paper 1 -2022 Flashcards
1
Q
define mass market
A
a mass market is a large market of customers which is undifferentiated and that sells product and services to suit a large number of potential customers.
2
Q
define a niche market
A
a niche market is a smaller part of a large market with products tailored to specific customer needs
3
Q
characteristics of a mass market
A
huge number of potential customers lower prices high sale high competition low fixed costs - economies of scale
4
Q
characteristic of a niche market
A
small but focused high / premium price low sales less competition high fixed costs
5
Q
advantage of a mass market
A
unit costs can be minimized
6
Q
disadvantage of mass market
A
highly competitive and marketed similarly
7
Q
advantage of niche market
A
fewer competition and high prices
build brand loyalty easier
8
Q
disadvantage of a niche market
A
trends can change quickly
fewer potential customers
9
Q
define market share
A
amount of the market controlled by one business
10
Q
market share formula
A
sale of one business / total market sales x100 = market shares
11
Q
define = market size
A
total amount bought or spent by customers
brought = volume spent = value
12
Q
market size formula
A
sale of business A / market share A x100 = market size
13
Q
how does having a brand influence the position of a business within its market?
A
allow the business to differentiate itself from other products to build loyalty and market share
14
Q
define dynamic market
A
a market that is subject to continuous change
15
Q
evaluate a dynamic market
A
positive = forces innovation - motivation for businesses to be market leaders
negative = uncertainty due to constant change - difficult to plan ahead
16
Q
define online retailing
A
selling products through an internet website
17
Q
evaluate online retailing for consumers
A
positive = cheaper prices / cable of comparing prices easily
negative = cant physically touch, feel, smell the product
18
Q
evaluation of online retailing for the business
A
benefit = cheaper fixed costs
drawback = lots of competition
19
Q
ways a market can change
A
PESTLE
- economic - recession or boom
- environmental - global warming/ pollution
- legal - new legislation that increase costs
20
Q
3 reasons why markets grow over time
A
- innovation - new products or processes
- economic growth - increased living standards, more disposable income
- demographic - aging population or baby boom
21
Q
3 ways a business can adapt to change in the market
A
- flexibility - multiskilled staff, mix capital and labor
- develop a niche market
- investment - into a new product or training
22
Q
define competition
A
where rival businesses in the same market try to win customers from each other
23
Q
what is direct competition
A
products / services that are close substitutes
24
Q
indirect competition
A
where businesses compete for the same income = less similar products
25
1 impact on a business of competition in a market
less market share and sales
26
1 impact on a consumer of competition in the market
more choice and variety
27
the difference between risk and uncertainty
risk = can be planned for and measured - using savings
uncertainty = potentially unpredictable + uncontrolled outcome
28
define product orientation
a business develops products based on what it is good at doing, rather than what the customer wants
29
define market orientation
a business reacts to what customers want through extensive market research
30
advantage of product orientation
do not have to wait for customer reactions or responses to products
31
disadvantage of product orientation
without an established reputation, this is a risky strategy
32
positive of market orientation
able to anticipate market changes and provide what customers want
33
negative of market orientation
continued consultation is costly and time consuming
| lose first mover advantage
34
why doesn't market orientation guarantee success
just because extensive research has been conducted doesn't mean that customers will like the product or prefer it to rivals
35
3 factors that may affect if a business uses product or market orientation
1. type of market - dynamic - time of research
2. type of product - innovation or unique
3. reputation - age of business
36
define market research
collection and analysis of market information
37
2 reasons why businesses may conduct market research
1. identify and anticipate customer needs and wants
| 2. quantify likely demand
38
2 limitations of market research
1. can be out of date quickly
| 2. prone to bias / sample size.
39
define primary research
research data that has been collected first hand for a specific purpose
40
define secondary research
research data that already exists that has been collected by someone else for a different purpose
41
methods of primary research
questionnaire / surrey
focus group
observation
interview
42
secondary research - methods
government reports
market reports
internet
internal data
43
advantage of primary research
specific
| up to date
44
disadvantage of primary research
expensive and time consuming
45
advantage of secondary research
fast accessibility info
| valuable industry info
46
disadvantage of secondary research
time spent to find the right info could be out of date
47
quantitative data
numerical data - easy to analyse
speedier to analysis - easier to spot patterns
black and white data
48
qualitative data
words and options - hard to analysis
49
3 uses of ICT to support market research
1. website - competitor research/ cookie data
2. social networking - polls on Instagram
3. data-bases - Tesco loyalty card and emails sign up
50
define market segmentation
dividing the market into smaller parts to allow identification of different customer groups
51
2 benefits of market segmentation
1. targeted advertising to the segment
| 2. product and services can be designed to suit specific customers
52
ways of segmenting the market
1. age
2. income
3. lifestyle
4. location
5. demographic
6. behavior
53
define supply
refers to the total amount of a good or service that suppliers are willing and are able to supply to a market at a given price at a particular time.
54
five factors affecting supply
1. government subsidies
2. new technology
3. indirect taxes
4. costs of production
5. external shocks
55
define equilibrium price
the price where supply and demand are equal
56
how the price of goods and services determined
the market force and the interaction of supply and demand
57
an equilibrium diagram
```
y = price
x= quantity
supply to the sky
decease move up
increase move down
```
58
define distribution
distribution is how you get the product to the right place for customers to make their purchase - physical or online
59
define distribution channels
the route taken by a product from a producer to the consumer
60
name the different channels of distribution
zero level = producer, consumer
one level = producer, retailer, consumer
two level = producer, agent/wholesaler, retailer consumer
three level = producer, agent, wholesaler, retailer, consumer
61
what are retailers, agents and wholesalers
intermediaries
62
2 reasons why a business may choose to distribute its products via a retailer
costs - as the more intermediates the less profit the producer makes as the costs will be higher
control - more control over reputation at a 0 level, as a customer has to report back to the retailer if there is an issue
63
name 3 factors that will influence the choice of distribution channel
type of product
type of market
the cost
64
define online distribution
is the power of websites to offer a wider and more varied range of products, that offer small firms a chance to reach a global audience
65
what is meant by changing a product to a service
when a product becomes obsolete due to a change in technology
e.g. music streaming apps
66
benefit to consumer of online distribution
1. more efficient - time
| 2. compare alternative brands products
67
benefits of online distribution to the business
1. reach a wider customer base
| 2. lower costs - no store
68
drawbacks of online distrubution to businesses
less foot traffic - less sales
| less able to communicate with the customer or build a relationship or show alternative products
69
define import
products and service produced abroad and consumed domestically
70
define export
products and services that are produced domestically and consumed abroad
71
name one reason why firms export
to reach new markets and increase customers
72
name one drawback to a business of exporting
increased costs - shipping and possible tariffs
73
name one benefit of importing goods
creates more choice for businesses and consumers
74
define specialization
a production strategy where a business focuses on a limited scope of products or services
75
why would a country specialize in trade, according to its comparative advantage
this results in greater efficiency, allowing goods and services to be produced at a lower cost per unit
76
name 2 benefits of specialization
lower costs per unit - need less specialist machinery, training - fewer mistakes and more efficient
improvement of quality - through repetitions
77
name two drawback of specialization
boredom - due to repetition
| cost of initial training
78
define FDI
foreign direct investment
| when a business purchases non-current assets in another country
79
name 2 methods of FDI
merger or takeover
| open new stores or branches - franchising
80
name 3 benefits of FDI for a business
access new markets
avoid tariffs and transportation costs
to be closer to main markets
81
name 2 benefits of FDI for the country
provides job opportunities
| raises living standards
82
name 2 reasons why a country may not want FDI
competition to small domestic businesses
| negative externalities e.g. harmful product sold in that country
83
define entrepreneur
is an individual who takes a risk to organize resources to produce a product or service
84
define skills
an ability to do an activity or job well, especially because you practice
85
define characteristics
a special quality or trait that makes a person, thing or group different from others
86
name 3 characteristics of an entrepreneur
creativity
hardworking
self confidence
87
name 3 skills required by an entrepreneur
communication
resilience
problem solving
88
name 2 financial motives for setting up a business
profit maximizing - entrepreneur aims to make profit in a period of time
profit satisfaction - entrepreneur aims to make profit to maintain their interest in the business
89
name 4 non-financial motives for setting up a business
1. ethical stance - entrepreneur support to moral belief
2. independence - own boss or freedom to make decisions
3. social entrepreneurship - aim to improve human/environmental wellbeing
4. homeworking - reduce travel costs
90
define a sole trader
a sole trader when one person sets up a business on their own.
91
2 advantages of being a sole trader
keep all the profit
| maintain control of all the business ideas
92
2 disadvantages of being a sole trader
unlimited liability
| stressful
93
define a partnership
is a business that is owned by two or more people
94
2 advantages of a partnership
shared ideas
| shared responsibility
95
3 disadvantages of a partnership
shared profits
unlimited liability
conflict
96
define a private limited company
a business that is owned by shareholders. these shareholders must be family or friends.
97
2 advantages of a private limited company (ltd)
limited liability
| easier to raise finance
98
2 disadvantages of a private limited business
less control
| pay dividends to shareholders
99
define franchising
is a legal agreement allowing an individual to trade under an established brand name
100
define franchisee
is a business or entrepreneur that buys the rights to use the name and business model of another business
101
2 advantages of being a franchisee
less risk - name well know and loyalty
| training and support - inexperienced entrepreneurs
102
2 disadvantages of a franchisee
less control and less independence
| initial payment and loss of % of profit
103
define franchisor
is a business that sells the rights a franchisee to use its name, logo and business model of the business
104
2 advantages of being a franchisor
expand quickly - ahead of competition
| receive payment regularly - without work
105
2 disadvantages of being a franchisor
can harm reputation
| regular control and monitoring needed
106
name 2 features of a social enterprise
1. help charities through donations to their cause from profits
2. improve human and environmental well-being
107
define a lifestyle business
is a business set up to make enough money to survive whilst allowing owner flexibility over work
108
name 2 features of a lifestyle business
likely to be a hobby or interest of the owner
| small and local
109
what is the difference between a lifestyle business and a normal start up business
a lifestyle has more flexibility and is not focused on profits
110
name 2 features of an online business
lower costs
| location is not important
111
define a public limited company
a business owned by shareholders and is listed on the stock market
112
2 advantages of a public limited company
limited liability
| easy to raise finance
113
2 disadvantages of a public limited company
costs/expenses to set up and make to a PLC
| poor press and reputation
114
what is meant by a stock market flotation
listing a company on the stock market so allowing the general public to purchase shares
115
give 2 reasons why a business may decide to return to Private limited status
take back control of the business (buy back shares )
| reduce diseconomies of scale ( as the business has grown to big)
116
percentage change
new figure - old figure / old figure x100
117
market growth formula
change / original x100
118
market size formula
value = £
volume = units
business A sales / business A market share x100
119
market share %
firms sales/ total industry sales x100
120
demand and supply diagram
```
remember to tie your LACES
L = label
A = axes
C= curves
E = equilibrium point
S = shifts
```
121
supply curve - demand and supply diagram
supply curve will shift left if less is supplied
| supply curve will shift right if more is supplied
122
name 2 reasons why a country may prefer to trade within their geographical region
cheaper to transport good
| culture and familiarity
123
define trading bloc
a group of countries that have signed an agreement to reduce or eliminate barriers to trade e.g. tariffs
124
name 6 forms of trading blocs
```
preferential trading area
free trade area
custom union
common market
single market
economic union
```
125
preferential trading area
certain products receive a reduced tariffs rate
| ASEAN has a PTA with china
126
free trade area
member states remove all trade barriers between themselves
| NAFTA
127
custom union
similar to FTA but member states adopt a similar common set of barriers with non-members
128
common market
more integrated than FTA or custom union as goods, labor and capital is freely flows
ASEAN
129
single market
further than a common market - common laws and policies for freely flows
EU
130
economic union
customs union and common markets as well as close economic, political and cultural ties as well as a common currency
EU
131
how does an economic union differ from a trade area or customs union
free movement of goods, labor and capital
132
define EU and how many member states are there
a single market with free movement of goods, labor and capital
total population = half a billion people
27 states
133
name 3 member of countries of the EU
france
germany
greece
134
what form of trading bloc is the EU
economic union
135
what is ASEAN and how many member states are there
association of south east Asian nations
population = 625mil
10 member states
136
name 3 member countries of ASEAN
Indonesia
Malaysia
Philippines
137
what form of trading bloc is ASEAN
free trade but looking to become a common market
138
why was ASEAN establishes
promote growth, social progress and socio-cultural evolution amongst members as well as regional peace and stability
139
what is NAFTA
north American free trade association
140
name 3 member countries of NAFTA
USA
Canada
Mexico
141
what form of trading bloc is NAFTA
FTA
142
why has NAFTA been beneficial for US/Canadian consumers but not so for Mexico
agricultural products - decreased prices for us and Canadian consumers
heavily subsidized corn from the USA - great for Mexican consumers but not for the farmers who were driven out of business
143
name 2 benefits for business located within a trading bloc member country
1. external tariffs will protect members from competition from other parts of the world
2. produces can benefit from economies of scale so lower unit costs due to increases in trade between the member countries
144
2 drawbacks for a business located within a trading bloc member country
1. expensive to import products from countries not in the bloc so costs increase
2. can protect complacent or inefficient industries from competitors
145
name 2 benefits for a business aiming to sell into a trading bloc from a country that is not a member
1. business outside the bloc can just sell their product into the countries without having to adjust to the culture
2. access to a large market with the same common tariff - negotiations easier
146
name 2 drawbacks for a business aiming to sell into a trading bloc from a country that is not a member
1. tariffs will add to the costs of products being exported to the bloc, making them less competitive
2. they may hold a competitive advantage in a particular product but are closed out of the market
147
why do manufacturing business tend to benefit more from membership of a trading bloc
they can produce their products in countries where their markets are, benefiting from economies of scale as well as cheaper labor and reduced shipping times and costs
148
define global competitiveness
the extent to which a business or country can compete successfully with its rivals
149
name 3 types of companies who would be affected by movements in exchange rates
1. those who reply on export markets
2. those whose domestic market is subject to competition from imports
3. those that need to import large quantities of raw materials/components
150
what is meant by appreciation of the pound
when the pond raises in value againist other currencies
151
what is the SPICEE acronym
```
S= strong
P = pound
I = imports
C = cheap
E = export
E = expensive
```
152
what effect would appreciation have on - a business exporting its goods abroad
harder to sell abroad due to increased prices.
foreign customers will need to pay more of their currency to buy the product so demand will fall for the exporting business
153
what effect would appreciation have on - a uk business with competition from imports
imports become cheaper to uk consumers as each pound can buy more of another currency making the imported products cheaper
154
what effect would appreciation have on - a UK business importing materials from abroad
will reduce the cost of production because the stronger pound can buy more of another currency making the imported product cheaper
155
what is meant by depreciation of the pound
when the pound falls in value compared to other currencies
156
what effect would depreciation have on - a business exporting its goods abroad
product will be cheaper in foreign markets because customers need less of their currency to pay for products, increasing sales
157
what effect would depreciation have on - a UK business with competition from imports
will become more expensive as £1 now buys less of the currency so increases purchases of home produced goods as more price competitive.
158
what effect would depreciation have on - a UK business importing materials from abroad
will cost more to buy from abroad, pushing up costs of production
159
the significance of fluctuations in exchange rates is likely to depend on what
1. elasticity of demand - some products are less responsive to changes in price as a result of changes in exchange rate
2. fixed contracts - which will lesson the risk of currency fluctuations
3. economic growth in other countries - an appreciation in the pound for example might be offset if there is economic growth
160
what is meant by a fixed contract and how does this help exporters
setting the price of raw materials 12/18 month into the future which reduces uncertainty
161
define competitive advantage
a distinctive strength that a business has and its competitors do not
162
name 2 sources of competitive advantage
(porters strategic matrix)
1. cost competitiveness
2. differentiation
163
name 3 ways a business can be more cost competitive
1. raise productivity - train or motivate employees
2. offshore - take advantage of low cost labor
3. outsource - use another business to preform a function more efficiently (payroll)
164
define differentiation
the extent to which a consumer believe that brand is unique or superior to other brands
165
what is the model that links to sustained competitive advantage
Kay's distinctive capabilities (AIR - architecture, innovation, reputation)
166
3 methods of actual differentiation
design
function
performance
167
3 methods of perceived differentiation
sponsorship
advertising
branding
168
what is meant by a skills shortage
where potential employees do not possess the skills demanded by employers
169
why would a skill shortage be a concern to a government
UK lagging behind international rivals threatening future competitiveness
170
why would a skills shortage be of concern to a business
pay and benefits need to be competitive which increases costs
171
why would a skills shortage damage a business's international competitiveness
reduces the effectiveness and productivity of workforce thus decreasing competitiveness with other countries
172
define MNC
a business that has branches in more than one country
173
name 4 impacts of MNC'S on the local economy
1. local labor
2. wages
3. job creation
4. working conditions
174
local labor - positive impact (MNC)
makes local workforce more productive and employable if investment mad in training
175
local labor - negative impact
own labor from other countries may be brought over rather than employing locally
176
wages - positive impact
usually pay higher wages than local firms, improving standards of living
177
wages - negative impact
locals may resent that they are being paid less
178
job creation - positive impact
regular income and financial security for workers
179
job creation - negative impact
may be at the expense of the local firms who may go bust
180
working conditions - positive impact
have to keep reputation intact so should provide above average working conditions
181
working conditions - negative impact
children may be exploited
182
2 positive impacts of MNC's on local businesses
1. may be used for the construction and/or supply of material, increases revenue and profit
2. growth within the local economy - increased income, more spending
183
2 negative impact of MNC's on local businesses
1. fewer workers available as locals attracted to gain employment with the MNC's
2. tough to compete as MNC's benefit from economies of scale
184
2 positive impacts of MNC's on local communities and environment
1. improvements to infrastructure
| 2. may be more environmentally friendly as have their reputation to uphold
185
2 negative impacts of MNC's on local communities and environment
1. may take advantage of less strict environmental protection
2. may just extract resources and then leave
186
name 6 impacts of MNC's on the national economy
1. FDI flows
2. Tax revenue and transfer pricing
3. consumers
4. business culture
5. balance of payment
6. technology and skill transfer
187
FDI flows - positive impact (MNC)
money invested into the country boosting economic activity, creating income and jobs
188
FDI flows - negative impact (MNC)
profit can be diverted back to the home country rather than being reinvested
189
tax revenues and transfer pricing - positive impacts (MNC)
increased tax receipts allowing government to spend more
190
tax revenue and transfer pricing - negative impact (MNC)
MNC's can minimize their tax bill for e.g. by using transfer pricing to avoid taxes by moving profits to countries with lower tax rates
191
consumers - positive impact (MNC)
cheaper products
192
consumers - negative impact (MNC)
May drive local rivals out of business, reducing consumer choice
193
business culture - positive impact (MNC)
may help to foster a culture of enterprise
194
business culture - negative impact (MNC)
Change in business culture could lead to loss of national culture
195
technology and skills transfer - positive impact (MNC)
train and develop local workforce improving skills
196
technology and skill transfer - negative impact (MNC)
reverse engineering - which is a risk to the MNC
197
define globalisation
interconnectivity between countries operating internationally or a global scale
198
5 features of globalization
1. reduction of international trade barriers
2. reduction cost of transport and communication
3. increased investment flows
4. growth of global labor force
5. structure change
199
what is meant by trade liberalisation
the removal of trade barriers to allow freely moving international trade (tariffs, quotas and regulation)
200
name 2 opportunities of liberalization
1. increased consumer choice
| 2. imports become cheaper
201
name 2 threats of liberalisation
1. reduce imports means domestic firms suffer
| 2. removes national cultures
202
name 2 political changes that have helped to increase or decrease globalisation
1. Brexit - decreased globalisation - increased trade barriers
2. china moving away from hardline communism
203
2 ways that reduced cost of transport and communication has increased globalisation
1. technological development make engines fuel efficient
| 2. stable / falling oil prices
204
define global (transnational) companies
companies that own or control production/ service facilities outside the country in which they are based
205
3. ways that the increase in TNCs has led to an increase in globalisation
1. represent 2/3 of global exports
2. boost the economies of countries they locate in and increase employment
3. higher demand for product
206
name 2 problems with the increase of TNC's
1. domestic firms suffer from transnational companies
| 2. consumer choice declines
207
2 ways in which increased investment flows has helped increase globalisation
1. communication flow have improved, cross border financial transactions have become easier
2. increased sales - shareholders happy
208
a problem with increased investment flows
financial crisis can stem from banks preparedness to lend foreign customers
209
define migration
temporary or permanent movement of people around the globe
210
4 ways that migration has helped to increase globalisation
1. well educated and highly skilled migrants
2. low cost labor
3. income (sent back to place of work benefits multinationals )
4. culture importation (polish shop)
211
2 problems linked to migration
1. overcrowding
| 2. unemployment
212
2 ways that the growth of the labor force has contributed to globalisation
1. drive global demand
| 2. lifts people out of poverty
213
name a problem for UK businesses of growth in the global labor force
shortage of skilled staff, recruitment from abroad
214
name 2 ways that structural changes have contributed to globalisation
1. western economies rely less on income from primary and secondary sectors
2. improve international competitiveness
215
what is the world trade organisation (WTO)
organisation that promotes free trade by persuading countries to abolish tariffs and other barriers
produce free trade agreements
