1.2 - Spotting a Business Opportunity

Question 1

What are the four main customer needs?

Answer 1

• Choice: When buying products, customers like to have a choice because different customers have different tastes and needs.
• Quality: Customers assess quality as a product’s suitability and their opinion will depend on expectations.
• Price: Customers will be influenced by price, especially by low prices.
• Convenience: Convenience refers to how easy it is for customers to purchase desired products.

Question 2

Why is it crucial for businesses to meet customer needs?

Answer 2

• Generate sales: Customers will continue to buy products. Repeat custom ensures that the business generates cash flow.
• Business survival: As the reputation of the business grows, more and more consumers are likely to buy its products. This should lead to increased profits provided costs don’t rise, making it likely that the business will continue to operate.

Question 3

What are the advantages of a business conducting market research?

Answer 3

• To identify and understand customer needs
• To identify gaps in the market
• To reduce risk
• To inform business decisions.

Question 4

Define primary research and identify 5 methods of conducting primary research.

Answer 4

Market research involves obtaining information about customers, potential customers or competitors which is carried out for the first time. Methods include:

• Survey
• Questionnaire
• Observation
• Interviews
• Focus Groups (small group of people discussing a product)

Question 5

What are the benefits and drawbacks for a small business of conducting primary research?

Answer 5

+ Primary research is more specific to the business as it is conducting research that is applicable to its prouct or service and market. This means it is likely to help make a more informed business decsion.

• Primary research does not exist already, therefore someone has to conduct the research, which means you have to pay someone in terms of time for planning, carrying out the research and the analysis. This can be expensive if you are just starting.

Question 6

What are the benefits and drawbacks of conducting secondary research?

Answer 6

+ As secondary research already exists it is therefore cheaper, as no time is spent planning and conducting the research, so is a low cost alternative to primary research which will help a small business keep start up costs low.

• The downside is that as it already exists it may not be as specific to your business so it may contribute to a poor decsion which isn’t approriate for your particular target market.

Question 7

Define secondary research and identify 5 methods of conducting secondary research.

Answer 7

Secondary research involves obtaining information about market trends, competitors and markets that already exists. Methods include:

• Websites
• Government Statistics and reports
• Company Reports
• Newspapers/magazines/books
• Market reports

Question 8

1. What is the difference between quantitative and qualitative data?
2. How are each collected?

Answer 8

QuaLitavtive - Data is expressed in the form of opinions and judgements and is collected via open ended questions.

QuaNtitavtive - Data is is expressed as numbers, percentages and statistics and is collected via closed questions.

Question 9

What is the advantage of collecting qualititiave data?

Answer 9

Qualitative data provides more detailed responses, so you may be able to understand the reasons behind customers answers which might contribute to a deeper understanding of customer needs and enable better business decsions.

Question 10

What is the advantage of collecting quantitative data?

Answer 10

Quantitative data is easier to anlyse as it can be expressed numerically using charts for example. This may make it easier to make business decisions.

Question 11

Idenitfy 4 ways social media can be used to conduct market research? (make sure your answer is specific to social media!)

Answer 11

• Posting a link to a survey
• Conducting a poll on Instagram or Twitter
• Idenitfying trends and opinions via hastags, retweets, shares and likes.
• Posting an open ended question on a social media site such as facebook for qualitative responses or likes

Question 12

What are the advantages of using social media to conduct market research?

Answer 12

Social media is a relatively cheap way of understanding customers, compared with traditional methods such as TV, flyers.

It allows a business to deepen their understanding of the market which helps them to identify popular trends and develop or improve their products

It’s more efficient, up to date information can be obtained quickly and in real time, which means the business can be more responsive to changes in the market place.

It enables a wider reach which means you collect more data from a larger sample size which can enable a better understanding of the market.

Question 13

How can a business ensure its data collected in market research is valid, reliable and accurate?

Answer 13

• The most appropriate research methods must be used in order to obtain the type of data required
• The sample size must be appropriate in terms of size and its representation of the market
• Sufficient data should be obtained to allow for anomalies
• Analysis of data must be thorough and accurate

Question 14

Why is it important that market research data is valid, accurate and reliable?

Answer 14

• If your research is not reliable the business decisions that it informs could lead to disastrous, harmful and expensive mistakes that will limit a business’ chance of profit and growth.
• Failing to align product/service with the needs of the customer which will impact negatively upon sales
• Missing gaps and opportunities in the market

Question 15

What is a market segment?

Answer 15

A part of a market that groups buyers with similar buying habits or characteristics.

Question 16

How can a business segment the market? (7)

Answer 16

• Location/area
• Demographic
• Age
• Income, socio-eceonomic categories
• Lifestyle, choices, interests
• Ethnicity
• Religion

Question 17

What is a market map and why is it useful?

Answer 17

A market map is a diagram based on two features of a product or service (e.g. high/low price and high/low quality) which compares different businesses.

A market map will allow a business to identify a gap in the market. This means they may be able to devlop a new original idea to fill that gap where there will be no competitors, or adapt an existing product that could also fill the gap.

Question 18

How can a business compete?

Answer 18

• Price (Are their prices in a similar competitive range?)
• Product range
• Quality (Are they delivering quality similar/ better?)
• Customer service
• Location (Are they closer to their target market)

Question 19

What is it and what are the benefits of conducting a SWOT analysis?

Answer 19

A SWOT analysis is a strategic planning tool that enables the business to identify its strengths, weaknessess, opportunites, and threats. This then helps them to turn their weaknesses to strengths and prepare for any threats, as well as exploit opportunities which will enable a business to maximise its profits and growth by outperforming competitors.

Question 20

What is the difference between a direct and indirect competitor?

Answer 20

Direct competitors are businesses that sell the same types of products or services whereas indirect competitors are businesses that sell different products or services but are competing in the same market, eg a hotel and cruise company both competing for holidaymakers, but have different products or cinemas and restaurants competing for the leisure market, but both provide different services.

Question 21

What is the impact of a busines operating in a competitive market?

Answer 21

• They will need to focus on product differentiation in order for their products to stand out
• Market research will have to be constant in order to stay ahead of trends and competitor actions to ensure the product continues to meet customers needs
• Pricing strategies may have to be reviewed, lower prices for example to undercut comeptitors
• Promotional spend may need to be higher than in a non competitive market to help establish your brand

Question 22

Define the term ‘monopoly’.

Answer 22

A business that has no or few competitors. In the UK a monopoly is defined as a business with more than 25% market share.