Edexcel GCSE Business Section 2

There are 3 key factors in meeting customer needs. These are:

• Keeping close to the customer - providing what they want, at a price they are willing to pay
• Being efficient and reliable - customers want their needs met consistently, so careful planning is important
• Providing great design - many customers value design and style above price

The design mix is made up of three aspects which businesses need to consider. These are:

• Economic manufacture - making sure that the design allows the product to be made cost effectively
• Function - does the product work well and work every time?
• Aesthetics - how well the product appeals to the senses

Design and product differentiation

Product differentiation means making your product stand out from the competition. This may help the product become a market leader, or it could allow higher prices to be charged.

Differentiation is important because customers can become loyal to something that they see as unique.

R&D stands for research and development. Spending money on scientific research and the development of products allows firms to keep one step ahead of the competition, by inventing new ways of working.

Patent - registering a new way of making something, so that no-one can copy the idea for 20 years

Managing stock is difficult. One one hand, you don't want to order too little, because you could sell out and cause disappointed customers. On the other hand, you don't want too much stock taking up stock and not selling out.

A bar gate stock graph illustrates how stock levels should ideally be maintained.

Just In Time (JIT) is a method in which businesses order supplies in small quantities, just before they run out. Deliveries are more frequent and in smaller amounts. The advantages of JIT are:

• it eliminates buffer stocks so less storage space needed
• fresher produce
• less of the business' capital is tied up in stocks

However, the disadvantages are:

• there is a greater risk of running out and disappointing customers
• losing out on bulk-buying discounts
• a mistake or misjudgement could cause running out of products

If a business focuses on excellent customer service, it may want high buffer stocks to ensure that customers are never disappointed. If, however, a business prefers low prices and low stocks then a JIT system should be used. 

There are various methods used by businesses to manage the quality of their products.

Quality control is where finished products are checked by inspectors to see if they meet the set standard. Workers do not feel involved in this type of quality management and therefore it is often flawed.

Quality assurance is where quality is built into the production process. For example, all staff check all items at all stages of the production process for faults. In this way everyone takes responsibility for delivering quality.

Quality culture is when quality management is part of the attitudes of staff in a workplace.

Warranty - a guarantee by the producer that it will repair any faults in a product for a specific period of time

Even large companies have to make sure that they keep costs down in order to stay competitive. To keep costs low, careful ordering of supplies is important.

Productivity - efficiency, measured by output per worker per hour

Ways of increasing productivity include:

• investing in up-to-date machinery to help workers or replacing them with automated equipment
• encouraging workers to work more enthusiastically and therefore harder and faster (improved morale and motivation)
• coming up with new ways to do things more effectively

Automated - processes that are fully carried out by machinery rather than people

To be effective, customer service must be:

• rooted in a clear understanding of what customers really care about
• practical and cost-effective
• based on a genuine wish to help, not just to seem helpful
• offered at the right time and right place

Good service may cost the customer extra, but as long as it represents value for money people will be willing to pay.

Bad customer service can seriously impact a business, as people find out through word-of-mouth. Customers won't make a repeat purchase if customer service was poor.

Some businesses let their standards slip. Possible reasons for this are:

• the businesses is in a monopoly position - it has no competition and therefore becomes sloppy
• a large business in a competetive market allows its ethical standards to slip
• business owners get greedy and want to make big profits in the short term

There are a number of consumer protection laws, which defend customers. Three examples are:

• Sale of Goods Act - ensures that goods are fit for purpose
• Trade Descriptions Act - makes sure that all advertising, labels and public statements by firms are 'demonstratably true'. It is an offence for a trader to use false/misleading statements
• Weights and Measures Act - packaging must contain as much product as it says it does

Many business believe that excessive rules hinder their growth. They say:

• too many rules mean too much paperwork, which costs time and oney
• rules restrict creativity and initiative

On the other hand, some argue that:

• it helps firms know what is acceptable and what is not
• rules do take time and money, but not enough to damage firms' success
• consumer protection laws are extremely important - people can die from unsafe cars, for example

Durability - how strong a product is and therefore how well it lasts

Monopoly - when there is only one supplier, i.e. no competition

Red tape - implies tangling firms up in too many rules/regulations, stifling them