Purpose of a Business- the purpose of a business is to produce goods and services. Goods- Physical objects like boots or Furniture or Services- involve buying someone elses time and/or skills, e.g- gardening or retail.
The Production Process- Inputs > 'doing something to them' > Output
Understanding Markets- A market is any 'place' where buyers and sellers come together to exchange (money for goods and services). It may be a traditional market like Leeds Kirkgate, a shop or a supermarket. There are also other non-traditional markets such as mail,telephone or the internet.
Suppliers > Business > Customer (the consumer)
Meeting Customer Expectations-
- Decent Choice
- It lasts (durablity)
- It works (as advertised)
- Looks good (aesthetic)
- Customer sales and after sales
- Value for money
Customer needs are EXTREMELY important as its the key to starting a successful business.
Primary Research (or field research)- involves the collection of primary data, information wich no-one else has collected. There are several types of primary research.
Surveys- people respond to a questionnaire, this may be face to face, over the telephone or on the internet.
Focus Group- is a small group of people from the products target market and their asked in detail their opinions (e.g- group of 8-10 year old children for the itchy and scratchy show)
Observation- this can be literally observing peoples habits,behaviour and reactions. It can also mean a form of experimentation- using a prototype to find out opinions.
Secondary Research (or desk research)- this involves the collection of secondary data. This is information which is already available both from within an existing business and from outside the business.
Business Directors- The Yellow Pages, Thompson Local, and the business section of the BT Phone Book. This helps gauge the level of competition.
The Internet- online directories (like Yell.com) feature information and company websites many feature more deatils on their products and prices.
Newspapers- local newspapers (particular free ones) feature alot of adverts and these contain information including promotion.
Market Reporters- specialist companies like Mintel produce a report on a given market and then sell the information to businesses. Copies of some and sold on or are avaliable in public libraries.
Analysing the Competition
Competition- competition is the process of attracting customers to a business in one of two ways: Price competition (i.e. by being the cheapest) or non-price competition (e.g.by competing on improved quality, a wider product rage or new ideas.
Price- Businesses often compete by offering the lowest price and attract customers away from the rivals.
Quality- Businesses may offer goods of differing quality. In the case of shoes this may be the difference between hand-man leather shoes and imitation leather shoes made by machines.
Product Range- Some businesses, such as supermarkets or department stores compete on their product range. This is the variety of goods or services that are on offer.
Design- Some products are better designed and are therfore easier to use or more stylish.
Brand Image- A brand is a named product which customers see as being different from other products. So while the quality of designer clothing may be no higher than cheaper alternatives consumers still buy the, because of the perception. The brand image is what comes into consumers' heads when they hear the name.
Selling Experience- Some firms compete on the selling experience offered. This includes the way the staff treat customers, the availability of the information and the decor and atmosphere of the shop. This can be an important part of securing repeat custom.
After-Sales Service- The law states that firms must refund customers for faulty products. They may also offer refunds for customers who simply change their minds and warranties.
Added Value- the increased worth that a business creates for a product; it is the difference betweem what a business pays its suppliers and the price that it is able to charge for the product/service.
Sources of Added Value-
- Design and formula
- Speed and quality of service
- Unique selling point
Unique Selling Point or USP- a characteristic of a product that makes it different from the other similar products being sold in the market such as design, quality or image.
Added Value is the difference between what a business pays its suppliers and what it recieves for selling its products. The wages its pay its staff are part of its value added. The workers of a business add value to the output of a business.
A product may have more than one unique selling point. There could be several ways in which the product is different to other products on the market.
Franchise- the right given by one business to another to sell goods or services using its name.
Franchisee- a business that agrees to manufacture, distrubute or provide a branded product, under licence by a franchisor.
Franchisor- the business that gives franchisees the right to sell its product, in return for a fixed sum of money or a royalty payment.
The Benifits of a Franchise-
- Finding Customers
- Back up services
- A brand name
- Exclusive area
The Costs- The franchisor does not provide all its services for nothing. The average amount of money needed to start up a franchise is around £250,000 according to the BFA. The amount depends on the type of franchise with the more successful ones requiring a greater investment.
Advantages for the Franchisee-
- The choice of employees
Disadvantages for the Franchisee-
- May not be affordable
- Needs permission from the Franchisor
- Some businesses are more successful
- Do you have the right location?