Theme 1 business

Theme 1 topics

mass market

business sells to large market; universal appeal to reach wide audience

advantage of mass market

associated with economies of scale

disadvantage of mass market

high competition levels

niche market

smaller segment of a larger market, specific customer wants and needs

advantages of niche markets

clear focus, can charge premium prices

disadvantages of niche markets

vunerable to market change

market share

total company sales/total market sales x 100

dynamic market

market subject to continual and rapid change

factors of dynamic markets

changing customer tastes, technology changes, new market entrants

implications operating in dynamic market

adaption and changes, higher costs, opportunities and threats

competiton

rivalry between sellers for the markets avalible demand

direct competiton

rivalry from same products

indirect competition

rivalry for same customers

competitive advantage

ability to add more value than rivals through better value. quality or service

gain competitive advantage:

more efficient, higher quality, more innovation, better customer service

value proposition: IKEA

offer more for less

value proposition: Rolex

offer more for more

value proposition: iPhone

offer more for the same

value proposition: Primark

offer less for less

product differentiation

offering something different from competitors and if customers perceive this as desirable

USP

unique selling point

added value

difference between selling price and cost

intangible value

adding value through building a brand

differentiation requirements

delivers needs and wants, distinctive, hard to copy, visible to customers

ways to add value

build brand, excellent customer service, features customers want

transformation process

Process between inputs and outputs where value is added

risk

the possibility of what can go wrong

uncertainty

the unpredictable outcome

Primary research

the collection of original data . It involves gathering information directly from sources rather than relying on existing data or information. Collected with specific research in mind

Secondary research

the process of collecting and analysing information that has already been gathered by someone else and already exists

market segmentation

dividing market into smaller sections of needs and wants

* demographic
* behavioural
* geographic
* psychological

product orientation

product most important factor when preparing for a market

market orientation

consumer most important factor when preparing for market

market mapping

can be used to find gaps in the market

demand

level of interest customers have in buying a product

factors affecting demand

* changing prices of substitutes
* change in customer incomes
* trends
* advertising
* seasonality

Supply

quantity of product that producers are able to deliver

Supply chain

how each part of producing a product works from material to customer

Supply curve

shows are supply increases when customers will pay more

factors affecting supply

* change in cost of production
* new technology
* external shock
* government subsidies

market equilibrium

point where demand curve meets supply curve

equilibrium price

amount customers want to buy = amount producers want to sell

disequilibrium

not a stable price and quantity

excess supply

difference between quantity demanded and quantity supplied

factors affecting PED

* substitutes
* brand loyalty
* habit

PED more than one

price elastic

PED less than one

price inelastic

\+ YED

normal/luxury good - income relationship with demand

\- YED

inferior good - poor=buy more

factors affecting YED

* degree of necessity
* disposable income
* substitutes

Design mix

finding the right balance between desirability, affordability and reliability

changes in design mix to reflect social trends

* sustainability
* waste
* recycling
* ethical sourcing

branding and promotion

generating customer awareness, interest and desire

digital coms + -

\+ specific customer segments can be targeted

\- can cut off older audiences

sponsorship + -

\+ build brand awareness

\- high profile = expensive

public relations + -

\+ increase customer loyalty

\- time consuming

advertising + -

\+ creates specific brand image

\- expensive

sales promotion + -

\+ clear stock, impulsive purchases

\- reduce full price sales

personal selling + -

\+ build relationship, personalised

\- increase costs; staff and traini

benefits of strong brand

* added value
* ability to charge premium prices
* reduce PED- loyal to brand

ways to build brand

* USP
* advertising
* sponsorship
* \

corporate branding

use of company name or logo to promote all products

Product Branding

use of unique name, design, symbol for specific product

Own brand branding

use of retailer name to promote a product or service

Cost plus

cost of production plus mark up

Price skimming

set high then lower over time to maintain demand

Penetration

set low to gain market share

Predatory

low enough prices to drive rivals out of business

Competitive pricing

set at market level or at discount to market

Psychological

$0.99

factoring influencing pricing

* number of USP
* PED
* level of competition
* brand strength
* product life cycle
* cost of production

four stage distribution

producer>wholesaler>retailer>customer

three stage distribution

producer>retailer>customer

two stage distribution

producer>consumer

Extension strategy Product

* improvements
* line extension
* repositioning

extension strategy promotion

* change in advertising
* price promotion
* sales promotion

how to develop customer loyalty

* customer service
* loyalty cards
* saver schemes

staff as assest

bring knowledge, skills and expertise

staff as cost

staffing costs are one of the largest costs business face

multiskilling

process of training workforce to fulfil multiple roles

outsourcing

moving part of the company external for someone else to complete

Flexible working

no more 9-5, can respond to customer 24/7

dismissal

termination of employment by employer

Redundancy

job is no longer avalible- reduce workforce size

internal recruitment

filling vacancies from existing workforce

External recruitment

filling vacancies from outside the business

recruitment costs

* process of hiring
* advertising
* recruiting
* interviewing

training costs

* trainers
* materials
* facilities

selection costs

* background checks
* visa costs

on-the-job training

training while working

off-the-job training

training outside of the workplace

induction training

training a new employee recieves as intro to company and role

chain of command

formal line of authority, who reports to whom

span of control

number of employees a manager can effectively manage

centralised

decison making authority concentrated at top

decentralised

decison making authority distributed through organisation

tall organisational structure

multiple levels of management, centralised

flat organisational structure

fewer management levels, decentralised, short chain of command

matrix organisational structure

built around specific products

intrinsic motivation

from within a person