business and economics

business

an organisation that provides goods or services to customers in exchange for money, usually with the aim of making a profit

entrepreneurship

the process of identifying a business opportunity, developing an idea and taking the necessary risks to create and run a business

trading business

a business that buys finished goods and resells them to customers without significantly changing the products (sells goods)

e.g. a supermarket buying soft drinks from suppliers and selling them to customers

e.g. a bakery

e.g. kmart

service business

a business that provides an intangible service or activity to customers, rather than mainly selling physical products (sells services)

e.g. a hairdresser providing haircuts to customers

e.g. a cloth alteration store

e.g. a repair shop

hybrid business

a business that combines the sale of physical products with services

e.g. a gym that sells fitness equipment and also provides personal training

reasons for starting a business

• making a profit – earning money from the business

• independence – being your own boss and making your own decisions

• following a passion – turning an interest or skill into a business

• identifying an opportunity – seeing an unmet customer need or gap in the market

• creating employment – providing jobs for yourself and others

• flexibility – having greater control over your working hours and conditions

characteristics of an entrepreneur

leadership -

the ability to guide, motivate and influence others towards achieving a common business goal

innovation -

the ability to develop new or improved ideas, products, services or ways of doing things

adaptability -

the ability to adjust to changes in the market, customers, technology or business environment

resilience -

the ability to recover from setbacks, learn from failure and continue working towards goals

financial literacy -

the ability to understand and manage financial information, such as costs, revenue, profit, budgets and cash flow

risk-taking -

the willingness to accept uncertainty and take calculated risks in the hope of achieving a reward

calculated risk = a risk that has been considered and assessed rather than taken randomly

invention

the creation of something completely new that did not previously exist

invention = create something new

innovation

the improvement or development of an existing product, service or idea to make it more useful, effective or appealing

innovation = improve or develop something

risk

the possibility that a business decision or investment may result in a loss or an outcome that is different from what was expected

return

the benefit or reward gained from taking a risk, usually in the form of profit or financial gain

risk and return

the relationship between the amount of risk taken and the potential reward received generally - greater potential returns involve greater risk

e.g. an entrepreneur invests money into a new business, there is a risk of losing the investment, but the potential return is making a profit

market

market -

a place or system where buyers and sellers exchange goods, services or ideas (can be both physical and online (e.g. a website)

market (business) -

a market is the group of potential customers who have a need or want for a particular product or service and are willing and able to buy it

product-oriented business

a business that focuses primarily on developing and improving its products, rather than starting with what customers want

e.g. a technology company develops a new device based on its technology and then tries to find customers for it

product-oriented - “what can we make?”

customer-oriented business

a business that focuses on understanding customer needs and wants and developing products or services to satisfy them

e.g. a restaurant surveys customers about what meals they want before adding new items to its menu

customer-oriented - “what do customers want?”

target market

the specific group of customers a business aims its products, services and marketing towards

market segmentation

the process of dividing a broad market into smaller groups of customers who share similar characteristics, needs or behaviours

demographic segmentation

dividing customers based on personal characteristics, such as age, gender, income, occupation or family size

e.g. a toy company targeting children aged 5–10

demographic = who are they?

geographic segmentation

dividing customers based on where they live or are located, such as country, state, city, climate or region

e.g. a clothing company selling heavier jackets in colder regions

geographic = where are they?

psychographic segmentation

dividing customers based on their personality, lifestyle, values, interests and attitudes

e.g. a business targeting environmentally conscious customers

psychographic = what are they like?

behavioural segmentation

dividing customers based on their behaviour towards a product or business, such as buying habits, loyalty, usage or benefits they seek

e.g. a coffee shop giving rewards to customers who purchase coffee frequently

behavioural = what do they do?

marketing mix (the 7 P’s)

the combination of marketing strategies a business uses to promote and sell its products or services and satisfy its target market

• product, price, place, promotion, people, physical evidence, and process

product

the good or service a business offers to customers to satisfy their needs or wants

includes things such as quality, design, features, branding, packaging and variety

price

the amount of money customers must pay for a product or service

businesses consider things such as costs, competitors and what customers are willing to pay

place

where and how a product or service is made available to customers

this can include physical stores, websites, apps, delivery services and other distribution channels

promotion

the methods a business uses to communicate with customers, create awareness and persuade them to buy its products or services.

examples include advertising, social media, sales promotions and publicity.

promotion mix

the combination of promotional methods a business uses to communicate with its target market

personal selling -

when a salesperson communicates directly with a customer to explain, recommend or sell a product or service (e.g. a salesperson helping a customer choose a laptop in a store)

opinion leader -

a person who has influence over the opinions or purchasing decisions of others, often because of their knowledge, popularity or expertise (e.g. a well-known athlete recommending a particular sports product)

publicity -

unpaid attention or exposure a business or product receives through media or public discussion (e.g. a news article mentioning a business because it has opened a new store)

publicity is generally not paid for directly by the business - unlike advertising

people

the employees, managers and other people involved in delivering a product or service and interacting with customers (e.g. friendly and knowledgeable staff can improve a customer's experience)

physical evidence

the tangible things that customers can see, touch or experience that provide evidence of the quality of a business or service (e.g. a restaurant's décor, cleanliness, uniforms, menus and packaging)

process

the flow of activities or mechanisms that take place when there is any interaction between the customer and a business (e.g. the delivery of a product or the experience of a customer purchasing an item)

competition

the rivalry between businesses that are trying to attract the same or similar customers

competition = businesses competing for customers

competitive advantage

a feature or strength that allows a business to perform better than its competitors or attract more customers

competitive advantage = what makes one business stronger than its competitors