Edexcel business theme 1 key terms

Niche Market

Small market with specific needs for specialised products or services. E.g. high quality chocolate.

Mass Market

Large market where most people tend to buy same or similar products. E.g. laundry detergents.

Market Size

Measured by either value or volume.

Market Share

Amount sold by a single business as a percentage of total market.

Dynamic Market

Constantly changing market. Can be due to rising incomes, fashions or arrival of a superior competing product.

Innovation

Bringing a new idea into existence and using it.

Product Innovation

New technologies make it possible to create new products or to improve quality of existing ones.

Process Innovation

Using new technology to improve production methods, so that costs are reduced. Change is often invisible to consumers, but it may result in price cuts.

Competition

Lower prices, better quality, more choice, innovation, greater efficiency.

Risk

Situations where the outcomes are known and can be quantified.

Uncertainty

Where events are unpredictable. Caused by factors outside the control of the business.

Product Orientation

Business will focus its efforts upon creating the product rather than responding to market needs. Make the product first then sell it. E.g. iPhone.

Market Orientation

Business will focus on customer preferences and needs, involves expensive market research.

Primary Research

Collecting new data directly from original sources. E.g. questionnaires and in-depth interviews.

Secondary Research

Gathering data from existing online and paper-based sources. E.g. government statistics.

Quantitative Research

Analysis of numerical data.

Qualitative Research

Customers' genuine opinions. Aims to understand customer behaviour.

Bias

If the sample includes disproportionate number of people from a particular market segment.

Market Segmentation

Way markets can be divided up, each with different customer preferences. E.g. income level or gender.

Product Differentiation

When each business creates a distinctive product. This could be with unique features. Reduces PED.

Market Map

Plots brands in the market according to how they meet customers' needs. It uses two sets of criteria such as quality and prices.

Competitive Advantage

Having an edge over rival products. May be based on low costs and keen prices or an innovative design feature.

Adding Value

Difference between selling price and costs of its material inputs.

Unique Selling Point

Distinctive feature that no competing product can match precisely.

Supply

Amount of a good or service that producers are willing to provide at a given cost.

Equilibrium Point

The quantity demanded is the same as the quantity supplied. There will be no unsold products.

Elasticity

Responsiveness to change.

Price Elasticity of Demand

How much a price change leads to a change in demand.

Price Elastic

Price Change causes proportionately bigger change in quantity demanded. Beyond -1.

Unit Price Elasticity

Price change causes same change in quantity demanded. -1

Price Inelastic

Price change causes proportionately smaller change in quantity demanded. -1

Income Elasticity of Demand

How much a change in income leads to a change in demand.

Income Elastic

Income change causes proportionately bigger change in quantity demanded. x\>1

Unit Income Elasticity

Same proportional change in quantity demanded and income. x \= 1

Income Inelastic

Income change causes proportionately smaller change in quantity demanded. 0 < x < 1

Luxury Good

Demand increases as income increases. E.g. Jaguar

Inferior Good

Demand decreases as income increases. E.g. Aldi Baked Beans

Design Mix

Function, Aesthetics, Cost

Social Trends

Way society as a whole behaves.

Branding

Creating a positive and recognisable image of the product or service.

Promotion

Inform customers and potential customers about the product or service.

Product Branding

Single product is recognised by that name. E.g. Jacuzzi

Personal Branding

Individuals who have become their own brand.

Viral Marketing

Strategy that encourages individuals to pass on a marketing message to someone else. Youtube has been very useful for this.

Emotional Branding

Creation of brands that appeal to a customer's emotional nature rather than their logical side.

Pricing Strategies

range of ways in which a business might decide on the price of its product/service.

Cost Plus Pricing

Adding certain percentage to the average total cost of the product.

Premium Pricing

Ability to charge higher price than competition without losing sales.

Price Skimming

Charging a very high initial price for the product.

Competitive Pricing

Charging about the same as, or a little less than, the prices of competing products.

Penetration Pricing

Used to enter a new market. Lower price is used to gain customers and penetrate the market.

Psychological Pricing

Used to make the price seem more attractive than it really is. E.g. £9.99

Predatory Pricing

Prices set at a very low level, possibly even below costs of production, in order to destroy competition. Effective but illegal.

Distribution Channel

Route taken by the product as it moves from the producer to the customer.
Producer -\> Wholesaler -\> Retailer -\> Customer

Product Life Cycle

Shows different stages that a product passes through. Development, Introduction, Growth, Maturity, Decline.

Extension Strategies

Used when sales are slowing. This could be re-launching the product or re-branding.

Product Portfolio

Range of products that a business produces.

Boston Matrix

Analyses company's products in terms of market share and growth potential.

Star

Product with significant market share in a fast growing market.

Problem Child

Small share of fast growing market. Need to be promoted or adapted to fit customer requirements more closely.

Cash Cow

Large share of a slow growing or static market. Sells very well and doesn't require much promotion.

Dog

Low share of low growth market. Best strategy is usually to discontinue production.

Business To Business

Process of selling products or services to other businesses.

Business To Consumer

Involves selling directly to customers who are buying products or services for personal use.

Marketing Objectives

Longer term marketing goals and targets.

Flexible Workforce

Workforce that can adapt quickly, e.g. to a sudden change in customer demand.

Multi-skilling

Practice of training employees so that they can do a range of tasks.

Flexible Hours

Requires the employee to work a certain number of hours in a given time period but the employees can choose their own hours.

Outsourcing

Where business tasks or processes are undertaken by an external provider. E.g. office cleaning.

Dismissal

The worker is sacked.

Redundancy

When the worker's skills are no longer of use to the business.

Individual Approach

Direct discussions between an employer and an individual.

Collective Bargaining

Discussions between employers and representatives of employees, often a trade union.

Internal Recruitment

Potential applicants are found within the organisation

External Recruitment

Potential candidates are found from outside the organisation, either by advertising or using recruitment agencies.

Labour Turnover

Rate at which staff leave the business

Induction

Training given to new employees to familiarise them with the work environment and the requirements of the job.

Organisational Structure

Framework which shows how a business arranges its lines of authority and communications.

Hierarchy

Employees are ranked in layers, one above the other, in a typical pyramid shape.

Delayering

Reducing the amount of middle managers

Span of Control

Number of people directly answerable to each person in the chain of command.

Centralised Structure

All decision-making is at the top of the hierarchy.

Decentralised Structure

Businesses have moved the decision making process away from a central head office and spread it throughout the organisation.

Matrix Structure

Individuals are assigned to teams according to their specialism.

Taylor Scientific Management

Close supervision and bonuses rewarded to more productive employees.

Mayo Human Relations

Focuses on addressing human needs, social and psychological factors.

Maslow Hierarchy of Needs

Self-Actualisation
Self-Esteem
Social Needs
Safety Needs
Basic Physical Needs for Survival.

Herzberg's Two Factor Theory

Motivating factors and hygiene factors.
Hygiene factors can only dissatisfy employees if they are not met.

Delegation

Allowing decisions to be taken at a lower level.

Empowerment

Giving employees some discretion as to how they carry out their tasks.

Leadership

Art of motivating and organising a group of people to achieve a common goal.

Autocratic

Top-down decisions without consultation. Delegation is rare.

Democratic

Guide rather than dictate, consulting widely and encouraging everyone to participate in the decision-making process.

Paternalistic

Behave like a parent might in making decisions. Consult early on and at every level and explain their reasons.

Laissez Faire

Set the initial agenda and then give staff complete freedom to complete the task.

Profit Maximisation

Making as much money as possible.

Profit Satisficing

Making enough profit to continue in business. They may not be interested in taking on the additional risk and effort involved in maximising profits.

Business Objectives.

Goals and Targets that the business needs to achieve in order to make progress towards the long-term aim.

Entrepreneur Characteristics

Hard work, motivation, risk-taking, initiative, creativity, resilience, perseverance, market understanding.

Sole Trader

Self-employed and runs his/her own business. Unlimited Liability.