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Business Studies > Theme 1 - Meeting Customer Needs > Flashcards

Theme 1 - Meeting Customer Needs Flashcards

1
Q

Benefit of a mass market?
(Line of analysis)

A
  • Mass market
  • Produce a product that appeals to a range of demographics
  • For example high and low income groups
  • Increased sales volume
  • Increase output - Factory
    Increase sales - Shop/retailer
  • Increased orders from suppliers
  • Discount for bulk buying
  • Lower unit variable costs
  • Increase in gross profit
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2
Q

Drawback of a mass market?
(Line of analysis)

A
  • Mass market
  • Less specialised in meeting needs of specific demographic
  • Reduced knowledge of specific customers
  • Products less likely to satisfy customer needs
  • More price elastic
  • Lack of differentiation
  • Pressure to keep prices low
  • Lower sales revenue
  • Lower gross profit
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3
Q

Benefit of a niche market?
(Line of analysis)

A
  • Niche market
  • Can develop a specialist understanding of the target demographic
  • E.g. what bird watchers like to do on holiday
  • Can more effectivley meet their needs
  • Creating a holiday/ product tailored to them
  • More effectivley than mass marketing/ generic products
  • Differentiation focus
  • According to porter
  • Competitive advantage
  • Increased sales
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4
Q

Drawback of a niche market?
(Line of analysis)

A
  • Niche market
  • Focused on the specific needs of a specific segment
  • E.g. halal baby food
  • Suitable only for babies and people who eat halal foods
  • Limited potential sales
  • Lower sales revenue
  • Lower net cash flow
  • Reducing current ratio
  • Increasing risk of liquidation
  • Making the business less attractive for investment
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5
Q

Benefit of online retailing?
(Line of analysis)

A
  • Combined with the rising popularity of purchasing online
  • This could lead to increased sales volume
  • More raw materials/ stock would be required
  • Increased orders from suppliers
  • Discount for bulk buying
  • Lower variable unit cost
  • Increased gross profit margins
  • Increased retained profit to reinvest
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6
Q

Drawback of online retailing?
(Line of analysis)

A
  • online retailing may not be beneficial
  • As customers can more easily find alternatives online
  • They can easily compare the prices of products
  • Making them more sensitive to changes in price
  • More price elastic
  • Pressured to lower prices
  • Lower gross profit margins
  • Lower retained profit
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7
Q

Benefit of dynamic markets?
(Line of analysis)

A
  • Dynamic markets are fast changing
  • Meaning new customer trends appear quickly
  • If the business is able to adapt to trends quickly
  • They may be able to differentiate from competitors
  • By gaining a first mover advantage
  • This can allow them to have charge higher prices
  • Whilst competitions are still trying to adapt
  • Leading to increased revenue
  • Increased gross profit margin
  • More retained profit
  • Able to invest in market research or R+D
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8
Q

Benefit of dynamic markets?
(Line of analysis)

A
  • Dynamic markets are fast changing
  • Meaning new customer trends appear quickly
  • If the business is able to adapt to trends quickly
  • They may be able to differentiate from competitors
  • By gaining a first mover advantage
  • This can allow them to have charge higher prices
  • Whilst competitions are still trying to adapt
  • Leading to increased revenue
  • Increased gross profit margin
  • More retained profit
  • Able to invest in market research or R+D
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9
Q

Drawback of dynamic markets?
(Line of analysis)

A
  • Dynamic markets change rapidly
  • Products and services need to change to keep up with trends in the market
  • Requires high investment into R&D
  • E.g. paying high wages of scientists and engineers
  • Leads to increased cash outflows
  • Lower net cash flow
  • Reduced cash reserves
  • Poor liquidity
  • May be unable to pay day to day bills
  • Forced to sell non current assets in order to cover payments
  • Business unable to operate
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10
Q

Benefit of product orientation?
(Line of analysis)

A
  • Product orientation involves focusing on developing the product
  • Lots of investment is R+D of the function of the product
  • Improved innovation by having unique features
  • Differentiate from competitors (Such as)
  • Customers willing to pay higher prices
  • More price inelastic
  • Increase prices without significant fall in demand
  • Increased revenue
  • Higher gross profit margins
  • Increased retained profit
  • Able to invest further in R+D to continue innovating
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11
Q

Drawback of product orientation?
(Line of analysis)

A
  • Product orientation can be expensive
  • Lots of investment into R&D is needed in order to innovate
  • Increased fixed costs
  • E.g. paying high wages of scientists/engineers
  • leading to lower operating profit margins
  • Reducing retained profit
  • Less capital to reinvest in further R&D
  • May be unable to effectively differentiate
  • Unable to pursue porters differentiation focus/ leadership strategy
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12
Q

Benefit of market orientation?
(line of analysis )

A
  • Market orientation involves focusing on customer wants and needs
  • This allows the business to create products based on trends
  • And use market research to quantify demand
  • Allowing them to produce products which are likely to have a high sales volume
  • Benefit from marketing economies of scale
  • Fixed cost of market research can be spread across more units
  • Lower fixed costs per unit
  • Increasing operating profit margins
  • Able to reinvest in conducting further market research
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13
Q

Drawback of market orientation?
(line of analysis)

A
  • However market research is needed to find out customer wants and needs
  • High amount of invesment need into market research
  • Eg. questionnaires and focus groups using a large sample size
  • In order to find out customer wants and needs
  • Leading to increased cash outflows on wages for specialist researchers
  • Lower net cash flow
  • Reduced cash reserves
  • Poor liquidity
  • May be unable to pay day to day bills
  • Forced to sell non current assets in order to cover payments
  • Business unable to operate
  • Limiting innovation
  • Less likely to develop unique and competitive products
  • (No differentiation)
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14
Q

Benefit of primary market research?
(line of analysis)

A

– Primary research involves collecting new data

  • Which is up to date and specific to the business
  • Eg. questionnaires and focus groups
  • Which allow the business to effectively identify customer wants and needs
  • Create a product which meets needs effectively
  • Build customer loyalty
  • Price inelastic
  • Increasing sales revenue
  • Increasing profit margins
  • More retained profit to reinvest
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15
Q

Drawback of primary market research?
(line of analysis)

A
  • However primary market research can be expensive
  • May need to hire specialist researchers to conduct research
  • Eg. questionnaires and focus groups using a large sample size
  • In order to find out customer wants and needs
  • Leads to increased cash outflows on wages
  • Lower net cash flow
  • Reduced cash reserves
  • poor liquidity lower volume of data is collected as a business may not have the cash to pay for researchers
  • Resulting in unreliable results as less people are asked
  • Resulting in the wrong product being produced or wrong price being charged
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16
Q

Benefit of secondary market research?
(Line of analysis)

A
  • The research is presented in report format
  • And has already been completed
  • Therefore does not require researchers to be recruited
  • As there will not be a requirement to do focus groups for example
  • This significantly reduces cash outflows
  • Improving net cashflow
  • Leading to increased current assets
  • Ability to pay debt and avoid failure
17
Q

Drawback of secondary market research?

A
  • The research has been completed in the past for a different purpose
  • May not be time or business relevant
  • Therefore making invalid
    suggestions on how the business should improve
  • Leading to inappropriate product portfolio
  • Leading to low sales
  • Lower gross profit
  • Risking an operating loss
  • Forcing the business to use cash reserves to pay expenses
  • lower liquidity
  • Less attractive to banks or investors
  • As suggest that the business may struggle to pay bills
  • Struggle to raise capital for future expansion
18
Q

Benefit of Quantitative Data
(Line of analysis)

A
  • Data collected in statistical form
  • Using closed questions.
  • These can be completed independently
  • And easily analysed
  • Therefore specialist researchers are unlikely to be needed
  • Reducing the costs of wages for conducting the research
  • Cash can instead be invested into using a larger sample size
  • Leading to more reliable data collected
  • More likely to produce a product which meets customer needs
  • Increased revenue
  • Increased gross and operating profit
19
Q

Drawback of Quantitative Data
(Line of analysis)

A
  • Data is presented in statistical form
  • Resulting in limited depth of knowledge
  • And respondents can’t explain why they made certain choices
  • Making it difficult to develop new ideas
  • Limiting innovation
20
Q

Benefits of qualitative research
(Line of analysis)

A
  • It invites participant to give a more detailed response
  • Which can lead to a greater understanding of customer needs
  • Resulting in the business being able to produce a Product or service which effectively meets customer needs and is unique
  • Increase customer loyalty
  • Increase selling price
  • Product becomes price inelastic
  • Increasing sales revenue
  • Increasing profit margins
  • More retained profit to reinvest
21
Q

Drawbacks of qualitative research .
(Line of analysis)

A
  • Gathering a large volume of detailed responses will require a significant number of researchers
  • this will significantly increase fixed costs
  • This may mean that a lower volume of data is collected as a business may not have the cash to pay for researchers
  • Resulting in unreliable results as less people are asked
  • Resulting in the wrong product being produced or wrong price being charged

Business Studies (16 decks)

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