Paper 1 Flashcards
What is promotion? (examples)
Involves businesses drawing attention to their products, services or companies. Use promotion to obtain and retain customers. Can have specific aims such as…
- Tell consumers about a new product
- Remind customers about an existing product
- Reach a widely dispersed target audience
- Reassure customers about products
- Show consumers that rival products are not as good
- Improve or develop the image of the business
What is above the line promoting?
Refers to advertising in the media. Businesses would pay to have their adverts broadcast or printed.
3 categories of advertising and definition
Reassuring advertising- Aimed at existing customers. It is designed to be comforting and suggest to consumers that they were ‘right’ to buy a particular product and that they should continue to do so.
Informative advertising- adverts are designed to increase consumer awareness of products. May give clear information about the features of a product. Eg classified advertisements in newspapers
Persuasive advertising- Often try to convince consumers to buy a particular brand rather than that of a competitor. Designed to appeal to people’s emotions such as fear and pity. Eg TV and cinema adverts are persuasive
What is below the line promotion?
Refers to any form of promotion that does not involve advertising
What is sales promotion (BTL)
Incentives used to encourage people to buy products. They are used to boost sales in the hope that if new customers are attracted they will continue to buy the product. Eg; Free gifts, coupons, loyalty cards, competitions, Buy One Get One Free offers and money off deals
What are public relations? (BTL)
Some businesses communicate with stakeholders using public relations (PR). The main purpose of PR is to increase sales by improving the image of the business eg. Press releases, press conferences, sponsorship and donations to charities and local communities
What is merchandising and packaging? (BTL)
Some businesses may arrange the point of sale so that it is interesting and eye-catching and likely to encourage sales (merchandising). Eg Product layout (eye level), Display material (Posters), Stock (empty shelves give off a bad impression)
What is Direct mailing? (BTL)
Businesses mail out leaflets or letters to households containing info about new products and prices
What is direct selling (Personal selling)? (BTL)
Sales reps calling at households or businesses hoping to sell products. Advantage- can discuss product
Disadvantage- often get irritated as calls are not invited
Explain exhibition and trade fairs (BTL)
Businesses may attend these to promote their products face to face. Can be tested out on consumers before launch, overseas can break into foreign markets and may attract media
What affects the choice of promotion?
Cost, market type, product type, stage in the product life cycle, competitors’ promotions, legal factors
What is branding and its forms?
Branding involves giving a product a name, logo or any feature that allows consumers to instantly recognise the product and differentiate it from those of competitors
Manufacture brands- created by the producers of goods and services
Own brand labels(distribute/private brands) are products which are manufactured for wholesalers or retailers sell the product under their own name eg tesco own brand
Generic brands are products that only contain the name of the actual product category rather than the actual product category rather than the company of product name
Benefits of strong branding
Added value- consumers will value brand names more
Ability to charge premium prices- strong brand names can charge higher than competitors
Reduced price elasticity of demand- Firms would prefer their brands to have a lower price of elasticity of demand.
Ways to build a brand
- USP; easier to differentiate the brand and make it stand out from the crowd
- Advertising; for new brands, spread word about the brand, reassures customers, source of pride for customers
- Sponsorship; raises brand awareness, create positive PR, emotional commitment to the brand, good relations with customers because sponsors often provide corporate hospitality at events.
- Using social media
Changes in branding and promotion to reflect social trends vase
Viral marketing; any strategy that encourages people to pass on messages to others about a product or a business electronically
Social media; helps build a brand
Emotional branding; refers to the practice of using the emotions of a consumer to build a brand- appeals to customers emotions. Aim is to develop a love affair between consumer and a brand
Explain seeing staff as an asset
Employers who view their staff as assets will value their employees and have concern to their welfare. Staff will be valued because employers recognise that their efforts will help the business perform more effectively.
Employer would provide perks to meet the needs of employees such as job security and reasonable holidays and sick days.
They know employees want to be challenged, acknowledged and rewarded
Explain seeing staff as a cost
Employers will try and minimise the ‘cost’ using things such as zero hour contracts and providing the minimum legal ‘employee rights’ in relation to sick leave, holiday pay and working conditions
Explain flexible workforce
Helps a business to adapt to change more easily. Might be able to make more use of temporary workers
Explain part-time and temporary staff
direct definition: people who normally work for not more than 30 hours a week unless stated otherwise.
Temporary workers are those employed for a limited time only
Number of these staff has grown significantly.
Explain flexible hours and home working
The workforce is more flexible if staff work more flexible hours. Zero hour contracts(only work when employer needs them) and home working may be used (suits their lifestyle
Explain outsourcing
Involves getting people or businesses to carry out tasks that were originally carried out by people employed by the business. This allows a business to focus on its core capabilities and lets others carry out peripheral work
Advantages of a flexible workforce
- A flexible workforce allows a business to expand and contract quickly in response to changes in demand for its products.
- Some specialist jobs need to be done but it would be wasteful to employ a permanent worker to do them
- In some cases, temporary staff or subcontractors are cheaper to employ than permanent staff
- Employers are responsible for training their permanent workers- dont need to do this if you are outsourcing
- Employing workers who can job share or work flexible hours may allow a business to operate more efficiently
Disadvantages of a flexible workforce
-Peripheral workers may have less loyalty to the business where they work temporarily
-Some businesses have found that their outsourced work has been of poor quality, damaging their reputation
with customers
-Communication can be a problem
-Employing peripheral workers can be a costly process
Whats the distinction between dismissal and redundancy
Dismissal: A dismissal is when you end an employer’s contract, with or without notice. Dismissal from work also occurs when an employee’s fixed-term contract expires and you choose not to renew it
Redundancy: Redundancy is when an employer reduces their workforce because a job or jobs are no longer needed
What conflicts may occur within employer/employee relationships?
Rates of pay: Employers often attempt to keep wages suppressed to help control their costs and remain competitive
The introduction of technology: Employers are often keen to use new technology because it helps to increase efficiency in the business
Flexible working: Employers prefer to employ a flexible workforce because it helps to manage production more effectively and keeps costs down
Work conditions: Employees may want better conditions or facilities from employers, such as the provision of a creche for workers’ children
What resolutions may be made to sort out employer/employee relationships 2
Individual approach: disagreements are settled through negotiations between an individual employee and a representative of the employee
Collective bargaining: Involves determining terms of employment through a negotiation between employers such as trade unions representatives
Advantages and Disadvantages of collective bargaining
Advantages
- Agreements are transparent and binding
- May be more cost-effective to have just one set of negotiations
- Rules and terms are more likely to be respected by both parties
- More equitable because power between both sides is equalised
- Favouritism and victimisation might be reduced at work
- Employee representatives are democratically elected
Disadvantages
- Negotiations can result in more bureaucracy and take longer
- The views of individuals are not always reflected by unions
- Negotiation costs can be high and are usually met by businesses
- A failure to agree can have serious consequences
- Owners may feel their freedom to manage is compromised
What is recruitment
When a business hire a new employee they want the best candidates; they may need new employees if the business is expanding and more labour is needed, people are leaving and to be replaced, positions become vacant due to promotion, people are required for a given period to cover temporary staff absence eg maternity leave
What are the stages in the recruitment and selection process
1) Identify the type and number of staff needed
2) Prepare job description and person specification
3) Advertise the job using appropriate media
4) Evaluate applicants and select a shortlist for interview
5) Carry out interviews
6) Evaluate interviews and make appointment
7) Provide feedback for unsuccessful candidates
What is a job description
states the title of a job and outlines the tasks, duties and responsibilities associated with that job. Shows clearly what is expected of a job description is to show clearly what is expected of an employee
What is a person specification
provides details of the qualifications, experience, skills, attitudes and other characteristics that would be expected of a person appointed to do a particular job
What is internal recruitment
recruitment from within the business. Could be chosen, they could apply for the vacancy. Advertisement could be sent by email or placed on a noticeboard. Larger organisation can use their newsletters or magazines. It is cheaper as you don’t have to pay to advertise. Internal recruitments will be familiar with the working environment of the business.Can be motivational for other workers as they can see their career progression
What is external recruitment? examples
recruitment from outside the business. Employer may want someone with new and different ideas to those already working in the business. This method will also attract a larger number of applicants and have more choice of whom to appoint.
- Word of mouth
- Direct application
- Advertising
- Private employment agencies
- Headhunting
- Jobcentres
What are the recruitment and selection costs
HR department will incur costs when identifying the number and
type of staff required eg administration cost and interviewing
What are training costs
Training costs can be so high that businesses can be reluctant to invest heavily however some training costs are essential and have to be met by the business
Loss of output cause
off the job taining will result in lower ouput as they are not producing anything
How would a business react to employees leaving
: after investing in training employers dont want to lose their employees they may recruit workers that have already been trained to avoid this
What is training
the process of increasing the knowledge and skills of workers so they are better able to perform their jobs
What is induction training
when businesses put on training for people starting a job
What is on the job training and examples
Training given in the workplace by the employer
- Learning from other workers
- Mentoring
- Job rotation
- Traditional apprenticeships
- Graduate training
Advantages and disadvantages of on the job training
Output is being produced
Relevant because trainees learn by actually doing the job
Cheaper than other forms of training
Can be easy to organise
Output may be lost if workers make mistakes
May be stressful for the worker- particularly if working with others
Trainers may get frustrated if they are ‘unpaid’ trainers
Could be a danger to others eg surgeon or train driver
What is off the job training?
Training which takes place outside the business by an external training provider like a local college or university.
Advantages and disadvantages of off the job training
- Output is not affected if mistakes are made
- Workers’ learning cannot be distracted by work
- Training could take place outside work hours if necessary
- Customers and others are not put at risk
- No output because employees do not contribute to work
- Some off-the-job training is expensive if provided by specialists
- Some aspects of work cannot be taught off the hob
- Trainees may feel that some of the training is not relevant to them
- It may take time to organise
Benefits of training for stakeholders
Managers, Owners, Employees, Customers
Managers will benefit because workers may be better motivated and more satisfied- easier to work with
Owners- Productivity is higher meaning that costs will be lower and the business may gain a competitive edge in the market
Employees-If they are trained they can do their job more effectively. Can reach job satisfaction and will feel valued if employer pays for training.
Customers- Benefit from better quality products. better customer service and better outcome when making complaints
The importance of motivation
If an individual’s needs are not satisfied, then that worker will not be motivated to work. Lack of motivation may lead to reduced effort and lack of commitment. Long term may result in high levels of absenteeism, falling productivity and profit for a business
Taylor’s theory of scientific management
He believed money was the main motivator- ‘fair days pay for a fairs day work’ therefore to get paid well they must work hard if not their pay gets docked. However he overlooks the
other reasons as to why people work other than money. Survey done to find the most motivating factors were
achievement recognition, positive working relationships
Mayo’s theory of human relations
Businesses that aim to maximise productivity must make sure that the ‘personal satisfactions’ of workers are met for them to be motivated. Management must also work and communicate with informal work groups to see if their goal fit with the businesses goals also. To do this they could involve workers to be part of decision making which would help increase commitment since they had a say in their decision. However this theory assumes workers and management share the same goals. Also assumes communication between workers and management will break down barriers. It is also biased towards management since the workers are being manipulated into being more productive by the managers
Maslows hierarchy of needs
Produced a hierarchy of needs from basic needs (physiological needs), safety needs,love and belonging, esteem needs, self actualisation. Need to pass through all levels to inevitably reach the top level of self actualisation.
Herzberg two factor theory what were they
Motivators & Hygiene/maintenance factors
Motivators: Factors which give workers job satisfaction such as recognition for their effort making them arguably more motivated. however not guaranteed as other factors can also affect productivity.
Hygiene or maintenance factors: these are factors that can lead to workers becoming dissatisfied such as pay
or conditions. Similar to Maslows ideas however only the higher levels of the hierarchy motivate workers. These ideas are often linked with job enrichment where workers have their jobs ‘expanded’ so that they can experience more of the production process allowing the workers ti be more involved and motivated. However removing dissatisfaction eg better work conditions would be taken for granted eventually and would lose effect
Financial incentives to improve staff performance
Piecework: payments for each unit produced-payment by results. They were recommended by Taylor- wirkers
would produce more when highly paid. Can only be used where its easy to identify contribution of an individual
worker. May encourage workers to take dangerous short cuts, rush production may affect the quality of the product
Commission: Payment for achieving a target eg £100 for every sale. basic salary with commission on top.
incentives workers by tying in pay with output.
Bonus: Usually on top of salary if they reach a target. payment is earned. motivates to reach target.
Profit sharing: profits are shared across workers as well as shareholders. motivates to reach objectives. However
workers have little influence over how much profit is made
Performance related pay: Designed specifically to motivate staff. extra pay for achieving target. However the
bonus may be too low to give workers incentive. Targets may be difficult or even impossible to achieve.
Non financial incentives to improve staff performance
Delegation: Managers hand more complex tasks to subordinate. Motivates workers as they feel trusted to carry out more difficult work
Consultation: If staff are consulted by employers when changes are proposed they are more likely to feel their views are valued. However it takes too long and slows down the process of change
Empowerment: Delegated decision making can be more successful if employees are empowered they feel trusted. However they do more work for same pay and can make wrong decisions
Flexible working: can cope with fluctuations in demand more easily and extend opening hours
Job enrichment: Attempts to give employees greater responsibility by ‘vertically’ extending their role in the
production process
Job rotation: involves employee changing jobs or tasks from time to time- dont get bored however may take a
while to settle in and perfect their craft in each task
Job enlargement: Involves giving an employee more work to do of a similar nature. Tasks that are repetitive can
be completed quicker and efficiently with machines
What are aims and objectives
Aims- what the business wants to achieve in the long term quite general
Objectives- the goals or targets that need to be achieved in order to achieve their aim
Why do businesses need to have objectives
Employees need something to work towards- help motivate people
Without them, owners might not have the motivation needed to keep the business going
Objectives help owners decide where to take a business and what steps are necessary to get there
SMART objectives
Specific Measurable Agreed Realistic Time specific
Survival
All businesses will consider survival to be important. However, from time to time survival can become the most important objective.
Profit Maximisation
Some businesses focus on profit more aggressively, usually because the owners want to make as much profit as they possibly can
Sales maximisation
Some entrepreneurs might try to increase sales as an objective.
Market share
Trying to increase market share is a common business objective- raises the profile of the business in the market.
Cost efficiency
Businesses may consider how to reduce their costs as a result profit margins would increase.
- lay off staff to cut labour costs
- find new suppliers to get cheaper resources -increase the usage of recycled materials
- develop new working practices that use fewer resources
- develop ways of saving energy
Employee welfare
If this is improved workers will be happier, better motivated, more productive, more co-operative, more flexible and less likely to leave
- Improve working environment
- Staff given proper breaks and somewhere comfortable for breaks
- Ensuring staff are equipped with the necessary tools and equipment
- Maintaining high standards of courtesy between all members of staff
- Encouraging regular exercise
Customer satisfaction
If customers are satisfied they are more likely to return-loyal customers are valuable to a business
Social objectives
Sets social objectives is one that shows concern for the local area.
What is contribution
selling price-variable cost
What is the break even point
The point where total costs (fixed costs+variable costs) are exactly the same as the total revenue
What is break even output (formula)
The level of output a business needs to produce so that total costs are the same as total revenue
=fixed costs/contribution
What is the margin of safety
How many sales could fall before the business makes a loss
What is the use of break even analysis
Can be used as a tool to make decisions about the future eg what if the price went up
Limitations of break even analysis
Output and stocks-assumes all are sold
Unchanging conditions- cannot cope with sudden changes
Assumes total revenue and total cost lines are straight
Multi product businesses- where to allocate fixed costs
Stepped fixed costs eg to increase output you may have to increase capacity
Define assets
The resources owned by a business
=capital+liabilities
Define liabilities
The debts of the business
Define capital
The money put into the business by the owners
What are non current liabilities
Long term resources that will be used repeatedly by the business over a period of time
What are current assets
Assets that will be changed into cash within 12 months
What is the liquidity of an asset
How easily it can be converted into cash
inventories(raw materials)
trade and other receivables(money that is owned by a business)
cash or cash equivalents
What are current liabilities
Any money owed by a business that must be repaid within one year
Loans and other borrowings
Trade and other parables(money owed by the business to suppliers)
Current tax liabilities
Non current liabilities
Long term loans and any other money owed by the business that does not have to be repaid for at least one year
Net assets
Total assets-total liabilities
Share holders equity
Summary of what is owed to the owners of the business.
Current ratio
=current assets/current liabilities
Acid test ratio
(current assets-inventories)/current liabilities
Working capital
amount of money needed to pay for the day-to-day trading of a business
Managing working capital(size of business)
Sales generate a need for stocks, trade credit & cash. Larger business’ would need larger working capital. Expanding would also need larger working capital.
Managing working capital (stock levels)
Businesses which are able to adopt just-in-time techniques will carry lower stocks than other businesses. The more stocks a business needs, the higher its working capital will be
Managing working capital (maintaining adequate levels of working capital)
If they keep working capital levels too low they may encounter problems
not enough raw materials may mean production is halted
not enough cash may mean they wont be able to pay bills on time
if they borrow too much through trade credit they may be unable to pay invoices when due
Too high..
Stocks are costly to keep
Too much money means you wont get very high rates of interest. Could be used to pay back debts instead
The importance of cash
Cash is the most liquid of all business assets. Cash is vital for a business to stay running. 21% of businesses failures are due to poor cash flow or a lack of working capital.
