Miss M Al-Saad Flashcards
Why do businesses exist
Business exist for multiple reasons
- To provide goods/services that meet needs & wants of their customers
- to achieve a specific social, ethical or environmental purpose
- To create wealth for owners or other stakeholders in the business
What is a mission statement
Mission statements are long term goals that a business strive to achieve
It is a broad statement of why the business exists
Benefits of a good mission statement
- it can be used as a marketing tool to attract customers
- it can be used to motivate employees
- it can attract future shareholders
- As a starting goal for a business
What are objectives
Objectives are specific, short term goals that business want to achieve/maintain in the business
Objectives should be S.M.A.R.T (Specific, measurable, achievable, realistic & time based)
What does S.M.A.R.T mean in a business
Specific
Measurable
Achievable
Realistic
Time based
Objectives can be corporate and functional.
What does corporate mean
Corporate objectives are meant for the whole business
Objectives can be corporate and functional.
What does functional mean
Functional objectives are based in a specific financial department
They may be HR, Operations, Finance, Marketing
What are output levels
Output levels are the number of goods or services produced by a industry, company or economy in a timeframe
What are variable costs
Variable costs are things that change almost immediately depending on the levels of output
What are fixed costs
Fixed costs are costs that don’t immediately change depending on the output levels in the business
Examples of fixed costs
Insurance, Mortgage, Rent, Salaries
Examples of variable costs
Raw materials, Packaging supplies, Commissions, Salaries
What is capital expenditure
Money spent by a business or organisation on acquiring or maintaining fixed assets
What is revenue expenditure
Any money spent in the business to cover short-term expenses
Examples of objectives
To (achieve):
Specific levels of profit
Specific levels of growth
Specific levels of cash flow
Survive as a business
Social and ethical targets
What is revenue
Revenue is the total amount of money a business earns from selling goods or services.
Cash cow products mean?
Products that have high market share in a low growth market
What is a product portfolio
The range of products a business sells (aka the product mix)
Benefits of a wide product portfolio
- more revenue as there’s more products available for purchase
- different products are at different stages of the product life cycle (products in growth/maturity stage can provide cash sales to develop products in the research & introduction stage)
Problem child products mean
Low market share in a high growth market
What is penetration pricing
Charging a low price for new product to secure a place in the market
The goal is to attract customers away from competitors by offering a lower price
Psychological pricing
Charging prices below significant figures.
E.g £9.99, £19.99, £49.99
What is Dynamic pricing
Businesses setting highly flexible prices for products based on current market demands
What is revenue
The value of products sold during a particular period
What is a sole trader
- Owned alone
- Finance is provided by the owner (capital)
- Owner is entitled to ALL profit
Advantages of sole trader business
- Complete control of the business
- more flexible
- quicker, easier & cheaper to set up than a LTD
Disadvantages of sole trader
- Unlimited liability - personal possessions at risk if business is in debt
- Owner is only source of capital/finance
Disadvantages of sole trader
- Unlimited liability - personal possessions at risk if business is in debt
- Owner is only source of capital/finance
Niche marketing
Aiming a product at a small segment of a larger market
Benefits of niche marketing
High sales due to lack of competition
Can charge high prices
Can establish customer loyalty
Marketing segment
Separating the market into group of people with similar characteristics
Types of segmentation in markets
- Demographic (age/gender)
- Geographic
- Income (socio-economic grouping)
- Behavioural
Types of segmentation in markets
- Demographic (age/gender)
- Geographic
- Income (socio-economic grouping)
- Behavioural
Disadvantages of niche marketing
- Will attract competition from large firms
- High average costs because of low volume sales
- Not enough customers to generate specific profits
Mass Marketing
Devising products with wide appeal and promoting them to all types of customers
Benefits of mass marketing
- Potentially high sales due to larger number of potential customers
- Lower average costs can allow lower prices to be charged
Drawbacks of mass marketing
- Harder to establish a USP
- Greater amount of competition
Consumer marketing (B2C)
Selling to the general public
Business to Business Marketing (B2B)
Selling to other business
Market mapping
Selecting two key variables that differentiate brands within a market then plotting a position of each brand
What are Markets
The meeting place between customers and suppliers.
They can be local, national or international
They can be physical or electronic
What is market size
The measurement of all sales by all sellers within a particular market
It can be measured by
- Volume: number of goods sold
Value: total amount spent by customers on volume sold
