unit costs because the buy such large quantities. This allows larger firms to charge lower prices or enjoy a higher profit margin than smaller businesses. Economies of scale are a major advantage for large firms.

<p dir="ltr">A hierarchy refers to the management levels within a business.

<p dir="ltr">Senior managers manage line managers who are responsible for overseeing the work of other staff. Delegation is when managers entrust tasks or decisions to staff they manage (also called subordinates).

Diseconomies of scale occur when a business grows so large that the costs per unit increase. As output rises, it is not inevitable that unit costs will fall. Diseconomies of scale occur for many reasons, but all are linked to the issues of employing and managing a larger workforce. ​ Levels of customer service can decline rapidly leading to major issues for the company in levels of customer satisfaction, complaints and reputation. ​

​Diseconomies of scale affect:

 control ​

 co-ordination​

 communication​

Tall organisations have many levels of hierarchy. The span of control is narrow and there are opportunities for promotion. Lines of communication are long, making the firm unresponsive to change.

Flat organisations have few levels of hierarchy. The lines of communication are shorter which makes it easier for change to happen. A wide span of control means that tasks must be delegated and managers can feel overstretched.

Owners have a major influence in how the aims of the business are decided, but
other stakeholders also have an influence over decision making.

Customers are also key stakeholders. Businesses who neglect their customers’
voice find themselves losing sales to rivals.

In a small business, the most important stakeholders are the owners, staff and
customers. In a large company, shareholders are the key stakeholders as they can
vote out directors if they believe they are not running the business successfully.

Stakeholders can have differing aims and objectives. For example customers want
low process and good customer service, but business want reduced costs and high
profit. Government may want to encourage business but may still raise taxes.

There are advantages in stakeholder engagement and support.
 Staff motivation/retention
 Improved reputation
 New Ideas
 Increased share prices

Financial position of business effects customer service:

• may not be able to invest in staff training
• may have lower number of staff
• low wages effecting morale - miserable staff
• lack of focus on customer service 

Motivation is about the ways a business can encourage staff to give their best. Motivated staff care about the success of the business and work better. 

Motivated workforce results in:

• increased output caused by extra effort from workers 
• improved quality as staff take a greater pride in their work
• A higher level of staff retention 

Maslow suggests that there are 5 levels of need that explain why people work:

• meet survival needs by earning a good wage
• safety needs - job security 
• social 
• self - esteem 
• self fulfilment needs

Mayo 

• better communication between managers and workers 
• greater manager involvement in employees working lives 
• more working in groups or teams 

Motivational factors:

• interesting and challenging work
• utilisation of staff capabilities 
• opportunity to do something meaningful 
• recognition for achievement 
• sense of importance to organisation
• access to information 
• involvement in decision making 

Hygeine maintenance factors:

• nice people to work to work with 
• good working conditions 
• pensions 
• paid insurance 
• job security 
• holidays 
• good pay

Why do businesses measure customer service?

• to feedback to the product development team 
• increase customer retention 
• competitive - customers need to feel listened to 
• identify weakness and strength to improve business

Ways to measure:

• customer satisfaction scores
• repeat business data - rewards cards
• levels of compliments/complaints 
• customer surveys 
• mystery shoppers 

Has the following advantages:

• provides word of mouth promotion 
• improves business reputation
• encourages repeat business
• sets the business apart from competitors
• brand awareness 
• customer loyalty

Job production or one off production, involves producing custom work such as one of product for a specific customer 

Batch production is when a small quanity of identical products are made eg baker makes a batch of rolls

Flow production (mass  production) use of production lines such as in a car manufacturer where doors, engines, bonnets and wheels are added to a chasis as it moves along the assembly line 

Mass customisation is a marketing and manufactoring technique that combines the flexibility of personalisation with the low unit costs associated with mass production 

Quality is about meeting the minimum standard required to satisfy customer needs.
High quality products meet the standards set by customers.

Poor quality can impact on:

• Reputation
• Repeat business
• Profit for the manufacturer

Quality Standard
In many industries a quality standard is laid down by independent organisations such
as the British Standards Institution (BSI). Firms benefit by adjusting the way they
work to meet these standards. Businesses hope that the cost of improving quality
will be more than covered by extra sales.

Lean production is a strategy businesses can use to make production more
efficient.

• the businesses aims to use as few as resources as possible and to have as little waste as possible.
• Workers can also be encouraged to think about ways to improve their productivity too.

In cell production, workers are organised into multi-skilled teams.

• Each team is responsible for a particular part of the production process including quality control and health and safety.
  

• Each cell is made up of several teams who deliver finished items on to the next cell in the production process.

Just in time means stock arrives on production line just as it's needed 

• reduces storage costs 
• requires efficient handling 

Outsourcing is a business practice used by companies to reduce costs or improve efficiency by shifting tasks,operations, components, jobs or processes to an external contracted third party for a
significant period of time.

Advanatages

• free up time to spend on other aspects of business
• increased efficiency 
• increased reach 

Disadvantages 

• service delivery may not be up to expected standard 
•  outsourcing company will have access to your info 
• lack of flexibility 
• outsourcing company could go out of business

Product Orientation 

A company that follows a product orientation chooses to ignore their customer&#39;s
needs and focus only on efficiently building a quality product. This type of company
believes that if they can make the best ‘breakfast cereal,&#39; their customers will come
to them.

Market Orientation 

A market orientated company is one that organises its activities, products and
services around the wants and needs of its customers.

Mass Market is a large, general market consisting of consumers belonging to various age groups, lifestyles and preferences. If a company manufactures a product which is useful to a wide range of consumers across various sectors and appeal to a large group of people.

•  high number of sales
•  large number of competitors
•  wide customer base
•  profit margins low

Niche Market  is the subset of the market on which a specific product is focused.Niche markets are usually a small, specialised market for a particular product or service.

•  sales volume low
  
•  small number of customers
  
•  specialized products
  
•  high profit margins

Secondary research (desk research) involves gathering existing data that has
already been produced. For example, researching the internet, newspapers and
company reports.

Advanatages

•  not expensive

•  easily accessible

•  immediately available

•  provides good background information

 not always recent

Disadvantages 

•  not always specific
•  may get ‘false’ results as lack of control over the data

Primary research (field research) involves gathering new data that has not been
collected before. For example, surveys using questionnaires or interviews with
groups of people in a focus group.

Advantages 

• data has been collected personally to its relevant to the research
• sample size can be selected by the researcher
• research has full control of how and where they collect information from
• information is up to date
• it belongs to the business, so they don’t need to share to with competitors

Disadvantages

• expensive to collect
• it can take all long time to process information
• if researcher makes a mistake it’s hard to tell as there is nothing to compare to with

Qualitative data cannot be expressed as a number. Data that represent nominal
scales such as gender, religious preference, opinions and preferences are usually
considered to be qualitative data.

Quantitative data is anything that can be expressed as a number, or quantified.
Examples of quantitative data are scores on tests, number of hours of study, or
weight of a person.

Newspapers 

+ Local advertising in newspapers can be focused to a geographical area

- Local may not be read by many people

Magazines 

+ May be targeted 

- High quality photos needed - can be expensive 

Posters and Bill boards 

+ reach local poulation easily 

- can be removed or damaged 

Leaflets 

+ relativelt cheap to print and produce

- people need to be paid to deliver them 

TV adverts 

+ reach a wide population 

- expensive 

Radio adverts  same as TV 

Internet 

+ focused on target audience 

- only reach those using internet 

Sales Promotion

• Competitions
• for 1 offers
• Free samples
• Coupons
• Point of sale displays
• Free gifts e.g. comes with free toy
  

Personal selling is a face-to-face selling technique by which a salesperson uses his
or her interpersonal skills to persuade a customer in buying a particular product.

Direct marketing is a form of advertising in which companies provide physical
marketing materials to consumers to communicate information about a product or
service.

There are two key ways of restructuring a business or organisation.

Delayering –This means reducing the size of a business hierarchy. This usually
means a reduction in management. This creates a flatter (less layered)
organisational structure.

Redundancies – elimination of a job role.

A stakeholder is an individual, group or organisation who has an interest in the business or enterprise, and may be affected by the business.

Stakeholders can be… internal - within a business. This includes:

• Employees
• Managers
• Owners
• Workers

Stakeholders can be… external - outside a business. This includes:

•  Customers
• Suppliers
• Shareholders
• Local community
• Government
• Finance providers

A product is goods or service that is sold to customers or other bsuinesses. Customers buy products to meet their needs.

• Goods are a tangible product - something you can touch 
• Services are intangible products - something you cannot touch

Introduction
 advertising costs are high
 profit low or loss being made on the product
 market share low
Growth
 sales increase
 customer knowledge increases
 profit may begin/rise
 competitors may enter the market
Maturity
 sale at the maximum
 profit is maximized
 competition levels very high
 customer interest peaks
 no further room for sales expansion
Decline
 sales decrease
 customer interest drops
 customer switch to substitute products

Extension strategies
 New advertising campaigns, for example, a new TV campaign
 New pricing strategies, for example, 2 for 1 offer
 New product features, for example, upgraded software on mobile phone

Development and innovation
 Remaining competitive
 Entering new markets
 Increase market share

Market share is the percentage of business or sales a company has out of total
business or sales by all competitors combined in any given market.

Market growth is the increase in size or sales recorded within a given consumer group over a specified time frame.

Star products have a high market share in a fast growing market
(The size of the circle indicates the size of the market share; the bigger the circle, the
more market share it has)
Cash Cows have a high market share in a slow growing market.
Question marks or problem children products have a low market share in fast
growing markets.
Dogs are products with a low market share in slower growing markets.

Factors affecting place:
 customer location
 location of raw materials
 transport and infrastructure links
 availability of staff
Channels of distribution
Agent – do not own the products, they sell on behalf of manufacturer and then
usually get a commission from the sale.

Wholesaler – buys in bulk and re-sells smaller quantities to retailers. This means
lower profit margins for the manufacturer.
Retailer – retailers can a purchase product to sell from wholesalers or
manufacturers. They sell directly to the end-users.
Direct – the manufactures sells directly to the customers; often via mail order or
online (e-commerce).

Agent 

+ will promote products, saving advertising costs 

- no control over the marketing of their product 

Wholesaler 

+ can buy in bulk so less deliveries 

- no control over the marketing of their product 

Retailer 

+ promote and advertise product at no cost 

- may change the price which can affect image of product 

E-commerce is a term for any type pf business that involves the transfer for information across the internet. It is currently one of the most important aspects of the internet. Ecommerce enables businesses to sell their products to customers which no barriers of time or distance. An online store enables customers to purchase products and services and you can place the items in a
virtual shopping basket, check out and complete the transaction by providing payment information.