Business 1 Flashcards
What is a mass market
— where a business targets a large population of the market with a generic product
— compete with many other business in the markets
Advantages of disadvantages of mass market
Advantages
— potential of economies to scales= products and services can be produced and distributed at a larger scale= lower production costs= higher profit margins
— lower price = greater affordability and higher sales volume= high revenue, able to invest in more r and d, easier to afford larger advertising campaigns
— wide potential customer base= large market= more likely to attract many customers= build strong brand recognition = customer loyalty = market share
Disadvantages
— lots of competition = due to MM attract many business a there’s less risk= customer have choice= competition with customers = price wars= lower profit margin
—product so similar= must be differentiated through marketing or else won’t survive= however is expensive
— high volume production= not flexible to demand changes
What are niche marketing
— targets small population of the market with specialized products.
— identify and satisfy demand of a small group of consumers
Advantages and disadvantages of niche marketing
Advantages
— less competition in a specific market= higher survival rate= less chance of business failure
— able to charge higher prices= higher profit margin as its specific to consumers needs and wants, there will be more willing to pay more of the expertise
— consumer tend to be more loyal= inelastic PED= repeated purchase
Disadvantage
— high prices= products less affordable = lower sales volume
— less competitive but fewer customers= less profit
— vulnerable to market change= risk over dependence on a single product
— likely to attract attention if successful
What are sales volume
Is the number of products sold ( total quantity
Sales revenue= price x quantity sold
What is market share
— is the proportion of a particular market held by a business. Use as a measure of success
Sales of a business/ total sales in the market x 100
What is a brand
— is a name, image, logo which helps one p/s stand out from its competitors
— one way to achieve product differentiation
— it adds value, makes product more desirable to consumers
—business operating in MASS market= use branding to stand out
— NICHE use branding to communicate their offspring to small group of consumers
—strong brand = able to charge higher prices
— improves customer loyalty and brand recognition
— strong increase in demand= reduce marketing cost
What is a dynamic market
— is a market that subject of rapid and continuous changes
— many market becoming more competitive and change is inevitable
— those that don’t adapt= less likely to survive in the long run
— business with monopoly power= might not face the same dynamic pressure as a business in more competitive markets
Factors that determine type and pace of change
— changing customer taste and preferences e.g. consumers desiring electric vehicles
— impact of technology
— change in economic environment ( economic growth)
— legislation s.g. Laws around environmental standards can create new market
— innovation
Static market = not dynamic
Implication of dynamic market
— often greater need for innovation
— involve higher cost= business needs to adapt to recognize and adapt to changes quickly
How successful business adapt in dynamic market
— investment in new tech— online retailing
Advantages
— provides business access to more customers internationally
—cheaper, lower fixed and variable cost = don’t need stores
— business can collect data by tracking consumer behavior = helpful primary research
— open 24 hours
Disadvantage
—high cost for maintenance, website development, promotion
—online retailing dominates market by larger business that are well know e.g. Amazon
— high levels of competition= expensive to stand out through differentiation
What is innovation
— involves the adaption or improvement of existing products e.g. improved video cameras on laptop
— carrying better market research to have a better understanding on customer needs
How competition affects market
Definition:competition = when 2 business are providing g/s to the same target market
high level of competition:
— lost of choice
— cheap= good value for money
— incentive to innovate
Low levels of competition:
— high price
— poor service= don’t care about customer needs as much
— limited choice
— little incentive to innovate
The difference between risk and uncertainty
— risk can be calculated and prepared for/ uncertainty can’t as they are unexpected events
— risk is the potential threat to a business success= exist as entrepreneurs commit resources that could be loss s.g loss of key staff
— uncertainty is when outcome difficult to predict
— exist as business operate in ever changing environment e.g. recession
One way to adapt
— changing needs of customers by carrying out market research= able to find what prices they are willing to pay and the most popular
= ensures products are in high demand= may involve adapting to trends
What is market research
Definition— involves gathering and analyzing qualitative and quantitative data about the market
A key indicator of:
— anticipating the future needs and wants of customers
— to identify consumer demand
— reduce risk when launching new products
What are primary research and the advantage and disadvantage
Definition: is the research collected first hand= comes directly from consumers in the target market
Such as observation surveys
— gathering info that’s new
Advantages
—info gathered is specific to needs of the business
— more up to date= reliable
— business can get in depth info from respondents such as the reasons behind certain behaviors
Disadvantage
—sample size may be too small= unrepresentative for all consumers= unreliable result
— bias= respondent may answer question in a particular way, also researcher can guide respondents = inaccurate
— expensive and time consuming = may need to hire specialists
Secondary research and the advantages and disadvantages
Definition: involves the gathering and analysis of data that already exist
Such as websites, market research reports, newspapers
— conducted by another organization
Advantages
— easily accessible= good starting point= suitable for start up business
— is cheaper to collect= lower cost compared to primary research
— often better if you want qualitatively data
Disadvantage
—info may not be up to date or specifically tailored to business needs
— detailed reports can be expensive to purchase
— may not be factually correct e.g. Wikipedia
What is Sampling and evaluation of it
— it involves selecting a representative group of people from a target population
— bigger the sample= more representative
— quicker and easier than collecting research from everyone
What is product orientation and evaluation of it
— product differentiation is an inward looking approach to marketing that focus on characteristics of products rather than the needs of the consumer
— focus on creating a product first then finding a market
Advantage
—potential EOS for maximum efficiency at lower cost
— focus on regular innovation, quality= can attract customers= able to compete
Disadvantage
— neglects consumers need and wants= low demand= increase risk of business failure
— expensive to conduct research and development
— lead to wastage and increase cost
What is market orientation and evaluation in that
— outward looking approach focus on the need of customers and used this info to develop products that need customers needs
Advantages
— benefit from increase demand= increase profit= value brand image as its products more desirable
— repeated customer = improve long term profitability
Disadvantage— product less likely to be unique= more competition
— challenges to responding to market changes= may not be sustainable in the long run
Evaluation
— more successful business tend to have MO= business can only succeed in competitive market= if they meet customer needs better than rivals
— however PO more appropriate when there little competition or info available
How can the use of ICT support market research
— company website- allow buskers to collect primary data more cheaply e.g. tracking consumer searches and analyzing customer reviews
Also collect secondary data about rivals e.g. prices
— databases -used to store large amount of customer info e.g. Tesco loyalty cards= effective in collecting customers email so they targeted customers can be surveyed later via email
— social networking- gathering info about consumers via online social channels e.g. twitter= useful running surveys, tracking opinion= so able to see trends
What is market segmentation
— is the process in which a single market is divided into sub markets that reflects different customers needs and wants
- firms often segment their market according to factors:
—age
— income
— location
— gender
—lifestyle
— culture and ethnic origin
— occupation
The advantage and disadvantage of market segmentation
Advantages
— identified and satisfy the needs of a specific group of customers= targeted more precisely = helps make the marketing mix more effective such as better targeting for promotion
— develop and build its brand= new product development = may increase loyalty if consumers feels that their needs are being met= repeated purchase
—differentiate itself from its competitors
Disadvantage
Markets are increasingly dynamic and fast changing so too are the segments
— segment may be identified but it may be too small and unprofitable to cater
— require detailed market research = costly
What is Market positioning
— refers to the process business goes through when launching a new product or service.
— involves deciding on the nature and characteristics of the p/s it sells and who its target market is. Based on quality, price and branding
Market mapping, analysis and evaluation
Definition- a tool for identifying position of a product within a market in comparison to rival products based on 2 relevant characteristics
—market map analysis:
- if there’s no space left in market map= market is saturated= completion very high= profit low
— however existence of a space on map met indicate existence of a market niche
— needs to be research carefully
Advantages
— market gaps can be identified which may enable a business to come up with new products
— useful as a market research tool to gain understanding of customer perception
Disadvantage
— gap in the market may exist due to it not being profitable to fill
— mapping a market may require primary research= expensive
— only 2 criteria can be chosen = too simplistic
Definition of competitive advantage
— refers to feature of a business and its products that are perceived as superior to its rivals by customers
— it’s how firm product is made both distinctive and defensible
Sources of competitive advantage
— price
— reliability
— brand image and reputation = hard to compete
— quality
— ethical stance
— customer service
— design
Also include innovation, building stint relationship with stakeholders, price leadership
What is product differentiation
— is an attempt by a business to distinguish its products from those of competitors
Can be achieved through:
— developing unique brand characteristics and features = help stand out
— offering price that undercuts competion
Strong product differentiation= develop its competitive advantage
— helps firms to create a USP( something that makes a business distinguishable)
— successful pd= increase demand for its product = increase brand loyalty
— also business can charge higher prices
E.g. fair trade
What is adding value
— is the difference beteeen the price of the finished product/s and the cost of input involved in making it
Methods of adding value
— packaging = create exciting opening experiences for customers
— marketing g and branding= build awareness and customer loyalty = able to charge high price
— speed of service
— USP= allows firm to charge a high price for its products = increase added value
— good customer service
— customization— allowing customers to design and create their products= allows firms to charge a higher price
HOWEVER adding value = raise cost but worth it if the increase in selling price outweighs the cost
What is a marketing mix
A framework for business to create and implement successful marketing strategies
— key elements:
Product- refers to the design and features/ should meet consumer needs/wants ( product life cycle, Boston matrix)., price( refers to how much consumer will pay),( price skimming , penetration
place, - how the product gets to the customer( retail, online, channel of distribution) - is it accessible
promotion- how you communicate your g/s
— 4 component work together to satisfy needs and want of a target market
- analysis / evaluation
Depends on competition, time, technology
What is a design mix
— refers to combination of element that make up a product design. Includes function, aesthete and cost
— balancing will help the product design be cost effective
Functions— refer to the intended purpose and specific tasks its design to perform
Also refer to its benefits it provides
It’s the most important aspect as it determines how well product will meet the needs
Features they successfully emphasize function in the design mix
- longer product life cycle
- build a reputation for quality based on reliability
- lower promotional cost
- features may create a USP= competitive edge over rivals
Aesthetic— refers to the appearance, the style of the product, include the shape, color and texture
Important for attracting customers creating brand loyalty
- high added value
- attracts imitation = need for design protection
- effective way to differentiate product
- needs to fit the segment that business is targeting e,g high income segment= high quality components and packaging
Cost— cost of production
Well designed product should balance cost and value = ensuring customer product is valuable enough to justify the cost while maintaining profitability
However Cutting cost could have an effect on design
How can social trends impact product design mix
— social trends refer to changes in attitudes, behavior and lifestyle of people
Change as a result of resource depletion:
- customers became aware of need to conserve natural resources and reduce waste
- the product design mix may change for waste minimization, recycling, produced products sourced ethically
Resource depletion is the consumption of resources quicker than they can be replenished
What are ethical source
— products are produced without exploitation of workers or environmental damage such as 100% slave free
- business only use materials and services from suppliers who care and respect the environment
— paying workers fair wage
Sustainability involves making a product without affecting the long term supplies of the input into product
-Source input that are not supplied by damaging environment
- minimize waste in production
- enable recycling or re-use
-sustainable supply chain
Benefits of adapting to changes in social trend
- in long term =waste minimization such as use of automation in production process=cost cut, more effort use of resources, improve quality, lower defects
- re cycling - many customer placing increasing importance on reusable products
- reflecting social trends= likely to sell large quantities= positive reputation = adds value to their product and service = willing to pay high prices
- social trend can be used as a USP to differentiate p/s
HOWEVER
There’s a trade off between ethic and profit
- being ethical= lower profit= no longer exploiting producers = increasing cost
- lower profit= increase prices= could lead to low sales may be to law of demand= less sales= less revenue
BUT
If ethical- lead to more customers, attracts attention from ethical investors
It depends on
- target market, consumers could be environmentally conscious
- it depends on the finance- may not have the finance= may need to find a source= but may not achieve profit max
-
What is promotion
— key method business will use to communicate with its customers and potential customers
— crucial role in generating customer awareness, interest
— also helps build loyalty= repeat purchase
There’s above the line promotion- involves any form of advertising through media such as tv, billboards, newspapers, radio
- includes mass communication platforms that target the general population
Below the line- include any form of promotion that’s targets specific audience with digital media assets such as sales promotion, public relations, packaging, email marketing
Types of promotion)
(Advertising, direct marketing, sales promotion and digital communications)
Advertising— promotion occurs through paid channels such as tv, radio and mags
✅ reach large audiences = brand awareness. Since reaching large audience, want to stand out, gains attraction= better quality products
✅ persuade customers= showing the benefits= increase Sales and demand
❌expensive
❌ many customer ignore ads = not cost effective
❌ only showing benefits= not satisfied at the end= bad reputation
Direct marketing— communicating directly with customers through email, message, social media
✅ business can personalized their message to specific customers= increase brand loyalty as you are catering to hit needs= maintain clients in the ongoing run
✅ also measurable= enabled to track results( in who open the message)and adjust strategy= then able to improve customer satisfaction
❌ not effective- unwanted spam emails= customer may find it irritating= harm brand loyalty
❌ limited reach - depend on budget
Sales promotion- marketing technique- encourages purchase of a product/service by offering temporary discounts such as free sample, coupon, loyalty cards
✅ quickly gain sales= demand or customer engagement = revenue
✅ helps clear out stock or promote new product
❌ can attract deal seeking customers= not loyal to the brand = customer are more price sensitive= short term
❌ may reduce sales of full priced products
❌ Amy range brand image= customers may anticipate further promotion
Digital communication- communication delivered electronically such as social media
✅ wider reach, increase brand awareness and feedback from customers
❌ easily ignored by customer
❌ significant investment in tech or will suffer faults
❌ increase in competition
Types of promotion
( personal selling, sponsorship and PR)
Personal selling— when a salesperson interacts with potential customers one to one
✅ allows to build relationship with customer = understood their specific needs= higher revenue= build customer loyalty
✅ enables business to provide personalized advice, guidance
❌ expensive due to cost of hiring, training staff
❌ limited impact= difficult to scale to large audience
Sponsorship- agreement which company provide financial support to event, team or organisation in exchange for exposure
✅ build brand awareness= attract media attention, create emotional connection with the target audience
✅ support specific business objective such as entering new markets or reaching new customers
❌ can be expensive may not directly drive sales= so no guarantee success
❌ may be subject to negative publicity if sponsored entity experience scandal= negative brand image
PR- . This is how info about company I shown to public.business seeks to build relationships with the public, manage their reputation.
✅ enhance business reputation= strengthen brand image== increase loyalty and sales= cost effective
✅ attract investors
❌ qualitative = time consuming
❌ difficult to measure direct impact of PR activists on profit
Influences on promotion
- technology— helps business reach to the right people
Subscription service allow buskers to target customers with Elena’s message and irrelevant info
— promotional budget- determines method, geographical reach
— target audience
— message e.g. sponsoring a sporting event could encourage association of healthy eating
Importance of branding
— establishes recognition and identity
— differentiates
— build customer loyalty = generates emotional connection with customers = generate repeat purchases
Types of branding
Manufacturing branding- refers to use of company name and logo to promote all the products or services offered by company. E.g. nestle, apple
✅ create a strong brand recognition and reputation = customer loyalty
✅ more easily introduced new products= reduce marketing cost= increase profit
❌if company reputation damage by a product = can have a negative impact on all product offered under the brand
❌ company may face intense competition= affect sales of the products
Product branding- refers to the use of a unique name, design or symbol to promote specific produc such as as Coca Cola, McDonald Big Mac
✅ creates a distinctive identity from the products = helps differentiate = increase brand loyalty
✅ helps build customer loyalty and trust by associating product with a specific quality and benefit
❌ cost of creating and promoting a new brand for each product can be expensive
❌different products within the brand may have different levels of quality = affect customer satisfaction
Own brand product- refers use of retailers name to promote a specific p/s and is often used by supermarkets
Such as Asda chocolate, Tesco finest
✅ helps retailers differentiate themselves from competitors by offering unique products
✅ build customer loyalty by offering exclusive product that’s not available elsewhere
✅ allows retailer to offer products at a lower cost than branded products= increases demand and sales= profitability
Disadvantage
- own brand products may have lower perceived quality than branded products which affect customer loyalty and trust= lower demand
The benefits of branding
— strong branding= add value to a product by creating a perception of quality, reliability and trust= makes it desirable
— able to charge premium prices= willing to pay more to product associated with well established brand= perceive higher quality
— strong branding = reduce price elasticity of demand= less entice as customer who are loyal to brand= more likely to continue to purchase even if price increase= repeated purchase = customer loyalty increase in long run
Ways to build brand
— USP- feature that… e.g. apple known for its innovative products
— advertising— create compelling acts that resonates with their target audience= raise brand awareness = creating emotional connection with audience= inspire brand loyalty
—sponsorship- partnering with ____ to gain exposure= build reputation by aligning with positive association
— social media- gold a loyal following= building a community
Changes in branding and promotion to reflect social trends
Viral marketing- a strategy where business use online platforms to promote their products by creating content at specific times= easily shared and commented
Emotional branding- building strong emotional connection with customers by appealing to values, beliefs
Such as a good cause- commitment for environmental and social care
Social media- promoting brand on social media= attract followers, e.g. insta, tiktok
Pricing strategies
Cost plus— a business based a price on the unit cost and then adds a % as a markup
The markup covers the COP plus the business desired profit margin = therefor effective
This pricing strategy is simple, commonly used by manufacturers that produced standardized goods e.g. washing machine
Price skimming— the business sets a high price for a new P/S when its first introduced to markets
- it’s in high demand= effective when established brand brand introducing new product or service such as apple phone
— high price= help recover its development and marketing cost quickly
— business then gradually lower price to ensure sales continues
Penetration— business sets a low price when first introduced
Effective when they want to capture market share, attract price sensitive customers= once gained enough customers= the business start to raise price
E.g. perfume launch
Predatory pricing— business sets low price that drives out competition out of the market, business may make a loss until the competitor fails.
This strategy considered anti- competitive = harms consumers by reducing choice in the market
Competitive— business set its prices based on its competitors prices
, effective when a business is in a highly competitive market, wants to maintain its market share
Business must continually monitor its competitors price, adjust its price to remain in competition
Psychological pricing— business based prices below the next whole number to trick consumers into thinking the prices are lower. E.g. 9.99 psychologically appear cheaper than 10 pounds = so this strategy takes into account how customer belief and attitude towards p/s
Factors influencing the choice of pricing strategy. ( base CCP)
— amount of differentiation= products with many USP= high differentiation = can charge premium prices
— price elasticity
business should set low prices if produces price elastic
Business shouldn’t higher prices if products price inelastic
— level of competition
High competitive market= set prices low to remain competitive e.g. budget airline
— strength of brand= strong brand with loyal customer base can command higher prices e.g. Nike allow to charge premium prices
— cost and need to make a profit= prices must cover the COP and provide a reasonable profit margin
E.g restaurants must consider cost of ingredients, labour rent. When setting nee price
— stages in product life cycle= in introduction stage= penetration pricing more appropriate = attract customers= builds market share
- growth stage = prices can increase as there’s increase in demand for the product
— maturity stage, prices may need to be lowered again
Adapting prices to reflect social change
Subscription pricing— business charges customers monthly fee to use a service. Suitable for online services
Personalized pricing— technology online databases collect customer info= allow business to target them with personal prices
Price comparison sites- such as triage makes it easier for customers to compare prices and choose best deal. Business have to remain competitive
What is distribution
Is the delivery from the producers to consumers
— traditional channel is the 4 stage distribution = producers, wholesaler, retailer, Consumer
Commonly used for groceries
— two stage distribution( direct channel) producers to consumers. Commonly used for products that’s sold online
— 3 stage distribution channel— often used for products with high profit margin= manufacturer can afford to sell directly to retailer and still have more profit.
Or products just have high demand
( producers to retailers to consumers)
Multi distribution - involves a business using more than one type of distribution channel
Changes in distribution to reflect social trends
— the growth of e commerce
Online distribution has become increasingly popular due to accessibility it offers to consumers
Many business now use drop shipping = allows them to sell products without holding stock ( direct channel) shipped directly from producers to consumers
- reduce cost, complexity for distribution
- easier for business to sell online
— many business now generate bulk of their sales like selling on Amazon
Increase service based business— distribution for service based business involves delivering service to customer directly through mobile app or websites
Such as Uber delivers or taxi service though all.
Service distributed directly to customers without need for wholesalers or retailer = reduce cost=increase profitability
What is the product life cycle
— describes the different stages a product goes through from its conception to its eventual decline in sales
Product life cycle
5 stages’s and their implications
— introduction- stages begin when products is launched
Characterized by slow growth, product still new
Implication: cash flow usually negative as business usually incurs high cost for promotion, advertising and distribution
Marketing focus= creating awareness for product
Growth— the product enters this stage when sales begins to increase rapidly
Business focus shift on market share and increasing production to meet growing demand
Prices may increase with popularity, new varieties introduced
Implication: cash flow positive during this stage as sales revenue increases = cost spread out over larger volume of production
— marketing strategy : differentiate products from its competition and build brand loyalty
Maturity— characterized by slowing sales growth as the product reaches its peak in terms of market penetration
Introduction of new customer slow down= focus on retention and repeated purchase
Implication- cash flow usually positive as during this stage, sales revenue continue to come in, cost are reduced due to EOS
Marketing strategy: aim to increase profitability by lowering price to remain competitive
Decline — sales begin to decline as the products become obsolete or its replaced by newer products
Implication- cash flow negative as sales revenue declines and cost associated with the product increases
— marketing strategy: may involve discontinuing product, reducing its price to clear inventory or finding new uses for its product
— or extension strategy may be used to relaunch, boost growth
What is an extension strategies to the product life cycle
Extension strategy— refers to techniques used by business to extend the life of a product beyond its natural life cylcle
—designed to boost sales, maintain profitability for a product that has reached decline stage of its life cycle
— there’s 2 types:
Product related extension strategy: involves changing the product to make it more appealing to customers, extend its life cycle: can be achieved by;
- product improvement ( feature)
- line extension
Promotion related extension strategy- changing the marketing and promotion of the product to extend its life cycle:
- price promotion
- changes to advertising
What are Boston matrix
— is a tool used by business to analyse their product portfolio, make strategic decisions about each product
— matrix classified product into 4 categories based on their market share and the market growth rate
Boston matrix categories
Cash cows— products with a high market share in a mature market. Entire market is no longer growing
Implication: generate positive cash flow= generate high revenue for a business = can be invested in other areas
Marketing will be focus on maintaining their market share and profitability
Cash cows are valuable assets can be used to find the development of new products
Little promotion required
Low growth
Question marks— have low market share in a high growth market
Products have the potential to become stars if the company invests in their development
Usually lost of competition from rivals
Implication: often new negative cash flow as business usually invest in ? Product to increase their market share, turn them into stars= however if don’t work= may discontinue product
Marketing focus will be brand recognition
Stars— possibly a leading brand in market. Have high market share in a high growth market
Typically invest in stars to maintain or increase their market share
Implication- generate significant positive cash flow
-should engage in price skimming
Marketing effort focus on increasing market share, maintaining profitability, building brand recognition
- distribution has to be effective to ensure product availability
- marketing required as the profit incentives new firms to come in the business- to protect their USP
Dogs- products have low market share in a low growth market
Implication- generate little revenue for the company, have no growth potential.
Business often move away to focus on profitable product= discontinue product.
Marketing effort minimal
-or focus on extension strategy- such a rebranding or repackaging
- or aim for break even- help maintain employment- not losing or gaining anything = for the benefits of consumers
Marketing strategies for different types of market
Mass market— focus on building brand awareness
E.g. advertising campaign usually design to reach as many of people as possible like tv and radio
— goal is to create strong brand identity that resonates with large segment
Niche marketing— marketing strategies focus on targeting a specific segment of the population and building relationship with them
- may use social media to reach potential customers , message more detailed
What is b2b
— focus on selling products to other business
— in b2b marketing they emphasis on building relationship with other business, demonstrate how your product can help them be more successful
- require more info, detail on features and benefits
— e.g. software companies selling to other business
What is B2c
—b2c marketing focus on selling P/s directly to consumers such as clothing retailers
— they emphasis is on building brand loyalty, creating positive customer experience , attracting customers
-advertising campaigns- social media ads, influencer marketing campaigns - to appeal to the emotions of consumers
How business develops customer loyalty
— helps business grow, be success in long term
— drives repeat purchases, help reduce marketing cost when launching new products
Methods of developing customer loyalty
- positive customer service = more likely to return, recommend business to others
-e.g. Zappos know for free shipping, returns, customer service, 24 hours - LOYALTY CARDS- way to I encourage repeat purchase= they typically offer rewards or discount for frequent purchases
— good communication— keeping customers informed of new product and development
What does effective staffing lead to
— high productivity, more profit, positive work environment
— owner might see employees as an asset or cost, determines the decision they make around the management
Employees as an asset
— staff bring knowledge, skills, expertise to o the business
— when staff is seen as a assets more likely to:
invest in working conditions
give reasonable holiday and sick pay
Delegate responsibility
See training as an important investment
— staff can increase productivity = enhance customer service= contribute to success, profitability of the business= can help build positive reputation
Employee as a cost
— where they see staff as a cost kore likely to:
Pay workers the minimum wage
Provide basic working conditions
Little thought to employee motivation
Training as unnecessary
= demotivation, lack of productivity, low staff retention
What is flexible working and the approaches to flexible working
Definition: relates to working arrangements where there are variety options offered to employees in terms of if working conditions time, working location, pattern of working
— can be in order to adapt to changing demands of the environment
— help balance work , home life
Approaches to flexible working
- multi skilling
- flexible hours and home working
- outsourcing
- part time and temporary
What is multi skilling and the evaluation
- is the process where workers fulfilling multiple roles
Advantages
- business utilize their workforce more efficiently= reduce labour cost= increase productivity
- reduce unit cost= less need of more staff
- workers are motivated, improved profit margin as they are not stuck on one role= staff retention
Disadvantages
- may require significant investment in training and development= high cost
- may not be appropriate for all job roles, especially those that require high level of expertise= mistakes can be made
- psychological problems= stress= affect quality
What are part time and temporary contract and its evaluation
Part time - A form of employment with less than 35 hours worked per week.
Temporary contract- where employees are hired for a specific period of time
Advantage
— flexible working arrangements, help business attract staff who value work like balance
— improve productivity = staff can work during most productive hours, avoid distractions
—less expensive than paying wages to full time workers = low cost
Disadvantage
— monitoring can be difficult =challenging in terms of communication = quality of work can suffer
— less engaged in your company = won’t be committed or loyal to your company= don’t plan on staying long
— may lack valuable knowledge of the company
Outsourcing
— getting other business to complete a particular task or business function
Advantages
— allow business to access specialized skills that may not be available in house
— Lowe cost may reduce labour cost
— maintain a competitive pricing
Disadvantage
— may lead to lost of control over quality and delivery, especially if outsourcing based in another country
— may create ethical concerns if partner based in area with low labor = standards of human rights and abuse
The distinction between dismissal and redundancy
- dismissal is the termination of employment by an employer against the will of employees
- so they failed to meet required standards poor performance or through misconduct
-employees me choose to dismiss immediately or provide a notice period
Redundancy— when the job is no longer available.
The business reduces the size of its workforce
- termination is not at the fault of the employee
- employee must follow certain legal procedures such as providing a notice, paying redundancy compensation
Employer- employee relations
Individual approach
- nature of employer / employee relationship is influence by whether there’s an individual approach or if company is operating under a collective agreement
Individual approach- individual negotiate their own pay and conditions
- means that agreement will differ from one worker to the next
- employer has the power to hire, set terms and condition of employment
Employer and employee relations
Collective bargaining approach
This process is where group of consumers ( represented by trade unction). Negotiate with their employer for better wages, working conditions and benefits
- employees have more bargaining power when they negotiate collectively rather than individuals
- unions acts as a collective voice of the employee and bargains with the employer in behalf of all workers
Employee representation
- trade union - an organization established to product and improve the working conditions of workers
- focus on negotiations through collective bargaining
- focus on pay and conditions
- decline of TU membership over the past 20 years
Work councils- a forum within a business where workers and managers meet to discuss isssues relating to conditions , pay and training
- allowed workers to be heard and be involved in key business decisions
- employees committees- a group of employees meeting together to focus on specific issues in workforce
unlike work council’s, it may not be recognized by managers
What is Recruitment
- is the process of attracting and identifying potential job candidates suitable for a particular role
- goal is to create a pool of qualified candidates who can be considered for the role
Internal recruitment- process of hiring employees from within the organization
✅ beneficial- encourage me employee development = motivation and retention
✅ saves time and money
✅less risky as managers know their employees
External recruitment- process of hiring employees from outside the business
— found through job ads, agencies
✅ they can bring new skills and ideas= innovation
✅ help increase capacity within the business = high employment rates
Also higher the capacity utilization = lower cost per unit= competitive advantage
What is selection
— the process of choosing the best candidate
- involves reviewing CV and conducting interviews or assessment task
-interview- involves meeting to ask questions about skills, knowledge and experience.
- assessment task- provide candid an opportunity to demonstrate their skills= see if suitable for job
Cost associating with recruitment, selection and training
- recruitment cost— expenses incurred in the process of hiring new employees
Include advertising, interviewing - high labour turnover rates can significantly increase these cost
-when employee leave the business they have to spend money and time recruiting, training new employees - training cost - if training not effective= employee may require additional training= increase cost of training
Selection cost- include background checks and visa cost
High labour turnover rates can increase selection cost
By improving effectiveness l, rescuing labour turnover rates= business can minimize this cost and improve their overall profitability
What is training and the types of training
Is the process of developing employees by improving their knowledge and skills so that they can perform their duties better
Type of training
- induction training
- on the job training
- off the job training
What is induction training plus evaluation
Is training new employees to learn their, duties,. System, procedure in a new job
- usually takes place before they start working
Advantages
- helps new employees to understand their job roles and responsibilities = less chance of mistakes = better performance
- improve employee confidence and motivation = enhanced productivity,
collaboration and communication - improved safety- become aware
Of important health and safety issues
Off the job training
A type of training take takes place while employee are working in their job roles
-it allows employees to learn new skills and knowledge from colleagues while performing their job duties
Advantages
- training tailored to employee specific role and responsibilities - training more practical and relevant for on employee job duties
- easier and cheaper to organize
- promotes teamwork as they work alongside peers = make you feel more at ease= build trust over time
Disadvantages
- employees may make mistakes= impact productivity, quality
Can lead to employee dissatisfaction if it’s not effective= high labour turnover rates
- dependent on the quality of trainer and their skills
Off the job training
a type of training that takes place outside of the workplace
Such as training Centres,conferences and online courses
Advantages
- mistakes recused as training not on site
- employee learn new skills and knowledge outside of the workplace = bring fresh new ideas to workplace
- safer
Disadvantage
- can be expensive especially if travel, accommodation are required
- employee may miss work while attending training= impact productivity
Benefits of training employees
- managers= better motivated workers
- owners- higher level of productivity
- employees - reduced anxiety so more able to do their job and increase potential for promotion
- customers- better quality products and better customer services
- training also required when new tech is required
- training can be a good investment for long term strategy
- another danger is that they may leave organizations and investment is them lost
What are organizational design
- describes how a business is organized to increase its chances of meeting its aims and objectives
- well designed OS= promoted efficiency = increase chance of meeting its aims and objectives
Structure - hierarchy
- refers to the level of authority within an organization
Higher the position in the hierarchy= the more authority and power it holds
Such as CEO or the owner of the company
Roles within the business organizations:
- directors - employee to run the business. Ultimate authority
- managers- take responsibility for managing an aspect of a business.
Make day to day activities = responsible to report to directors
-Supervisors - monitor regulate work of other employees= may be delegate responsibility from manager
- team leader- member of team who takes a leadership role to guide work of the team and ensure employees are motivated
What are chain of command
Refers to the level of hierarchy form top management to lower level management
- organization- naturally increases level of the hierarchy as they grow
- helps to establish a clear communication , maintains accountability within organization
What is span of control
Refers to number of employees that a manager directly responsible for
Wider span of control=fewers layers of management= flat hierarchy
✅ encourage delegation, better communication, empowerment
✅ appropriate if labour cost are significant = reduce number of managers
❌ less control= lack of close supervision
❌ less opportunities for advancement
Narrower span of control= more layers of management
❌slower communication, higher cost= affect productivity
✅ more focus supervision = better monitoring
What is centralized and de centralized structures
— in centralized structure, decision making authority is concentrated at the top of the organization with senior managers making most of the decisions
Advantages
- suitable in times of crisis= more control
- suited to authoritarian leadership
- appropriate where managers have the knowledge and workers are low skilled
In decentralized structure- decision making authority is distributed through the organization, with lower level employees have more decision making power
Advantages
- promotes innovation= new ideas
- reduces the workload of senior managers
- effective where local teams placed to make decisions to meet customer needs
Different types of organizational structure
( tall organizational structure)
- characterized by multiple levels of management and a more centralized decision making process
- long chain of command
- narrow span of control= Organization tend to add levels to their hierarchy as they grow
- common in large organization like gov agencies
Advantages
- offer opportunities for career advancement and promotion within their organization
- provides a clear hierarchy = defined roles and responsibilities
- promotes specialization, expertise within each department or function
Disadvantage
- decision making can. Slow as info must past through multiple layers of management due to long chain of command
- less delegation and empowerment
- all the above reduces efficiency and motivation
- expensive due to posts of managers= high cost
Flat organizational structures
— characterized by fewer levels of chain of command and a more decentralized design making process
- span of control for managers could be wide
- common in small organizations or start up’s such as small business
Advantages
- promotes culture of collaboration and open communication
- decision making can be faster and more efficient
- encourages creativity, innovation as employees have more autonomy
-cheaper
- all the above increases efficiency and motivation
Disadvantage
- manager may lose control of the workforce as it lacks a clear hierarchy
- requires workers to take multiple roles and responsibilities = burnout and overwhelming
- all the above reduces efficiency and motivation
Matrix organizational structure
- involves workers being organized by a project and business function
- in a matrix structure = teams are formed to carry out a specific project
Such as development of a new product
Advantages
- flexible= workload balance between team members= also learn new skills
- allows to bring specialist together for a common cause= increase efficiencies
- motivational and commitment as they feel includes
Disadvantages
- can lead to conflict over priorities = reduce efficiency and motivation
- requires a high degree of communication and coordination= challenging
- team roles may not be clearly defined
Definition of leadership and management
Leadership is about setting a vision, sharing the vision with others and putting in place strategies to get there
-focus on goals - encourage - motivate
Management is the day to day organization of the business, its resources and its staffing
- focus on task - instruct
Key difference between leadership and management
Vision vs execution on task
Influence vs control
Leadership focused on influencing other to achieve a common goal by inspiring, motivating and empowering
Management focused on controlling resources, processes and ensuring objectives are met
Long term vs short term
- leadership focus on long term vision and strategy
Management focus on short term goals and targets
Creativity vs efficiency
- leadership encourages creativity and innovation
Management focus more on efficiency and productivity
What are the types of leadership styles
Autocratic
Paternalistic
Democratic
Ladies faire
Autocratic and democratic
Autocratic— leader had complete control over decision making with little or no input from others
Advantages
- focus on getting task done= productivity
- high level of control suitable for unskilled workforce
- speeds up decision making process = important in times of crisis
Disadvantage
- lead to low levels of motivation= employee may not feel respects or valued
- no opportunity for employee to be involved in decision making= lack new ideas
- no opportunity to collect opinions of the workforce that might be valuable
Democratic— leader involve their team in the decision making process
Advantages
- allows a manager to collect ideas and opinions from whole workforce= innovation
- less absenteeism, more staff retention =productivity
- develop a team spirit
Disadvantage
-decision making can take a long time, done by committee
- employee may vote on a decision that benefits them= not efficient
When does democratic or
autocratic leadership style work best?
Autocratic work best when:
- need quick decision making
- fast paced business such as McDonald
Democratic works best when:
Business needs to encourage creativity, innovation or employee engagement
- where decision require input from multiple stakeholders
Laissez faire
Leader takes a hand off approach and allow their team to manage their own work
Advantages:
Allow employee to have an autonomy to make their own decisions
- can lead to high level of creativity and motivation among workers
Disadvantage
-lack of control over workforce = due to no supervision= deadline or target might be missed
- task not coordinated very well= may have the necessary skills
This leadership style work better when:
Appropriate where staff very experience, require minimal supervision
- effective when leader wants to build culture of independence or self motivation
Paternalistic
—leaders take on a parental love making decision in the best interest of their staff
Advantages:
Attention given to employee welfare
- employee feel they are being looked after
Disadvantage
- low levels of motivation
- employee given no power to make decisions
What is motivation
Refers to the willingness to work and to achieve a given target or goal
- employee can be motivated by financial incentives or social interaction
Impact on motivation
- more productive and efficient as they are kore likely to engaged in their work and take initiative to meet their goals
= generate high level of output and quality= increase productivity = higher profit - likely to be reliable and dependable
Take pride in their job such as showing up on time or meeting deadlines, low absenteeism
Leads to increase trust between business and employees= higher productivity
Motivated employees are more likely to stay with the company long term which reduces turnover rate= reduced the need for costly recruitment and training cost
Motivation theories: Taylor scientific management
- focus on breaking down complex task into simpler ones
- standardizing work process’s and providing workers with clear instructions and training to achieve maximum efficiency
Business-who use Taylor approach:
Workers trained to perform only 1 task which they become very skilled at
- workers usually paid for completed work
Advantages
- increase efficiency = lower cost= improved competitiveness
- standardized procedures = help reduce errors and inconsistencies
-incentivize work with financial rewards= people more motivated solely by money
Disadvantage
- over emphasis on efficiency = reduced worker satisfaction and creativity
- potential for exploitation = exploiting more work from workers without compensating them fairly
Mayo human relation theory
Focus on importance of social factors in the workplace such as communication, job satisfaction
- mayo suggest key to improving productivity relies on improving relationship between workers and supervisors and management
How a business may use this approach
- team building activities are used to build relationships
- employee partake in decision making
- providing recognition to employees such as worker of the week
- encouraging employee development like mentorship opportunities
Advantages
increase in productivity, workers feel valued and supported
Improve job satisfaction = less staff retention= low cost in training new employees
Efficiency can be achieved through team working and teams
Disadvantages
lack of control as workers take more decision so may base their choice on their own preference not the organization
Time consuming on building positive relationship requires time and effort
Limited applicability- may not work for business which require high degree of independence
Motivational theories : Maslow hierarchy of needs
- outline 5 tiers of human needs that must be met for individuals to reach their full potential
1 physiological needs- business can provide necessities such as access to clean water, food
2 safety- business can provide job security = fair pay or safe working. Conditions
3. Love and belonging - business can encourage teamwork, generate sense of community
4. Esteem - business can provide recognition for employees accomplishments
Provide a positive work culture that values individuals contributions
5. Self actualization- business can help achieve this need by offering opportunities for employees to pursue their passion and interest - person cannot move up the hierarchy without fulfilling needs
Advantages:
Higher employee satisfaction = by meeting the needs of employees = business can create more satisfying work environment= it increase productivity = lower turnover rate
Increase motivation = by offering incentives that align with their specific needs and desires
Improved employee performance = employee who feel valued and supported by their employees are more likely to perform
Disadvantage
- meeting many individuals needs can be costly, especially when offering perks
- time consuming= Requires significant effort from management to connect individually to understand which opportunities for personal growth are desired
Motivation theories : herzberg 2 factor theory
Theory suggests that there’s 2 types of factors that affect employee motivation and job satisfaction
1. Hygiene factors
2. Motivators
- hygiene factors - their absence cause dissatisfaction which decreases motivation
These are
Poor pay, lack of motivation, poor working conditions
-motivators - elements that lead to motivation and job satisfaction such as achievement ,
recognition, for their hard work= motivated to continue performing well
personal growth- such as learning new skills or advanced in careers
How business can use hygiene factors to decrease dissatisfaction
- pay fair wages
- offer excellent working conditions
What is a entrepreneurs
Is a person who is willing and able to create new business ideas or invention and take risk in pursuing success
- they make decisions = determines success or failure of business
- take risk such as introducing new product or enter a new market = however chance of market failure
- got the idea from
1 spotting a gap
2 business experience form their previous jobs
3 skills
When setting a business
- idea
- research into market and customer needs
- planning
- financing
- resources such as suppliers, manufacturing
Running and expanding a business
- financial management
Administration
Marketing - research , promotion - purchasing- loading with suppliers, deadlines
What is intrapreneurship
Refers to employees within a business who have the opportunity to develop their ideas and use their creativity to innovate
- involves empowering employees to think , act like entrepreneurs
- encourage to take risk
Advantages
As it allows business to rapidly into the creative potential of employees, generate new p/s= growth and competitive advantage
- increase engagement among employees = increase motivation = help retain top talent
To promote intrapreneurship business may offer rewards for successful projects
Barriers to entrepreneurship
responsibility of becoming employer
Fear of failure — lack confidence as they may worry about the financial risk
Lack of finance- struggle to secure the funding necessary to start, grow a business
Competition from large establish business
How Entrepreneurs anticipate risk and uncertainty
- risk is something an entrepreneur can plan for
Entrepreneur can decide level of risk they take
Uncertainty in business are caused by unexpected factors outside of the entrepreneur control even though they are sometimes profitable
- entrepreneurs have less control
- e.g. environmental factors like the tsunami 2011
Economic changes
Entry of new competitors
Successful entrepreneurs can manage risk, quickly respond to uncertainty. Can do this by:
Carrying out detailed research
Analyzing external influence
- producing detailed plans
Characteristics and skills of entrepreneurs
Characteristics
-self confidence- believe they can succeed
- initiative- they are productive and adapt to change
- risk taker
- commitment
- hardworking
Skills
- managing and communicating to people
- negotiating- deals, contracts with suppliers
- team working
- problem solving
- numeracy
Financial and non financial reasons for setting up a business
Financial motives
Profit maximisation- generate substantial revenue and profit for themselves.
Ortega founder of Zara, built fast fashion empire= one of the most profitable clothing retailers
Profit satisficing- to generate enough profit, to live a comfortable lifestyle = common in small business priorities their woe like balance
Non financial motives
Running a business to support ethical principles e.g. environmental sustainability that they want to build their business around (climate change)
Social enterprise- running a business for a social or environmental
Independence- many people want control over their work
- Amy be dissatisfied with traditional employment or desire the freedom
Home working- due to advancement in technology = many people have started business from their homes, offers them more flexibility, a better work life balance
Forms of business
- sole trader
- partnership
- public limited company (plc)
- private limited company ( LTD)
- franchise
Sole trader
- a business’s that has a single owner
- an entrepreneur starts a business, they often start operating as a sole trader
Advantages
- easy to set up
- owner has complete control over business
-all profit belong to owner
Disadvantage
- unlimited liability- owner is personally responsible for any debt the business incurs
- limited set of skills
- limited access to finance and capital( retained profit, not enough investment)
Partnership
2 or more people join together to form a business such as lawyers
Advantages
More skills and knowledge available
Shared responsibility and decision making
- increase access to finance
Disadvantage
-unlimited liability
- potential for disputes between partners
-profit often shared equally, regardless of contribution
Private limited company
Owned by its shareholder, run by directors and its where the liability of shareholder debts of the company is limited
- these shares can be sold by owners, usually to family and friends or to venture capitalist
Advantages
Limited liability- owners not personally responsible for company debt= protects personal wealth
Additional capital can be easily raised by selling shares
This type of organisation has a much higher business status than a sole trader= can have a professional image= reputation
Disadvantage
- expensive and time consuming to set up then sole trader
- more complex legal requirements and regulation than a sole trader
- shareholders have little control= owner no longer make all the decision
Public limited company
- large publicly owned companies
Can raise capital through selling shares to the public
Advantages
Access to share capital- significant amount can be raised very quickly through existing and new investors= more cost effective way to raise capital than borrowing from the banks
Creates a public profile= becoming PLC raise a company profits= increase visibility with customers, suppliers and potential investors= can help the company attract new business= grow its customer base
The company will have broad of directors= can extend decision making process= bring additional expertise= help the company grow
Disadvantage
Can lose control over business
Expensive to set up = require a minimum set up cost of 50K
Greater risk of hostile takeover by rival company as the company cannot control who buy its shares
Franchising
- is a limited company where an individual ( franchisee) it’s the right to operate an established business( franchisor) in exchange for an initial lump sum plus ongoing fees
Advantages
- effective way to grow the business without owners taking direct responsibility for each branch
Franchisor gets set up fee and royalty payments
Recognition
- franchisee provided with training and support
Disadvantage
- expensive to set up= fees and little freedom to change the business format
Risk of franchisee damaging the brand if not running efficiently
Royalty payment= shares of sale go back to the franchisor
Other forms of business
Social enterprises— business that has a primary purpose to create social or environmental impact
Profit usually reinvested back to business or used to create positive social change
Such as not for profit organisation like charities, cooporatives
Lifestyle business
- business run in order to sustain a particular lifestyle for its owners
Typically small, often run by a single person
Priorities personal interest of the owner over growth = often run from home= work life balance
Online business
Providing product or service sole they through internet- e commerce
Are faster growing business
Low overhead cost
Business still required to have a legal structure
What are stock market flotation
Occurs when a company goes public and become a plc
Means company shared offer sale to the general public
- it has a significant impact on how the company operates
- minimum of 50k share capital provided up front
Share price can change due to economic downturn = demand for share falls as investors fall nervous.
What happens when share price rise and when it falls?
When share price rise
Managers may receive bonus
Company find it easier to raise capital
Consumers with shares feel more confident to spend
When share price fall
Company may become vulnerable to takeover
Price fall give indication of poor performance
Company find it harder to raise capital
What is opportunity cost
- is the loss of the next best alternative when making decision
- due to problems of scarcity , choices have to be made about how to best allocate resources among consumer needs and wants
What are trade offs and examples
Occur when 2 things cannot be fully achieve= having more of 1 things= having less of another
Examples of potential trade offs
—product- choosing to spend money upgrading existing products = loss of the next best alternative = r and d on new product
—pricing strategy — if business decided to use competitive pricing strategy = it loses the opportunity to price skimming
— promotional methods- due to limited amount of money on spending
— business ownership- choosing to operate as a partnership means business loses benefits of operating as a private limited company
What are objectives
Are medium to long term plans that are establish to coordinate the business and act as target
- business objective are those set by the owners or director of the business
Is to:
- provide quantifiable steps to achieve aims
- reward employees = motivation
Financial business objectives
Survival- sim of most start up business to survive the initial entry and to generate enough cash flow to remain in business
- effective cash flow more important than gaining income or seeking profit maximisation
Profitability- the wealth created through profit = allows to invest in new project= helps business grow and keep up with the demand of ever changing business environment
Increases the underlying share price
It secure long term success
Market share- refers to the % of total sales in a particular market that a company holds
-business can aim this by selling better quality products than its competitors
Cost efficiency.- refers to company ability to produce and deliver its product at the lowest cost possible
Is crucial for companies that operate in highly competitive markets= low cost enables them to compete with low price
Sales maximization- focus on generating the maximum revenue possible by selling its P/s
- firm should raise price to achieve revenue maximization when their product is price inelastic
- firm should lower price to achieve revenue when their product is price elastic in demand
Non financial objective
Employee welfare- refers to a company commitment to providing a healthy and safe working environment for its employees
- aim to promote employee welfare by offering competitive wage, comprehensive benefit packages -‘d promoting a healthy work life balance
- HOWEVER it will increase cost but raise morale, productivity of its worker
- may reduce profit in short term by may lower cost in long term= retain employee
Social objective- refers to company commitment to addressing social or environmental issues
- this objective important for business who aim to operate sustainability and build positive reputation ( minimizing waste, fair labour practices)
Customer satisfaction— by delivering high quality products, providing excellent customer service and offering attractive pricing
Brand recognition
Influence on business objectives
- size = they may change as business grow, start up business = aim to survive
- sector- public sector organisation driven by meeting customer needs not profit
- market- objective can be determine by how competitive it is
- owner- may simply run business for the love of their job
Entrepreneur to leader
— successful entrepreneurs will experience growth= stop being a small business and become a larger company with number of employees
At this point entrepreneurs has become a lease of people
leadership may demand certain characteristics
-motivate and inspire other
- reassure larger groups
- the need for strategic vision
Difficulties becoming a leader
- stress- larger business being more responsibility
-entrepreneur need to delegate task and responsibility of others= difficult for enter who are used to control over every aspect= share ownership and control
- leader need quality like confidence, compassion
- learning to listen they often driven by their ideas. But as a leader important to listen to their ideas and perspectives
Overcoming difficulties
-stress management- use approaches to reduce stress levels, find time to relax
- mentor- gain advice, support from experience mentors
- trust - utilized qualified employees to lighten their load and take responsibility for aspect of running business
What is delayering
- removing layers of management from the hierarchy of the organization
- flatter structure
-widen span of control - expertise may be lost
Benefits
- low labour cost
-faster decision making
- stimulating employee innovation
Drawbacks
- widening span of control
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