Marketing Flashcards
What is Marketing?
Marketing is the process responsible for identifying , anticipating and satisfying customer requirements profitability.
What is market research?
The collection of information from consumers and people who may become consumers, finding out whether they like or will buy the firm’s products
Purpose of Market Research
To find out info about customers and what customer are most like to buy
To reduce the risk of selling the wrong products or services
To find out the best place to sell a product/service
What is primary research?
Primary research is also known as field research. It is the collection of original information and is carried out by making direct contact with consumers.
Methods of primary research
Observation
Testing
Interviews
Questionnaires
Consumer panels
Advantages of primary research
- information is up-to-date, more relevant and accurate
- competitors will not have access to info/research giving a competitive advantage
- The business can design the research, so they can obtain exactly the info they want
Disadvantages of primary research
- can be very expensive - not at their job
- very time consuming - not at their job
- difficult to obtain - people may not want to fill in questionnaires, surveys
What is secondary research?
Also known as desk research. It is research using published statistics,data and other information which have already been collected and analysed.
What are some examples of methods of secondary research
Government publications
Internet
Newspapers and journals
Firm’s internal records
Advantages of secondary research
- The Information is cheap to obtain
-The information is usually available immediately
-Businesses can find out what it’s competitors are doing
Disadvantages of secondary research
- the information may be out-of-date , not relevant
-Every other business can view this information- no competitive advantage - The data was originally collected for a different purpose, may be difficult to make sense of
Methods of primary research - Questionnaires and Interviews
Most common method. Can be conducted by telephone, face to face, mail or the internet/e-mail
Advantages of Questionnaires and Interviews
- Info is taken directly from people who are or will be customers
-Questioner/Researcher can help people understand the questionnaire
-The questions are designed to find out the exact info the business requires
Disadvantages of Questionnaires and interviews
-Some people do not want to be stopped and asked questions
-People can misunderstand and give misleading responses
-It is a slow method and can be expensive
Methods of primary research - Observation
Involves watching or observing the reactions of people to products
Advantages of observation
- cheap for the business
- Does not inconvenience customers
Disadvantages of observation
- less accurate and open to interpretation
- not suitable for all products
Methods of primary research - Consumer Panels
Involves taking responses from people who regularly sit in on panels and give their personal opinions on different products or other consumer information. They are selected for their expertise and knowledge.
Advantages of Consumer Panels
- very detailed information can be gathered
-they are skilled,impartial,experienced and give high quality answers
Disadvantages of Consumer Panels
Can be quite expensive, must pay those on the panel
Methods of primary research - testing
Involves members of the public being given samples of the product and being asked for their opinion on it
Advantages of testing
- Straightforward to organise
- Consumer’s first hand opinions are given
Disadvantages of testing
- May not test a cross-section of the public, only certain people may attempt it
- not suitable for all products
What is Sampling?
Sampling is a form of market research. It involves questioning a selection or a sample of people.
It would be impossible to interview or questionnaire every single person, so sampling is used to find out the views of a selection of the population.
Why do Businesses use Sampling?
· It is impossible to carry out market research on every customer and every potential customer.
. Using sampling makes primary research more manageable for the business as it would be impossible to survey everyone.
· It saves the time and money.
What is the Method of Sampling - Random Sampling
A random sample is where people are randomly selected and asked their opinions on a product.
The random sample may be taken as every tenth person who walks down the street.
There is a possibility that some of the people questioned may not be familiar with the product or even interested in it.
The results of the random sample are of most use when the product is used by everyone, for example a chocolate bar.
Advantages of Random Sampling
· Personal opinions are given by those surveyed.
· Everyone has a chance of being chosen.
· Random surveys are easy to organise and cheap as respondents are chosen at random.
Disadvantages of Random Sampling
· Results are not accurate unless the sample is very large.
· The method is not suitable for all products.
· It doesn’t always reach the most appropriate people.
What is the Method of Sampling - Quota Sampling
Is where interviews are held with a set number of people who fall into predetermined categories and reflect the type of product.
E.g. a quota sample might consist of 50 per cent makes ad 50 per cent females, or ten people from defined age groups, such as under 18, 18-68, and 69 and over.
Advantages of Quota Sampling
· Results are more accurate than in random sampling – gives the business confidence that results are reliable.
· It is more likely to reach the most appropriate people.
· Personal opinions are given by those surveyed.
Disadvantages of Quota Sampling
· The composition of the population in the area must be known in order for the correct proportions to be interviewed.
· Not suitable for all products.
What is Qualitative Data
This type of data is non-numerical and aims to provide explanations for changes in trends and tastes in the market.
An example of this type of data is customer opinions or feelings about specific topics of interest to the business.
It is usually gathered using open-ended questions, e.g. ‘What do you like about the product and why?’
It usually includes descriptive information and it provides a business with detailed information that cannot be expressed in a graph or chart.
While qualitative data gives detailed information, it can be time consuming and costly to gather and analyse.
What is Quantitative Data
This type of data is numerical and measures changes in the topics of interest to the business.
An example of this type of data is an indication of the size of the market or percentage market share.
It is usually gathered through the use of closed questions, such as ‘yes’ or ‘no’ responses, multiple-choice options or a rating system.
Results can often be expressed in a graph or chart.
It has the benefit of being simple and quick to analyse. It can also be analysed in a way that gives easy-to-understand results.
However, quantitative data lacks specific opinions and doesn’t always allow a business to see exactly what its customers think.
What is Market Segmentation?
Market segmentation is the selection of groups of people who would be most interested in a particular product so that the product can be targeted at them. Targeting the correct segment of the market is vital to ensure the business achieves sales.
How can the market be Segmented?
AGE - Cartoons aimed at children or hearing aids
GENDER - Females may be more interested shape/colour of a car
while men may be more interested of the performance
ETHNIC BACKGROUND - food,music,clothes
REGION - Gaelic football, American football
SOCIO/ECONONIMC CLASS - luxury cars aimed to the rich
LIFESTLYE - sportier people have healthier foods
What is The Marketing Mix?
The marketing mix describes all the key activities which are used in marketing a business’s products. This is important as it enables a business to satisfy the needs of customers, which helps the business to be successful.
These are referred to as the four Ps; Price, Place, Promotion and Product
What is the Product?
the product or service the customer needs
What is the Product life cycle?
The product life cycle is a model which charts the stages a product will typically go through over its lifespan in 6 stages.
Explain the Product Life Cycle stage - Research and Development
· This stage takes places before the product is on the market.
· Usually market research would be carried out on the product and it would also be tested e.g. for mechanical products (Xbox).
· It is an expensive stage for the producer because research is expensive which means the costs are high and no income is coming in.
· Therefore, it is in a loss making position.
Explain the Product Life Cycle stage - Introduction/ Launch
· Sales are low and profits will be negative.
· The business uses sales promotion to try and increase sales.
· The product would still not be in a profit making position because sales would not be high enough to cover the costs from stage 1.
Explain the Product Life Cycle stage - Growth
· Sales increase rapidly as people are aware of the product.
· Sometimes, the price of the product may be lowered due to other producers beginning to provide competition.
· The product will be in a profit making position as sales cover the initial costs
Explain the Product Life Cycle stage - Maturity
· This is the longest and most common stage – sales are maintained and the product is well established.
· Often profits are at their highest.
· Sales continue to grow but at a slower rate due to the intense competition.
· This stage would be longer for household product and shorter for fashion items because the new craze takes over.
Explain the Product Life Cycle stage - Saturation
· This is the highest point in the product lifecycle.
· Competition will still be high but there are no new competitors at this stage.
· Sales will not increase because new customers cannot be found.
· Profits would still be good but will not grow further.
Explain the Product Life Cycle stage - Decline
· Sales are falling.
· Profits are falling.
· The business may not be covering their costs.
· Some businesses will usually have prepared for this stage by having a second product ready for introduction to the market.
How to extend the product life cycle?
A business aims to prolong the life of their products to maximise profits. This is typically done by making alterations to the product, which makes people want to have the latest variety or model.
Strategies used to extend the product life cycle - Modifying the Product
This involves business bringing out new designs of products, sometimes only making minor modifications.
The new model product is re-launched which entices customers to buy it.
Strategies used to extend the product life cycle - Altering the Packaging
The packaging of a product can be altered to give an updated appearance to the product.
Redesigning product packaging can increase awareness of the product; it can give the product an updated appearance.
Strategies used to extend the product life cycle - Reducing the Price
Reducing the price or discounting the product or service is frequently used to encourage sales e.g. 25% off or buy one get one free offers.
Strategies used to extend the product life cycle - Exporting the Product
Exporting the product to new markets or different geographical areas outside of their domestic market can increase awareness and sales of the product.
Strategies used to extend the product life cycle - Increasing the Advertising
Advertising the product through various media can increase customer awareness, for example advertising in local or national media, TV and radio or more recently social media
Strategies used to extend the product life cycle - Introducing New Varieties
Many businesses will produce different varieties or flavours of products to entice more customers to purchase them. E.g. Coca Cola have introduced ‘lite’ varieties so people on diets will still continue to purchase their products
Explain the Consumer Rights Act 2015
· Goods and services supplied must be of “satisfactory quality.” This means they must be produced properly and safely and free from defects.
· Goods must be fit for purpose for which they were supplied.
· Goods must be exactly as they are described on the packaging. They must match the description given to the consumer.
· All services must be given with reasonable care and skill, at a reasonable price and completed in a reasonable time frame. Where service delivery is unsatisfactory, a provider must re-supply the service at no additional cost.
Explain the Consumer Protection Act, 1987
· Goods supplied must be safe, any product not safe is deemed to be defective.
· A customer injured by defective products are entitled to sue for damages.
· Customers must use the product in accordance with the instructions provided and observe warnings associated with the product.
· Suppliers must not mislead customers in relation to product prices.
· Local council can seize unsafe goods and confiscate them.
What is pricing policy?
The pricing policy is the way in which the business sets a selling price which customers pay for the product or service.
Explain the pricing policy - Skimming
· It is most often used with new products when there is not as much competition in the market.
· This strategy sets a high price initially in an attempt to skim the market (like skimming cream of the milk).
· Some people will be willing to pay the higher price because the product is new and not many people would own it.
· The price will be reduced as competition enters the market.
· Skimming enables a business to gain high levels of sales revenue in the short term.
Explain the pricing policy - Penetration Pricing
· This strategy involves setting a low price at the beginning to gain entry into a market and then increasing the price once the place in the market is secure.
· It is used by a business to get into a market that is competitive.
· A business will use lower prices to attract customers away from competitors in the hope they will become regular customers. The business will then increase the price.
· This strategy ensures sales in the short term but means there might not be much profits.
Explain the pricing policy - Competitor-based Pricing
· Competitor based pricing involves accepting the price which competitors are charging for a product and charging a similar price either at the same level or slightly lower.
· Competition would be strong in this market and businesses would have to monitor competitor’s prices.
· Consumers can now compare prices easily using price comparison sites.
· Competitor-based pricing can lead to price wars with competitors competing on very low profit margins.
Explain the factor which effects price - Costs of Production
· A business will incur costs when producing a new product or service. The costs could include the cost of raw materials, electricity costs, rent etc.
· The business must be aware of the cost of production so the price charged to the customers will cover all these costs. It can also include the costs for selling the products.
Explain the factor which effects price - Need to make a Profit
· The overall aim of a business is to make a profit.
· Products must be priced at a level which covers the total costs and also leaves a margin of profit for the business.
· The highest level of profit is not always about charging the highest price as this can drive away customers.
Explain the factor which effects price - Competition in the Market
· Aim of a business will be to set a price which will encourage customers to buy their products instead of competitor’s products.
· To do this, the price will need to be lower than the competition if the goods are the exact same.
· The prices of competitors’ products must then be monitored.
Explain the factor which effects price - Demand
· This refers to the quantity of the product or service needed by customers.
· Usually if the demand is high, a higher price may be charged, whereas when demand is low for products or services price will also be low.
· In times of a recession, people are unemployed so demand will be low but will rise when there is money in the economy.
Explain the factor which effects price - Price which the market can bear
· The business must decide what their target market is and charge a price which customers are able or willing to pay.
· If the goods are luxury items then they are targeted at wealthier people because the business will know that the customers are able to afford a higher price.
· If the products is being placed in a less ‘well off’ area then the business will know to charge lower prices in order to encourage people to buy.
· The price charged must be one that can encourage the highest level of sales.
Explain the factor which effects price - Quantity of Inventory in Hand
· If a business has large amounts of stock left which they want to get rid of then they will hold a sale. Therefore the price will be lower.
· If the business didn’t sell the stock they would have to pay money to hold it and so they are losing money instead of making money.
Explain the factor which effects price - Seasonality
· The demand for certain products will change at different times of the year.
· The highest level of sales for toys is in December because of Christmas and therefore they will be at their highest price and then fall straight after (January sales).
State factors that cause a change in Demand
Price charged, customer tastes, level of income, advertising, price of other goods, credit rates
What is Demand?
Demand is the quantity of a product which can be bought by consumers at a given price.
The price of a product has a very great influence on demand. In general, as price increases, demand decreases and as price decrease, demand increases.
Demand curves and Product life cycle graphs
look in book
What is Promotion?
Promotion is the process by which businesses inform customers about their products and encourage them to buy those products.
Explain methods of promotion - advertising
Involves:
· Introduce a new product to the public to encourage sales.
· Remind the public about an existing product to boost sales.
· Target a new segment of the market thereby increasing their market share.
· Provide information about products or events.
What are the three types of advertising?
informative, persuasive, generic
Explain the type of advertising - Informative advertising
this is purely factual and its intention is to give information.
Explain the type of advertising - Persuasive advertising
this method aims to entice or persuade members of the public to purchase the advertised product. It convinces people to select the advertised product in preference of other goods.
Explain the type of advertising - Generic advertising
this aims to increase consumer awareness of products/services at an industry/sector level.
State some methods of advertising and explain them
Television - expensive, wide audience, effective, visual impact
Radio - cheaper, wide audience, can be local
Social Media - fast growing, cheap, worldwide audience, lots of info, needs equipment to access
Newspapers/Magazines - wide audience, lots of info, can be local, can target particular market segments, expensive, can be lost amongst other advertisements
Evaluation of Advertising - Advantages
· It helps to alert consumers to the launch of a new product/service.
· It reminds customers about existing products/services.
· It helps to increase market share in a specific target market or market segment.
· It provides provide/service information to consumers.
Evaluation of Advertising - Disadvantages
· It can expensive to use some methods of advertising.
· There is no guarantee that the intended audience will see the advertisement.
Explain methods of promotion - Sales promotion
· Increase sales for a short period of time.
· Encourage people to purchase the product.
· A good way to bring new life into a brand which is reaching maturity.
State some methods of sales promotion and explain them
Discounts - The customer is attracted by the low prices and sales for the business
would increase.
Loss Leaders - The price of one or two items is reduced to a low level and the shop
hopes to encourage customers to buy other products.
Loyalty cards - each purchase earns points which can be exchanged for cash
attracting people to shop there.
Free samples - Encourages sales e.g. samples in shops introduce product
Price guarantees - Encourages sales as why shop elsewhere when you believe get the best price already e.g. ASDA “Our price cannot be beaten!”
Evaluation of Sales Promotion - Advantages
· Sales promotion activities can increase the sales of a product, which increases sales revenues and market share.
· They can allow a business to gain a competitive edge over their rivals.
Evaluation of Sales Promotion - Disadvantages
They do not guarantee continued customer loyalty as a customer may only be looking for a one-off bargain with no intention of repeating the purchase.
· They often result in companies constantly fighting against each other to entice customers to come to them instead of their rivals e.g. price wars.
Explain methods of promotion - Sponsorship
This is where businesses provide funding (in part or in whole) for specific events in return for a prominent display of the business logo/products/services. This helps to increase customer awareness of the business. Examples include business sponsoring local Gaelic teams, formula 1 teams.
Evaluation of Sponsorship - Advantages
· It increases awareness and publicity of the business.
· It helps customers perceive the business in a positive manner as they are seen to care about the local community and stakeholders.
· It can help to increase sales for the business through the increased media exposure.
Evaluation of Sponsorship - Disadvantages
· Once the event has taken place the image of the business may disappear and is no longer at the forefront of the customer’s mind.
· If a sponsor performs badly or receives negative press, it can damage the company’s reputation. E.g. Tiger Woods and Nike.
· Sponsoring an event/team costs the company money.
Explain methods of promotion - Public Relations
This is where the public’s awareness of a business is raised and the business is seen to be generous and helping to the public.
The aim might be to protect the reputation of the business, increase customer loyalty or increase sales through the demonstration of positive activities by the business.
Examples include participating in corporate social responsibilities such as waste reduction, recycling and donating to charities.
Evaluation of Public Relations (PR) - Advantages
· Public relations activities are useful where the business seeks to immediately improve its reputation with stakeholders, particularly in response to a negative issue or experience.
· It helps to create a good impression with members of the public, who will then be more likely to buy from the business.
· It is cost effective, as it does not require a payment like advertising does.
Evaluation of Public Relations (PR) - Disadvantages
· There is no guarantee that it will reach its intended audience, particularly if the media do not publicise it.
· The business does not have full control over what is published about them i.e. the newspaper may alter the story slightly to fit with what they want.
How Social Media promotes Business Activity - Advantages
· Increase awareness of the business and, therefore, attract new customers.
· Increase promotion of the business and its product/service range.
· Enable the business to advertise globally for a relatively low cost.
· Allow a degree of interaction between the business and a consumer – allowing consumers to comment and ‘like’ products or ask questions of the business, which the business can then reply on.
· Be used by the business to undertake market research and identify new tastes, trends and fashions.
How Social Media promotes Business Activity - Disadvantages
· Customer complaints can result in negative publicity for a business.
· Resources are required to support this aspect of business activity, including staff, IT equipment and other resources.
Explain the Trade Descriptions Act (1968)
The Trade Descriptions Act (1968) states:
· A business cannot provide false or misleading description of goods and services supplied, including:
o Quantity of the product
o The place and date of their manufacturer
o The people who manufactured them
· Prices must be genuine - if products are reduced in sale they must have been on sale at the higher price in that shop for at least 28 consecutive days in the previous six months.
· The country of origin information must be clearly labelled on the products packaging.
· Product descriptions must be provided either in writing, orally or pictorially.
Explain the Advertising Standards Authority (ASA)
The ASA monitors and regulates advertisements such as commercials on radio, TV or the cinema, newspapers, magazines, websites, apps, leaflets, brochures or email.
Explain Ofcom (Office of Communications)
Ofcom regulates the communications industries in the UK. Its duty is to protect customers from harmful or offensive material on TV, radio or other wireless devices.
What is Place?
Place refers to where the consumer buys the final product. The channels of distribution are the ways in which a business distributes the product to its customers.
A business must consider:
* The most appropriate sales outlet for the product.
* The most appropriate channel of distribution to use.
* The most appropriate method of transport for a particular product.
What does Ofcom ensure?
That all advertisements:
· Adheres to rules on taste and decency
· Is impartial
· Does not give offense or cause harm
· Supports market growth and competition
· Sets high technical standards
What does ASA intend to do?
Ensure that all advertisements are:
.Legal, decent, honest and truthful.
· Prepared responsibly for consumers.
· Consistent with fair competition rules.
Why is there legal constraints on promotion?
The government aims to protect customers to ensure that there is fair and honest trading in society.
It protects customers from being deliberately misled by false advertising or promotional offers which are not genuine value for money.
What is place?
Place refers to where the consumer buys the final product.
What is the party involved in distribution - Manufacturer
this is the producer or original creator of the product.
Parties involved in Distribution - Wholesaler
this is an organisation which stores products for manufacturers and retailers.
Parties involved in Distribution - Retailer
this is the seller of the product. It is usually a shop or website.
Parties involved in Distribution - Consumer
This is the person or group of people who buys and uses this product
What is a channel of distribution?
The channels of distribution involve a manufacturer, wholesaler, retailer and Consumer. Some will use just one method while others will use a combination. All businesses will base their choice on the nature and requirements of their product and consumers, as well as the most cost effective way of getting their product to the consumer.
What does the choice of channel depend on?
• Type of good: if it is specialised it will be directly sold between the manufacturer and customer.
• Value of the good: the more expensive it is, the fewer the places it will sell.
• Life span of the good: if the product is perishable it must be distributed widely so that people can get it quickly.
• Costs involved: the most cost effective method has to be found.
• Demand for the goods: if it is used regularly by everyone it must be distributed widely and be available immediately.
• Competition for the goods: manufacturers must make sure their goods are available at the same places as their competitors.
Explain Channel 1 - Traditional Distribution Method
In this method, the manufacturer sells (usually large) quantities of its product to a wholesaler. The wholesaler sells smaller quantities of the product to the retailer, who sells a smaller quantity again to the consumer.
When is traditional distribution method often used?
• By smaller retailers/or manufacturers who do not have large storage facilities.
• Where products are usually generic, rather than specialised, and are often in high demand over a wide area.
Explain Channel 2 - Modern Distribution Method
In this method, the manufacturer sells directly to the retailer, who sells to the consumer. Large companies such as Marks & Spencer, ASDA, TESCO would all buy directly from the manufacturers. This is because they have very large storage facilities and the money to place large orders and obtain a discount from manufacturers (economies of scale), which allows them to sell the product cheaper than smaller retailers.
When is Modern distribution usually used?
• Some manufactures use this method because their products have a short lifespan (e.g. fresh food) so they need to get the product to the consumer quickly.
• Some manufacturers use this method so they a have more direct relationship with the retailer and customer.
Explain Channel 3 - Direct Distribution Method
In this method, the manufacturer sells directly to the consumer.
• Products are often expensive – direct selling ensure exclusivity and enhanced the consumers experience through an excellent after sales service.
• Selling direct to the consumer means the manufacturer can sell each individual product for a higher price than going through wholesalers or retailers, so they will gain higher profit margins.
• Some manufacturers like having a close relationship with consumers.
What is competition and what does it force a business to do?
Competition in business is rivalry between businesses. It is a situation where they are competing against one another for a share in the market, and where they employ all kinds of tactics to discourage their customers from going to other businesses while also encouraging the customers from other businesses to come to them instead.
Competition forces a business to:
• Improve product quality in order to maintain market share.
• Keep prices competitive.
• Offer a wider range of products and services.
Strategies to manage competition - Pricing
• Businesses will keep their prices at the same level as, or slightly lower than their competitors in order to maintain or increase market share.
• Lower prices will encourage customers to shop at their business compared to rivals.
Strategies to manage competition - Product
• The quality of the product should be at least as good as competitors’ products.
• A business can expand the range and variety of products they sell to offer customers more choice.
• They will try to ensure they have the required products in stock and available for the customer.
Strategies to manage competition - Effective Customer Service
• The business will try to provide excellent standards of customer service to consumers, as consumers are likely to return to a business that has an excellent service which will help the business have a positive corporate image.
Strategies to manage competition - Promotion
• Promotions and discounts can be used to entice customers away from competitors if they think they are getting better offers.
• They will advertise widely.
Impact on Competition on the Marketing Mix - Pricing
• Competitive pricing strategy will be used.
• Prices cannot be higher than the competitors’ prices.
• Special offers will used to entice customers to buy their products.
Impact on Competition on the Marketing Mix - Product
• Quality of products may have to be improved to attract customers away from the competitors.
• Range of products has to be greater than that of competitors.
Impact on Competition on the Marketing Mix - Promotion
• Constant advertising is required to attract and retain customers.
• Promotional offers such as discounts and special offers are used.
• Good customer service is very important to retain existing customers and attract new ones
• Attractive packaging will be used.
Impact on Competition on the Marketing Mix - Place
• Products must be available in the store when required; otherwise the customer will go to the competitor for them.
• Products have to be available in a convenient place for consumers.
What is customer service?
Customer service refers to any interaction between a company and its customers, including assistance and advice given about its products or services.
Explain some customer service methods
- Excellent staff training so that customer service staff communicate well with customers at all stages of the buying process.
- Excellent follow up with customers in relation to purchases.
- Ensuring customer complaints and feedback are addressed to ensure successful resolution.
- Ensuring interaction with customers using social media to gain a positive global image.
State examples of ways a business can achieve excellent standards of customer service:
• Listen to the customer (e.g. phone calls, conferences).
• Provide high quality, safe and reliable products.
• Make the customer feel valued by responding to emails, phone calls or texts.
• Try to rectify any concerns or complaints and offer refunds or product exchanges.
• Their employees are well trained, skilled and helpful.
What are some benefits of excellent service
• Gain a competitive advantage
• Increase customer loyalty
• Increase sales revenues and profits
• Improve the reputation of a business, attracting new customers
What is international trade?
International trade is the selling and buying of goods to and from foreign countries.
Advantages of International Trade
· Increased markets and profits – A business can sell its goods in increased quantities. This leads to increased profits for the business.
· More employment – Increased sales leads to higher levels of production in the business. This situation leads to more people being employed.
· Economies of scale – Increased production allows the business to benefit from economies of scale. This ultimately results in higher profits for the business.
Disadvantages of International Trade
· Competition – With international trade a business will meet stiff competition because there are so many more producers trying to sell their goods. To succeed, a business’s marketing and product have to better than those of its competitors.
· Production – Increased markets and increased production may require capital investment and the recruitment of additional staff.
· Language – Businesses who are trading internationally must have members of staff who can speak, write and translate the language of the country in which the marketing is taking place.
· Currency – Businesses need to be familiar with the currency of the foreign country and be able to sell their products in that currency.
How the Marketing Mix affects International Trade - Product
· May have to be changed to suit the legal, traditional and cultural requirements of the foreign country. E.g. some Indians do not regard black clothes as fashionable.
· Must suit the technical set-up in the foreign country. E.g. electrical sockets are different in the UK from many other countries.
· Units of measurements may differ in the foreign country.
How the Marketing Mix affects International Trade - Price
· Needs to reflect what the market in the foreign country would be willing and able to pay. It would be impossible to sell a product at the same price in every country. E.g. the price of McDonald’s products vary according to what the local people could spend, and also according to the prices charged by competitors in that country.
· Has to be set at a level to cover taxes and duties.
· Has to be set at a level to cover transportation costs.
How the Marketing Mix affects International Trade - Promotion
· Advertising must be global.
· Promotional material must be in an appropriate language. Instructions on the packaging must be understood.
· Must consider any possible cultural differences. E.g. illustrations must not be offensive.
How the Marketing Mix affects International Trade - Place
· Product must be available in places where the target market would be able to buy it.
· Suitable transportation must be arranged for the movement of goods overseas.
· Insurance costs are high because of the risk of loss or damage to the goods.
· Climatic conditions are very different abroad and this results in variations of trading hours. E.g. many shops abroad close for a period during the day and contact during this time has to be avoided.
Implications for Transport of International Sales are as follows:
· Products have to be delivered in safe conditions, cheaply and on time. Small or light items can be posted using air mail. Larger, heavier items must be shipped or taken by aeroplane to their destination.
· Matters involving customs and exercise cise import and export regulations and shipping laws must all be observed.
The main implications of the global market for the local economy are as follows:
The need for training and practical experience - costs time & money
The need to be able to use the available technology competently – However, this requires capital investment in technology accompanied by training in the use of technology.
Stiffer competition for businesses in Northern Ireland – Can result in the closure of businesses and the redundancies of employees.
The opportunity for Northern Ireland to trade equally with all other countries – Using modern technology, communication is equally easy throughout the world. Trading opportunities are equally available everywhere.
Globalisation has been made possible partly by:
The lifting of import controls between countries. This makes it easier for local business to sell their products abroad.
The advancements in technology. Due to the continual development of the Internet businesses can reach connection with potential customers all over the world.
In order to make use of opportunities of international trade, the business has to
· Research the market abroad to see if its product has to be modified
· Decide on suitable forms of transport for the goods
· Provide the type of packaging required
· Understand the documentation required for sending products abroad
· Train some staff to speak the foreign language required
· Supply the goods in the shortest possible time.
Explain the freedoms of the single market:
- Freedom of movement of people and labour
· Citizens of any part of the European Union can live and work in any other part of the EU. This helps businesses as they can recruit staff from various member states, bringing different knowledge and experience.
- Freedom of movement of goods
· Companies can sell their products anywhere in the European Union and consumers can buy where they want.
- Freedom of movement of capital
· Currencies and capital can flow freely between any areas of the European Union.
- Freedom of movement of services
· Professional services such as banking and insurance can be offered in any European Union country.
Explain the role of the European Union (EU)
The European Union is an economic and political union made up of a number of countries located in Europe.
The European Union’s aim is to promote social and economic progress among its member states.
Membership of the European Union provides better trading opportunities for businesses in those member states and opens up a wide market of potential customers and suppliers.
It is easier to trade in this market than other overseas markets as many of the trading practices, regulations and standards apply throughout the European Union.
Explain the term E-Business
E-Business is the conduct of business activities using electronic methods – for example, internet, emails and other forms of telecommunications, using devices such as computers, laptops and other IT equipment.
to increase profitability, market share and interaction with stakeholders and allows the business transactions to be completed securely and quickly and in a remote manner
Advantages of E-Business for a BUSINESS
· Business can occur 24/7 – even when the store is closed.
· The business can buy products and services from a range of international sources.
· Fewer sales personnel are required for E-Business, saving wages.
· Payment for the goods is made immediately and securely.
Disadvantages of E-Business for a BUSINESS
· Competition is increased.
· An attractively designed website and an efficient electronic system are essential.
· Efficient packaging and reliable transport systems must be place.
· The business needs to be able to cope with many languages.
Advantages of E-Business for CUSTOMERS
· Accessible 24 hours a day, 7 days a week.
· Goods are generally cheaper as business expenses are reduced.
· Consumers can ‘shop around’ between businesses which allows them to compare prices between products.
· It is very convenient to shop from home and time is saved by not having to visit shops.
Disadvantages of E-Business for CUSTOMERS
· Lack of trust of payment system particularly for elderly
· Security issues and fear of personal information being wrongly used by hackers.
· There is no guarantee of product quality.
· There may be currency or language barriers.
How does E-Business supports International Business
· E-Business allows home businesses to purchase supplies and raw materials from international sources. These may be cheaper.
· E-Business opens an international market for home businesses who can market their products abroad and become known internationally.
· E-Business gives businesses a competitive advantage by opening up a global market and an international range of customers.
· Through E-Business, products manufactured in this country are offered in for sale on a world-wide scale. This increases productivity and sales revenue, market share and profits.
What is M-Business?
M-Business is also known as mobile business and refers to the application of technology and systems used to undertake business transactions using mobile devices such as smartphones.
This is important as it allows a business to achieve its objectives through remote interactions with stakeholders using Wi-Fi technologies.
State some uses of Mobile Technology in Business
Mobile commerce
Mobile payments
Mobile Banking
Mobile ticketing
Explain the use of Mobile Technology - Mobile Commerce
Businesses can sell directly online and through mobile apps on a customer’s phone.
Making their products easily available to mobile customers creates new opportunities for businesses.
A business can also acquire supplies directly from a supplier using a mobile phone.
A retailer also might use mobile devices to check, update and manage their inventory levels.
Explain the use of Mobile Technology - Mobile Payments
Many businesses now also accept payments via mobile devices in their physical stores through their point-of-sale (POS) systems.
Explain the use of Mobile Technology - Mobile Marketing/Communications
Mobile technologies allow businesses to communicate with their customers easily. E.g. by sending notifications to customers’ smartphones.
Mobile devices also allow customers to communicate with businesses. E.g. they can provide feedback on their shopping experience or make a customer service enquiry.
Explain the use of Mobile Technology - Mobile Banking
It is simply for bank customers to check their bank balances and make payments using an app.
Mobile banking means there is less need for bank branches, which saves banks money.
Customers can also have access to their account information on their phones.
Explain the use of Mobile Technology - Transport and delivery services
New transport services are combining mobile payments with location-based technology.
You can book and pay for a taxi service, or order a takeaway meal using a smartphone app and have it delivered to your exact location.
Explain the use of Mobile Technology - Games
Mobile games now earn more money than any other type of app.
They are convenient for users than console or PC-based games and can be played on the go.
Explain the use of Mobile Technology - Mobile ticketing
Mobile ticketing allows customers to use their mobile devices to search, order and pay for tickets for activities such as events, hotel rooms and travel.
Mobile ticketing can reduce costs for businesses by eliminating the need to issue printed tickets.
For many customers, mobile tickets are more convenient than having to print and remember paper tickets or reservations.
Advantages of M-Business to a Business
· Businesses can communicate with their customers and other stakeholders immediately, wherever they are.
· Businesses can accept new forms of payments, giving customers more options and improves cash flow.
· It allows employees of a business to work from home.
Disadvantages of M-Business to a Business
· Businesses may have to invest substantially in new hardware and software in order to make use of mobile technology. E.g. Business apps or POS systems.
· New competition. Many existing businesses will have to compete with new businesses that deliver services mainly using mobile technology.
· Design online advertising to suit mobile devices.
