What is market research
Market research is all about finding out what your customers want, market research finds out what your customers like, how much they want to pay for the product or service you provide and where they want to purchase your product or service.
There are two types of market research, the first one is primary research which can also be called field research. Primary research is collected by the business and is usually used to gather information specifically for the businesses purposes. This type of market research can be expensive and take time to organise but is also good as a precise amount of data can be collected and is designed by the business so it is just the information the business wants and needs.
Gap in the market
Definition - an identifiable market opportunity that has not yet been exploited
This term could be related to :
- market segments, such as an age group that hasn't been catered for yet. For example many older people have retired, yet are still active and have the income to do extensive traveling
- products, such as a new fruit juice flavour
- some entrepreneurs will go on a 'hunch' and just launch their new product whereas some will undertake some type of market research to see If a 'gap' exists
- if a 'gap' has been identified then some type of promotional campaign will have to be undertaken to ensure consumers are aware of the product/service
A higher price could be charged as there is unlikely to be much competition
- The number of sales is likely to be high, there may not be anybody else providing it
- It would be difficult for competitors as your business product is already established
Sole traders and partnerships
SOLE TRADERS :
- keep all the profit
- make all the decisions by having complete control
- have privacy of financial statements
- relatively straight forward to set up, as few legal requirements
- UNLIMITED LIABILITY - the owner can lose personal possessions to pay business debts
- lack of start up capital And may have to work longer hours and take shorter holidays
- the partners can introduce more fianance to the business
- each partner can bring more specialist skills to the business
- they may work less hours and be able to take longer holidays and privacy of financial
- UNLIMITED LIABILITY
- there may be disagreements between a partners over the running of the business
- profits have to be shared
Deed of partnership
Definition - a legal agreement drawn up between the partners of the business stating the responsabilities of partners, for instance, how profits and losses are to be shared
- if there is no deed, then profits will be split equally, each partner has an equal vote, no salary is paid and there will be no interest on capital paid.
IT SHOULD INCLUDE THE FOLLOWING :
- each partners roles and responsibilities to stop arguments
- the amount of capital (money) each partner has introduced and the interest they will receive
- the differing share of profits for each partner - if this is required
- a company has a separate legal identity to its owners. In a legal dispute it is the company that is sued
- shareholders own the business by buying a share of the business. If there are a 100 shares and you buy 1, then you own 1/100 of that business. If the shares are priced at £10 each then the company would have £1000 to expand the business.
- the shareholders appoint a board of directors to run the business on their behalf. In large businesses the B of D'S will appoint managers to help run the business.
- all companies have limited liability. The shareholders liability is limited to the amount they have invested in shares of the company. The shareholders cannot lose personal possessions to pay for the companies debt.
- anyone can see the financial statements of a company e.g. Income statement
- shareholders would like to receive a dividend, usually twice a year, out of profits. They also want the share price to increase.
Private limited company vs public limited company
Ltd = private limited company. Plc - public limited company
- shares in a Ltd can only be sold/purchased with permission of the board of directors, usually to family and friends. The disadvantage of this is that it limits the amount a variable is able to raise as share capital, as compared to a Plc.
- A Plc, particularly if listed on the stock exchange, can sell shares to any member of the public. It can therefore, potentially , raise large amounts of finance
- there are far more reporting requirements for a Plc, particularly if they are listed on the stock exchange, which is costly too.
- as anybody can buy shares in a Plc, they are then liable to be taken over, by someone who has more than 50% of the shares. In a Ltd this cannot happen, as the board of directors, decide who will buy the shares.
- large plc's are under media scrutiny, which if the results are good can have positive effects but can also have the opposite affect. In the past M&S have seen both sides. Also Tesco have recently received bad publicity for their first fall in profits for over 20 years.
What are stakeholders?
A stakeholder can be an individual or group(s) of people who have an interest in a business. There are many different stakeholders in a business, and they often go beyond the business itself .
The main stakeholders in business are :
- local community
- interests and pressure groups
all businesses have stakeholders and stakeholders can have diffrent intrests.
- buisnesses such as mcdonalds, pizza hut, KFC, British school of motoring and Thorntons are all examples that use the franchise system.
- a franchise occurs when a franchisor (mcdonalds) sells an existing business idea to a franchisee (anybody who is subtle)
- it is NOT a form of business ownership, the franchisee will choose if they want to be a sole-trader, partnership or Ltd.
- the franchisee will pay a franchisor a start up fee (which is usually quite expensive depending on the business) and on going royalty payments (the money that the franchisor will expect to recieve from the businesses annual profits ) usually based on a percentage of the franchisee's sales revenue
- the franchisee will pay for nearly the same things, that a person setting up their own business would e.g. eqiupment, buying stock etc. the only thing they wouldnt pay for directly for is advertising and advice
- advantages of buying a franchise
- a tried and tested business idea, brand name is already established, the franchisor will provide support and training and benefit from a national (regional) advertising campaign
- disadvantages of buing a franchise
- a different franchisee may give the whole business a bad report and the franchisee does not have total control on how to run the business.
location of the business
businesses locate in different areas for a number of reasons. the main ones are as follows;
- raw materials - if these are costly to transport then a business should locate near to the source. examples of these would be oil-refineries near the coast, steel mills close to both coal and iron-ore mines
- the cost of the location- For businesses starting up this is quite an important factor as the location in different areas can be extreamley expensive or cheap
- Acess to Markets - most retailers and other service industries have to be located near to a population centre. this may bring competition,some buisnesses will still locate there because of potential sales it would bring.Resturants will tend to locate near to competition
- Availability of labour - high population denstity areas are likely to have a greater pool of potential workers. in areas of higher unemployment, there may be a more ready supply of labour,however, these areas may be "rundown" with social problems which would put some businesses off from locating there and the workers may not be that skilled.
- Transport and Infastructure - excellent or good transport systems and business parks
- Tradition - some areas are renowned for certain industries, which have been there for a number of years so the work force becomes skilled in that business. e.g- Grimsby=food production
- if a business can locate virtually anywhere, these are called "Foot-loose" industries.