TEMPORARY - Mock test Flashcards
Factors that effect the demand of a product
- price
- substitutes
- changes in consumer incomes
- tastes
- advertising/branding
- demographics (changes in population)
- external shocks (outside of business control)
- seasonality
factors affecting the supply
- changes in production costs
- introduction of new tech (lower unit cost = supply rise)
- indirect taxes (increased taxes = higher cost = supply fall)
- government subsidies (opposite of indirect tax)
- external shocks
if demand is higher than supply:
prices will rise to make the demand go back to the equilibrium level of supply = demand
if supply is higher than demand:
price will fall to attract customers, which increases demand and will create an equilibrium between supply and demand
what do supply and demand diagrams show?
they show how much of a product would be demanded/ businesses are willing to supply at different price levels
increase in supply or demand
line moves right
decrease in supply or demand
line moves left
where do the lines go?
within the X the top label is supply and bottom is demand
What is capacity utilisation?
is the proportion of maximum capacity being used by the business. businesses try to operate to full capacity to avoid waist and boost profitability.
capacity utilisation formula
(expressed as a percentage)
capacity utilisation = (current output/max output) x100
Implications of under-utilisation
Fixed costs per unit will be higher. Which can result in
-job loss fears, which hurts motivation
Implications of over-utilisation
- they may not be able to accept any new orders because there current capacity won’t be able to hold it. This could mean turning down customers to rivals
- little time to carry out maintenance or train staff if the demand for a product is really high
Ways of improving capacity utilisation
- increase current output (by using methods that boost sales volume like cutting selling price)
- reduce maximum capacity (this reduces fixed costs - involves selling off assets or cutting staff)
why do businesses use sources of finance
There comes circumstances where businesses need to raise finance. E.g when starting up, growing or expanding, dealing with cash flow, increased production costs.
Internal sources - safest method of financing as if the investment were to fail, the business won’t be left in large debt.
- owners capital
- Retained profit (not for start up investment)
- sales of assets - Established businesses sell off unwanted assets
External sources - require some sort of return
- family + friends (limited to small business contexts)
- Banks - loans e.g (hard to get at reasonable rate)
- peer to peer funding - investors from websites (rare)
- Business angels - rich investors who want a stake in the business in trade for their skills and expertise (for early stages)
- Crowdfunding - allows multiple investors to invest in one business (for startups)
- Other businesses - firms seek smaller businesses to provide finance for return of shareholding
Production methods
certain methods of production differ between different kinds of businesses and the products they sell.
- Job production
- Batch production
- flow production
- cell production
Job production (advantages/disadvantages)
Job is the making of one-off items tailored to customer needs
AD - can charge higher prices
DIS - high unit costs, staff costs (skilled workers)
Batch production (advantages/disadvantages)
makes a group of products at one time (allows some variation yet specialisation) - e.g same shoes, different sizes
AD - speedier than job production + allows variation
DIS -machinery may be required - this increases costs
Flow production (advantages/disadvantage)
continuous production of a single product
AD - cost effective, Huge volumes allow huge demand in mass markets to be met as well as lower unit costs
DIS - identical products, high unit costs to start off with
Marketing mix
the general approach to marketing used by a business
4 Ps
Product - what you sell
Price - how much are you charging and is it affective?
Place - where do you promote, is it able to reach your Target marker
Promotion - how do your customers find you
Ansoffs model
ansoffs matrix can link into the marketing mix in the product development area which involves marketing and distributing your existing product in a new market, this is seen as more high risk but can boost sales and gain a new customer base
Sales revenue -
is the value of the output sold by a business. It may be calculated for a specific time period like day, week or moths. It can also be calculated for individual products when businesses sell a range of products
Quality management
when consumers buy a product, they expect it to be of a certain standard
At a minimum level, customers expect the product to be fit to perform the purpose for which it was bought.
In some businesses, the quality of their products is their point of differentiation.
what is total quality management (TQM)
More of a way of encouraging staff to think about the business than managing the quality of their product.
It trains them to see the importance of quality and ‘getting it right the first time’.
TQM disadvantages/ advantages
AD - once all staff think about quality, it should show through all areas of work - design, manufacture and after sales service. And will be deeply rooted the firms culture
DIS - can be costly with extensive training courses.
lacks a clear concrete program so staff may disregard it as unnecessary
Boosting sales revenue
- lowering production costs
- entering new markets
- widen product range
- lower prices
- pricing strategies
sales revenue formula
sales volume x price
