Business Opportunities (Entrepreneurship, Business Plans, Markets, Demand/Supply, Market Research)

Enterprise

Another name for a business/ someone taking initiative

Rewards

Profit maximisation, profit satisfaction, independence, home-working, social entrepreneurship, ethical stance

Good Entrepreneurs

Innovative, Risk-Takers, Hard-Working, Organised, Determined, Launch new ideas in response to changing tastes/attitudes, try to spend as little money as possible

Bad Entrepreneurs

-Ignore risks, rush to bring in something new or make changes, spend freely

Benefits of entrepreneurs

- boost economic growth
- provide new job opportunities
- raises the productivity of firms and economies

Limitations of entrepreneurs

- face a substantial risk of failure
- may lead to lay-offs if existing firms close
- entrepreneurship can flourish in an over-regulated economy

Business plans

- a document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts

Purposes of a business plan

- secure external funding
- a focus to set targets (SMART)
- helps identify problems the business may face
- helps develop a healthy financial structure

Contents of a business plan

- executive summary
- product/service
- the market
- financial forecasts
- operations
- marketing strategy

Markets

A place where buyers and sellers come together to exchange goods and services

Niche marketing

Where a business targets a smaller segment of a larger market, where customers have specific needs and wants

Benefits and costs of niche markets

Benefits
- less competition
- can often charge a higher price
Costs
- lack of economies of scale
- vulnerable to market changes

Mass marketing

Where a business sells into the largest part of the market, where there are many similar products offered by competitors

Mass market

- customer needs and wants are less specific
- higher production output + capacity + potential for EofS
- success usually associated with low-cost operation
- widest customer base

Mass market aims

- create products with universal appeal
- build strong brands
- exploit EofS
- largest market segment

Market size

Measured by either value or volume, market share per company
- indicates the potential sales for a firm

Market share

- explains how the overall market is split between the existing competitors
- based on market value
- good indicator of competitive advantage

Market growth

can be calculated using either market sales or volume
- a key monitor for existing + potential market entrants

Market Segmentation

the process of dividing a market into groups that reflect different customer needs and wants
A segment - a group of customers who share the same characteristics (demographic/income/geographical/behavioural)

Benefits of Segmentation

- focuses resources on parts of the market most likely to succeed
- allows a business to grow share in markets
- helps with new product development - focused on needs of customers in the segment

Drawbacks of segmentation

Higher sales leads to...

more customers - better customer service - more competitive

monopoly, oligopoly, monopolistic competition, perfect competition

no of businesses in the market increases
competition increases

Monolopy

A single producer within a market
- any business with over 25% of the market
- price makers

Oligopoly

Few suppliers, many buyers
- strong brand identity and loyalty
- only a few businesses dominate the market

Monopolistic competition

Many buyers, many suppliers
- a large number of relatively small businesses
- weak brand loyalty
- products are similar but differentiated from each other
- few barriers to entry

Perfect competition

Many buyers, many suppliers, perfect knowledge
- the goods sold are homogeneous
- large number of businesses
- equal access to technology
- price takers
- no barriers to entry

Global markets

- All about selling goods or services to overseas markets

Advantages of global markets

- Higher earnings
- Spread risks
- Economies of scale

Trade markets

The marketing role that focuses on selling + supplying to distributors, retailers, wholesalers, and other supply chain businesses instead of the consumer
- B2B - Business to business
- B2C - Business to consumers

Demand

The quantity of something that consumers are willing and able to buy at a given price in a period of time
The basic law of demand is that demand varies inversely with price \-- lower prices make products more affordable for customers

Causes of changes in demand

Price, Income, Fashions, Advertising, Seasonality, External Shocks, Demographic Change

Seasonal factors

For most products there will be seasonal peaks and troughs in production and/or sales

Demand shifts right

An increase in demand shifts the demand curve to the right, and raises price and increase the quantity supply.

Demand shifts to the left

A decrease in demand shifts the demand curve to the left and reduces price and decreases the quantity supplied.

Income effect

A fall in price increases the purchasing power of customers
- demand rises when incomes increase

Subsitution effect

- A fall in the price of good X makes it relatively cheaper compared to substitutes
- Some customers will switch to good X leading to higher demand
- much depends on whether the products are close substitutes

Supply

the quantity of a good or service that a producer is willing and able to supply onto the market at a given rate in a given time period
The basic law of supply is that as the price of a product rises, so businesses expand supply to the market

Inferring supply

A rise in the market price brings about an expansion of supply
A movement along the supply chain is caused solely by a change in price

Main causes for change in supply

- cost of production - lower unit costs mean that a business can supply more at each price - higher unit costs cause an inward shift of supply
- subsidies - any form of government support - financial or otherwise - offered to producers and occasionally consumers

Supply shifts to the right

An increase in supply shifts the supply curve to the right, which reduces price and increases the quantity demanded.

Supply shifts to the left

A decrease in supply shifts the supply curve to the left, which raises price but reduces the quantity demand.

Inelasticity

Low response in quantity of demand to change of price

Inelastic qualities

- strong brand loyalty
- lack of rivals and substitutes
- high differentiation
- quality product

Elasticity

Small change in price, bigger change in quantity of demand

Elastic qualities

- large no. of rivals and substitutes
- homogeneous products
- Low brand loyalty

income elasticity of demand

The change in quality of demand when income changes

Market Research

The activity of gathering information about consumers' needs and preferences and the level of competition

Orientation

Product - Business develops products based on what it is good at doing
Market - Business responds to consumer needs + wants + designs products accordingly - markets are much more dynamic and customers are getting more demanding

Why is market research important?

- customers differ in terms of quantities they buy, time and place they buy, amount they are willing or able to pay
- allows businesses to see dimensions of the market, competitor strategies, market sgements

Primary research

Data collected first hand for a specific research purpose
eg observation, surveys, focus groups, experiments

Primary research benefits

more accurate, up to date, specific to needs, effective at collecting qualitative data, direct customer contact, kept private, more detailed insights

Primary research disadvantages

Costly, time consuming, risk of survey bias, sampling may not be representative

Secondary Research

Data that already exists and which has been collected for a different purpose
eg google, market research reports, competitor websites, trade associations

Secondary Research Advantages

Often free and easy to obtain, good source of market insights, quick to access and use

Quantitative Research

research that collects and reports data primarily in numerical form

Quantitative Research benefits

data relatively easy to analyse, provides insights into relevant trends, can be compared with data from other sources

Quantitative Research drawbacks

Focuses on data rather than explaining why things happen, may lack reliability if sample size and method isn't valid

Qualitative Research

Research that is based on opinions, attitudes, beliefs and intentions

Qualitative Research benefits

essential for important new product development and launches, focused on customer needs, wants and expectations, can highlight issues that need addressing

Qualitative Research Drawbacks

expensive to collect and analyse, based on opinions so may be biased

Sampling

The gathering of data from a sample of respondents, the result of which should be representative of the population as a whole

Sampling benefits

can provide useful research insights, can reduce risk and costs, flexible and relatively quick

Sampling Drawbacks

risk of sample being unrepresentative of population, risk of bias in research questions, less useful in markets where tastes and preferences change a lot

IT (secondary research) benefits

quick and automated, data can be linked, reduced need for sampling

Social media

- source of primary and secondary research
- software can quickly highlight customers opinions
- surveys are easy to set up and analyse results in real-time