PAPER 3 Flashcards
How to segment a market
Age
Gender
Location
Income
Interests
Religion
What is market segmentation
how a business splits up its target market
+ and - of market segmentation
+ identify niches
+ change marketing mix
- cannot target mass market
- missing out on segments
Factors influencing demand
Seasonality
Trends
Substitutes
Income
Quality
Cultural differences
poly
geo
ethno
Global ethics
Conflict of profit v ethics
sustainability of materials
Child and slave labour
fast fashion and overconsumption
Sustainable clothing become more popular
Focus on environmentally sustainable
For example, nike synthetic leather
Sole trader
Unincorporated
Unlimited liability
One person
Partnership
Unincorporated
Unlimited liability
2 -21 people
Private LTD CO (LTD)
Incorporated
Limited liability
Privately sell shares
Public LTD CO (PLC)
Incorporated
Limited liability
publicly sell shares
Independant
PORTERS - Focus on differentiation
Multinationals
Range from low cost mass market to highly differentiated
Production location factors
Cost of production
Access / cost of raw materials
Access / cost to labour
Infrastructure
Location
Trade bloc
India
H&M
Nike
M&S
Tommy Hilfiger
Largest cotton producer
45 million employed in cloth jobs
Spain
ZARA
Higher labour costs, production seed responsive
change inv 12 times a year in comparison to average 3-4 in asian production
China
Infrastructure in manufacturing
Strong business ecosystems
Large pool of workers
Labour costs rising
Italy
Quality, craftsmanship
Innovative
Brands
Fashion hubs like Milan
Adds value
Location , trade
Impact MNCs have on local economy
Create jobs, impact wages, working conditions and local community
Impact MNCs have on national economy
FDI flows, tech and skills transfer, culture, tax revenue
Controlling MNCs
Political influence
Legal control
Pressure groups
Social media
Gross profit margin
(Gross profit / revenue ) * 100
Operating profit margin
(Operating profit / revenue ) * 100
Net profit margin
(net profit profit / revenue ) * 100
Return on capital employed
(Operating profit / capital employed ) * 100
Capital employed
Non-current liabilities + total equity
Current ratio
Current assets / current liabilities
Acid test ratio
( ( CURRENT ASSETSS - INVENTORIES ) / Current liabilities )
Gearing ratio
(Non-current liabilities / capital employed ) * 100
Payback period
(Amount needed to payback / cashflow in following year ) * 12
Average Rate of Return
( (Net return / no of years of project) / initial investment cost) * 100
Net present value
Multiple by discount and add together
What does organic growth look like
Opening new branches
Launching new product lines
Expanding online
What does inorganic growth look like
Mergers, vertical integration, takeovers
Entrepreneurial motives
Profit maximisation
Profit satisfying
Independence
Entrepreneurial characteristics
Risk taking
Inititat ive
Leadership
Creativity
Direct distribition
Direct to the consumer
indirect distribution
Through a third party retailer to consumer
Online retailer pros
Easy / convenience
Order from anywhere anytime
Bigger variety of options
Less pressure to purchase
Online retailer cons
Needs suitable tech
Take longer
Shipping issues
No way to try before buying
% change
new-old/old x 100
Gross Profit
Sales revenue – cost of sales
Operating profit
Gross profit- overheads
Net Profit
Operating profit +/- finance costs
Total variable cost
number of units sold x variable cost per unit
Contribution per unit
selling price per unit – variable cost per unit
Total contribution
contribution per unit x number of units sold
Margin of safety
Actual output - breakeven output
Break-even
fixed costs/ Contribution per unit
Variance
Actual – Budget
Job production
when individual products are made one at a time to meet specific customer preferences
Batch production
Identical or similar items are produced together in groups (batches), each item passing through the production process at the same time
Cell production
form of flow production whereby the production line is split into a series of self contained cells which teams in these cells work together to create one unit of output.
Flow production
continuous movement of items through the production process
