Paper 1 Flashcards
Define promotion
Is an attempt to obtain and retain customers by drawing their attention to a firm or its product
Define Above the line promotion
Involves advertising in the media
Explain the different forms of above the line promotion (3)
Informative advertising - Designed to increase consumer awareness of products, by giving clear information on the product.
Persuasive advertising- advertising designed to put pressure on consumers to buy a product, to appeal to peoples emotions
Reassuring advertising- advertising aimed at existing customers, designed to be comforting and to suggest to consumers they were right to buy the product and should continue to do so.
Define Below the line promotion
Refers to any forms of promotion that does not involve advertising
Explain the different forms of below the line promotion (4)
Sales promotion- incentives used to encourage people to buy products in order to break into a new market, reward loyal customers or help to kickstart repeat purchasing. Involves BOGOF deals, loyalty cards or free gifts.
Public relations- involves trying to increase sales by improving the brand image. Involves press releases or sponsorships.
Merchandising and packaging- occurs where a firm arranges the point of sale so that it is interesting and eye catching. Includes product layout and display material, such as posters and lighting to draw in customers.
Direct selling- uses a sales rep calling households or businesses hoping to sell products
Define advertising
Involves communication between a business and its consumers where images are placed in the media to encourage the purchase of its product
Explain the factors for a business to consider when choosing methods of promotion (6)
Cost - some forms of promotion are more expensive than others
Market- businesses in mass markets are more likely to use national television or newspapers rather than specialist methods
Product- certain products are better suited to certain types of promotion, car manufacturers are not likely to use BOGOF or coupon offers
Stage in product life cycle - promotional methods often change as a product gets older, become less aggressive.
Competitors - common for businesses to copy successful promotion methods used by rivals
Legal factors - legislation is put in place to protect consumers, in the EU tobacco products cannot be advertised
Explain the different types of branding (3)
Manufacturer brands - are brands created by the producers of the good, bearing the producers name. E.G. Dell computers or Kellogg’s cornflakes
Own label brands - are products manufactured for wholesalers and retailers to sell under their own name. E.G. Tesco baked beans
Generic brands- products that only contain the name of the actual product category rather than the company. E.G. Carrots or foil
Define a brand
Is a product with unique character, which is consistent and well recognised
State the benefits of strong branding (5)
Added value - brand itself can add value
Can charge a premium price - inelastic in price
Inspires brand loyalty- good word of mouth marketing
Leads to higher barriers to entry
Allows new product development
Explain the ways of building a brand (4)
Exploiting a USP- If a product has a USP it is much easier to differentiate the brand.
Advertising - a business can use advertising to introduce a new brand and spread the word about it.
Sponsorship- attaching the brand to specific events raises brand awareness and association
Social media - allows the firm to communicate more effectively to customers , to gain trust of the brand
Explain the changes in branding and promotion to reflect social trends
Viral marketing- encourages people to pass on messages to others about a product, electronically. Creates exponential growth in the exposure of the brand. Led to many firms focusing marketing budget on social media.
Emotional branding - refers to the practice of using the emotions of a consumer to build a brand. Designed to develop a connection between a consumer and the brand. E.g. A football club
Define Brand extension
Occurs when the strength of the brand can be exploited to develop new products in similar markets. For example, Oreo biscuits and Oreo ice cream
Define brand stretching
Occurs when the strength of the brand is used for a diverse range of products, not necessarily connected. For example, virgin airlines and virgin broadband
Define Contribution
Give the formula
Contribution is the amount of money left over after variable costs have been subtracted away from revenue.
Contribution per unit = Selling price - Variable costs per unit
Define Break Even
Give the Formula
Is the point where a business is selling enough to just cover costs without making a profit.
Break Even Point= Fixed Costs / (Selling price - Variable costs per unit)
Define Margin of Safety
Give the formula
Margin of Safety is the difference between the business’ actual level of output and the break even level of output.
Margin of safety = Actual output - Break even level of output
Explain the limitations of break even analysis (6)
- Assumes all output is sold
- Based on firm selling only one product at the same price
- Variable costs are assumed to constantly increase
- Does not take into account uncertainties
- The data may not be accurate
- Assumes revenue and costs are linear and do not fluctuate
Define Liquidity
Is the ability for a business to find the cash it needs to pay its bills.
Define a Balance Sheet
A Balance sheet is a document describing the financial position of a business, comparing what it owns (assets) and what it owes (liabilities).
Define Current Assets
Define Fixed Assets
Define Intangible Assets
Current Assets are assets that can be easily turned into cash. Includes cash, inventories or receivables.
Fixed Assets are assets used by the business to generate profits over a long period of time. Includes Land, Property, Equipment and Machinery
Intangible Assets are non physical assets. Includes patents and franchising agreements.
Define Current Liabilities
Define Non Current Liabilities
Current Liabilities are debts owed by the business to be paid within one year. Includes Loans and Payables.
Non-Current liabilities relate are long term debts that do not need to be repaid for at least a year. Include bank loans and mortgages
Define Shareholder Equity
Is the final section of the balance sheet providing a summary of what is owed to the owners of the business.
Give the formula for the Current Ratio
Current Assets / Current Liabilities x 100%
Give the formula for the Acid Test Ratio
(Current Assets - Inventories) / Current Liabilities x 100%
Explain the ways of improving liquidity (5)
- Selling under used fixed assets
- Raising more share capital
- Using overdraft facilities and long term borrowing
- Sell Stock to raise cash
- Postpone planned investments
Define a Objective
Define a Strategy
An Objective is a specific target set by a business
A Strategy is the plan devised by the business to achieve its objective.
Why do businesses need objectives (3)
- Employees need something to work towards
- Allows owners to maintain control and prevent business failure
- Help owners to decide where to take a business
Explain the common Business Objectives (7)
- Survival - A focus on generating sufficient cash to sustain the business and establish itself within the market.
- Growth - Is a focus on generating enough cash to be able to expand operations, either organically through opening new stores/ franchising or inorganically through mergers and takeovers.
- Profit Maximisation- Involves a business trying to earn the most profit in the shortest amount of time.
Sales Maximisation - Involves a business trying to grow the number of customers without a focus on costs, in order to increase market share and brand loyalty.
Employee Welfare - Involves looking after employees in order to keep high levels of motivation and productivity.
Consumer satisfaction- Involves prioritising consumer needs to ensure they have a positive interaction with the firm, in order to have high sales, repeat purchasing and brand loyalty.
Social Objectives - Involves a business trying to achieve environmental and ethical objectives to benefit society and benefit from a positive brand image.
Define the Mcgregor theory
explains the opposite approaches used for staffing, the hard approach and the soft approach
Define the Hard Approach
Advantages and disadvantages
- Sees staff as a input who need to be controlled and supervised
Advantages:
Cost effective workforce
Quicker decision making
- Disadvantages:
Low employee motivation
Low labour turnover and absenteeism
Define the Soft Approach
Advantages and disadvantages
Sees staff as a asset who are a source of innovation and can give a competitive advantage
Advantages: Can lead to innovation Easier recruitment High employee motivation High productivity
-Disadvantages:
Expensive
Longer decision making
Can lead to lower productivity if staff get comfortable.
Define Flexible Working
Flexible Working describes the range of employment options designed to help employees balance home and work life.
Explain the types of Flexible Working (4)
- Multi-Skilling involves training staff to perform a range of different roles within the firm, to deal with absenteeism and demand
- Part time and temporary brings people into the workforce who have the skills and experience but are not able to work full time.
- Home working involves allowing people to work from home, due to technology.
- Outsourcing involves contracting out work to another business to perform certain functions.
Explain the advantages and disadvantages of flexible working
Advantages:
- Can lead to reduced costs
- High staff retention
- Higher motivation
Disadvantages:
- High set up costs
- Potential lower productivity
- Mangers can find it difficult to manage flexible working
Define Labour Turnover
Give the formula
Is the proportion of employees who leave the business over a year
Labour Turnover= Number of employees who left the firm / Original Workforce x 100%
Define Labour Retention
Give the formula
Is the proportion of employees who remain at the firm over a year
Labour Retention = Number of employees who remain at the firm / Original Workforce x 100%
Define Absenteeism
Is the number of days missed by employees over the course of a year
Absenteeism = Number of days missed / Total number of working days x 100%
Define Redundancy
What are the features of redundancy (3)
Redundancy occurs where a job disappears
Features:
Done due to the business needing to cut costs, close down or relocate or because the worker is no longer needed.
Define Dismissal
Define Unfair Dismissal
Dismissal occurs where an employee is not operating effectively
Unfair dismissal occurs where the employer has not followed the fair dismissal process. May occur due to age, gender, race, religion or disability.
Define the Individual Approach
Define Collective Bargaining
Individual Approach occurs where individual workers represent themselves in negotiations with employers
Collective Bargaining occurs where workers are represented by a trade union when negotiating with employers
Explain the Advantages (3) and Disadvantages (2) of a trade union for a business
A: Increased employee motivation Less likely to go through unfair dismissal process Faster negotiations Increased labour retention
D:
Weaker negotiating power
Potential for strikes (absenteeism)
Define Recruitment
Why would it be needed (3)
Recruitment is the process of filling a job vacancy.
May be needed due to:
Existing staff leaving, Require new skills, Business Growth
Define External Recruitment
External Recruitment involves filling a job vacancy with somebody who does not already work for the firm.
Define Internal Recruitment
Advantages and disadvantages
Internal Recruitment involves filling a job vacancy with somebody who already works for the business.
- Advantages:
Quicker and cheaper than external recruitment
Chance of promotion increases employee motivation
Already familiar to work environment - Disadvantages:
Limits the potential number of applicants
Failure to bring new ideas to the firm
Vacancy still needs filling
Define Training
Advantages and disadvantages
Training is the process of enhancing existing skills or developing new ones
- Advantages: Develop new skills, Increased motivation
- Disadvantages: Costly and time consuming, Disrupts normal operations
Define Induction Training
Induction training involves the employee becoming familiar with their new working environment and fellow employees
Define On the job training
Advantages and disadvantages
On the Job training occurs where employees receive training whilst remaining at the workplace.
- Advantages:
Cheaper and less time consuming
Become more familiar to the businesses practices - Disadvantages: No new ideas brought to the firm
Less likely to be done properly
Reduces other employees productivity
Define Off the job training
Off the job training occurs where employees are trained off the business premises by another firm
Define Motivation
is the ways in which businesses can encourage staff
State the effects of increased motivation (6)
Increased Productivity and Lower Unit costs
Improved Customer service
Higher sales
Improved Quality
Improved Brand image and Customer loyalty
Reduced Labour turnover and Absenteeism
Explain Taylors theory of motivation
Explained that people only work in order to maximise their own income
Used today for commission and piece rate.
Explain Mayo’s theory of motivation
Explained there was other factors affecting motivation other than money
Non monetary factors can motivate people
Explain Maslows theory of motivation
Explains that humans have a fixed set of needs, with the most basic needs at the bottom and higher level needs at the top
Basic needs - Pay
Safety needs - good working conditions and job security
Social needs - teamwork
Esteem needs - recognition and responsibility
Self actualisation- ability to develop new skills
Explain Herzbergs two factor theory pf motivation
Believed that motivation is doing something because you want to do it.
Involves Hygiene Factors (factors that don’t motivate but can demotivate if not met) and motivators
Explain Piecework as a monetary method of motivation
Advantages and disadvantages
paying each employee every time they repeat a task
A: High Productivity, Cost effective
D: May lead to poor quality
Explain Commission as a monetary method of motivation
Advantages and disadvantages
paying staff a % of sales revenue on top of a basic wage
A: High sales
D: Poor customer service
Explain a Bonus as a monetary method of motivation
Advantages and disadvantages
paying a lump sum as a additional reward to employees
A: Incentivises high productivity
D: Worsen relations between employees
Explain profit sharing as a monetary method of motivation
Advantages and disadvantages
Allocating a proportion of profits to be shared amongst employees
A: Aligns employee objectives with businesses objectives
D: some employees may feel they deserve more than other employees
Explain delegation as a non-monetary method of motivation
Advantages and disadvantages
Passing decision-making power down the structure to a subordinate
A: meets esteem needs, innovation
D: longer decision making , may not have the experience of skill to make a decision
Explain team working as a non-monetary method of motivation
Advantages and disadvantages
Allowing employees to work in a group
A: meets social needs, mayos human relations
D: productivity of highly productive individuals may be brought down by the team
Explain flexible working as a non-monetary method of motivation
Advantages and disadvantages
Working conditions designed to help employees balance home and work life
A: higher staff retention, meet basic needs, cost-effective
D: harder to communicate and coordinate for managers, lower productivity, potential loss of personal relations with customers
Explain job enrichment as a non-monetary method of motivation
Advantages and disadvantages
Giving extra responsibility to staff
A: meet self actualisation needs
D: Some employees may not want extra responsibility
Explain job rotation as a non-monetary method of motivation
Advantages and disadvantages
Involves moving staff between different tasks
A: reduced boredom, self actualisation, minimises absenteeism issues
D : prevents specialisation
