Business Theme 1 Flashcards
What is the difference between risk and uncertainty?
Risk is a decision with the hope to bring significant reward, like an invest, where Uncertainty is a negative effect that comes from the general course of business, they are unable to plan for uncertainty.
Define primary research.
Primary research is conducting research which hasn’t been done before, which is usually directly from the target audience of potential consumers.
Define secondary research.
Secondary research is the collection of data from information that already exists , All secondary research was originally primary research.
What is quantitative research?
Quantitative research asks closed questions, which shortens the scope of the answer making it easier to find patterns in the market.
What is qualitative research?
Qualitative research asks open questions, making them open for interpretation, this makes the answers more accurate, however as each answer varies it can be difficult to analyze the results in large quantities.
What is the purpose of product differentiation
Product differentiation is used as a way to gain a competitive advantage, involving creating a product with distinguishing features which make the product unique.
What is added value?
Added value is the difference between the selling price and the total cost of producing the product, businesses wish to add value to their products to make them more desirable, so that customers are more willing to pay a higher price.
What is a dynamic market?
A market that is constantly changing with consumer tastes, government regulations and the emergence of new competition.
What is market segmentation?
When a market is split into groups, such as location, age or language. This is used to help businesses understand which section of the market they should focus on.
What is a market map?
A visual representation of a consumer market, utilizing 2 axes.
What is ceteris paribus?
Is where you assume everything else remains the same.
What is disposable income?
Income that consumers have leftover to spend after taxes.
What is a substitute good?
A good that has the same function has another good.
What is a complimentary good?
A good that is usually bought alongside another good.
What are some demographics?
Gender, age, income, Ethnicity, and occupation.
What is an external shock?
A factor that affects a business that is usually not preventable.
What does market equilibrium mean?
Its where price and quantity meet. The amount suppliers are willing to sell their goods at, and have enough quantity to satisfy demand.
How do you calculate PED?
% change in quantity demanded/ %change in price
What do the answers for PED mean?
If the answer is 0 = complete price inelasticity, no change in demand if there was a change in price.
If the answer is less than 1, demand for the product is price inelastic which means the demand is not very sensitive to changes in price.
If the answer is greater than 1, then demand for the product is price elastic. This means that demand is quite sensitive to changes in price.
What does PED look at?
The responsiveness of demand after a change in price.
What influences PED?
Brand loyalty of the consumer
Disposable income of consumers
Availability of substitute products
Purchase frequency
Degree of necessity
Time
How do you calculate YED?
% change in quantity demanded/ % change in income
What do the answers of YED mean?
greater than 1 = demand is income elastic
Between 0 and 1 = demand is income inelastic
less than 0 = increases in income have a negative effect on demand (usually with inferior products)
What does YED look at?
The responsiveness of demand after a change in income.
What influences YED
Luxury, necessity or inferior goods
Expectations of income, promotion, job loss and recessions.
What are the 4 Ps?
Product
Promotion
Price
Place (where consumers go to buy your product)
What are the 3 points in the design mix?
Function
Aesthetic
Cost
What are the advantages of public relations?
Businesses create a name for themselves, which consumers remember, helps with branding.
Businesses promote themselves through storytelling which creates interest for the consumers.
What are the disadvantages of public relations?
Difficult to measure success.
Word of mouth can have a negative impact on a business if it becomes skewed.
what are the advantages of direct marketing?
Easy to track success of their work.
Able to test usefulness of a method before opening it to a full-scale marketing campaign.
What are the disadvantages of direct marketing.
Many consumers may not want to be contacted.
Can lead to poor quality leads.
What influences a business’s choice of promotional mix?
Budget
Competition
Promotion objectives
Product
Product life cycle
Target market
What are some examples of Unique Selling Points?
Design
After-sales service
Unique features
Distribution
Quality
Durability
What is price skimming?
Price skimming is where the selling price starts off high, but slowly is reduced as demand falls.
What is price penetration?
Price penetration is where you initially start off with the price being fairly affordable or even cheap, and once it becomes favorable in the market the price is increased
What is competitive pricing?
Competitive pricing is where a business follows the price of a competitor. Where the largest company will set the price, with the smaller companies following suit.
What is cost-plus pricing?
Calculating the average cost of producing a single product and then adding a mark up, considering how much consumers would actually be willing to pay.
What is a loss leader?
Selling a product for an artificially low price to entice consumers to buy other products at the business.
What is Psychological pricing?
Selling a product at a price which seems cheaper (selling at £9.99 instead of £10)
What is a distribution channel?
A distribution channel is the flow of organization that connect a product from producer to consumer.
What are all of the possible stages of distribution?
Producer
Wholesaler
Retailer
Consumer
Distributor
Agent
What are the stages in the product life cycle?
Research and Development
Introduction
Growth
Maturity
Decline
Extension Strategy
What is a Boston Matrix?
Displays each product/service in relation to its market: How much market share they have and how well the market is performing in general
What are the 4 categories in a Boston Matrix
Cash Cow ( Low market growth, High market share)
Question Mark / Problem Child ( High market growth, Low market share)
Star ( High market growth, High market share)
Dog ( Low Market Growth, Low market share)
What are the advantages of mass marketing?
Large target market allows for high number of potential sales
Global marketing allows for economies of scale
Potential to create huge brand with worldwide recognition
What are the disadvantages of mass marketing?
Expensive forms of marketing
Time consuming
Constant investment
Risk of irritating the consumer
What are the advantages to niche marketing?
Targets a specific customer type
Less expensive than mass marketing
Less competition
What are the disadvantage to niche marketing?
Can potentially attract other competing firms
Potential for sales is much lower than mass marketing
What is business-to-business?
Marketing is aimed at other businesses
What is business-to-consumer?
Marketing is aimed at almost everyone
What are some ways businesses can increase customer loyalty?
Loyalty/Points cards
Saver schemes
Good customer service
What are the problems with loyalty?
May just be convenience, not loyalty
May just be the cheapest alternative
Some customers are indifferent and are not actually loyal
What does loyalty mean?
When a consumer decides to stay with a business and make repeat purchases.
What does sponsorships mean?
When a business supports another person or business in exchange for cross-promotion
What does sustainable mean?
Where a business fulfils their strategic objectives without compromising the land or society in which they operate.
Benefits of treating staff as an asset?
Likely to perform better
staff turnover is likely to stay low
Benefits of treating staff as a cost?
Cheaper
Saves time
What does outsourcing mean?
Where a business will find a person or other firm to take on a particular business process
What does the term dismissal mean?
Where:
an employee is unable to perform key tasks due to lack of skills or qualifications
Gross misconduct
Long term illness not related to disability
What does the term Redundant mean?
Where:
A company has to close down
Technology replaces tasks normally performed by workers
A firm move production line overseas
What is the recruitment process?
Vacancy arises
Job Description and Person Specification are written
Job is then advertised
Application forms
Short-listing
Interviewing
References
Appointment
Advantages of internal recruitment?
Existing employees require less training
Helps motivate and retain employees
Business already knows employee with their skills and qualities
Relatively cheap
Disadvantages of internal recruitment?
Doesn’t bring in any new ideas for the business
Will need to fill the old job of the employee
May cause friction in the workplace
Advantages of external recruitment?
Brings new ideas into the business
More options and variety to choose from
Less likely to be badly influenced by others
Disadvantages of external recruitment?
Can be timely and costly
Could demotivate employees
Selection procedure can be rigorous
Advantages of on-the-job training?
Still working in the business and is contributing to productivity
less expensive for the business
easier to assess progress of trainee
Will learn from experienced workers who have practical training
Disadvantages of on-the-job training?
May pick up bad habits
More likely to make mistakes which could be costly
Workers training the new employee are distracting and productivity might fall
Advantages of off-the-job training?
Training is given by specialist, qualified instructors
Gives employee chance to experience new business ideas and working practices
No opportunity to damage equipment or make mistakes on the job
Disadvantages of off-the-job training?
Expensive
Skills learnt may not be easily transferable to workplace
Does not contribute to productivity while training
What does a centralized business mean?
Few top level managers that make decisions and hold responsibility for the entire company, centralized in a main office
What does a decentralized business mean?
Business delegates responsibility to employees lower down the chain of command, allowing various branches to make decisions for themselves
What does chain of command mean?
The the order of authority, and how instructions are passed through a business.
What does it mean to have a TALL structure
Lots of chains of command which encourages specialisation, however has a slow response time and information may become inaccurate or different from what it originally was
What does it mean to have a flat structure?
Few layers of command, making the decision making process much quicker and easier, however the span of control for managers is very high, making it more difficult and may demotivate workers as they wont be that close to their managers.
Who are the 4 motivational theorists?
Mayo
Maslow
Taylor
Herzberg
What was Taylors Theory
People are motivated by money, with the idea of piece rate pay to make employees more efficient
What was Mayos Theory?
The idea of working in groups with communication to motivate workers, as well as changing their working environment (light study)
What was Maslows theory?
Hierarchy of needs :
Self actualisation needs
Esteem needs
Love and belonging needs
Safety and security needs
Physiological needs (basic needs)
What was Herzbergs theory?
Hygiene and motivation factors:
Without hygiene factors, motivational factors will have little effect
Hygiene : ( Working conditions, salary, security )
Motivation : ( Recognition, responsibility advancement )
What are some financial incentives ?
Piece rate pay
Time rate pay
Profit sharing
Commission
Bonus
Fringe benefits
Performance related pay
What are some non-financial incentives?
Job enrichment
Job enlargement
Job rotation
Employee empowerment
Team working
Consultation
Flexible working
What is the difference between management and leadership?
Management focuses on planning, organising, leading and co ordinating all the resources of the business, whereas leadership is focused on guiding the business, how a person motivates their employees and positively influences them in order to bring success.
What are the 4 types of leadership?
Democratic : Decisions involve everyone, with the leader consulting the employees
Autocratic : Decisions made by business leader with business’ best interest in mind
Paternalistic : Decisions made by business leader but with the interests of the employees
Laissez faire : Empowers employees with minimum interference
What is a sole trader?
Business that is owned and operated by a single person
With full responsibility of the business
What is a partnership?
Operated by multiple people but are still liable for the business
What is a PLC?
Public limited company, owners are no longer liable for the business, and sell shares on the stock exchange. Must share business plans to public.
What is a LTD?
Private limited company, owners are no longer liable for the business, but share parts of their business to friends or family, or people they trust
What is an opportunity cost?
The value of the second best alternative foregone.
