Paper 1 Flashcards
What is market mapping?
Finding the variables that differentiate brands in the market
What are the strengths of market mapping? [3]
-Can find a gap in the market
-Identify customer needs
-Helps a business reposition themselves if needed
How can businesses compete other than price? [5]
-Added value
-Branding
-Quality
-Innovation
-Convenience
What is demand?
The amount of goods people are willing and able to buy
What factors lead to changes in demand? [acronym + one other]
PIGPO and external shocks
What does PIGPO stand for?
P-Population
I-Income
G-Government
P-Personal tastes
O-Other products
What are examples of external shocks?
War and Inflation
What are complementary goods?
Goods that consumers purchase together
What is supply?
The quantity of a good or service that a producer is willing to make available
What factors affect supply? [acronym + one other]
TWICT and external shocks
What does TWICT stand for?
T-Technology
W-Weather- product availability
I-Industrial Relations- relationship with staff
C-Cost of production
T-Taxes and Tariffs
What is the equilibrium price?
When supply and demand are equal
When does disequilibrium occur?
When a price is set at a point where supply and demand aren’t equal
What is PED? [2]
-It measures the responsiveness of demand to a change in price
-It can be elastic or inelastic
What does the term “elastic mean? [2]
-Demand for the product/service is sensitive to price change
-The value is higher than 1
What does the term “inelastic” mean? [2]
-If the price changes, demand stays the same
-The value is between -1 and 1
What is the formula for PED?
PED = % change in quantity demanded/ % change in price
What are the factors influencing PED? [3]
-Availability of substitutes
-Whether it’s a necessity or luxury good
-Strength of brand
What is the relationship between PED and revenue?
If the price of an elastic product increases, demand falls, therefore revenue falls
What are inferior products?
Products/services where demand decreases when consumer income increases (value below 0)
What are luxury goods?
Products/services where demand proportionally increases when consumer income increases (value above 1)
What are normal goods?
Products/services where demand increases when consumer income increases (value above 0)
What is the formula for YED?
YED = % change in quantity demanded/ % change in income
How does YED effect business decisions?
If incomes rise, businesses may:
-Promote their products more
-Produce more normal goods
What are the factors that influence YED? [2]
-Availability of substitutes
-Whether the product is a an inferior, normal or luxury product
What is the design mix?
A range of features that are important when designing a product
What are the 3 aspects of the design mix? And where are they located on the triangle?
-Function- top
-Cost- bottom left
-Aesthetics- bottom right
Explain function [3]
-The product must be functional
-Should be designed so maintenance is carried out easily
-Must be safe
Explain aesthetics
The size, appearance, shape etc, must be considered as it will affect consumer choices
Explain cost [2]
-Must select materials and processes that will minimise costs
-Environmental trends mean businesses now design for: waste minimisation, re-use and recycling
What are six types of promotion explained?
- Personal Selling-Sales people
- Direct Marketing-Targeted emails
- Above The Line- Mass media (e.g. TV, Radio)
- Below the Line- Smaller reach (e.g. Leaflets, Posters)
- Public Relations- PR is building a relationship with the public by creating a good image
- Sponsorship- An affiliation with a celebrity or sport
What are 2 types of sale promotions
-Price discounts
-Coupons
What are the six types of pricing?
-Cost plus
-Skimming
-Competitive
-Penetration
-Predatory
-Psychological
What is cost plus pricing?
Pricing the product a certain margin above your costs (the cost to make plus extra)
What is price skimming?
Price is set high, then is later reduced
What is competitive pricing?
Products are priced in line with competitors
What is penetration pricing?
Setting prices low, then raising them once consumers like them
What is predatory pricing?
-Happens in oligopolies
-Businesses hold off new ones by lowering their own prices, so that new businesses cant make a significant profit
What is psychological pricing?
Setting prices lower than a whole number to make the product appear cheaper
What are oligopolies?
Markets with a few large businesses
What are the factors that affect business pricing? [5]
-USP
-PED
-Level of competition
-Strength of brand
-Stage in product life cycle
What are the stages of the product life cycle in order? [4]
- Introduction
- Growth
- Maturity
- Decline
What are the 2 ways a business treats it’s employees?
As an asset or a cost
What are ways a business treats asset employees? [3]
-Incentives
-Higher pay
-Better working conditions
What are ways a business treats cost employees? [3]
-Lower pay
-Less flexibility
-No training
What are the pros of training employees? [2]
-Inspires employees
-Good training reduces the number of employees that leave
What are the cons of training employees? [2]
-Can cause an information overload
-Takes time
What are the 5 organisational structures?
Tall, Flat, Centralised, Decentralised, Matrix
What is a tall structure? [3]
-Many layers of management
-Long chain of command
-Small span of control
What is a flat structure? [2]
-No hierarchal levels
-Wide span of control
What are the pros of a tall structure? [3]
-Clear promotion structure
-Higher degree of supervision
-Provides clear and distinct layers with obvious lines of responsibility
What are the cons of tall structures? [3]
-Communication is more difficult
-Decision making takes longer
-More expensive due to additional layers
What are the pros of flat structure? [4]
-Higher visibility for all employees
-Better communication
-Faster decision-making
-Promotes autonomy
What are the cons of flat structure? [3]
-Lack of progression opportunities
-Higher workload for managers
-Less supervision
What is a matrix structure? [3]
-Teams report to multiple team leaders
-Open communication between teams
-Two chains of command
What are the pros of a matrix structure? [2]
-Improved decision making
-Improved communication
What is the con of a matrix structure?
Confusing regarding roles, responsibilities and priorities
What is a centralised structure? [2]
-Business decisions are made at the top of the business and distributed down the chain of command
-Wide span of control
What are the pros of a centralised structure? [2]
-Encourages efficiency
-Clear leadership
What are the cons of a centralised structure? [2]
-Limited communication
-Lack of flexibility
What is a decentralised structure? [2]
-Decisions are made by managers and subordinates
-Narrow span of control
What are the pros of a decentralised structure? [2]
-Efficient communication
-Employee autonomy
What is the con of a decentralised structure?
Branches may compete with each other
What is one financial motivator?
Piecework- paying employees for every piece of work they complete
What are 4 non financial motivators?
-Consultation- employees become apart of decision making process
-Empowerment- employees have more power to delegate to others
-Team working
-Job enrichment- giving employees a wider variety of tasks that are higher skilled
What are the 4 types of leadership with explanations?
-Autocratic- Managers make decisions with little to no input from employees
-Democratic- Employees help in decision making process
-Paternalistic- Dominant figure who makes the right decisions for employees
-Laissez faire- Employees carry out activities and make decisions freely
Who created scientific management where employees were provided with proper tools and training and incentives for good performance?
Taylor
Who’s theory was based around human relationships?
Mayo
Who created the hierarchy of needs?
Maslow
Who created the 2 factor theory that argues there are 2 factors (motivation and hygeine) that cause job satis/dissatisfaction?
Herzberg
What are the roles of an entrepreneur in order with explanations? [5]
- Setting up the business- market research, business plan
- Running the business- supplies, organising staff, complaints
- Expanding the business- organic or inorganic
- Innovation
- Anticipating risk and uncertainty
What does the term “intrapreneurship” mean?
Employees who think like an entrepreneur
What are 3 barriers to entrepreneurship?
-Lack of job security
-Lack of capital
-Lack of knowledge
What are 3 objectives that businesses set?
-Sales maximisation
-Cost efficiency
-Customer satisfaction
Define opportunity cost
The value of the loss of the next best alternative foregone
