OCR Business Paper 1

What is a digital distrubtion channel?

Is the distrubition of goods and services digitally though a website

What is primary research? 4 Examples:

Research conducted firsthand

e.g. Questionnaires, interviews, trialling, focus group

What is an entrepreneur?

A person who sets up their own business and is willing to take a risk

What is forward vertical growth?

Is when a business mergers/takeovers a business that it supplies goods and services to

What are the characteristics of an entrepreneur?

Creativity

Risk taking

Determination

Confidence

What is a business plan?

A document that outlines the businesses aim and objectives and how they will achieve them

What is the purpose of a business plan?

To obtain finance e.g. A bank loan

To explain how a business intends to achieve its objectives

What is a sole trader?

A business set up by 1 person

Advantages of being an sole trader:

Can keep all the profits

Can make decisions quickly

Disadvantage of being an soul trader:

No one to develop ideas

Unlimited liability

What is a partnership?

A business set up between 2 to 20 people

Advantage of being a partnership:

More ideas

Can share the set-up costs

Disadvantage of being a partnership:

Have to spilt the profits

Unlimited liability

What is an LTD?

A private limited company that sells shares to friends and family

What is an PLC?

A public limited company that sells shares on the stock exchange

Advantage of being a limited company:

Can gain a high gain of capital

Limited liability

Disadvantage of being a limited liability:

Can lose control of your business

Complicated to set up

What is unlimited liability?

When the business bank account and the personal bank account are not separate

All the business debts rest with the owner

Your personal assets can be taken away

What is limited liability?

When the business bank account and the personal bank account are separate

The debts of the business is limited to the amount that was invested

Your personal assets can not be taken away

What 2 businesses have unlimited liability?

Sole trader

Partnership

What 2 businesses have limited liability?

LTD and PLC

What are the 5 business objective?

Survival

Profit

Provide a service

Growth

Increase market share

Who are internal stakeholders?

Owners

Employees

Who are external stakeholders?

Customers

Suppliers

Government

Local community

What is organic growth?

Growing inside the business

What are the methods of organic growth?

Increasing output

Gaining new customers

Developing new products

Increasing market share

Advantages of organic growth:

Cheaper method of growth

Can stay in control of business

Disadvantage of organic growth:

Slow method of growth

What is eternal growth?

Growing externally through mergers and takeovers

Advantage of external growth:

Quicker way to grow

Access more customers

Disadvantage of external growth:

Costly

Conflict between 2 businesses

What is horizontal growth?

A merger or take over where 2 businesses are involved in a similar operation

What is backwards vertical growth?

Is when a business mergers/takeovers a business that supplies it with its goods and services

What is diversification?

Is when a business mergers/takeovers a business that is completely different (have no connection)

Advantage of diversification:

Reduces risk due to having another market as a back up

Helps achieve long-term investment plans

Disadvantage of diversification:

Lack of knowledge and expertise of the market

Reduces Quality

What is the purpose of marketing within the business?

Identifying and understanding its customers

Informing customers and increasing sales

What is primary research? 4 Examples:

Reserach conducted first hand e.g questionnaries, inteviews, trialling, focus groups

Advantage of primary research:

Reliable

Questionnaire - Cheap

Interview - Questions can be explained

Focus Group - Representative of diff customers

Trialling - Reduces risk

Disadvantage of primary research:

Higher costs

More time-consuming

Questionnaire- people may not understand

Interview - expensive

Trialling - hard to find the right people

Focus group - only a small group

What is secondary research? 5 examples:

Using secondhand research that already exist

e.g. newspapers, magazines, sensors, website, internal data

Advantage of secondary research:

Quick

Cheap

Easy to obtain

Disadvantage of secondary research:

Less reliable

Very general

Can be outdated

What is qualitative data?

Collecting data about peoples thoughts and opinions

(open questions)

Advantage of using qualitative data:

More in-depth data collected

Helps to understand what customer wants

Disadvantage of using qualitative data:

Harder to analyse

May only be provided by not that many people

Advantage of using quantitive data:

Easier to analyse

Gathered from a lot of people

Disadvantage of using quantitive data:

Does not tell you why? Lacks depth

Limits how much people can say

What is quantitative data?

Collecting is this statistical data

(close questions)

What does market segmentation mean?

Breaking down the market to identify a target market

How does a business segment the market?

Age

Income

Location

Lifestyle

What is the marketing mix?

Product

Price

Place

Promotion

What is innovation?

The improvement of an original idea

What are the stages of the life-cycle?

Introduction

Growth

Maturity

Decline

(extension plan)

Advantage of the product life-cycle:

Know when to do advertising

Can develop extension plan strategies

Disadvantage of product life-cycle:

Does not tell you how long it takes for a product to go through life-cycle

What is price skimming?

Setting prices higher when you enter the market

Advantage of price skimming:

Customers will perceive the product as having high quality

Larger profit

Disadvantage of price skimming:

May put off customers, lack of cells. Requires a strong brand

What is cost plus pricing?

Adding a markup to the cost of the product

Advantage of cost plus pricing:

Ensure that you make profit on each item

Disadvantage of cost plus pricing:

Prices may come out too high, might not be competitive prices

What is penetration pricing?

Setting price is low when you enter the market

Advantage of penetration pricing:

High sales

High profit

Disadvantage of penetration pricing:

May be perceived to have poor quality

Lower profit to begin with

What is competitive pricing?

Setting price is based on the competition

Advantages of competitive pricing:

Enables you to stay competitive

Disadvantage of competitive pricing:

Not unique from competition

What is promotional pricing?

Promotional pricing is a reduction in price

Advantage of promotional pricing:

Attracts more customers

Disadvantage of promotional pricing:

Customers may always expect to buy the product as the reduced price

What is the traditional chain of distribution?

Manufacturer -> wholesaler -> retailer -> customer

What is a physical distribution channel?

The distribution of goods using a physical presence such a shop or office

What is a digital divide channel?

Is the distribution of goods and services digitally through a website

Advantage of Digital distribution:

Customers can access 24/7

No costs for transport or packaging

Disadvantage of digital distribution:

Not all customers have access to Internet

Very competitive

Some dont like sharing bank details

What are point of sales promotion?

Includes price reductions, loss leader, competitions, and free samples

Market Share Formula

Total sales of business / Total Market Sales x 100

What is the purpose of the HR department?

Identifying and meeting the HR needs of the business

What are advertising promotions?

Advertising using different types of media

What is a tall structure?

An organisational structure with four or more layers

Advantage of a tall structure:

More chance of promotion - motivation of workers, a smaller span of control - less stress on managers

Clear communication

Opportunities to gain a promotion

Disadvantage of tall structure:

Communication is slower

May feel too restricting

What is a flat structure?

An organisational structure with three or less layers to go through

Advantage of flat structure:

Better communication due to less layers to go through

Delegate work to workers managers are responsible for

Disadvantage of flat structure:

Less chance of promotion

Stressful on mangers

What does span of control means?

The number of subordinates a manager overseas

What does chain of command mean?

The link in the level of authority from those at the top with the most authority

What does delegation means?

Passing down tasks and aurthority to a subordinate

What does subordinate mean?

Subordinate are the workers that a line manager is responisble for

What does authority mean?

Authority is the power that a person has to make decision

What does full time mean?

When a worker works 35 hours a week or more

What does part time mean?

When a worker works less than 35 hours a week

What does flexible working mean?

Is the practice of employees either working from home or in the office, working flexi time or shift working

What does temporary mean?

Workers only work for the business for a short period time

What does working from home means?

Workers complete work from home

What does working whilst mobile mean?

When people work not from the office or home. E.g. on a train, in a café, in holiday

What does self-employed mean?

Is when people work as their own boss

Advantage of letter:

Formal

Can keep a record of the message

Disadvantage of letter:

May not get delivered