Facts Flashcards
Identify the stages in product lifestyle
Development Introduction Growth Maturity Decline
The product lifestyle
What is development
The business is researching and developing the product. product testing and trials take place
. the product is not yet available for sale.
The product life-cycle
What is introduction
The business launch is the new product on the open market and makes it available for sale. During this stage, The business advertises the product and uses promotions to encourage sales
Product life-cycle
What is growth
Customers are now familiar with the product and sales are increasing. At this stage of the life-cycle, sales are increasing at the fastest rate.
Product life-cycle
What is maturity
During the stage, sales of the product have reach their highest. It is likely that the number of new customers is reducing and sales growth is limited. Other businesses organisations may have entered at the market to compete with a number of similar products available may mean the market is saturated
The product life-cycle
What is decline
In the decline phase sales of the product will begin to fall. The business will not actively advertise the product and will eventually remove from the sale.
What is an extension strategy
Action is a business can take to extend the life of a product and increase sales
Examples of extension strategies
Advertising Price reduction Add value Explore new markets New packaging
Cost of production formula
Product costs+ profit= selling price
Examples of pressed strategies
Competitive prices
Price skimming
Psychological pricing
Price penetration
What is competitive pricing
Selling a product with a price which is similar to other local competitors however it will be lower so customers will buy yours
What is price skimming
Introducing the product at a high price and then it gradually lower as it overtime
What is psychological pricing
Set an approach that appears attractive to a customer for example 999 rather than 1000
99p
What is price penetration
Introduce the product at a lower price than usual to attract customers gradually increase the price all the time
advertising
Leaflets Social media Websites Newspapers Magazines Radio
What is a sole trader
A business owned and controlled by one individual
Give an example of a sole trader
Plumber
Electrician
Mobile
Examples of a sole trader
Easy to set up
Low set up costs
The owner makes all the business decisions
You can choose your working hours
Disadvantages of a sole trader
Difficult for the business to grow Banks are less keen to lend No one to share a responsibility with May have to long work long hours Unlimited liability
What is partnership
Business that is owned and controlled by two or more individuals
Examples of a partnership business
Estate agents
Accountant
Solicitors
Advantages of partnership
Partner is bringing different skills
Responsibility and risk a shared
Partners can discuss queries before finalising decisions
Disadvantages of partnership
Decision-making can be consuming
There is a potential disagreement and conflict
All partners are jointly responsible for business debt
What is a franchise
A business organisation where the franchisor grants a license to another business so they can sell brand or business ideas the franchisor owns the business ideas
Examples of a franchise
McDonald’s
Pizza Hut
Starbucks
Advantages of a franchise
Limited business and its industry experience
The franchise still owns the business but not the idea
Is easier to gain customers
Disadvantages of franchise
The initial and ongoing costs of operating a franchise are not cheap
The franchise will need to stick to the marketing activities agreed by the franchisor
What is the functional area
A department that plays a pacific role within an organisation and his employees carry out a particular aspect of the work of the organisation
What are the four main functional areas
Human Resources
Marketing
Operations
Finance
What is the formula for total cost
Fixed cost + variable costs = total cost
What is revenue
The money a business earns from selling goods or providing services
What is total revenue
The total amount of money earned at a particular output level
What is the formula for total revenue
Total revenue= selling price per unit X number of sales
How to calculate profit
Sales revenue - total cost = profit/loss
What is Break even
The point at which a business makes no profit and no loss
The formula for calculating breakeven points in units
BEP=FC divided by (SP-VCPU)
Fixed costs
Variable cost per unit
What are the name of the three lines which could be shown on a break even graph
Fixed cost
Total cost
Total revenue
How to calculate cash flow
Net cash flow = cash inflow - cash outflow
