Business OCR

What is an Entrepreneur?

Someone who takes the financial risk to set up and run a new business, bringing resources together to take advantage of a clear business opportunity.

Why is starting a business highly risky?

New businesses can easily fail, and not everyone has the right motives or characteristics.

Name the 7 key characteristics of a successful entrepreneur.

Confidence
Creativity
Determination
Innovative
Risk taking
Negotiation
Communication.

Define Confidence.

Being confident is to set up a business, gain investment from banks/investors, and be able to sell to customers. Without investment and customers, a business will struggle to succeed.

Define Creativity.

Creativity is to be able to come up with new business ideas that are unique and will work in the area. Being unique will allow the business to be more successful.

Define Determination.

Being determined is when you put in extra hours of work that can be the difference between being successful or not. They will not have a boss telling them what to do, therefore, they must be determined to make sure all jobs are complete.

Define Innovation.

Innovative is to be able to think on their foot. Coming up with solution to sudden problems and keep the customer interested in the business by keeping the business relevant.

Define Negotiation.

Negotiation is being able to make deals with suppliers to get discounts and reduce costs. Negotiate with investors to get funding, and with customers to make sales. being able to convince others is very important for success.

Define Communication.

Communication is to be able to deal with customers, suppliers, and investors professionally. Being an effective communicator will give off a professional image and allow the business to be seen more positively by customers, investors and suppliers.

Define Risk Taking.

Risk taking is when entrepreneurs risk losing their own savings to start or support a business. Also they may have left their old jobs and losing secure wages to start a business.

What are the rewards for risk taking and running a successful business?

Financial
Independence
Self-satisfaction
Making a difference/change

Define the financial reward.

Running a business allows the entrepreneur to eventually make more sales, profit, and can pay themselves higher wages than working for an alternative business.

Define the independence reward.

Entrepreneurs are their own boss, they decide on the working hours, the jobs to complete and how to run the business.

Define the reward of making a difference/change.

Lots of entrepreneurs set up businesses to make their community / the world a better place. For example, creating more opportunities to young people, creating environmentally friendly alternatives.

Define the reward of self-satisfaction.

The joy that an entrepreneur will gain in coming up with a business idea and making money from it will get them a lot of self-satisfaction. They may become role model in the local area.

What are the risks when trying to set up and run a business?

Financial
Work-life Balance

Health / Wellbeing
Personal Relationships

Define the Financial Risk when trying to set up a business.

Financial - Entrepreneurs will use their savings to fund a new business. They may also have to give up their old job to set up a business full-time, losing guaranteed wages. There is no guarantee the business will be a success.

Define the Work-life Balance risk when trying to set up a business.

Entrepreneurs work many more hours running their own business than working for someone else. Even when hiring employees to share the workload, they must make sure all employees are doing their jobs correctly, increasing workload.

Define the Health / Well-being Risk when trying to set up a business.

Entrepreneurs work many more hours running their own business than working for someone else with so many more tasks to complete. They will experience stress and worries if the business is failing to cover it’s costs / pay it’s bills.

Define the Personal Relationships Risk when trying to set up a business.

Having less time for friends and family because of continuously running the business can affect personal relationships of the entrepreneur.

What is the purpose of market research?

Market Research involves collecting information about customers, competitors and trends in the market.

Why complete market research?

1) To understand customers views that will help the business develop a product /service that meets their needs at a suitable price

2) To understand competitors and help the business spot a gap in the market to create a product / service better than the rivals

When should a business complete market research?

1) A new business should research their potential customers and competitors before launching the business in order to help plan for a successful business start-up that is different, better and suitable for its customers.

2) Businesses should regularly conduct research to find out changes in customer opinions and competitor actions to keep on top and stay relevant.

15×15?

225

What is primary market research?

Market research that involves collecting brand new, first-hand information for a specific business purpose.

What are Questionnaires, Surveys and Interviews?

Methods where workers ask potential customers quantitive and qualitative questions to get an idea of their opinions.

What is a Focus Group?

Inviting a small group of potential customers to a meeting room to discuss a business idea or product, providing detailed qualitative feedback.

What are Observations?

Watching customer behaviour and habits rather thank asking direct questions. Only collects quantitive feedback, not opinions.

Questionnaires vs Surveys.

Questionnaire - A specific set of written questions used as a tool to gather information from an individual respondent.

Survey - The complete process of collecting, aggregating, and analysing data from a group of people to identify trends.

What is Test Marketing / Pilots?

Releasing or selling a product/service in a small, limited area first to gather feedback and make improvements before a full launch.

What are Customer Trials?

Giving a small group of customers a product or service to try out so they can recommend detailed qualitative improvements.

What are the main advantages and disadvantages of primary research?

Advantages - It is brand new, completely up to date and highly specific to business’s exact needs.

Disadvantages - it is time-consuming, expensive and requires a large sample size to truly be reliable

Define secondary research.

Using information that has already been collected by someone else for a different purpose.

What kind of data do Government publications / statistics provide?

Monthly reports covering statistics like income levels, unemployment numbers, and regional business trends.

What is the main limitation of government statistics?

They are only quantitative and do not give the reasons why changes have happened.

What information can a business gain from Competitor’s data?

Information on products sold and their prices, helping the business differentiate itself.

What is Internal Data in secondary research?

A business’s own past records, such as previous sales figures, past adverting campaigns and promotion strategies.

Why should a business be caution when using Internal Data?

Customers opinions may have changed, meaning the current market could be very different from past data.

How do books, newspapers and trade magazines help a business?

They provide previous research and stories by journalists/professionals to help understand past trends in their industry.

What is Mintel?

A commercial company that produces and sells detailed analyses of consumer and industry trends.

What’s a consumer?

A consumer in business is an individual or group who uses or consumes a product or service to satisfy personal, family, or household needs

What is a major benefit and a major drawback of using Mintel reports?

Benefit: Uses large sample sizes/areas over a long timeline, making it great for trend analysis.

Drawback: It can be very expensive for businesses to purchase

Exam Tip: Why is just writing the internet not credited in the exam?

Too generic, you must make a specific reference to types of internet websites (competitor’s websites, mintel)

What are the advantage of secondary research?

Cheaper and much more easier to access because the research has already been carried out. It’s useful for businesses who lack the time or money to do their own research.

What are the disadvantage of secondary research?

It can be out of date and may not reflex the current market. It is not specific to the business as the research was carried out for a different purpose.

Where can the results of the research findings be collected?

Internally (inside the business) or Externally (outside the business).

Example of internal data:

The results of business’s own surveys or sales data.

Examples of externally collected data:

Government reports and Mintel.

Data can be:

Quantitative or qualitative.

Give an advantage of quantitative data.

It is easy to compare results between he options customers selected, and the graphs can be created to show these results.

Give a disadvantage of quantitative data.

it does not tell us why customers selected that answer.

What is qualitative data?

Research based on opinions (open ended questions).

An advantage of qualitative data is:

The answers are more detailed and tell the business why the customer answers in a particular way.

Give a disadvantage of qualitative data.

It is difficult to compare the results, and the results cannot be easily put into a graph because every customer can give a completely different answer to each other.

What is market segmentation?

Breaking down customers into different groups with similar characteristics.

What are different types of market segments?

Age

Gender

Occupation

Income

Location

Lifestyle (different habits/preferences of people)

Which type of market segmentation includes Age, Gender, Occupation, and Income?

Demographic Segmentation (Characteristics focused on who the customer is).

Which type of market segmentation focuses on Lifestyle?

Psychographic Segmentation (Characteristics focused on why they buy, including hobbies, values, and personality)

Which type of market segmentation focuses on Location?

Geographic Segmentation (Characteristics focused on where the customer is, like country, city size, or climate).

Benefits of Market Segmentation:

Helps identify and meet specific customer needs better, which will make customers return to the business if their needs are met, increasing sales and profit.

Attracting more customer segments will increase the market share of the business and it allows the business to create more specific promotions to attract different market segments.

Fixed Costs

Costs which stay the same no matter what.

What are the examples of fixed costs?

Rent (to the landlord)
Insurance (property insurance and liability insurance)
Advertising
Loan interest
Salaries (managers, office staff and accountants)
Utilities (lighting, heating, water and phone bills)

What are variable costs?

Variable costs are expenses that go up when you make or sell more, and go down when you make or sell less. They can change.

Give examples of variable costs.

Raw materials / Components

Packaging

Wages (workers are paid wages, the more hours worked, the more they get paid)

How do you calculate Total costs?

Total Costs = Total fixed costs + Total variable costs.

Calculate Variable Costs

Variable Costs = Number of Units Produced x Cost per unit

How do you calculate the fixed cost per unit?

Fixed cost per unit = Total fixed costs / Number of units produced.

How do you calculate the variable cost per unit?

Variable Cost per unit = Total variable costs / number of units produced.

How do you calculate the total cost per unit?

Total cost per unit (Average Cost) = Total costs / Number of units produced.

What is total revenue?

Total revenue is all the money received from the sale of the goods/services.

How do you calculate total revenue?

Total revenue = Selling price per unit x Number of sales.

What is profit?

The total money a business makes one call costs have been deducted.

How do you calculate profit?

Profit = Total Revenue _ Total Cost
(price x number of sales)

What is a loss?

When a business’s costs are higher than it’s revenue, so the business has lost money rather than made a profit.

What is profit per unit?

The total money a business makes per sale once costs have been deducted.

Calculate profit per unit.

Profit per unit = Selling price (revenue per unit) - Total costs per unit

What is break even?

A financial concept where it calculates exactly how many goods/services a business neds to sell to cover their costs.

How do you calculate the break even formula?

On a line define where the break-even point (break even output) is:

It’s where the total revenue and total cost lines meet.

How does a break even graph show loss and profit?

How is break-even information used by an entrepreneur?

It helps the entrepreneur work out whether their business idea has a realistic chance of being successful. It also provides the minimum sales target for the business and the business can re-calculate the break even if the costs or prices change.

What is the key role of marketing

To identify and satisfy customer needs by carrying out market research and designing an effective marketing mix.

What is the marketing mix?

The 4P’s. The 4 key elements of marketing to gain as many customers as possible.

What are the 4 P’s?

Product - What shall we sell?
Price - How much shall we charge?

Place - How do we get the product to the customer?

Promotion - How shall we let customers know about the product?

What are the problems with the marketing mix?

An effective marketing mix needs all the elements. A business could have a good product but if it’s too expensive (price), sold in the wrong place (location), or nobody knows about it (promotion), the business will not be successful.

When designing a marketing mix what should it be?

Every element needs to be appropriate fro the customer the business is targeting/

Explain one benefit to a small business of having an integrated marketing mix.

• Point: All 4 Ps work together to match customer expectations.

• Because: Promotion brings customers in, while the right price and product secure the sale.

• Leading to: An increase in total sales volume.

• Therefore: Maximising the business's overall revenue and profit.

What is digital advertising?

Promoting the business using online methods.

What is non-digital advertising?

Promoting the business using traditional methods (not online)

Give examples of non-digital methods.

Leaflets

Newspapers

Posters/Billboards

Give an advantage and disadvantage of leaflets.

Advantage: Can be delivered to specific people easily and is cheap to create.

Disadvantage: They contain only pictures and words, they aren’t interactive or video based to demonstrate the product in action. They are also often ignored and seen as junk.new

Give an advantage and disadvantage of newspapers.

Advantage: Can reach large audiences, can be accessed very easily and are more trusted by consumers.

Disadvantage: Younger people use online sources rather than newspapers, and the quality of the newspaper print is often poor or has low visual appeal.

Give an advantage and disadvantage of magazines.

Advantage: They have a specific reader so adverts can be targeted directly to specific audience. They have better quality compared to newspapers.

Disadvantage: Magazines adverts may not be read as the consumers buy the magazines for the stories, they contain just pictures and not words.

Give an advantage and disadvantage of posters/billboards.

Advantages: They can be placed in areas with lots of potential customers such as near bus and train stations which people will look at whilst waiting.

Disadvantages: They contain mainly pictures and are not interactive to show the product in action, people may walk or drive past them fast so they don’t look at them.

Give examples of digital methods.

Social media

Vlogs/Blogs

Podcast

SMS text message

Online banners / pop-ups

Websites

Give an advantage and disadvantage of social media.

Advantage:

Low cost

Multiple formats (videos, images, reviews)

Real-time customer social proof

Disadvantage:

Zero control over influencer lifestyles (potential brand damage

Highly dependant on building/ having a follower base

Give advantages and disadvantages of websites.

Advantages:

Full control over the content

Customers are more likely to trust and purchase from a website

Disadvantages:

Business has to pay for a website and can take time to keep it up to date

May take a while for it to b popular

Give advantages and disadvantages of online banners/ pop-ups

Advantages:

Can be displayed in video or other forms to attract customers.

Cookies track the website that customers visit so the pop-ups are targeted to people who visit similar websites

Disadvantages:

Annoying

Blocked by customers so they don’t appear on the websites

Give advantages and disadvantages of SMS text messages.

Advantage:

Quick to receive and can be sent to thousands instantly

Disadvantage:

May ignore the messages and consider it junk, the business will also need to get all the customer’s details which is pricey and time consuming.

Give advantages and disadvantages of podcasts.

Advantages:

They can be streamed and the audience can ask questions in the podcast

They are more personal than written communication as you can hear the business being represented instead of reading a written promotion.

Disadvantages

They are not visual and they can’t demonstrate the product like a video post.

It can be difficult to attract customers to listen as there’s so many podcasts.