Theme 1 Flashcards
What is span of control?
The amount of control that a manager has. The layer below.
What is a hierarchy?
The way in which a business is structured, such as flat, tall or matrix.
What is delegation?
This is the process of transferring authority and power from a high management layer to an employee in a lower management layer. Authority can be delegated downwards but responsibility can’t.
Chain of command?
This is the route in which power and authority are passed down through the various layers of management.
De-layering?
Removing layers of the organisations management.
Centralisation?
This often means that a few top-level managers retain decision-making powers and responsibility for a whole business. All decisions made in central / head office.
Decentralisation?
This often involves the process of delegating authority and decision-making powers to employees lower down the business’s chain of command.
Also, branches and outlets having making their own decisions.
What is outsourcing?
When a business pays workers in another country to manufacture a product/service.
Dismissal?
When an employee is removed from his/her position within a company.
Redundancy?
This happens when an employee’s position no longer exists within a company.
Laissez-faire leadership?
Style empowers employees to carry out a given set task with the minimum of interference from the manager.
Autocratic leadership?
Dictatorial style of leadership where workers are set a task and told how and when to complete it, without consultation and participation in the decision-making process.
- undervalued employees
Democratic leadership?
Empowering employees by involving them in the decision-making process. The leader consults employees, but teams ins in overall control. Best way to complete a task.
- may be slow but can improve motivation.
Paternalistic leadership?
Asks for consultation with employees but the decision is decided by him.
What are the non-financial motivators?
Job enrichment Job enlargement Job rotation Employee empowerment Delegation Team working Consultation Flexible working
What are the financial motivators?
Piecework Time rate Profit-sharing Commission Bonus Fringe benefits Performance-related pay
The 7 ways markets change(dynamic markets):
- Seasonal factors
- Consumer tastes
- Consumer attitudes
- Government regulations
- The availability of new technologies
- New competitors entering the market
- Changes in business structure and outsourcing
What is uncertainty?
Factors and effects that you cannot possibly predict. External factors (natural events)
Why take risks?
In hopes that the risk will bring significant reward. Every decision runs risk.
What is product orientation?
When a business focuses more on its product and production process than considering what consumers are looking for.
What is market orientation?
Market orientation is an approach to business that prioritizes identifying the needs and desires of consumers and creating products and services that satisfy them.
The 6 limitations of analysing marketing data?
- Sample size may be too small
- May be too expensive to collect specific data
- Data may be out of date
- Data may be inaccurate
- Dat may be taken out of context
- Problems with regional differences
What are the 4 types of market segmentation?
- Demographic (age,family size,ethnicity…)
- Geographic (town,county,country…)
- Behavioural (on how customers react, behave towards, certain products, brand loyalty…)
- Psychographic (customers lifestyle,values,personalities and attitudes)
Advantages of market segmentation?
- Helps the business get to know it’s customers
- Help focus on specific target audience
- Encourages business to specialise
Disadvantages of market segmentation?
- Costly and time-consuming process
- It could over-narrow the focus of the business
- It could lead to the manufacture of too many different products
Purpose of product differentiation?
To gain an advantage over their competitors. (USPs)
Added value equation?
= Selling price of a product/service - Total cost of producing the product or service
Ways to add value?
Function:
- Offer customers alternative methods of payment.
- Offer gift voucher
- Loyalty card
- Offer customers cash discounts on purchases
- Warranties
- Options for adds insult and upgrades
- Price the product appropriately
Ways to add value?
Aesthetics:
- Associate the product/service with well-known personalities or businesses
- Package and present the product in a way that creates the perception of value and quality
- Present the product as a uniquely designed ‘must have’ item.
What’s a dynamic market?
These are markets that change with a variety of factors, such as consumer tastes, government regulations and the emergence of a new competitor.
What’s a stable market?
These markets stay the same regardless if changing factors or trends
Factors leading to a change in demand?
- Disposable income (right) - left for inferior goods
- Changes in price of substitute goods (decrease-left)
- Changes in price of complementary goods (decrease-right)
- Fashions, tastes and preferences
- Successful advertising and branding
- Demographics (when areas become wealthier-right)
- Adverse external shocks (Left or right)
- Seasonality (Left or right)
Factors leading to a change in supply?
- Increase cost of production (left)
- New technological improvements (right)
- Indirect tax (VAT-left)
- Government subsidies (right)
- Adverse external shocks (left)
Price elasticity of demand equation?
% change in quantity demand / % change in price
What is 1 Ped?
What is 0 Ped
What is less than 1 Ped?
What is more than 1 Ped?
1 Ped = unitary price inelasticity of demand (percentage change is exactly the same on both price and demand)
0 Ped = completely price inelastic, even if price changes, there will be no change in demand
-1 Ped = price inelastic, consumers not very sensitive to changes in price
+1Ped = price elastic, consumers very sensitive to changes in price
Factors influencing PED?
- Brand loyalty
- % of disposable income spent on the products
- Availability of substitute goods
- The frequency of purchase for the product
- Degree of necessity
Income elasticity of demand(YED) equation?
%change in quantity demanded / %change in income
Less than 0 YED mean?
More than 1 YED mean?
What does greater than 0 mean?
0YED, if incomes goes up, quantity will go down (inferior good)
+1YED, that a 1% change in income causes a greater than 1% change in quantity demanded. (Luxury goods)
+0, increased income leads to higher demand (normal good)
What is a the market equilibrium?
The point at which consumer demand and producer supply are equal.
What is the marketing mix?
Is the combination of elements a company uses to best offer a new product/service to the market.
What are the 4 Ps (marketing mix)?
Product
Promotion
Price
Place
What does the design mix consist of?
Function
Aesthetics
Cost
What are the factors that the design mix needs to consider:
Sustainability Ethics Health Technology Government Business Objective USP
Why use public relations (promotion)?
Companies use this technique to increase selling potential of their product or service by building a positive image for the external market to see.
Ads:
- Creates a name for themselves, which consumers remember
Dis:
- It is difficult to measure success with this method
What is direct marketing used for?
Direct selling initiatives aim to get an immediate response so that business can create long-lasting relationships and build on their customer database.
Ads:
- Businesses can track the success of their work
- Can test the usefulness before full-scale marketing campaign
Dis:
- Many consumers do not want to be contacted
- Can lead to poor-quality leads
What is personal selling?
Businesses will often send a sales representative to meet with potential customers in person. - human-side of the business, personality into the process.
Ads:
- good way to build strong personal relationships
Dis:
- Personal selling has a high cost per action(CPA)
- require training
What is advertising used for?
Consists of any paid form of communication that is not personal. Inform consumers and persuade them to buy their product or service without having any real contact.
Ads:
- The potential for consumer reach is great
- Some types of advertising can be easily tracked
Dis:
- Could be backlash (publicity)
- Expensive
What is sales promotion?
A short-term incentive designed to encourage and persuade the consumer to buy a product or service. (Coupons)..
Ads:
- Help encourage repeat purchases
- Entice costumers
Dis:
- Expensive to manage effectively
- Could suggest the business is in need of money
What is sponsorship?
To promote their products or services to consumers that might not be aware of them.
Ads:
- A positive knock-on effect to the brand (if sponsored event is successful)
- Great brand awareness
Dis:
- If event is not liked, negative knock-on effect on brand
- Limited genuine brand exposure
What is digital communications?
Information technologies allow businesses to reach out to more potential customers than ever before.
Ads:
- Can easily target the consumers they want
- Digital much cheaper than physical
Dis:
- Loads of brands (great potential for ad clutter)
- People become more internet-savvy, ignore ads
What influences a business’s choice of promotional mix?
- Budget
- Competition
- Promotion objective
- Product
- Product Life Cycle
- Target market
Benefits of strong branding?
- Can significantly add value to a product. Lead to a reduction in PED, can charge a higher rate.
- Can create barriers to entry, keep potential competitors away
Examples of types of USPs?
- Design
- After-sales service
- Unique features
- Quality
- Durability
- Distribution
The current changes in branding and promotion comes through:
Viral marketing- people can share content with one another in seconds
Social media- brands can have sponsored posts…brand awareness is highly user focused and can be talked about from person to person
What are pricing strategies used for?
Companies use price strategies to evaluate business decisions based on the market and any possible financial consequences that may arise.
What is price skimming?
Involves charging a higher price on release of a product or when it is in the growth stage of the product life cycle. - to gain make back a significant portion of the funds that lead up to a product’s launch
What is price penetration?
When the company charges an artificially low price for their product or service. - to grab consumer interest and quickly gain market share.
What is cost-plus pricing?
Involves calculating the average cost of producing an individual product and then adding a markup, which considers how much consumers would actually be willing to pay.
(Total budget cost + markup) / budgeted sales in units
What is competitive pricing?
Where competitor prices are the main influence in the price set
What is psychological pricing?
When u mark a product at 9.99 rather than 10 as it seems more of a bargain.
Predatory pricing?
When a business sets a price so low that it threatens to destroy all competition and raises the market’s barriers to entry.
What’s a loss leader price tactic?
Involves selling one product at an artificially low price on order to encourage consumers to see what else is on offer.
The factors that determine the most appropriate pricing strategy for a particular situation?
- Level of competition
- Amount of Differentiation
- Costs and the Need to Make a Profit
- PED
- Pricing Objective
- Target Audience
- Stage in the Product Life Cycle
- Strength of the Brand
What are the five stages of the product life cycle?
- Research and development
- Introduction
- Growth
- Maturity
- Decline
What’s an extension strategy used for?
A company will try to breathe new life into it.
What are the two Boston matrix axis?
Market growth and market share
What are the 4 categories of the Boston matrix?
Star
Question Mark
Cash Cow
Dog
What is flexible working?
A phrase that describes any working pattern adapted to suit your needs.
Characteristics of a flat structure?
- A Flat structure has few layers in the hierarchy, a wide bottom and a gentle slope to the top
- Lots of small companies have a flat structure
- Span of control is wider
- Less hierarchy – easier to make decisions
- More employee empowerment
- Can be cheaper as don’t have to pay expensive management salaries
Characteristics of a tall structure?
- A tall structure has many layers in the hierarchy
- As there are many layers the chain of command is longer
- Managers have smaller spans of control and there is less delegation
- Clear hierarchy
- Smaller chains of command
- More control
- Clear communication
What is delayering and why was it used?
- Delayering is the process of removing layers ion the hierarchy
- Businesses saw delayering as a way of cutting costs and increasing efficiency
What is a matrix structure and it’s characteristics?
- Matrix structure is where the business is organised by task
- Combines a vertical chain of command with project / product teams
- The focus is on the task
- Is a more flexible structure and allows the business to be more responsive to customer needs
- However it can cause conflict and employees may have divided responsibilities
- Extra costs may be generated by duplication of support staff
What should distribution channels do?
- Encourage repeat purchases from consumers
- Enable safe delivery of a product/service
- Maximise the number of potential customers for a product/service
- Ensure quick delivery of a product/service
What’s 3 and 4 stage distribution?
3 stage = producer - retailer - consumer
4 stage = producer - wholesaler - retailer - consumer
Advantages of mass marketing?
- Large target market allows for high number of potential sales
- Global marketing allows economies of scale for the company
- Potential to create huge brand with worldwide recognition
Disadvantages of mass marketing?
- Expensive form of marketing
- Time-consuming to both implement and analyse
- Requires constant investment for brand to stay relevant
- Risk of irritating the consumer
What are the two main approaches to staffing for a business?
- Staff as a cost
- Staff as an asset
Why flexibility is needed in a business?
Flexibility is needed because of dynamic changing markets where consumers are driving the products with demand pull, through organisations that need to have more flexible operations to respond to these demands to remain competitive.
What are the advantages and disadvantages to a flexible workforce?
Ads:
•Businesses can avoid the costs of having to pay for full-time employment
•They can benefit from access to skilled individuals without having to train them first
•Cover shifts can be filled when demand spikes
Dis:
•Staff may have low job security, which could lead to low morale/motivation
•Communications can be difficult, especially if some employees work from home or have sporadic hours
•The low motivation can lead not only to poor productivity but a high turnover of staff
Whats dismissal?
Dismissal is the act of terminating an employee’s contract.
Whats redundancy?
An employee can become redundant once his/her job no longer exists.
Whats internal recruitment?
Internal recruitment involves filling a job vacancy through a trawl of the existing workforce. The vacancy is only advertised within the organisation using an internal notice, staff magazine or meeting.
Whats external recruitment?
External recruitment involves filling a job vacancy by recruiting from sources outside the business’s own workforce.
Benefits of training?
- Reducing wastage in time and materials
- Increasing the flexibility of the workforce
- Motivating employees by making them feel more valued and so help reduce absenteeism
- Reducing staff turnover
Characteristics Required for an Entrepreneur?
- Creative
- Hardworking
- Resilient
- Self-confident
- Risk-taking
- Initiative
Skills Required for an Entrepreneur?
- Problem-solving
- Teamwork
- Communication
- Organisation
- Numeracy
- Information technology
Whats SWOT analysis?
Strengths
Weaknesses
Opportunities
Threats
Advantages of being a Sole Trader?
- The owner keeps all the profits themselves.
- The owner makes all the business decisions.
- It a relatively simple form of business to start up.
Disadvantages of being a Sole Trader?
- The owner is personally responsible for all the debts and losses of the business –that is, they have unlimited liability.
- The owner must personally take total responsibility for the efficient and effective running of the business. All business decisions are theirs and theirs alone.
- The owner has a limited ability to raise capital for expansion as the business is usually small with a limited asset valuation for use as collateral security.
Whats a Private Limited Companies (Ltd)?
Company’s finances are distinct and separate from the personal finances of its owners. Shareholders are the owners of the company and are protected by Limited Liability. Not liable to losing personal assets but only lose amount of share capital invested.
Advantages of being a Private Limited Company (Ltd)?
- Less risky investment as shareholders are protected by limited liability.
- The protection of limited liability encourages more private individuals to invest and so gives the private limited company a larger capital base.
Disadvantages of being a Private Limited Company (Ltd)?
They cannot offer shares for sale to the general public as their circulation is restricted to private investors. This greatly restricts the amount of capital they can raise.
- Some of the profits made by the company are distributed to shareholders and debenture holders. This reduces the amount of retained profit they can keep for reinvestment and expansion.
- They must file annual accounts with the Registrar of Companies at Companies House.
Advantages of being a Public Limited Company (PLC)?
- They can obtain very large amounts of capital as their shares can be bought and sold on the stock exchange worldwide by individuals or financial institutions.
- As they are very large, usually dominate the market and have an extensive asset base, public limited companies find it easy to obtain loans from financial institutions.
- Because of their huge size, they can benefit from Economies of Scale.
Disadvantages of being a Public Limited Company(PLC)?
- They can get too large and impersonal, causing employees to lose their sense of identity. This in turn can cause motivation and communication problems as well as diseconomies of scale.
- They can be subject to hostile takeovers
