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Edexcel Business Studies Theme 1 > 1.2 Spotting A Business Opportunity > Flashcards

1.2 Spotting A Business Opportunity Flashcards

1
Q

What are the four main customer needs?

A
  1. Price
  2. Quality
  3. Choice
  4. Convenience

PQCC

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2
Q

How does price affect sales?

A
  1. Lower prices usually leads to increased sales.
  2. By increasing the price on certain products, customers can see that as a brand and therefore are willing to pay extra for the brand/ quality.
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3
Q

What does loss-leaders mean?

A

When companies sell products for less than their value in order to attract customers.

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4
Q

What important thing must be done when considering the price of products?

A

When launching a new product or service, it is important to research potential customer’s opinions about pricing.

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5
Q

Explain the importance of Quality for customers.

A

Products or services with a high quality usually generate customers to spend more.

A customer assesses the products quality by how much they spend but also their expectations of the product and whether the product meets their demands.

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6
Q

How is quality linked to customer service?

A

The quality of customers service is determined by the business’s ability to meet its customers’ expectations.

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7
Q

Explain why Choice is an important customer need?

A

Customers like to have a choice because different customers have different tastes and needs.

Choice can also help customers make buying decisions. Companies can help make a point of showing how different brands or products represent very distinct choices.

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8
Q

Give an example of how Choice is used in businesses.

A 
Toothpaste manufactures may offer:
a brand for people with sensitive teeth
a brand for children
a premium ‘dentist recommended’
a standard mint flavoured brand
a brand that comes in different flavours.
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9
Q

Why does differentiation in choice benefit the customer?

A

It makes it easier for a customer to choose which of a number of products is suitable to them. A business should aim to make customers feel confident about making a buying decision.

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10
Q

Explain the importance of Convenience .

A

Customers usually have a preference for confident goods and services.

Sometime’s customers need for convenience can help a business to reduce its costs. For example airlines may ask the passengers to print of their boarding pass. Therefore it is cheaper for the business and easier for the passenger as there is no need for checking in.

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11
Q

Explain the importance of meeting customer needs.

A

Meeting customer needs will ensure that customers are happy with the quality of the product or service that the purchase.

This is likely to encourage repeat custom and generate customer loyalty leading to increased sales.

Satisfied and loyal customers are also more likely to recommend a product or service to others.

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12
Q

State examples of each customer need.

A

Price- Offering products at a competitive price.

Quality-Training and encouraging staff to provide a very friendly and helpful service.

Choice- Keeping a wide variety of products in stock for customers to choose between.

Convenience- Offering same-day or next-day delivery

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13
Q

What are the main buying decisions customers make based on?

A
  1. Family needs
  2. Financial needs
  3. Emotional needs
  4. Brand loyalty
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14
Q

Using examples what would happen if a business does not focus on their customer needs.

A

The business may completely fail.

For example, if a business launches a new product that is too expensive for its intended market, the product will not generate enough sales.

Similarly if a supermarket stops selling a particular well known brand customers who are loyal may start shopping at a rival supermarket in order to buy that brand.

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15
Q

How do entrepreneurs spot a business opportunity?

A
  1. Personal experience- For examples Someone who has dietary needs and is finding it difficult find product and service that suited that erpson may then start a new business.
  2. Some business opportunities can also be identifies if an entrepreneur sees a way of making something possible that seeks impossible. For example, navigation apps were initially considered impossible.
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16
Q

Explain the benefits to companies by using market research

A
  1. Market research helps small business understanding and familiarise themselves with the competition and get to know what people are prepared to pay for products or services.
  2. It also ensures that small businesses invest in the right sectors and the right products.
  3. It can help the entrepreneur decide whether their business idea is viable.
  4. Business are able to use market research to analyse customer needs and therefore reduce their level of risk.
  5. It also allows business to identify a gap in the market.
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17
Q

What can Market research gather information about?

A
  1. The market
  2. The needs of potential or existing customers
    . What needs aren’t currently being met
    . What customers want
    . What target market the business should aim at
  3. Any competitors the business may have.
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18
Q

What are the two main types of market research?

A

Primary and Secondary research

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19
Q

What is the definition of Primary Research?

A

Research that is carried out to answer specific issues and questions by a business itself.

Involves collecting data that has not been collected before.

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20
Q

Examples of Primary research.

A

Questionnaires

Focus Groups

Interviews

Observations

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21
Q

How can Surveys be conducted?

A
  1. Online, using online questionnaires and online focus groups
  2. in person or face-to-face, using interviews and focus groups
  3. Over the telephone or through the post.
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22
Q

What is a questionnaire?

A

A questionnaire is a set of questions with a choice of answers.

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23
Q

How should an effective questionnaire be conducted?

A

Questionnaires need to be carefully planned in order to provide useful feedback.

It also needs to have clear objectives.

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24
Q

What might a business be thinking about when designing a questionnaire?

A
  1. Age group
  2. Income bracket or social group
  3. Home town or regional
  4. Gender
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25
Q

State 3 example of answers in a questionnaire.

A

MCQ

Yes/No

Sliding scale

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26
Q

What are focus groups?

A

A focus group is a group of people who are asked about their views, opinions, beliefs and attitudes towards a product or service.

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27
Q

State an advantage to focus groups compared with questionnaires.

A

A business can understand its customers opinions more deeply.

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28
Q

What impact does focus groups and the internet have on the business?

A

This can significantly reduce the cost of holding focus groups and allows participants to be brought from all over the world.

It makes the sample more representative.

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29
Q

How can interviews be conducted?

A

In-depth interviews can be conducted by telephone, face to face or increasingly online.

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30
Q

State disadvantages of interviewing

A

The cost of hiring a room, paying for interviewer and travel and travel can be expensive.

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31
Q

State advantages to telephone and online interviews.

A

More cost-effective, can help save time.

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32
Q

What does observations mean?

A

Observations means watching how customers behave naturally when they do not think they are being watched.

It is a very effective way of gathering primary data.

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33
Q

How can observations be carried out?

A

Observations can be carried out in person, or by using appropriate technology such as CCTV cameras or Webcams.

For example, the manage could set up cameras and observe how the customers react .

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34
Q

Examples of situations where observation can be used.

A
  1. Understanding people’s reactions to different packaging designs
  2. Measuring how long it takes someone to make a purchase decision in a shop
  3. Understanding how people actually use a product and whether they encounter any problems.
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35
Q

State the advantages of using Observations

A
  1. Customer behaves relatively naturally
  2. Research is less likely to be biased as they would not be influenced to give answers that the interviewers want to hear.
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36
Q

State the disadvantages of using observations

A
  1. A disadvantage of using observations in market research is that it is time consuming.
  2. Observations can also be inconclusive
  3. Research ethics is a particularly important factor when planning an observation. Research must be conducted in an ethical manner.
37
Q

What is the definition of secondary research?

A
  1. Secondary research is using existing sources of information that has previously been researched.
  2. This information can be sourced internally and externally.
38
Q

What does internally sourced information mean? Give an example.

A

Internally sourced information is the data, statistics and research that a business has accumulated in the past.

For example, shops can use information at the tills to see most popular product.

39
Q

What does externally sourced information mean? Give examples of sources.

A

Externally sourced information is information published by people or organisations that are not related to the business.

Sources include government agencies, industry and trade associations, trade unions, Chamber of commerce and media sources

40
Q

What does ONS collect information about?

A
  1. Social trend- social and economic data collected by the government departments and other organisations, which is used to create an overview of modern a society and how it changes.
  2. Regional trends- a range of statistics such as demographic, social, industrial and economic, about life in different regions in the UK.
41
Q

How do market research Oma pines helps businesses?

A

The data can be used to help plan for the future.

42
Q

What are trade associations?

A

Organisations founded and funded by businesses that operate in a specific industry.

43
Q

State and provide an example of a trade association and information they provide.

A

Bristish hospitality association- provides information and advice to hotels, clubs, restraints about tourism and the hospitality industry.

Educational institutions such as universities and colleges are also useful external sources of information.

44
Q

State advantages of Primary Research

A
  1. Specific to the business
  2. Provides detailed information
  3. Relevant and up to date
  4. Can gather a mixture of quantitative and qualitative data
45
Q

State some disadvantages of primary research

A
  1. Time consuming
  2. Expensive
  3. Sometimes difficult to collect
47
Q

What are the two different types of data that can be used in market research?

A

Qualitative data- is descriptive that can be used.

Quantities data- numerical data

48
Q

What is qualitative data used for?

A

Used when gathering feedback on new product ideas or new marketing campaigns in order to understand customers’ reaction.

49
Q

What are the uses of qualitative data?

A

Products and services- for example to check whether customers like a proposed new recipe.

Design and packaging- for example to find out which colour of packaging is more appealing to customers.

Advertising and marketing messages- for example to find out which colour of packaging is more appealing to customers.

Price changes- for example to find out whether putting up a product’s price would stop a customer from buying that product.

50
Q

List some advantages of qualitative data.

A

Provides depth and detail giving a detailed picture of why customers behave in a particular way.

Helps a business to listen to what their customer want rather than jumping to conclusion.

51
Q

Disadvantages for qualitative data

A

A relatively small sample of people is surveyed so the results may be biased.

Responses are very subjective meaning that they are based on one perosn’s opinions and beliefs.

Results can depend on the skills of the interviewer for example making sure that they do not lead the interviewees’ answers.

52
Q

How is quantitative data gathered?

A

Gathered by asking people for information about their habits and lifestyles in a structured way using a tool such as questionnaire.

53
Q

How can we get reliable quantitative data?

A

Survey people in large numbers to make sure that the results are based on a representative sample of the population

54
Q

What types of questions are used in quantitative data?

A

‘Closed questions’ meaning that they can only be answered with a simple yes or no.

55
Q

What is the benefit of closed questions?

A

A business can build a clear picture of what consumers want and how they behave.

56
Q

What are incentives?

A

Something such as payment or gift that encourage someone to do something. They use this when wanting people to fill out a questionnaire.

57
Q

State some types of Quantitative data.

A
  1. Compare different groups of their customers,
  2. Generate statistics
  3. If used regularly a business can monitor how customers opinions change and how it’s new products and services are received by the customers.
58
Q

State some advantages of using social media as a market research.

A
  1. Deepen their understanding of their market
  2. Identify popular trends
  3. Improve their product and marketing
  4. Save time conducting market research
59
Q

How can social media help understand the market for a business?

A

A Business can set up a Facebook page in order to communicate with its target audience. This allows a business to see what interest its customers and potential customers.

Competitor’s pages can also given information about its rivals.

60
Q

How can social media identify trends?

A

Social media platforms such as Twitter allow businesses to analyse market trend.

For example a business can look at the latest posts and popular search terms or hashtags in order to understand what customers are talking about at that moment.

By setting up automated searches business can receive instant information about when their brand name has been used by customers.

61
Q

How can social media improve products and marketing?

A

Because social media platforms allows people to talk to one another a business can see how customer talk to one another about its products or services.

62
Q

How can social media save time?

A
  1. Can provide results within minutes rather than months
  2. Social media can provide much bigger samples.
  3. Questions can be sent with people relying instantly
63
Q

What is the definition of validity?

A

Validity is a measure of how good the design and methods of research are and suggest whether the findings of the research can be trusted,

For example, research conducted by a researcher who asks leading questions is not valid.

64
Q

What is the definition of reliability?

A

An indication of whether the research results from a sample are representative of a wider group.

For example, research based on a sample of people from just one social or ethnic group will not be reliable if it is used to make generalisations about the whole British population.

65
Q

List three external sources of secondary information.

A
  1. ONS
  2. BHA
  3. EDUCATIONAL INSTITUTIONS
66
Q

Describe the difference between primary and secondary research.

A

Primary research is research that involves finding information that has not been researched before. This involves the business itself to research for the information and results are usually tailored to their needs.

Secondary research involves using information that already exit is to help a business with their market of products. This can be sourced either internally or externally.

67
Q

Using real life example describe why it is important to use data that is reliable and valid.

A

For example, election polls can produce inaccurate results like they had done before the 2015 election where they had predicted a conservative win.

It is therefore important to use reliable and valid data to get accurate results and in this example, the aim is not to loose the public’s trust.

68
Q

What is the definition of Market segmentation?

A

The process of dividing a target market into smaller categories by grouping together consumers with a particular need or interest.

69
Q

Why is Market segmentation important?

A

It allows a business to know who its intended customers are in order to aim its products or services at those target consumers.

70
Q

What are the different Market segments business may use.

A
  1. Location
  2. Demographics
  3. Behaviour
  4. Lifestyle
  5. Income
  6. Age
71
Q

How does location link in with Market segmentation?

A

A business may choose to divide its market into group based on where they live.

It uses the type of home they live in or area as a prediction of consumer purchasing.

72
Q

How does Demographics link in with Market segmentation?

A

Demographic segmentation divides the market by factors such as sex or family type.

73
Q

Explain the family life cycle and it’s importance

A
  1. Young single person living alone
  2. Young couple with no children
  3. Family with young children
  4. Family with teenage children
  5. Older couple with no children at
  6. Retired couple
74
Q

Why is the family cycle an effective method of market segmentation?

A

Dividing a market into different groups cases int heir current stage of the family cycle can help a business understand the way in which its customer’s choice of products or services will change throughout their life.

75
Q

How does Behaviour link in with Market segmentation?

A

Behavioural segmentation divides the population based on the people’s behaviour. For example, people behave differently around special occasions.

76
Q

What is impulse buying?

A

When consumers buy products that they do not necessarily need.

77
Q

What are the reasons for impulse buying?

A
  1. Getting satisfaction from buying something nice without considering the cost.
  2. Deciding to save money by buying immediately in order to take advantage of a sale, two-for-one offer or discounted price.
78
Q

What does the term lifestyle mean?

A

The term lifestyle refers to the way in which customers live their lives.

79
Q

How can a business use information of the lifestyles of customers?

A
  1. Connect with its customers and interest
  2. Build a relationship with their customer.
  3. Likely to be brand loyal as they seen the product as part of who they are.
80
Q

How can business use income information for their customers?

A

Income segmentation is mainly used by luxury brands in particular.

This enables them to choose where to advertise its products.

81
Q

What is market mapping?

A

Market mapping is the process of creating a diagram known as a market map that identifies all products in a market and maps them out against two of their features.

82
Q

What does a market map allow a business to do?

A

A market map allows a business to:

  1. See all the products or services in the market
  2. Identify its competitors
  3. Spot any gaps in the market
83
Q

What are the two different types of competitors?

A

Direct competitors

Indirect competitors

84
Q

Definition of a direct competitor.

A

Direct competitors are businesses that sell the same type of product or service. For example, McDonald’s and Burger King are direct competitors.

85
Q

Indirect competitors meaning

A

Businesses that do not sell the same product or service but still find themselves in competition with one another. For example Someone planning to travel from the UK to France can choose to take a ferry, an airliner or other transportation.

86
Q

What are the key competitor strengths and weaknesses?

A

Price: The competitor’s lower price is a competitor strength

Quality: The quality of that competitors sandwiches is a competitor weakness

Location: a location that is more convenient for customers is a competitor strength

Product range: a wider range of products attracts sales. This is a competitors strength

Customer service: short serving times and kind staff increase customer satisfaction. That competitor’s customer service is a competitor’s weakness.

87
Q

What does SWOT stand for?

A

Strengths, Weaknesses, Opportunities, Threats

88
Q

What does SWOT analysis involve?

A

SWOT analysis involves identifying the strengths and weaknesses of a business as well as any opportunities it might be able to take advantage of

89
Q

What can SWOT analysis help a business to:

A
  1. Identify the strengths of competitors and learn about what they do well
  2. Review competitors weaknesses such as the loss of market share or clients
  3. Investigate the opportunities that exist for it and its competitors such as the dissatisfied customers of a rival.
  4. Find out what threats are posed by competitors such as a good reputation for customer service.

Edexcel Business Studies Theme 1 (8 decks)

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