Taking Care of Business

Exam study notes

Markets

somewhere where buyers and sellers exchange good at an agreed price

Examples of types of markets

financial market, property market, labor market, education market

black market

the selling of products illegally

supply

the amount of products produced

demand

the amount of the product consumers want

Models of Competition

a description of the type of market that a particular business or industry operates in

Types of Market Structures

1. Perfect Competition

2. Monopoly

3. Monopolistic Competition

4. Oligopoly

Perfect Competition

• a market structure in which a large number of firms (businesses) produce the same product. ​

• Only reason to choose one firm over another is the PRICE​

Coniditons of Perfect Competition

1. Many buyers and sellers

2. identical products

3. Informed buyers and sellers

4. Free market entry and exit

Perfect Competition - Barriers of Entry

• start-up costs

• technology

Monopoly

a market dominated by a single seller.

This seller controls prices and supply, and there are significant barriers to entry for other firms.

Natural monopolies

are markets that run best when one firm provides all of the supply.

government monopolies

• Patents: Licenses that give inventors the exclusive right to sell their product for a certain period of time.​

• Industrial Monopolies: Rare cases where the government allows an industry to restrict the number of firms in the market.

Monopolistic competition

Many companies compete in an open market to sell products that are similar, but not identical.

Coniditions of Monopolistic Competition

1. Many Firms

2. Few Articial Barriers to entry

3. Slight control over price

4. differentiated products

nonprice competition

1. Characteristics of goods

2. locations of sale

3. service level

4. advertising image

oligopoly

A market dominated by a few, large profitable firms

Market power

The ability of a company to control prices and output

Predatory Pricing

Setting the market price below cost levels for short term to drive out competitors

Types of Resources

1. Natural

2. Captial

3. Labour

Natural resources

water, ocean, forests, minerals, climate

Captial resources

building, machinery, equipent, vehicles and technology

used in the production of final goods and services for customers

Labour resources

The mental and physical efforts of people in the production process​

Scarcity

unlmited need and wants but limited resources

opportunity cost

the value lost when resources are used for one purpose rather than the nect best alternative

Living Standards

the quality of life of people in a country

Types of Living Standards

1. Material

2. Non - material

Material living standards

measured by access to goods and services

law of demand

if price of a good increases the demand is decreased

law of supply

as price of a good increases more is supplied

non - material living standards

quality of life factors that are not related to money

• environment quality

factors that effect living standards

• employment

• education

• healthcare

• government services

• environmental quality

• inflation and cost of living

private goods and services

are depleteable and consumable in consumption

(i.e.Purchase & consumption by one person reduces the amount available for another person & a person can be legally stopped from consuming it if they didn’t pay for it)

public goods and services

are non-excludable and non-rivalrous (non-depletable) in consumption.​

A person who does not pay for the good (or service) cannot be excluded or stopped from consuming it and one person’s enjoyment/ consumption does not lesson another’s enjoyment.

common access resources

1. Non-excludable- anyone can utilise these resources without having to pay for them​

2. They are rivalrous in consumption- this means that when someone consumes it it reduces or affects the consumption of it by others.

role of government - stabilise the economy

Governments try to reduce the size of economic downturns/ booms i.e the level and pace of economic activity and try to meet their economic goals and of course- maintain and improve the wellbeing of the nation.​

Over time, economic activity moves in a cyclical pattern and has four main phases. ​

1. The expansion (recovery) phase- features?​

2. The peak (boom) phase- features?​

3. The contraction (slow down)phase- features?​

4. The trough (recession, depression)phase-features?

ethical consumerism

when businesses and consumers make choices that are good for people, animals, and the planet

factors that make businesses ethical

• use fair trade products

• support human rights - e.g. no child labour

• protect the environment - e.g. using environmentally friendly resources

• honest in advertising

• treat animals well - cruelty free

reasons businesses are ethical

• Builds trust with customers.

• Attracts people who care about doing the right thing

• Helps create a better world

unethical consumerism

when businesses care more about profit and ignore what’s right or fair.

factors that make businesses unethical

• Exploit workers (e.g. low pay, dangerous conditions, sweatshops).

• Use child labour.

• Pollute the environment .

• Lie in advertising

• Test on animals

• Avoid paying tax

consequences of unethical consumerism

• Damage to their reputation.

• Lose customers.

• Might get fined or face legal action.

• Hurts people, animals, and the planet.

competitive advantage

what makes a business better than its competitors. It gives customers a reason to choose that business over others

Types of Competitive Advantage

1. price advantage

2. quality/product advantage

3. customer service advantage

price advantage

offering lower prices than competitors

quality/product advantage

offering better quality or unique features

customer service advantage

giving excellent service that makes customers loyal

innovation

creating new ideas, products, or ways of doing things to improve the business

types of innovation

1. product innovation

2. process innovation

3. marketing innovation

product innovation

creating a new or improved product

process innovation

making the way businesses work more efficient

marketing innovation

finding new ways to promote products

connection between innovation and competitive advantage

innovation helps a business gain competitive advantage

types of factors influencing consumer decisions

• psychological

• sociocultural

• economic

• government

types of psychological factors

• perception

• motives

• attitude

• personality

factor - perception

• marketers must create a positive perception of their product in the mind of the consumer

• consumers will not usually purchase a product that they percieve as being of poor quality or inferior to similar brands

factor - motives

main motives that influence consumer choice include

• comfort

• taste

• amusement

• approval of others

advertising also attempts to influence an individuals motives to choose a product

factor - attitude

consumer attitude towards a business and its products generally influences the success or failure of the businesses’s marketing strategy

factor - personality

• only to some extent

for example, wanting to keep up with trends

types of sociocultural factors

• family and roles

• peer groups

• social class

• cultue and subculture

factor - family and roles

All of us occupy different roles within the family and groups in the wider community.

market research shows that most women still make buying decisions related to, for example, healthcare products, food and laundry supplies.

factor - peer groups

A consumer’s buying behaviour may change to be more in line with that person’s peer group, beliefs and attitudes.

factor - social class

he factors generally used to classify people are education, occupation and income. ​

Social class, therefore, influences the type, quality and quantity of products that a consumer buys.​

culture and subculture

Culture influences buying behaviour because it infiltrates all that we do in our everyday life. It determines what people wear, what and how they eat, and where and how they live. ​

Subcultures differentiate themselves from a larger culture to which they belong (for example, goths are a subculture.)

factors - economic

• Economic forces have an enormous impact on consumers’ willingness and ability to spend.

  During an economic boom, consumers are willing to spend because they feel secure about their jobs and source of income. ​

  During a recession, consumer confidence is low and consumer spending falls to a very low level. Consider current situation in Australian and global economy. 

government

Governments use economic policy measures to influence the level of economic activity.

Of more direct and immediate impact is the influence of government regulations. Laws dealing with misleading and deceptive advertising

marketing

It is the whole process of providing goods and services to satisfy the needs and wants of consumers at the right place and time, using the right promotions

The 4 P’s

• product

• price

• promotion

• place

Successful marketing needs to involve the following elements:​

• research: gathering information from potential consumers about their wants and needs​

• publicity: providing information about a new product or service​

• promotions: assisting the launch of products and services (for example, events)​

• advertising: promoting new behaviours (for example, anti-litter, Quit campaign, road safety programs)​

• evaluation: finding out the success of the product or campaign

target markets

the specific group of customers you are hoping to sell your products to

features of consumer rights

1. Right to Safe Products

2. Right to Accurate Information.

3. Right to Choose

4. Right to Repair, Replacement or Refund

5. Right to Fair Contracts

consumer guarantees

automatic and can’t be taken away.

warranties

extra promises that a busines can choose to make on top of the consumer guarantees

ACL

Australian Consumer Law

Australian Consumer Law

set of rules designed to protect consumers when they buy goods and services in Australia.

applies to all businesses and all consumers across all states and territories

when do consumers have rights

when they buy goods and services

ACL states that

Goods and services must:

• Be of acceptable quality (safe, lasting, and free from major defects)

• Match the description or sample shown

• Be fit for purpose (do what they are meant to do)

• Come with clear information and pricing

• Be delivered within a reasonable time

remedies for customers when businesses don’t follow ACL

• repair

• replacement

• refund

• cancel of a service

• compensation

blended marketing

business uses both traditional and digital marketing in tandem to promote their goods and services

why blended marketing

• Reaches more people - old and young

• Increases brand visibility across different platforms.

• Helps build trust with different types of customers.

blended marketing benefits

• Wider audience reach.

• Builds stronger brand awareness.

• More chances for customers to see the product.

open innovation

when a business gets ideas from outside the company to help them improve or create new products

why open innovations

• More creative ideas.

• Faster innovation (less time spent trying to figure everything out themselves).

• Uses other people’s expertise or technology.

benefits

• Saves money on research.

• Leads to better products.

• Encourages teamwork and community involvement.

social media in business

Social media in business means using platforms like Instagram, Facebook, TikTok, X (Twitter), and LinkedIn to:

• Promote products or services

• Communicate with customers

• Build brand awareness

• Advertise and run promotions

• Get customer feedback

advantages of social media in business

1. Low Cost Marketing

2. Reach a Large Audience

3. Direct Communication to Consumers

4. Targeted Advertising to target groups

5. Increased Brand Awareness

6. Encourages Customer Loyalty

disadvantages of social media in business

1. Negative Feedback is Public

2. Time Consuming

3. Risk of Hacking or Scams

4. Hard to Measure Success

5. Trends Change Fast

economic problem

unlimited wants and limited resources