A bit of everything

To provide goods and services.

Goods: Something you can physically touch and own, for example a phone.

Services: A thing that iss provided generally at a cost, for example a hair cut.

Everything a business needs to provide goods and services.

Land: Stock, Materials, Land, Heat/Light.

Labour: Workers, Management.

Capital: Money, Premisis, Equipment.

Enterprise: Investment by the owners, Ideas, Risk

A place where buyers and sellers meet.

Need: Something you need to live/survive.

Want: A desire for something.

• There are scarce resources, such as: coal, oil, wood and food.
• There are too many people and the population still continues to grow.
• Business makes the problem.
• They create more wants, using up more precious resources.

• good customer service
• good quality
• good price
• convnience
• product range

We can find out wht cuustomers want through market research. There are 2 types of market research:

• Primary (field), for example questionnaires, observations and focus groups.
• Secondary (desk), for example government statistics, internet, newspapers and material published by the business.

There are 2 types of data:

• Quantitative Data: Statistics (numbers)
• Qualitative Data: Opinions

The combination of factors which help the business to take into account customer needs when selling a product.

The 4P's

• Product
• Price
• Promotion
• Place

The 7P's

• Packaging (physical evidence)
• People
• Process

The amount the customer has to pay for a good or a service.

• Competition Based: A price set to what a competitior has set.
• Cost-plus pricing (mark-up): How much the business pays plus a% for their profit.
• Price Discrimination: Charging a different price for the same product/ service.
• Loss-leader: Selling a product at a loss to attract people in whilst they buy other products.
• Psychologcal: Price looks cheaper than what is actually is (99p).
• Penetrating Pricing: Setting a low price for a new product to get people to try it.
• Skimming: Setting a high price for a new product because people want it.

Supply and Demand

• As the price falls more is demanded
• As the falls less people want to supply the products.
• Where demand equals supply this determines the price.

• label
• taste
• colour
• style/looks
• comfort
• production
• information
• materials
• ease of use

• internet
• market
• supermarket
• store chain
• franchise
• vending machine
• off licence

• informing people about your product/ service/ business.
• remind you about the product.
• persuades you to make a purchase.

Above the line: advertising that target everyone (or a specific group).

• TV advert
• billboards
• internet
• posters
• newspaper
• magazine
• radio

Below the line: advertising that targets individual people.

• direct mail
• personal selling
• sales promotion
• public relations
• branding
• exhibitions
• merchandising

Customer focus is looking at satisfying customer needs and wants.

• Identify Needs: What do people want?
• Anticipate Needs: Guess what people want in the future
• Meeting those Needs: Being able to meet the needs.

A part of a market that contains a group of buyers with similar buying habits.

Ways of sgmening the market:

• age
• gender
• income
• geographic
• religion
• ethnic group

A diagram showing the range of possible positions of a product or business. It can highlight a gap in the market.

The stages every product goes through from being developed to when it is removed from sales.

Intro/Development Stage

• Market reserch takes place.
• Product makes a loss because lots of money is spent on it.
• A test market is often used.
• Product is designed and tested.
• Most products never get passed this stage.

Growth

• The product is heaavily promoted.
• Sales grow rapidly.
• The product is found in more retail outlets.
• At the end of this stage the product begins to become profitable.

A good product mix is where the business has products in each stage of the product life cycle.

• a business wilhave more products in the intro/development stage as many do not get pass this stage, this is expensive.
• products in the maturity stage pay for the ones in the intro/development stage, they also provide the profits for the business.
• products in decline will eventually be replaced by one in the intro/development stage.
• Another word for product mix is product portfolio

A model showing he products of a business highlighting the growth rate and market share of each.

The increased worth that a business creates for a product.

It is the diiference between what the business pays its suppliers and what it is able to charge it customers

• Quality: If you think something is better quality you will pay more for it.
• Design of Formula: Either what it looks like or what it feels like, the ingredients that go in it or whether it is handmade.
• Convenience: Making it easy and effortless for people.
• Quality of service/speed: If a business provides a good service they can charge more, same with speed.
• Branding: By having a popular brand you can charge more because people can charge more because people know it is good quality.
• USP: Where a business has something completely different to its competitors.
• Create a package: Selling a selection of products.

Is when a customer tries the product for the first time to see whether they willl buy it again.

How?

• free publicity
• offers (introductory price)
• advertisment
• trade/testing
• free samples

Getting people to buy the same product again and again.

How?

• Promotion
• Branding
• Price
• Place
• Product
• Customer Loyalty

The right given by one business to another business or person to sell goods or services using their name.

A franchisee is a business or person that agrees to manufacture, distribute or provide a branded product under the licence by the franchisor. They pay for the right to operate under the other business name.

The Franchise provides:

• advertising
• legal requirements (but the franchisee pays for them)
• suppliers for stock (but the franchisee pays for them)
• equipment (but the franchisee pays for them)
• employees, recruitment and uniform

• Training is provided
• Business starts with an established reputation
• Help is provided when setting up the business
• Advertising is provided
• The concept/products are provided
• Equipment and materials are provided
• Exclusive area
  
• Very expensive
• Possibility of failure
• No freedom to operate how you would like
• Have to pay royalty payments

• Don't have to pay to run the business.
• The franchisee is usually keen and motivated to make the business successful.
• Recieves royalty payments.

• Run the risk of employing a rogue that could destroy the franchise's repuataion
• Has to provide training, equipment, uniform and advertisment.
• Regular checks are undertaken on the franchisee.

The only owner of a business which has unlimited liability. The owner of the business owns the business.

Adv:

• Control of the business is lead by the owner.
• Profits are distributed however the owner wishes.
• More privacy, as finances cannot be accessed at Companies House.

Disadv:

• They have unlimited liability.
• The risk is high, because if the business fails they can lose everything.

A company whose shares can only be bought by shareholders. The shareholders own the business, they have limited liability.

Adv:

• They have limited liability.
• Easier to raise finances.
• Seperate legal entry.

Disadv:

• Have to register with companies house.
• Have to oublish their house.
• More expensive to set up.

1. Idea

2. Name for the business, original and reflect business without copying trademark companies.

3. Register name at companies house and decide whether it is a Sole Trader, Limited Company or Franchise ownrship types.

4. Business address.

5. Register with HMRC.

1. VAT

Value added tax 20%

2. Income Tax

Tax on wages, taken directly, between 20 and 50%

3. National Insurance

Tax on earnings for redundancy, pension, illness

4. Corporation Tax

Tax on the businesses profit.

Coming up with a new and unique idea.

It's all about:

• innovation
• new product ideas
• improving existing products
• solving problems
• obtaining a competitive advantage
• asking questions

Creative thinking can lead to a competitive advantage.

• define the problem
• plan the method
• capture your thoughts
• review your thoughts
• take a reality check

This can be done with the aid of these 4 methods

1. Blue Skies Thinking: brainstorming, there is no limit

2. Lateral Thinking: reasoning, thinking outside of the box

3. De Bono's Six Hats: evaluating ideas, problems, facts, feelings, solving, benefits, control

4. Mind Mapping

Invention: formulation of new ideas for products or processes.

Innovation: practical application or new inventions into marketable products or services.

Patent

• Gives rights of ownership of an invention or process when it is registered with the government.
• A patent can be kept for 20 years.
• You can sell the patent.

Copyright

• Legal ownership of material such as books, music and films.
• Prevents these being copied by others.
• Has a long duration, life of publisher and then 70 years after death.

Trademark

• The symbol, sign or other features of a product, of a business.
• That is protected in law, for example: Coca-cola and Microsoft.

• part made products (work in progress)
• product (finished goods)
• ingredients/ component parts (raw materials)

Just in Time

• there is no stock hanging around or spare it is delivered just when it is needed.

Just in Case

• there is spare stock at all times to be used.

• buffer stock means there can be allowances for:
• sudden increase in demand
• late delivery
• faulty packaging/ goods

• need extra space for storing stock
• some stock will go out of date or fashion
• got to protect stock- they get stolen
• costs money to hold stock

Total Costs= Total Fixed Costs + Total Variable Costs

Total Revenue= Quantity Sold x Price

Profit/Loss= Revenue - Total Costs

How to calculate revenue, costs and profit

1. Put the formula down

2. Put the figures into the formula

3. Simplify/ Calculate

4. Underline your answer

Fixed Cost: A cost that does not change directly with how many produced/sold.

Variable Cost: A cost that changes directly with how many are produced/sold.

1. Increase Revenue: change the price, branding, advertising.

2. Decrease Costs:

    (i) fixed costs: utiities, wages, advertising, promotios

    (ii) variable costs: less packaging, less waste, cheaper supplier

The amount each sale contribution to paying off the fixed costs. Once all the fixed costs are paid off all contributions becomes profit.

Contribution per unit = Selling Price - Variable Cost Per Unit

Running: Fixed or Variable Costs

Capital: a one-off cost to buy an assest

When revenue equals total costs.

fixed costs / (selling price - variable cost per unit)

• owners set a target to achieve- can motivate them
• allows owner to see the effect of changes they make to costs
• forces owner to plan ahead and consider revenues and costs

• fixed costs don't stay the same all the time
• you don't get the same price as you sell more
• can be difficult to calculate selling price and variable cost per unit

Cash flow is the money going in and out of a business.

A business which has a poor cash flow is not likely to survive.

CASH FLOW IS NOT PROFIT!

The prediction of the money going in and out of a business over a period of time.

Increase inflow

• increase sales revenue
• bank loan
• collect oney from debtors quickly
• de-stocking
• debt factoring

Decrease outflow

• find a cheaper supplier
• credit from suppliers
• delay payments to supplier
• less wastage
• spread the cost of big items/ or delay purchase
• rent or lease instead of buying
• reduce labour costs

• personal savings/ family and friends
• crowd funding
• bank oveerdraft
• bank loan
• trade credit
• venture capital
• retained profit
• share capital

adv: you don't have to pay interest

disadv: you are risking more of your own or family and friends money

adv: you don't pay interest and you don't offer a share of the business

diadv: if you don't get the amount you need in the time allocated, you don't get any money

adv: it is flexible and you only pay interest on the amount you go overdrawn

disadv: the interest rates are very high

adv: you get a lum sum of money straight away

disadv: you have to pay interest

adv: you can buy goods and pay for them later.

disadv: businesses may overspend

adv: the money is already in the business

disadv: owners get paid less

adv: the shareholders don't have to be paid back interest

disadv: each shareholder owns part of the business, if you sell to many shares you can lose control, and each shareholder gets a share of the profit.

1. How long do you need the money for?

2. How much money does the business need?

3. Do we need to borrow?

4. Is the business profitable?

5. Is it a new or small business?

Short term or long term?

Internal or external?

The range of variables which contribute to a successful product.

Successful Design Mixes lead to product differentiation.

This gives the business a USP and a competitive advantage.

Leading to increased sales and profitability.

Factors affecting the design mix:

• costs
• appearance
• function

Money is spent on research and development

Prototypes are made

Extensive testing takes place

Quality Control:

• A quality control system relies on inspection of products
• Assumes defects are inevitable
• Allows mistakes to happen
• Goods inspected > faults found > fixed or thrown > customers recieve perfect products

Quality Assurance:

• Quality assurance focuses on prevention
• Designs the process to ensure mistakes do not occur
• focuses on getting it right first time
• self-checking is vital rom employees
• requires training
• AKA TQM: total quality management

Customer service is the experience a customer gets when dealing with a business and the extent to which that experience meets andexceeds their expectations.

Effective customer service is:

• helpful and friendly staff
• listen to customers
• spped of service
• deal with complaints
• solve problems
• quality
• good facilities
• getting the right roduct
• delivery times met with undamaged and correct
• going beyond what is expected

Good customer service is important because......

• repeat purchase
• good word of mouth advertising and reviews
• you can charge more

Maturity

• This is the most profitable stage.
• Sales are high but stop growing.
• Extension strategies are used to make this stage last longer.

Decline

• Sales fall, little money is spent on the product.
• The number of retail outlets is reduced.
• It is still profitable but once it stops making profit it is removed and replaced.