Business and Entrepreneurship Unit 2

Qualitative

descriptive information, expressed in terms of language rather than numerical values, that focuses on qualities, characteristics, and meanings, often collected through interviews, observations, and open-ended questions

e.g. what are the strengths and weaknesses of competitors?

e.g. what are customers looking for in their product?

Quantitative Data

information that can be counted, measured, or given a numerical value, such as height, weight, age, or test scores

e.g. how many competitors are in the market?

e.g. what price are customers willing to pay for the good or service?

Unique Value Proposition

What customers? - who are your end users

What needs? - what products, features or services

What relative price? - premium, parity, discount

These are all the things you have to consider when creating a product.

Why will people purchase your product over competitors?

Who is your target market, where are they and how will you appeal to that specific area?

Purpose of the UVP

clearly and concisely communicate to your target audience the unique benefits and value a product or service offers, differentiating it from competitors and convincing customers to choose it

helps decide your target market, product and price

Methods of maintaining and creating a competitive advantage

• Innovative ways of managing the workforce

• Increased productivity

• Research and development

• Advertising and marketing

• Offering low-cost products

Why should you gain a competitive advantage?

• Stay in the business

• Meet the challenging demands of a competitive global market

• Achieve efficiencies

• Lower cost and increase profit margins

• Fulfill a social need

• Fulfill a market need

Market Share

Percentage of total sales in an industry generated by a particular company. It is calculated by dividing the company's sales by the total sales of the industry over a specific period of time

Revenue

Total amount of income generated by the sales of goods of services related to the company's primary operations

Bankrupt

Bankruptcy is a legal statue of a person for organisation that cannot repay its debts

Price Conscious

Being price conscious means being aware of and sensitive to the prices of goods and services. Price-conscious consumers often seek to purchase products that offer the best value for money, comparing prices before making a purchase

Expense

Outflow of money or assets from an individual or company to another person or group to pay for an item or service. It represents the cost of operations that a company incurs to generate revenue.

UVP - Customer

Who will be using the product?

Who will be purchasing the product?

Who are your end users and how are you going to reach them?

UPV - Needs

What do the customers actually need?

What do they want to gain from the product/how will they benefit?

If there is a specific customer, what specific aspects of the product will need to be included for them to benefit from the product?

UPV - Price

Premium - more expensive than competitors (buy for better quality)

Parity - same price as your competitors (buy for aesthetic, band name etc)

Discount - cheaper than competitors (buy for convenience etc)

Types of businesses

Sole Trader

Partnership

Company

Sole Trader

• Self-employed person who owns and runs their business as an individual

• Legally responsible for all aspects of the business including debts and losses

• You can hire people/staff if you want to

• The individual is responsible for all business assets and liabilities

Partnership

• This is where between 2 and 20 people go into a business together

• They can be limited or general, depending on the liability of the partners

• General partnership: each partner is responsible for the management of their business and they have an unlimited liability for the debts and obligations that may occur

• Limited partnership: one or more partners have limited liability for the debts and obligations of the business, while the rest of the partners have unlimited liability. The limited partners liability will be in proportion to their investment in the business (no maximum number of limited partners)

• Incorporated limited partnerships: special type of limited partnership, mainly used by businesses involved in high-risk venture capital projects.

Comapny

• Usually have members (shareholders) who own the company and a director who runs it, or an independent contractor can also set up a 'one-person company' with a sole director and member

• Companies can be publicly listed, which means the public can buy shares to invest in the company

• A company is a separate legal entity. This means the company has the same rights as a natural person and can incur debt, sue and be sued. This takes the liability off you as a company owner, but a company is more expensive to register and more complicated to run, so make sure it’s the best structure for your needs.

Segmentation in the market

Segmentation is a process of categorising together like characteristics or behaviours that will distinguish

1. Geographic - needs, preferences, interests, based on location

2. Demographic - age, education, income, family size, race, gender, nationality and occupation

3. Psychographic - lifestyle, personality traits, characteristics, values, interests

4. Behavioural - purchase, lifestyle, consumption usage

Why should you use a target market?

By focusing on a target group, the business can better satisfy their needs and wants and work to increase sales and profit, which they can do by

• Use resources more effectively, making marketing campaigns more cost effective and time efficient

• Use promotional material that is more relevant and more likely to be noticed

• Better understand the buying behaviour of the target market

• Collect data more effectively and make comparisons within the target market over time

• Refine the marketing strategies used to influence customer service

Types of market research

• Primary research: directly gathered (new data) from the source, you gather it

• Secondary research: analysing existing data

Both qualitative and quantitative research methods can be used

Target Market

a particular group of consumers at which a product or service is aimed

Once a market is segmented, a business will select a target market (who do you want to appeal towards)

• Distinguish among the different segments that make up the market

• Choose one or more segments on which to focus on

  

Steps to conduct effective market research

1. Identify your objective - what do you need to know? (customer needs, market size, competition)

2. Define your target market - who are your potential customers? (demographic, location, behaviour)

3. Choose research methods - primary research (survey, interview, focus groups) or secondary research (industry reports, academic papers, competitor analysis)

4. Collect data - gather information systematically from your chosen sources

5. Analyse data - identify trends, patterns, and insights from the collected data

6. Make informed decisions - use the insights to shape your business strategy (product development, marketing strategies)

Primary Research

Examples- surveys, interviews, focus groups

Benefits- tailored to your needs, more recent, reliable

Limitations- More expensive, time consuming

Secondary Research

Examples- industry reports, academic papers, competitor analysis

Benefits- quicker, cheaper, more accessible

Limitations- not as relevant or reliable

Pareto Principle

80% of outcomes come from 20% of causes

80% of revenue come from  20% of customers (most of their profit come from their loyal and regular customers) This shows that your target market is important as you need a small group of loyal customers for your business.

consumer trends

• Healthy lifestyle: impacting food and leisure

• Environmental concerns: impacting energy usage, packaging type, cars, leisure and food

• Shopping style: shift from in person services to online (e.g. paper to online menus)

Consumer tastes and preferences change, especially as their lifestyles change. Markets also spend a lot of time analysing these social trends and change closely to ensure that their product doesn't become redundant in the change, (can see what is trending on search engines).

types of market segmentation

• Psychological influence: internal factors that influence a consumer - e.g. motive, perception, attitude and personality.

• Sociocultural influence: external factors that influence a consumer - e.g. family, peer group, social class, culture and sub-culture

• Economic influence: consumers' willingness and ability to spend

• Government Influence: economic policy, government regulation and legislation

define market segmentation

process of dividing a consumer or business market into meaningful sub-groups of current or potential customers known as segments. Its purpose is to identify profitable and growing segments that a company can target with distinct marketing strategies.

potential business loctions

• Shopping centre

• Shopping strips

• Home

• Online

• Industrial

facts to consider when choosing a business location

visibility

costs

proximity to customers

proximity to supplies

business location factor - proximity to competitors

Proximity to competitors: a location with too many similar businesses may limit business success, however a complementary business can assist in bringing new customers to the business. For example, an electrical store and a furniture store, or a men's clothing store and a shoe store may attract similar customers.

business location factor - proximity to customers and supplies

A manufacturing business needs suppliers of raw materials to have good access, however a retail business requires high levels of 'foot traffic' and good parking/transport options for customers/

business location factor - cost

Cost: the cost of rent or purchase of the physical space (if online, cost is mostly ads)

business location factor - visability

Visibility: potential customers must be able to see and easily access your business, especially if your business is a service or retail business. Manufacturing or wholesale businesses so not require high visibility (related to how much you pay for advertising in an online business)

shopping center as a business location

Usually suited to specialist retail businesses, supermarkets, takeaway restaurants, banks and pharmacies

Advantages	Disadvantages
More attractive experiences	Little space
More accessible parking	Very expensive
High visibility	Lots of competitors
	Must remain open during shopping centre hours

shopping strip as a business location

Usually suited to higher-end retail businesses, cafes, restaurants

Advantages	Disadvantages
High visibility for passing traffic	Limited weather protection
High costs, but less than in a shopping centre	Lack of parking
Often located near public transport
Reliable customers for local residents

home based business as business location

suited to service businesses (e.g. hairdressers, plumbers, electricians)

Advantages	Disadvantages
Choose your own hours	No visibility, need to pay for advertising
Do not need to dedicate themselves to a specific location	Less living space in the house as the business needs space
Employees can be family members, which makes the business accessible
Less travel time
No cost for business location

online businesses as the location

Advantages	Disadvantages
Wider range of customers (anyone with internet has access to the business)	Less visibility, advertising is needed to gain exposure and customers
Access from anywhere, anytime	Customers cannot try the products before purchasing it
Can be quicker then establishing a business in a store
No rent needed

sells products through ecommerce or provide online servies

business models → Online Business Model

• An online business is one which does not have a physical business premises or storefront

• Carries out its business activities, access customers and sells its goods/services purely online though eCommerce

• Approximately 75% of all Australian Businesses generate sales revenue through eCommerce each year

business models → Bricks and Mortar

• More 'traditional' model for interacting and transacting with customers in a physical store or office

• Advantage of more direct face-to-face customer interaction, making it easier to build a relationship and loyalty with the customer base

• Customers can see, touch and try the products prior to purchasing them, which helps build a trusted brand

business models - Importer/Exporter

• Buy and sell products across international borders use an importer or exporter business model

• Globalisation: the interaction among companies, governments, etc.

• This has enabled an increase in the importing/exporting of goods and services between countries

• Importing enables access to materials and other goods and services that aren't available in Australia

business models → franchise

• A business that grants another person the right to operate under its name, uses its business systems and sells its goods and services

• A franchise licenses its branding, products and business processed to franchisees

• The franchisee typically pays the franchisor an upfront fee for the business's licensing, as well as regular proportional fees and a percentage of the revenue each month

• Agreement sets out all of the conditions and responsibilities of the franchisee and franchisor to ensure the rights are clear for both parties

business resources → capital resources

Capital Resources

• Tools, buildings, machinery etc, used by a business to create its final goods/services

• Used by businesses in the production of many goods and services

• e.g. electricity grid system, commercial buildings, highways, schools, dams and ports

business resources → labour resources

Labour Resources

• People who provide their knowledge, skills, effort and experience to a business

• Needed to produce particular goods and services

• e.g. skills and knowledge of doctors, builders and business people (expert in the field)

business resources → natural resources

Natural Resources

• Naturally occurring material of asset in natural

• From the environment or are unprocessed

• Used in the protection of many types of goods such as crops, as well as services

• e.g. rainfall, climate conditions, mineral deposits, oceans and forests

types of business resources

labour, natural and capital resources

methods of funding

equity

• The money contributed to a business by its owner at the start and also during the life of the business (generally for expansion)

• This is often in return for a partial ownership

debt capital

• Any form of finance that comes from external institutions (generally funded from banks, other financial institutions, government and suppliers)

• It MUST be paid back over time with interest

• If you can't pay back a debt, you face bankruptcy

e.g. mortgages, loans, leases and after pay

grants

• Used to develop a business

• Obtained through federal and state governments (e.g. small business grants)

• You must meet certain conditions to be eligible for a grant

• Government websites show types of funding businesses can apply for

• Don’t have to pay back

types of equity finance

1. Self-funding (bootstrapping)

• Business using their own personal finance to fund the business

• High risk that the business with fail

• The entirety of the owner's personal finances will be at risk

• This is also limited by the amount of personal finance available. 

  2. Family of friends

• Family and friends can provide financing for the business, who often share part of the profit or partial ownership in the business in return

• This can be easy and quick way to obtain finances for the business but it can also be risky

3. Private investors

• The investors may contribute to the business in return for a share in the business's profit and equity

• e.g. shark tank

4. Shares

• A business may raise funds by selling shares in the business

• Publicly listed companies can sell shares which allows investors to purchase a percentage of the company in exchange for profit

• Private investors will lose control of the business and control will be distributed to the board of directors, rather than a single individual.

5. Crowdfunding

• Using online social networks to raise funds

• Quick way to get finance to startup and gain guidance and feedback on the idea

• There may be difficulty in getting the idea off the ground without sufficient support and a failure to deliver a product after gaining funding in significant damage towards the business reputation

• e.g. gofundme and pateron