1
Q
what is a mass market?
A
An unsegmented market in which products are offered to every customer through mass retailers or independent stores and promoted through mass media.
2
Q
what is a niche market?
A
The subset of the market in which specialist products are offered to small group of customers.
3
Q
characteristics of a mass market?
A
- fast moving consumer goods
- can produce large quantities at lower unit cost by exploiting eos
- customers form majority of market
- needs and wants more general
- higher output and capacity
4
Q
characteristics of a niche market?
A
- sells to small consumer groups w specific needs
- easier to focus on needs
- able to charge prem prices
- loyal customers
- higher profit margins
- lack economies of scale
- can attract competition if successful
5
Q
market size?
A
- value: total amount spent by customers buying products
- volume: physical quantity of products which are produced and sold
6
Q
market share?
A
sales of a business / total sales in the market
x 100
7
Q
why might the measurement of market share be important?
A
it may indicate a business that is a market leader
8
Q
what can brands be used to do?
A
- differentiate product from rivals
- create customer loyalty
- help product recognition
- develop an image
- charge prem price when brand is strong
9
Q
what is a brand name?
A
name, term, sign, symbol or any feature that allows consumers to identify the goods/services of a business and to differentiate them from competitors
10
Q
dynamic markets?
A
a market which is subject to continual and rapid change
11
Q
benefits of online retailing?
A
- can market to those who prefer to shop from home
- easier to gather personal info from customers so that they can be targeted w other products/ offers in the future
- selling costs (sales staff, rent, overheads) can be avoided
- marketing costs will be lower
- reach more customers
- open 24/7
- greater flexibility
- customers can buy anywhere, globally
12
Q
how markets change?
A
- size of markets
- nature of markets
- new markets
13
Q
adapting to change
A
- flexibility (e.g., employees w multiple skills)
- market research
- investment (in new product)
- continuous improvement in increasingly competitive environment
- develop a niche
14
Q
how competition affects the market
(business)
A
methods to attract customers from competitors:
- lowering prices
- making products appear different
- offering better quality
- offering extras, e.g., customer service
15
Q
difference between risk & uncertainty?
A
risk:
when actions are taken however, the outcomes are unknown
uncertainty:
events which are completely beyond the control of businesses which can impact the market and cause financial consequences
16
Q
product orientation?
A
when businesses focus on the production process and the product itself
develop and make a product which they believe customers will want and will sell well
17
Q
market orientation?
A
a business which continually identifies, reviews and analyses consumer’s needs
18
Q
advantages of market orientation?
A
- can respond quicker to changes in market due to market info
- stronger position to meet new competition
- more able to anticipate market changes
- more confident that launch of new product will be successful
19
Q
effect of market orientation on business:
A
- consult consumer continuously (market research)
- design product according to consumers wishes
- produce in consumers preferrable quantity
- distribute to consumers buying habits
- set price that consumers are willing to pay
20
Q
what is market research?
A
involves gathering, presenting and analysing info about marketing and the consumption of goods and services
21
Q
use of market research:
A
- identifies and anticipates customers wants and needs
- quantify the likely demand of a product
- provides insight into consumer behaviour
22
Q
what is primary research?
A
involves collecting primary data, information that did not exist before the research began.
23
Q
methods of primary research?
A
- questionaries
- phone interviews
- personal interviews
- focus groups
- observation
- test marketing
24
Q
what is secondary research?
A
collection of secondary data, info which already exists in some form
25
methods of secondary data?
- internal data; existing market research reports, sales figures, annual reports from businesses, stock movements
- external data; info from competitors, gov publications, data from customer services, international publications, internet website pages
26
quantitative & qualitative data
qualitative:
- collection of data about attitudes, beliefs and intentions
e.g., through focus groups and interviews
quantitative:
- collection of data that can be measured
e.g., use of gov publications
27
limitations of market research?
- human behaviour: may not be honest
- sampling & bias
- behaviour of interviewers
- external data may not be accurate to own business
28
use of ICT to support market research
- company websites
- social networking
- databases
29
geographic, demographic and psychographic segmentation
geo: different customer groups are likely to have different needs depending on where they live
demo: age, gender, income, social class, ethnicity, religion
psycho: groups customers n attitudes, opinions and lifestyles
30
behavioural segmentation
how customers relate to a product
- usage rate
- loyalty
- time and date of consumption
31
benefits of market segmentation?
- can produce diff products for diff segments which can increase revenue
- more loyalty to tailored products
- avoid wasting promo to uninterested customers
- can market a wider range of goods to diff customer goods
32
factors which affect market positioning?
- benefits offered by product
- usp
- attributes of product
- origin of product
- classification of product
33
what is a market map?
a 2 dimensional diagram that shows 2 of the attributes or characteristics of a brand and those of rival brands in the market
34
disadvantages of a market map?
- only 2 attributes can be analysed
- info needed to plot on maps can be expensive and may require primary research
- questionable on how valuable this type of map is
35
factors affecting comp advantage of a product/service?
- product design
- product quality
- promo
- customer service
- delivery times
- eos (produce efficiently at a low cost)
- flexibility (can change designs, speed up processes)
- ethical stance
- focusing on particular market segment
36
product differentiation?
attempt by a business to distinguish its product from those of competitors
37
factors of product differentiation?
- flexible pricing
- recognition
- extend product range
- brand development
- overcome competition
38
adding value to products & services
- bundling
- customer service
- speed of response to customers
- packaging
- frequent buyer offers
- customisation
39
demand?
the amount of product that consumers are willing and able to purchase at any given price
40
factors leading to a change in demand?
- prices of subs
- prices of complements
- changes in consumer incomes
- fashions, tastes and prefs
- advertising and branding
- demographics
- external shocks ( competition, gov, economic climate, social / environmental factors
- seasonality
41
supply?
the amount of a product which suppliers will offer to the market at a given price
42
factors leading to a change in supply?
- changes in the costs of production
- intro of new tech
- indirect taxes
- gov subsidies
- external shocks ( world events, weather, gov)
- price of related goods
43
what is the equilibrium price?
where supply and demand are equal
44
total revenue?
price x quantity
45
changes in demand?
if demand increases, price will rise
if demand falls, prices also fall
46
changes in supply?
if supply increases, price will fall
if supply falls, prices increase
47
factors causing disequilibrium in market?
- excess demand:
position where demand is greater than supply at a given price and there are shortages in the market
- excess supply:
position where supply is greater than demand at a given price and there are unsold goods in the market
48
price elasticity of demand?
percentage change in quantity demanded / percentage change in price
49
percentage change?
change / original x 100
50
interpretation of values:
- less than 1
- greater than 1
less than 1: price inelastic
greater than 1: price elastic
51
factors influencing ped?
- time (subs will be used in long term)
- competition for same product
- branding
- proportion of income spent on product
52
formula of income elasticity of demand?
percentage change in quantity demanded / percentage change in income
53
interpretation of numerical value
greater than 1
less than 1
greater than 1: income elastic
less than 1: income inelastic
54
diff between normal & inferior goods?
normal:
when there is an increase in income which results in an increase in demand, and the value of income elasticity will be positive
inferior:
when there is an increase in income which results in a decrease in demand and the value of income elasticity will ne negative
55
factors influencing income elasticity of demand?
- necessities
- luxuries
- price of product
56
significance:
- businesses selling goods w high income elasticity
- businesses selling goods w low income elasticity
- production planning
- product switching
- demand for goods that are v sensitive to changes in income
- demand for goods that are income inelastic tend to be more stable during diff phases in business cycle (farmers not affected by income changes)
- if businesses know the income elasticity of demand for their products they can respond to predicted changes in incomes
- some manufacturers have flexible resources and can switch from the production of one good to another
57
what are the factors of a design mix?
function:
product/service must be fit for purpose and must be capable of doing the job that it is sold to do
aesthetics:
products/services should provide a sensory simulation in addition to performing a function
(size, appearance, shape, smell)
cost:
a business should be able to produce and sell a product/service at a profit
58
benefits of adapting product designs to social trends?
- if waste is reduced, fewer resources will be used, lower costs and higher profits
- products are likely to be more popular and sell in larger quantities, revenue will raise and improve profits
- design features can be used as usp
- viewed as good corporate citizens
59
what is promotion?
an attempt to obtain and retain customers by drawing their attention to a firm or its products.
60
above the line promotion?
advertising in the media. e.g., newspapers or tv adverts
categories:
- informative advertising
- persuasive advertising
- reassuring advertising
61
below the line promotion?
form of promotion that doesn't involve advertising
sales promo:
free gifts, coupons, loyalty cards, competitions
public relations:
press releases, conferences, sponsorship, donations
merch & packaging:
product layout, display material, stock
direct mail
direct selling
exhibitions and trade fairs
62
factors affecting the chosen method of production?
- cost
- market type
- product type
- stage in product life cycle
- competitors' promos
- legal factors
63
types of branding?
manufacturer brands:
created by producer of goods and services
own label brands:
products manufactured for wholesalers or retailers by other businesses
generic brands:
only contain name of actual product
64
benefits of strong branding?
- added value
- ability to charge prem prices
- reduced ped (price increase will have less impact on demand)
65
ways to build a brand?
- exploiting a usp
- advertising
- sponsorship
- using social media
66
pricing strategies?
competitive:
based on prices charged by rivals
cost plus:
adding a % to costs of producing product
mark up:
% added to unit cost that makes a profit for a business when setting price
penetration:
low price initially
predatory:
v low price forcing rivals out of business
psychological:
slightly below a round figure
skimming:
high initially
67
what are pricing strategies?
pricing methods used by a business when deciding what to charge for its products
68
factors that determine most appropriate pricing strategy?
- differentiation and usp
- ped
- amount of competition
- strength of brand
- stage in product life cycle
- cost and need to make a profit
69
what is distribution?
the delivery of goods from the producer to the consumer
70
what is a distribution channel?
the route taken by a product from the producer to the customer
71
direct selling?
when producers market their products directly to consumers
e.g.,
the internet
direct mail
door-to-door selling
mail order catalogues
direct response adverts
telephone selling
72
what is a retailer?
a business that buys goods from manufacturers and wholesalers and sells them in small quantities to consumers
73
what is a wholesaler?
a business that buys goods from manufacturers and sells them in smaller quantities to retailers
74
what is an agent/broker?
an intermediary that brings together buyers and sellers
75
factors when choosing the appropriate distribution channel?
- nature of the product (exclusive, may need a demo, fast moving)
- cost
- the market
- control
76
product life cycle?
product development, intro, growth, maturity, decline
77
what are extension strats?
ways to prolong the life of a product, before it starts to decline.
- product adjustments
- promotion
78
what is a product portfolio?
a collection of products a business is currently marketing, made up of product lines (group of products that are v similar)
79
what is the boston matrix?
a 2x2 matrix model that analyses a product portfolio according to the growth rate of the market and the relative market share of products within the market
80
explain the boston matrix
categorised by market growth rate and relative market share
stars: high market growth, high market share.
- need to invest in product to cope w growing market and sales e.g., new production facilities or promo
- net cash flow = nearly 0
cash cows: low market growth, high market share
- little need for investment
- strong positive net cash flow
? : high market growth, low market share
- investment required to cope w expanding sales in fast growing market
- net cash flow likely to be 0 or -
dog: low market growth, low market share
- little investment required but may earn some profit
- net cash flow depends if profit is made
81
what is a marketing strategy?
a set of plans that aim to achieve a specific marketing objective
82
strats for mass markets?
product: develop a usp to differentiate from similar rivals
price: prices charged are to be v similar
promo: should invest heavily in advertising
place: often use multiple channels to distribute their goods
83
strats for niche markets?
product: designed carefully to meet specific needs of customer groups
price: more flexibility in pricing
promo: more targeted, less need to use national media and specialised publications instead
place: more selective when choosing distribution channels
84
strats for B2B & B2C?
outbound marketing strats:
directing marketing material at potential customers whether they are expecting it or not.
e.g., mail, email, telemarketing
inbound:
attracting potential customers to websites when they are looking for suppliers/ solutions.
e.g., blogging, socials, video marketing, search engine optimisation
hybrid:
combination, inbound strats take at least 6 months to generate results so outbound methods can be employed in the short term, which can be dropped after.
85
disadvantages of outbound & inbound marketing strats?
outbound:
- can be ignored
- persistence can ruin brand rep
- may be seen as poor quality and wasting resources
- higher costs
inbound:
- effort and resources required more to build up useful content
- recruitment of experienced inbound marketers can be difficult and to keep up w trends.
86
how to develop customer loyalty?
- communication
- customer service
- customer incentives
- personalisation
- preferential treatment
87
approaches to staffing?
staff as an asset:
employees are valued and their welfare is cared for.
e.g.,
- acceptable remuneration
- reasonable holidays, sick leave, maternity leave, pensions
- safe working environment
- training
- job security
- recognition & professional rs
- clear & effective leadership
- chances for promotion
- opps to solve problems
employees will have high retention costs and is likely to help recruit and motivate high quality staff.
staff as cost:
- paying minimum wage
- using 0 hour contracts
- neglecting investment in training
- providing minimum legal rights (holidays, sick pay)
- penalties for being late
- using cheap recruitment methods
88
what is a flexible workforce?
workforce that can respond, in quantity and type, to changes in market demand
89
methods to increase flexibility?
- multi-skilling
- part time / temp staff
- flexible hours & home working
- outsourcing
90
advantages of a flexible workforce?
- allows business to expand and contract quickly in response to changes in demand for its product
- specialist jobs can be completed by a temp worker
- temp staff are cheaper to employ
- employees are responsible for only training their permanent workers
- employees that can job share and work flexible hours allows for more efficiency
91
disadvantages of a flexible workforce?
- temp workers may have less motivated and only financially driven
- outsourcing may result in poor quality work, damaging rep
- temp workers may not be available when required
- employing temp workers can be a costly process
- temp workers may not work as well as permanent staff
- too many temp workers may cause demotivation amongst core workers (bad environment)
92
difference between dismissal & redundancy?
dismissal:
when employees are dismissed for a number of unfair reasons e.g., for joining a trade union
redundancy:
where there is no work for the employee to do so are dismissed under a lawful method
93
why are employer / employee rs important?
it has an impact on the welfare of the employee and the performance of a business.
as a result, the business should result in an adaptable and co-operative workforce and high levels of skill and output.
94
objectives which may cause conflict between employer/employees?
- rates of pay
- intro of new tech
- flexible working
- work conditions
95
what is individual approaching?
this is when employers have developed a rs with employees at an individual level.
employees will negotiate wages, holidays, hours of work and other terms directly w the employer.
pay and other conditions vary w employees as those w good bargaining skills may get a better deal.
96
what is collective bargaining?
determining wages, conditions of work and other terms through a negotiation process between employers / employee representatives e.g., trade union reps.
97
advantages of collective bargaining?
- agreements are transparent
- cost effective for one set of negotiations
- rules & terms are likely to be respected by both parties
- favouritism may be reduced at work
98
disadvantages of collective bargaining?
- negotiations can take longer
- views of individuals may not always be reflected
- negotiation costs can be high
- failure to agree can lead to consequences e.g., strike
- owners may feel their freedom to manage is compromised
99
what is recruitment and selection?
when businesses hire new employees, they need to attract and appoint the best people, those w the right skills and appropriate experience.
100
stages in recruitment & selection process?
- identify the type & no. of staff needed
- prepare job description & person specification
- advertise the job using appropriate media
- evaluate applicants and select a shortlist for interview
- carry out interviews
- evaluate interviews & make appointment
- provide feedback for unsuccessful candidates
101
what is a job description?
states the title of a job and outlines the tasks, duties and responsibilities associated w that job.
main purpose is to show clearly what is expected of an employee
102
what is a person specification?
provides details of the qualifications, experience, skills, attitudes and any other characteristics that would be expected of a person appointed to do a particular job.
103
what is internal recruitment and its advantages?
recruitment from within the business.
advantages:
- cheaper no adverts
- employees familiar w procedures and environment, less induction training
- qualities, abilities and potential of the candidate is better known to the employer
- regular internal recruiting can motivate staff
104
what is external recruitment and its advantages?
when someone is appointed from outside the business
advantages:
- new and different ideas brought in as well as experience from other working organisations.
- may attract larger number of applicants, more choice
105
other methods of recruitment?
- word of mouth
- direct application
- advertising
- private employment agencies
- headhunting (chosen by agency)
- job centres
- gov funded training schemes
106
what are some recruitment and selection costs?
- HR: to identify the number and type of staff required
- admin: checking and updating job descriptions and person specifications
- advertisement
- interviewing
- new person recruited may negotiate higher salary or more benefits
107
what are some examples of training costs?
- training courses
- loss of output (off the job training)
- employees leaving
108
what is training?
process of increasing the knowledge and skills of workers so that they are better able to perform their jobs.
109
objectives of training?
- making workers more productive, teaching effective ways of working
- familiarising workers w new equipment or tech
- educating workers in new methods of working e.g., change in production line
- making workers more flexible
- preparing workers to move into a diff department
- improving standards of work, to improve quality
- implementing health & safety at work policies
- increasing job satisfaction & motivation (confidence gained)
- assisting in recruiting and retaining high quality staff
110
what is induction training?
training given to new employees when they first start a job
111
what is on the job training?
training given in the workplace by the employer.
- learning from other workers
- job rotation
- mentoring
- apprenticeships
- graduate training
112
advantages / dis of On TJ training?
- output is being produced
- trainees learn by doing job
- cheaper
- easy to organise
disadvantages:
- output may be lost if workers make mistakes
- may be stressful for worker
- trainers may get frustrated
- could be danger to others
113
what is off the job training?
training which takes place outside the business by an external training provider e.g., uni.
114
advantages / dis of Off TJ training?
- output is not affected if mistakes are made
- workers learning cant be distracted by work
- training could take place outside of work hours
- customers and others are not at risk
dis:
- no output
- can be expensive
- some aspects of work cannot be taught off the job
- may take time to organise
115
benefits of training?
managers:
workers are more motivated & satisfied, more co-operative and easier to work with, better at doing job
owners:
will benefit if productivity is higher, costs will be lower and may gain comp advantage
employees:
able to do jobs more efficiently, more motivated, less stressed, more job satisfaction
customers:
better quality products produced, improvements in customer service
116
what is an organisational structure?
the way in which positions within the business are arranged. the structure defines:
- workforce roles & job titles
- route through which decisions are made
- who is responsible and accountable to whom
- relationship between positions in a business
- how employees communicate w each other
117
what are organisational charts?
a diagram that shows the different job roles in a business and how they relate to each other.
they show:
- how the business is split into departments
- role of employees & job titles
- who has responsibility
- to whom people are accountable to
- communication channels
- rs between different positions in the business
118
employee roles in the organisational hierarchy?
directors: appointed to run the business in the interest of its owners. overall charge of activities in an organisation
managers: responsible for controlling / organising within the business. make day-to-day decisions about running the business.
team leaders: members of a team whose role is to resolve issues between team members and co-ordinate team efforts so that the team works efficiently.
supervisors: monitor and regulate the work in their assigned or delegated area
professionals: positions for staff w high levels of qualifications and experience
operatives: skilled workers involved in the production process, carry out instructions of managers / supervisors
general staff: staff w non - specific skills
119
what is a chain of command?
the way authority and power is organised in an organisation
120
what is a span of control?
number of people a person is directly responsible for in a a business
121
what is centralisation and decentralisation?
centralisation:
business organisation where major decisions are made at the centre or the organisation and then passed down the chain of command
decentralisation:
business organisation where decision making is pushed down the chain of command and away from the centre of the organisation
122
advantages of centralisation?
- senior management has more control of the business
- procedures, ordering and purchasing can be standardised throughout the organisation, leading to eos
- senior managers should be more experienced and skilful in making decisions
- senior managers can make decisions from the pov of the business as a whole
- business may need strong leadership by a central group of senior managers
- communication may improve if there are fewer decision makers
123
advantages of decentralisation?
- empowers and motivates workers
- reduces stress and burdens of senior management
- provides subordinates w greater job satisfaction
- subordinates may have better knowledge on conditions affecting their area of work
- quicker response changes
124
types of organisational structures?
tall: long chain of command, narrow span of control.
flat: fewer layers of hierarchy, short chain of command but wide span of control (more employee freedom)
matrix: allows businesses to connect people w particular specialist skills, used to solve problems in a business
125
implications of all organisational structures?
tall:
- higher management costs (more managers)
- communication may be poor
- messages may get distorted
- slower decision making
flat:
- managers may lose control due to wide span of control
- thus, negative impact on productivity
- co-ordination problems, over-burdened
matrix:
- needs expensive support systems
- may have issues w co-ordinating a team from diff departments w speed of decision making
126
what does it mean to be motivated
& what is it's importance?
the desire to take action to achieve a goal.
a lack of motivation may lead to reduced effort and lack of commitment (short term)
long term effects include of high levels of absenteeism and falling productivity and profits
127
what is taylor's theory of scientific management?
she designed a method to find out the best way to carry out a task at work which included of observing employees then to teach them the quickest method to completing this instead.
however, the quickest and doesn't suit everyone and taylor viewed people as machines.
128
what was mayo's hawthorne study?
initially, people believed that worker's productivity was affected by work conditions, skills and financial incentives however changes made showed that this had little to no effect.
elton mayo reported that a business must make sure the personal satisfactions of workers are met for them to be motivated
however, it assumes workers and management share the same goals, that communication will break down barriers and is also biased towards management.
129
what is maslows hierarchy of needs?
self actualisation: promo, more responsibility
esteem needs: more recognition for good job
love & belonging: teamwork, communication
safety: job security, safe working conditions
physiological needs: high wages, good working conditions
130
what is herzbergs 2 factor theory?
he asked a group of engineers to describe incidents at their job and whether it satisfied or dissatisfied them.
he divided the causes into 2 categories; motivators vs hygiene factors.
motivators: responsibility, recognition, sense of achievement, chance of promo
hygiene: pay, conditions, treatment, relationships w managers, company policy
however, this may be taken for granted, can be expensive to implement and results may vary on subjects
131
what are some financial incentives to improve staff performance?
piecework: payments for each unit produced
commission: payment for achieving a target
bonus: addition to basic wage/salary
profit sharing
performance related pay: extra pay for achieving targets, targets can include of; getting to work on time, improving skills, getting on w other workers
however, bonus may be too low, may be difficult to achieve, few staff see appraisal.
132
what are some non financial incentives to improve staff performance?
delegation: workers may feel more trusted being handed down responsibility from manager
consultation: told about changes
empowerment: recognition, trust, control in decision making, good work environment
(costly, manager may feel insecure)
teamworking: increases productivity, more skills shared, responsibility shared, more ideas
flexible working: staff are able to choose their hours of work, work from home or take lengthy period of leave
job enrichment: more responsibility as their role is extended in the production process.
job rotation: reduces boredom and enables skills / experience.
job enlargement: giving an employee more work to do of a similar nature- prevents boredom
133
difference between managers and leaders?
managers:
predict what will happen in the future, plan to achieve their objectives, organise resources, command staff lower down the hierarchy, monitor day-to-day tasks.
leaders:
visionaries, good at carrying through the process of change, often excellent motivators
could be argued that leaders devise strategies whilst managers are responsible for implementing them.
134
characteristics of a leader?
- positive self image, confidence, realistic aspirations
- need to be able to get to core of a problem, should have vision and commitment
- intelligent and articulate
- creative and innovative
- ability to sense change and can respond to it
135
leadership types?
autocratic:
(when manager makes all decisions w out consultation)
manager sets objectives, allocates tasks and insists on obedience- group is dependant on them.
high levels of supervision, poor levels of motivation w employees, little cohesion
paternalistic:
(where leader makes decisions but takes welfare of employees into account)
democratic:
(where managers allow other to participate in decision making)
either persuasive or consultive
good communication skills however long decision making
laissez - faire:
(where employees are encouraged to make own decisions)
group members may be skilled and experienced however may lack knowledge, not able to set deadlines or manage own projects- costly.
136
what are entrepreneurs?
individuals who set up and run a business and take the risks associated with this.
- innovative
- organised
- risk takers
137
how do entrepreneurs find business ideas?
- business experience
- personal experience
- skills
- lifestyle choices
138
what are the stages in setting up a business?
- idea
- research
- planning
- financing
- location
-resources
- launch
139
factors in expanding a business?
- financial management
- admin
- marketing
- purchasing
- managing people
- production
140
what are intrapreneurs?
employees who use entrepreneurial skills without having to risk their own money to find and develop initiatives that will have financial benefits for their employer
141
advantages of employing intrapreneurial staff?
- can drive innovation in a business and discover new commercial opps, gain comp advantage
- satisfies the self actualisation needs
- awards can be won for unique products
- induvial gains opportunity to experiments and be creative
142
barriers to entrepreneurship?
- lack of finance
- lack of entrepreneurial capacity
- becoming an employer
- legal barriers
- lack of ideas
- fear of failure
- aversion to risk
- unsupportive environment
143
anticipating risk & uncertainty
risk:
- can take measures to reduce the amount of risk they take e.g., test it out in similar market.
- using quantitative techniques e.g., decision trees
uncertainty:
- make preparations to deal w consequences, if they were to occur e.g., contingency funds set aside, may also use SWOT analysis and PESTLE to reduce uncertainty
144
what are the characteristics of an entrepreneur?
- self confidence
- self determination
- self starter
- judgement
- commitment
- perseverance
- initiative
145
what are skills required by entrepreneurs?
- organising
- financial management
- communication
- managing people
- decision making
- negotiating
- IT skills
145
reasons why people set up a business?
financial motives:
- profit maximisation: attempt to make as much profit as possible in a given time period
- profit satisficing: making enough profit to satisfy the needs of the business owner
non financial:
- ethical stance
- social enterprise (not for profit)
- independence
- home working
146
what are business objectives?
goals or targets set by a business to help achieve its long term purpose
- increases motivation
- helps owners decide where to take business and steps required
- SMART; specific, measurable, agreed, realistic, time specific
147
examples of objectives?
- survival
- profit maximisation
- sales maximisation
- market share
- cost efficiency
- employee welfare
- customer satisfaction
- social objectives (community)
148
what is a sole trader?
+ advs & dis
a business organisation which has a single owner
advantages:
- owner keeps all profit
- business is independent and owner has complete control
- simple to set up
disadvantages:
- unlimited liability
- may struggle to raise finance
- work hard long hours
149
what is a partnership?
+ advs & dis
business organisation that is usually owned by between 2-20 people
advantages:
- easy to set up
- partners can specialise in their area of expertise
- doesn't have to publish financial info
dis:
- unlimited liability
- share profit
- conflict
150
what is a limited partnership?
partnership where some members contribute to capital and enjoy a share of profit but do not participate in running business. at least 1 partner must have unlimited liability.
151
what is a limited company?
a business organisation that has a separate legal entity from that of its owners
features:
- capital is raised by selling shares
- owners (shareholders) have limited liability
- run by directors who are elected by shareholders
- pay corporation tax
152
what is a private limited company?
features:
- shares can only be transferred privately (1 individual to another)
- often family businesses owned or friends
- directors tend to be shareholders and involved in running the business
advantages:
- shareholders have limited liability
- more capital can be raised by issuing shares
- control cannot be lost to outsiders
dis:
- have to publish financial info
- profits shared between more members
- cannot raise large amounts of money like plc
153
what is a franchise?
a business model in which a business (franchisor) allows another operator (franchisee) to trade under their name
advantages to franchisees:
- lower risk
- support from franchisor
- can benefit from marketing campaigns of franchisor
dis:
- profits shared w franchisor
- lack independence and must stick w rules
- must sign contract, reduce independence
adv to franchisors:
- fast method of growth
- take financial risk
- franchisees more motivated than employees
dis:
- profit is shared
- poor franchisees will damage rep
- cost of supporting may be high
154
what is a social enterprise and its different forms?
a business that trades w the objective of improving human or environmental well being
forms:
- co-operatives (organisation owned by its members who have equal voting rights)
- mutual organisations (business owned by its members who are customers not shareholders)
- charities
155
what is a lifestyle business?
a business that aims to make enough money to provide the flexibility needed to support a particular lifestyle for the owner
features:
- often small and just owner
- interests of entrepreneur is likely to influence nature
- less stressful, home based most likely
156
what are online businesses?
a business that uses the global communications infrastructure of the internet as a trading base
features:
- customers access via internet
- collect payment electronically e.g., paypal
- must have secure websites
- low set up costs
paid for or sponsored advertising is main source of revenue
157
what is a plc?
a company owned by shareholders where the shares can be traded openly on the stock market
158
what is a stock market/ floation?
stock market:
market for second hand shares
stock market flotation:
process of a company going public- making shares available to the public for the first time
159
advantages + dis of plcs?
advantages:
- huge amounts of money can be raised from sale of shares to public
- production costs may be lower as firms may gain eos (plcs are expected to grow, as they get bigger unit costs fall)
- can often dominate the market
- easier to raise finance
dis:
- high setting up costs
- outsider can take over
- members of public have access to company's accounts (more info published than ltd)
- difficult to deal w customers on personal level
- inflexible due to size
- may be divorce of ownership and control
160
what are opportunity costs?
when choosing between diff alternatives, the opp cost is the benefit lost from the next best alternative to the one that has been chosen
161
what are trade-offs?
where a decision maker faces a compromise between 2 alternatives
e.g., an ethical stance may be chosen however cam be v costly.
weighing up:
- obtain info (advs / dis)
- balance short and long term
- gauge support
162
moving from entrepreneur to leader
- need for formality
- need for shared ownership
- greater responsibility to others
- need for motivation & inspo
- need for strategy and vision
business
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