Theme One Flashcards
1
Q
Dynamic Market
A
A market that is constantly changing to suit customer wants and needs.
2
Q
Market Share
A
The volume of sales (as a percentage) that a business has out of the total market.
3
Q
Market Size
A
Total number of percentage buyers; total volume of total sales in a market
4
Q
Mass Market
A
A large market with a sizeable demographic and high volume of sales; one standardised product is aimed at the majority of the population.
5
Q
Niche Market
A
A small segment of a larger market. Often involves selling specialised or luxury products.
6
Q
The Market
A
Any medium through which buyers and sellers interact and agree to trade at a given price.
7
Q
Advantages and disadvantages: mass marketing
A
+ economies of scale
+ long lasting appeal
+ can use mass advertising
+ increased sales volume
+ more potential customers
- needs high investment
- difficult to entice multiple demographics with a single advert
- more competitors
- may need to charge lower prices therefore reducing the profit margin
- more barriers to entry
8
Q
Advantages and disadvantages: niche markets
A
+ can charge higher prices since they are meeting customer needs more specifically
+ higher prices may mean higher profit margin
+ fewer barriers to entry
+ less competition
+ brand loyalty due to fewer alternatives
- if successful, more businesses may enter the market
- cannot benefit from economies of scale meaning higher unit costs
- limited sales as total market may be quite small
- vulnerable to market change if they specialise in one product
- limited growth
9
Q
Market Growth
A
the change in a market’s size over a given period, typically expressed as a positive or negative percentage; key indicator for existing and potential market entrants and can be calculated using either value or volume.
10
Q
Innovation vs Invention
A
- innovation is the application of new inventions into marketable products or services
- invention is the creation of new products and ideas
11
Q
Four key factors in dynamic markets
A
- online retailing
- adapting to change
- how markets change
- innovation and market growth
12
Q
Advantages and disadvantages: online retailing
A
+ open 24/7
+ no need for staff to take orders
+ can reach international markets with greater ease
+ lower overheads as no need for a physical outlet
+ flexible
+ easy to set up
- some customers still prefer to browse physically rather than shop online
- issues with returns may put customers off
- customers may have online security worries
- IT skills requited
- easier for competitors to see the business model and prices etc
13
Q
Process Innovation
A
Using new tech to improve production methods, usually so that costs are reduced without a loss in quality.
14
Q
Advantages of process innovation
A
- reduced costs
- improved quality
- more responsive customer service
- greater flexibility
- higher profits
15
Q
Product Innovation
A
Occurs when new technologies make it possible to create completely new products.
16
Q
Advantages of product innovation
A
- first mover advantage
- higher prices chargeable
- added value
- opportunity to build early customer loyalty
- enhance reputation as an innovative company
- public relations - e.g. news coverage
- increased market share
17
Q
How does competition affect the market?
A
- battle for market share
- a constant battle to gain or protect share
- threat of new entrants always there - pricing
- price wars are commonplace in
competitive environments
- market leaders and stronger competitors
often set the price - battle for competitive advantage
- product differentiation is key part of this
18
Q
competitive advantage
A
When a business has an edge over their competitors by being able to differentiate themselves through a usp, better value, quality or service.
19
Q
How does competition affect the customer?
A
- more choice (too much choice?)
- lower priced substitutes
- better quality alternatives
20
Q
How does competition affect the business?
A
- may reduce profitability due to lower prices being charged
- price wars
- lower market share
- shrinks customer base
- may lead to increased quality
- could prompt innovation
- stops complacency
21
Q
How does competition affect the economy?
A
- higher employment due to more firms in the market
- more efficient use of resources
- productivity increases
- businesses become more competitive globally
22
Q
Risk vs uncertainty
A
- risk is the possibility that things will go wrong and it can be managed and prepared for
- uncertainty refers to unpredictable and uncertain events that will affect the business e.g. external shocks
23
Q
Contingency planning
A
An activity undertaken to ensure a business is prepared in the case of an emergency and that the correct follow up steps will be taken by management and employees
24
Q
Product Orientation
A
When businesses are focused on the product itself and product efficiency rather than customer needs
25
Market Orientation
When a business focuses on customer needs and then designs a product around that
26
Market Orientation
When a business focuses on customer needs and then designs a product around that
27
Why is market orientation crucial to success?
- markets are highly dynamic and changing technologies shorten the product life cycle
- customers are more demanding and share negative experiences on social media
- barriers to entry are getting lower and many new entrants are utilising online and technological advancements
28
Stages of the product life cycle
introduction > growth > maturity > decline (or extension)
29
What is the purpose of market research?
- identify market opportunities
- gain insight into competition
- inform business decisions and reduce risk
- identify and understand customer needs
30
What are the two types of market research?
- primary research which is conducted first hand
- secondary research which is done using existing resources or third party data
- this could be further separated into quantitative (numerical) and qualitative (verbalised) data
31
Name 3 methods of primary research.
- surveys
- focus groups
- questionnaires
- interviews
32
Advantages and disadvantages: primary research.
+ private
+ can cater to meet your specific needs
+ more detailed insights
- expensive
- time consuming
- sample may not be representative of entire market
- risk of bias
33
Advantages and disadvantages: secondary research.
+ usually free and readily available
+ quick
+ typically a wide range of info
- competitors also have access
- not tailored to business needs
- specialist reports can be expensive
- may be out of date
34
Name 3 methods of secondary research.
- newspapers and magazines
- internet
- outsourcing specialist reports
- existing government/market report
35
Advantages and disadvantages: qualitative data.
+ focused on understanding customer needs and wants
+ more in depth
+ essential for developing new products
+ better understanding of consumer mindset
- expensive to collect and analyse
- subjective
36
Advantages and disadvantages: quantitative data.
+ relatively easy to analyse
+ can compare to other historical data easily
+ quick and easy to collect
- doesn't explain why the data is why it is
- may lack validity if sample size isn't a sufficient size
37
Advantages and disadvantages: surveys/questionnaires.
+ can be conducted face to face, via post, email, telephone or online
+ can be given to both existing and potential customers
+ relatively cheap
+ usually quantitative data is collected making it easy to analyse
- questions needs to be well designed in order for information to be of any use
- reply rates are often low, especially when not conducted face to face
- can be time consuming
- questions asked may have an element of bias
38
Advantages and disadvantages: focus groups
+ more in depth as the information is qualitative
+ can ask follow up questions
- individuals may be influenced by other members of the group
- some voices may be louder than others which would inhibit a holistic overview
- moderator bias
- only effective if sample is representative
- usually only a small amount of data is collected
- difficult to analyse as data is qualitative
39
Advantages and disadvantages: interviews
+ can ask follow up questions
+ easily clarify misinterpretations
+ in depth
+ can be conducted in person or over zoom etc
- more difficult to analyse than quantitative data
- interviewer bias
- may not receive honest answers to sensitive questions
- difficult to attract participants
- may not be representative
40
Name a trade journal that could be used as secondary research.
- Motor Trader Magazine
- Police Chief
- Education Digest
- Energy Weekly News
- Aviation Week and Space Technology
- Engineering News Record
- Design News
- Traffic World
- among others
41
What is Eurostat? IMF? WTO?
- eurostat contains useful infographics on europe that could he
- international monetary fund is an organisation of 188 countries that work to foster global monetary cooperation and reduce world poverty, among other things
- world trade organisation, works at lowering barriers and tariffs between nations
42
What does ONS stand for? What does it do?
the Office of National Statistics contains useful data about markets and industries a business may operate in.
43
Name a company that conducts specialist market research for businesses.
Mintel - reports typically cost between £1000 and £3000
44
Advantages and disadvantages: sampling.
+ even small sample sizes can provide valuable insights provided they are representative
+ reduces risk if used before marketing decisions
+ flexible and relatively quick (however it is advisable to take extra time to ensure sample is representative)
- risk of subjectivity in questions
- sample may not be representative of population or target demographic
- less useful in dynamic markets as consumer tastes and preferences are constantly changing
45
What is data mining and its benefits?
The practise of examining large pre-existing databases in order to generate new information
+ quick and automated
+ can analyse large sets, reducing the need for sampling
+ data can be linked (e.g. transactional data can be linked to customer
profiles.
46
How can loyalty cards be used as a form of market research?
Loyalty cards not only build customer loyalty through awarding points or other incentives, they also help businesses collect data on consumer tastes and preferences.
47
Advantages and disadvantages: market research.
+ gives insight into market and helps identify gaps
+ reduces risk
+ can keep up with trends easier
+ helps maintain competitive edge
+ informs business plan
+maintains customer centric approach to marketing
- may not provide enough information
- could be inaccurate or misleading
- secondary data won't be specific to the organisation
- may be unreliable if sample size is too small
48
Define market segmentation and name some examples of segments.
A method which involves sectioning consumers into factions who share similar needs or wants in order to help target promotional activities etc. Segments typically depend on demographic (age, gender etc), geography, behaviour and lifestyle, and physiography (personality types, good or bad with money etc)
49
Define market positioning.
Market Positioning refers to the ability to influence consumer perception regarding a brand or product relative to competitors. The objective of market positioning is to establish the image or identity of a brand or product so that consumers perceive it in a certain way.
50
What is a market map?
A diagram that illustrates the range of positions that a product can take in a market based on two dimensions that are important to customers. A business will position themselves and competitors on the map.
51
Name some possible 'dimensions' for a market map.
- high/low price
- high/low quality
- healthy/unhealthy
- low-tech/hi-tech
52
Advantages and disadvantages: market mapping.
+ helps identify gaps in the market
+ useful for analysing competitors
+ encourages (use of) market research
+ simple and easy to understand
- placements are subjective
- a gap may not constitute demand
- may be time consuming depending on the scale to which it is completed and the depth and thought behind it
- actual quality etc may differ from customer perceptions
53
What are the two types of competitive advantages? Explain what they both mean.
- cost advantage is when the business is maximising profit through having the lowest cots possible (while still remaining efficient) and providing the lowest prices to attract customers
- differentiation advantage is when a business sets its products apart from competitors through offering something unique and different that acts as a USP
54
What are 4 different positioning strategies?
- more for the same
- more for less
- less for much less
- more for more
55
Define product differentiation.
When customers perceive a a clear distinction between your products and alternatives provided by competitors.
56
What is the purpose of product differentiation?
- to position against competition as it is a source of competitive advantage
- protect and build a brand
- add more value
57
Define adding value.
The difference between the price of the finished product/service and the costs involved with making it.
58
Name 2 ways a business could add value.
- build a brand
- operate efficiently
- offering convenience
- deliver excellent value
- add product features and benefits that customers want
59
Advantages of adding value.
- charge a higher price
- create a point of difference with competitors
- protection against competitors offering lower prices
- focuses business on its target segment
60
What is demand?
The amount of a good that consumers are willing to buy at a given price.
61
Demand depends on...
- the price of the good
- income of consumers
- demand for substitute goods
- demand for complementary goods
- consumer taste
62
Name 5 factors that can lead to a change in demand
- changes in price of substitute and complementary goods
- changes in consumer spending
- fashion, tastes and preferences
- advertising and branding
- demographics
- external shocks
- seasonality
63
Name 5 factors that can lead to a change in demand
- changes in price of substitute and complementary goods
- changes in consumer spending
- fashion, tastes and preferences
- advertising and branding
- demographics
- external shocks
- seasonality
64
What is a complementary good? Name one example.
A product that is intended to be bought along side another one - e.g. xbox games require a console.
65
What are substitute goods? Name one example.
Alternative goods that are often a lower price than the initial product - e.g. if fuel prices become too high, people may choose to commute via train instead.
66
What are substitute goods? Name one example.
Alternative goods that are often a lower price than the initial product - e.g. if fuel prices become too high, people may choose to commute via train instead.
67
How does the price of complementary goods impacts demand? Name one example.
An increase in price of complementary goods will lead to a decrease in demand e.g. a £50 coffee machine is ok as long as the capsules are affordable. If the capsules are too expensive, consumers may not think the initial coffee machine is worth it.
68
How does advertising affect demand?
Heavy advertising will lead to an increase in demand, especially if they are advertised using things we have a strong positive feelings about.
69
What might an ageing population constitute an increase in demand in?
Medicine, mobility aids, leisure activities, technology that enables mobility, magazines/books, holidays.
70
What external shocks impact demand? Give some examples.
- outbreak of war (increase in demand for artillery and tanks etc)
- increase in unemployment (increase in demand for inferior goods)
- house price changes (financial products such as mortgages or loans to improve existing property)
- increase in interest rates (more likely to save)
- increase in inflation rates (less likely to purchase luxury goods and opt for cheaper substitutes)
- tax rates (decrease in consumer spending)
- exchange rates (impacts imports and exports)
71
What is an inferior good?
A good whose demand drops when people's incomes rise.
72
Products that are affected by seasonality.
Christmas trees have higher sales in winter and pumpkins higher sales in autumn. Swimsuits would most likely experience a spike in sales during summer and Easter eggs are only sold during spring.
73
What are the two types of competitive advantages? Explain what they both mean.
- cost advantage is when the business is maximising profit through having the lowest cots possible (while still remaining efficient) and providing the lowest prices to attract customers
- differentiation advantage
74
Define supply.
the quantity of a good or service that a producer is willing and able to sell at a given price.
75
What are the 4 main causes of changes in supply? Explain how they affect supply.
- cost of production - rise in cost of raw materials will lead businesses to opt to produce more profitable products rather than the ones with higher unit costs
- taxation and subsidies - increased tax on goods such as petrol will decrease supply however government subsidies will increase supply
- new technology - improves efficiency and productivity of the business increasing output and supply
- external shocks - for example, a change in labour laws that reduces the working week would limit the amount produced
76
What is an indirect tax? Name 3 examples.
Taxes that are added onto the price of goods (rather than deducting them from pay) making them more expensive. Examples include:
- landfill tax
- VAT
- fuel duties
- tobacco duties
- alcohol duties
- air passenger duty
77
What is a government subsidy?
Financial help from the government that encourages businesses to supply more
78
Name 2 examples of government subsidies.
- biofuel subsidies for farmers
- subsidies for wind farm investment
- food/fuel subsidies for consumers
- apprenticeship schemes
- solar panel 'feed in tariffs'
- aid to businesses making losses
- child car for working families
- subsidies to rail industries
79
Name 2 examples of government subsidies.
- biofuel subsidies for farmers
- subsidies for wind farm investment
- food/fuel subsidies for consumers
- apprenticeship schemes
- solar panel 'feed in tariffs'
- aid to businesses making losses
- child car for working families
- subsidies to rail industries
80
Market equilibrium
When the price allows for equality or balance between market supply and market demand; consumer and supplier wishes are aligned. If the price causes an imbalance between supply and demand (e.g. it is too highly priced) it is referred to as a disequilibrium.
SIMPLY PUT
demand = supply
81
What are the 4 Ps? What are extra 3 Ps?
- product
- place
- promotion
- price
+ people
+ physical
+ process
82
What are the elements of the design mix?
- aesthetic
- function
- economic manufacture
83
Explain 3 extension strategies.
- increased advertising to target a wider audience
- price reduction to appear more attractive to customers
- adding value by adding new features to the current product
- explore new markets by targeting new segments or selling the product into new geographical areas
84
Impact of getting the design mix right or wrong.
+ can add value
+ can reduce manufacturing costs, boosting profit margin
+ provide a point of differentiation
+ competitive advantage
+ can improve brand image and brand loyalty
- cost money to solve issues such as manufacturing
- lead to loss of sales if it doesn't meet customer expectations
- damage brand image
85
Name 3 changes that can be made to a design mix in response to social change.
- fair trade
- reducing waste
- reusing materials
- recycle
- reducing consumables
- ethical sourcing and management
86
Resource Depletion
reduction in the earth's natural resources such as precious metal
87
Finite Resources
natural materials that will eventually run out such as coal and metal. Wind and solar power are examples of resources that are infinite as they won't run out.
88
Define sustainability
The use of resources and suppliers that don't negatively impact the environment and can be maintained over and extended period of time.
89
What is waste minimisation?
businesses way of making sure that there is no waste in the production process; making other goods from offcuts, for example.
90
5 Rs
Reuse, Reduce, Repurpose, Recycle, Refuse
91
What is ethical sourcing? Name a way in which businesses could source ethically.
Buying from sustainable suppliers and sources that don't have an extreme negative impact on the environment. One way in which businesses could source ethically is by purchasing through arborists who replant trees after cutting them down.
92
Ethical Trading
Operating every aspect of a business with care for its impact upon people and the environment
93
Define Branding
A brand is what distinguishes a product from other products in the industry, allowing it to be easily communicated and effectively marketed; a characteristic, name or symbol that distinctly distinguishes one product from another.
94
Advantages and disadvantages: (strong) branding.
+ a strong brand can allow for reduced promotional costs
+ easier to persuade retailers to put products in stores
+ easier to expand product portfolio
+ customers are more likely to make repeat purchases
+ easier to grow and expand
+ can charge premium prices
- difficult to change customer perceptions once established
- limits flexibility
95
Explain 3 types of branding.
- product branding - associated with a particular product, typically fast-moving consumer goods
- umbrella 'family' brand - brands that are assigned to more than one product (e.g. cadbury owns dairy milk, crunchie etc)
- corporate brand - promoting name of corporate entity rather than individual products (e.g. unilever own dove and walls)
- own label brand - owned by retail outlets and usually a cheaper alternative (e.g. waitrose and waitrose essential)
- global brand - household names that are internationally recognizable
- service branding - add perceived value to services, either online or face to face etc (e.g. uber)
96
What is a brand extension? Name an example.
When a business uses a brand name on a new product that has similar characteristics to existing products. For example, mars bar ice cream is a brand extension of mars bars.
97
What is brand stretching? Name an example.
Where one brand name acts as an umbrella for a diverse range of products that aren't necessarily connected. For example, virgin have many different branches, including virgin media and virgin atlantic.
98
State 5 reasons why businesses promote.
- increase sales
- change attitudes
- attract new customers
- encourage customer loyalty
- encourage trial
- inform
- create awareness
- create an image
- position and reposition products
- launch a new product
- encourage brand switching
- support a distribution channel
99
elements of the promotional mix
- advertising
- sales promotion and merchandising
- personal selling
- public relations
- direct marketing
100
Name 2 factors that influence promotional decisions.
- the stage of the life cycle the product is at
- nature of the product
- competition
- objectives
- budget
- target market
101
Define advertising and name a method of advertising.
Advertising is the process of promoting and marketing a product, service or business to the public in order to gain sales. Methods of advertising include:
- television and radio
- billboards
- social media
- written media such as magazines/newspapers
102
Advantages and disadvantages: advertising
+ wide coverage
+ control message and consumer perception
+ effective for building brand loyalty
- expensive (especially mass advertising)
- impersonal
- lacks flexibility
- may be negatively misinterpreted by the public
103
What is personal selling?
promotion on a person to person basis, mainly through phone, email or face to face.
104
Advantages and disadvantages: personal selling
+ high customer attention
+ customised message
+ more persuasive than mass marketing
+ adaptable
+ easier to close a sale
- expensive
- labour intensive and time consuming
- limited reach
- requires a someone with a persuasive and charismatic personality if conducting face to face or over the phone
105
Name 3 examples of sales promotion.
- coupons
- money off
- competitions
- free gifts
- loyalty points
- merchandising
- buy one get one free etc
- trade in offers
- free samples
- demonstrations
- point of sale displays
106
Advantages and disadvantages: sales promotion
+ effective at achieving a quick boost
+ encourages customers to switch brands and/or trial new products
+ attracts customers attention
- could damage brand image by making it appear cheap
- customers may come to expect frequent promotions
- short term
107
Define PR.
Public relations entails activities that create goodwill towards an individual, business or product. It aims to build good relations with stakeholders and create a good reputation. This could be done through sponsorship deals.
108
Direct marketing
Promotional material directed through mail or texts etc.
109
Advantages and disadvantages: direct marketing.
+ focuses on targeted promotion
+ can be personalised
+ relatively easy to measure response and success rate
+ cost effective IF it is well manages
+ easy to test different marketing messages
- varying response rates
- carries connotations of junk mail
- expensive to maintain database and ensure it remains accurate
110
Define viral marketing.
The use of social media and other online platforms to create brand awareness.
111
What is emotional marketing? Give an example.
When the business aims to create a bond between the consumer and product/brand. This is often seen in christmas ads by businesses like John Lewis and Sainsburys.
112
Name three pricing strategies.
- cost plus
- price skimming
- penetration
- predatory
- competitive
- psychological
113
Name three factors that influence pricing.
- stage of product life cycle
- price elasticity
- costs
- market share
- competitor pricing
- market positioning
- objectives
114
Difference between pricing strategies and tactics.
Strategies are typically medium to long term whereas tactics are adopted in the short term to suit particular situations.
115
What is cost plus pricing and how is it calculated?
Money added on top of the cost of the product. Can be done through adding the profit margin on top in £ or by calulating and adding a percentage markup [unit cost + (markup x unit cost)]
116
Advantages and disadvantages: cost plus pricing.
+ easy to calculate
+ price increases can be justified when costs rise
+ confidence in that each product is being sold at a profit
- disregards price elasticity
- may not take account of competitors prices
- financial loss if price is set above what customers are willing to pay
- less incentive to control costs
117
What is competitive pricing?
When businesses look to competitors as a benchmark for where to set their price.
118
Define the terms price takers, makers, leaders and followers.
- price takers have no choice but to charge the ruling market price (such as new entrants)
- price makers can fix their own price and aren't hugely influenced by the market (common in niche markets)
- price leaders are market leaders whose price is followed by competitors
- price followers keep up with and abide by changes made by price leaders
119
Advantages and disadvantages: competitive pricing.
+ low risk
+ cost effective
+ easy to settle on price
+ could make a business more competitive
- not customer focused
- market research costs to discover competitor prices
- may lead to increased need for promotional offers, impacting profit margin
- makes cost differentiation harder as all prices are a similar price
120
What is price skimming? Name a company that often uses this method.
When prices are initially high and then decrease overtime. Often used by tech companies, like Apple, when a new product is released.
121
Why might companies use price skimming?
- sets themselves up with a high quality, luxury brand image
- they have something which highly differentiates them such as new technology (e.g. face recognition for Apple)
- if they are market leaders
122
Advantages and disadvantages: price skimming.
+ potential for high profits
+ product may get positive reputation of being high quality etc which could encourage customer loyalty and attract new consumers
+ additional profits can be reinvested into the business
- initial price may be above what customers are willing to pay
- not a sustainable strategy
123
Penetration Pricing
When the price is set very low to encourage purchases and once customer loyalty is established, the price is steadily increased. Typically used in the mass market.
124
Advantages and disadvantages: penetration pricing.
+ builds customer loyalty
+ increase market share
+ long term profits
- risky if customers already have brand loyalty to established businesses
- may initially be selling at a loss or reduced profit margin
- difficult to raise selling price in the future
125
What is an oligopoly and a monopoly?
- an oligopoly is an industry with limited competition e.g. pharmaceuticals, automotives
- a monopoly is a theoretical market where only one business can operate. The closest that exist are in the field of natural gas or Microsoft as they hold over 75% market share.
126
Explain predatory pricing and its advantages and disadvantages.
Where existing businesses in oligopolies or monopolies hold off competition by setting prices so low that new entrants or less established businesses wouldn't make a profit. In many nations, including the UK this is illegal.
+ have a dominant market position
+ reduced competition
- illegal so could face government action
- drop in quality once competition has been eliminated
- no drive to innovate
127
Psychological pricing
When a product set is a pence or two below the next pound in order to make it appear cheaper (£1.99 rather than £2)
128
Advantages and disadvantages: psychological pricing.
+ could attract customers who were on the fence as to whether or not they wished to purchase the product or not
+ easily implemented
- consistent use may damage the brand reputation as it would appear to lack quality and prestige
129
Loss leaders
When prices are set below normal, maybe even below break even, in order to attract customers. Often used with products that have complimentary goods so that they can be priced more highly.
130
Advantages and disadvantages: loss leaders.
+ possibility to attract lots of customers
+ can sell old stock
- will make a loss if the loss leading product is bought alone
- may deter customers as low price may make the product appear low quality
131
Dynamic Pricing
When businesses adapt their prices to meet market conditions and demand.
132
Name some price comparison sites.
USwitch, Which, Go Compare, Money Supermarket...
133
What are the 3 different distribution channels.
- manufacturer to consumer (direct)
- manufacturer to retailer to consumer (indirect - retailer)
- manufacturer to wholesaler to retailer to consumer (indirect - wholesaler)
134
Name three factors to consider when deciding on a distribution channel.
- nature of the product
- perishable/fragile; type of product; complexity; customised;
desired brand image
- the market
- extent and nature of competition; geographically spread?
- the business
- size; nature; established distribution network?
135
Multi channel distribution
Involves using more than one distribution channel
136
Advantages and disadvantages: multi channel distribution
+ allows more market segments to be reached
+ enables higher revenues as their is more than one way customers can buy
- potential for conflict between channels
- complex to manage
- customers may increasingly expect to be able to purchase from multiple channels
- danger of confusion regarding pricing strategy
137
Uses of the product life cycle.
- forecast future sales trends
- help with positioning and marketing
- analyse and manage product portfolio
138
Weaknesses of the product life cycle.
- shape and duration varies from product to product
- strategic decisions can change the life cycle
- difficult to accurately place a product
- decline is NOT an inevitability
- length cannot be reliably predicted
139
Name two extension strategies.
- change product (restyling packageing etc)
- lower price
- change promotion tactics
- look for alternative distribution channels
- develop new market segment
- find new uses for the product
- reposition the product
- rebrand
140
Product Portfolio Analysis
Assesses a businesses range of products in order to devise the best marketing strategy for each one
141
Explain the Boston Matrix and its sections.
A method of product portfolio analysis where the products are assessed against a set of categories:
- dog (low growth, low market share)
- star (high growth, high market share)
- question mark/problem child (high growth, low market
share)
- cash cow (low growth, high market share)
Useful for analysing existing products but as little to no predictive value.
142
What is a possible strategy for question marks?
- invest to increase market share (ideally a substantial sum in order to achieve growth)
- invest in promotion
- build selectively
143
What is a possible strategy for stars?
- invest to sustain growth
- build sales and/or market share
- spend to keep competitors at bay
- repel challenges from competitors
- invest to maintain or increase leadership position
144
What is a possible strategy for cash cows?
- defend market share
- aim for short term profits
- reduce investment to maximise short term profits
- use profits generated to invest in new products
145
What is a possible strategy for dogs?
- divest, phase out and sell off
- reinvest all profit to maintain market share
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What is B2B marketing?
When businesses market to other businesses (e.g. suppliers). Marketing strategies need to be informative as opposed to clever and persuasive. Good relationships with customers are essential
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B2C marketing.
Business to consumer, used by most businesses. Long lasting relationships aren't as vital as they are with B2B however emotive marketing is often successful (e.g. john lewis).
148
Inbound vs outbound marketing.
- outbound involves pushing a message out to customers, could be through above-the-line or below-the-line methods.
- inbound is where businesses try to attract customers to websites through blogs or search engine optimisation etc
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Hybrid Marketing
Involves a combination of both inbound and outbound where the latter are seen as more short term and the former a long term strategy as it takes around six months to generate real interest.
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Staff as an asset vs a cost.
Staff who are seen as a cost are more likely to have lower costs and less job security than those who are seen to be assets. Decision making is also more likely to be centralised with less delegation if staff are seen as costs.
151
Explain a flexible workforce.
Employees are employed on varying contracts and may have the luxury of choosing hours and working from home part time. A flexible workforce may also be also one where the workers are multiskilled.
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Define multiskilling
Where a workforce is trained in multiple jobs and therefore can be placed in different roles when needed. E.g. a history teacher who also teaches english.
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Outsourcing
When businesses get other specialist businesses to complete certain tasks.
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Advantages and disadvantages: flexible working.
+ can respond to short term changes in demand
+ reduces labour costs
+ better work-life balance improving motivation
- those on temporary or zero hour contracts may feel more like a cost than an asset and therefore be less motivated
- outsourcing may not be of sufficient quality and may be costly
- communication issues if shifts don't align
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Dismissal vs redundancy.
- dismissal is when an employee is fired fir failing to meet required standards (e.g. gross misconduct, continuous tardiness..)
- redundancies occur when there is no work for a position and therefore it has to be eliminated. Sometimes employees are given the opportunity to volunteer in exchange for a pay-out.
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Individual bargaining vs collective bargaining.
- individual bargaining is where a single worker is discussing their own wages etc with their manager; no collective strength to this method however may be suitable for small business where each individual has different needs and demands
- collective bargaining involves an individual (typically a union rep) negotiating with managers for everyone in the workplace and if demands are not met then there may be strikes or sit ins. A disadvantage is that not everyone may agree on the terms being negotiated
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Work Councils
- forums within businesses where workers and managers meet to discuss issues relating conditions, pay and training
- members are elected by the workforce
- cooperation is built with managers
- employees are involved with key business decisions
- workforce can be heard by trade unions
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Employee committees
- informal groups set up by workers to focus on a particular aspect of work
- most commonly associated with social events, safety and work conditions
- not attended by managers however they may have some influence over what is discussed at a work council
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What is the human resources flow?
Refers to the movement of employees through an organisation - there are three specific areas that need to be effectively managed
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What is the human resources flow?
Refers to the movement of employees through an organisation - there are three specific areas that need to be effectively managed for it to operate efficiently (inflow, internal and outflow)
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Human Resources Inflow
People coming into the business
- hr plans
- recruitment, selection, induction
- headhunting
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Human Resources Internal
Current employees within the business
- training
- redeployment
- job design
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Human Resources Outflow
Employees leaving the business
- redundancies
- resignations
- dismissals
- retirement
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What are the stages of the recruitment process?
1. identifying a vacancy (may be due to a new project or because an employee has left)
2. write a job description detailing the tasks involved in the job
3. write a person specification highlighting what candidates should have
4. advertise the vacancy
5. candidates apply
6. candidates are shortlisted
7. shortlisted candidates are interviewed
8. candidates participate in other means of testing such as psychometric tests
9. job offer, acceptance, contract signing
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Advantages and disadvantages: recruiting internally.
+ less training required meaning fewer costs
+ already know the company culture and ethos
+ no cost of advertising
+ their ability is known
+ possibility of promotion may motivate other employees
- don't gain a fresh perspective
- will then have to fill their old position
- limited pool of selection
- could create atmosphere of toxic competitiveness and resentment among employees
- existing employees may not have skills required
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Advantages and disadvantages: external recruitment.
+ wider pool of applicants
+ fresh new perspective
+ helps increase capacity
+ more motivated as they are new to the business
- may not be as adequate for the job as was expected
- may not fit in with the company culture
- expensive to advertise and interview
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Cost of recruitment?
- advertising
- agency fees to find a temp while the position remains vacant
- pay for the new employee
- loss of productivity while new employee is inducted
- training
- hidden costs (average of 20% of new employees leave within the first year)
- loss of management time taken up with the recruitment processs
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Induction Training
When training is part of the recruitment and selection process. Typically gives employees a basic introduction to the workplace and equipment they will be using.
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On-the-Job Training
Employees are coached and guided by more experienced members of the workforce while they work.
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Advantages and disadvantages: on-the-job training.
+ continuation of output
+ less expensive than off-the-job training
+ trainees can see the relevance in skills being taught
- reduces efficiency as it takes time to show what needs to be done
- some workers may pass on their bad habits
- the trainee may not pick it up quickly or fail to ask for help when needed
- training can be disruptive for others
- ill trained staff may make expensive mistakes
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Off-the-Job Training.
Training that is conducted away from the workplace, typically via courses or lectures etc
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Advantages and disadvantages: Off-the-Job Training.
+ focused environment with few distractions
+ increased motivation as workers feel more valued
+ less stress on trainee
+ reduction in onsite mistakes
- loss of output
- expensive
- employee may fail to see relevance to the workplace
173
Define Organisational Design.
How people and management are structured within a business. Shows how people within the company relate to one another, how it responds to external factors, and how it adapts to change.
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Name two of the key factors in an organisational design.
- delegation
- decision making
- authority
- levels of hierarchy
- organisational structure and culture
- span of control
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Name two factors that influence organisational structure and explain them.
- size of the business: larger businesses are more likely to have a taller structure
- type of business: a business operating in several locations around the world etc is likely to have a taller structure.
- management and leadership style: autocratic leadership styles will probably have a different leadership style to a laissez-faire style of leadership
- competitive environment: can influence distribution channels, suppliers etc
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Span of Control
The number of employees that a manager is directly responsible for
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Advantages and disadvantages: narrow span of control.
+ allows for closer supervision of employees
+ helps more effective communication
- may require more layers in the hierarchy
- managers may lack motivation as they have fewer people to guide and instruct
- more managers means higher costs
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Advantages and disadvantages: wide span of control.
+ gives employees more independence which may motivate them
+ reduces labour costs as there are fewer managers
- some employees may need closer supervision and guidance
- some employees may find delegation and independence stressful
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Chains of Command
Describes the lines of authority within a business - the flow of information, power and authority through the organisation.
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Tall vs flat structure.
- tall (or traditional) structures have more levels of hierarchy with narrow spans of control
- flat (organistic) structures encourage delegation and have a wider span of control
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Advantages and disadvantages: tall structures.
+ allows tighter control
+ more chances for promotion
- higher costs as there is more staff
- takes time for communication to pass through
- employees may want more independence
182
Advantages and disadvantages: flat structures.
+ more delegation
+ more responsibility
+ vertical communication is improved
+ cheaper as there's less staff
- fewer opportunities for promotion which could be demotivating
- less direct control
183
Matrix Structures
Individuals work across teams and projects as well as within their own departments and functions.
184
Advantages and disadvantages: matrix structure.
+ improves communication by breaking down traditional department barriers
+ individuals can use their skills in different contexts
+ may improve motivation
+ encourages sharing of good practise and ideas
+ a good way of sharing resources across departments
- difficult to coordinate
- may not be a clear line of accountability for project teams
- team members may neglect their functional responsibilities
- divided loyalties as team members have two line managers to report to
- takes time for members to grow accustomed to this way of working
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Why may organisational structures change?
- reduce costs and complexity
- boost employee motivation
- business growth may require a more formal structure
- improvements to customer service/quality
note: changes may be met with employee/manager resistance and may have an adverse effect, increasing costs and reducing service
186
Define Delegation.
The assignment of authority to others for particular tasks, functions and decisions.
187
Advantages and disadvantages: delegation.
+ reduces management stress and workload
+ senior managers can focus on key tasks
+ subordinates are empowered and motivated
+ potential for better decisions and use of resources
+ good method of on the job training
- cannot/should not delegate responsibility
- dependent on quality and experience of subordinates
- harder in a smaller firm
- may increase stress and workload of subordinates
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Employee Empowerment.
Giving employees the power to do their job and showing more trust in them to make decisions.
189
Centralised Structure
Decision making comes straight from the top (ceo/owners etc)
190
Advantages and disadvantages: centralisation.
+ easier to standardise policies
+ prevents parts of the business from becoming too independent and straying from other parts
+ easier to achieve economies of scale
+ easier to coordinate and control
+ usually quicker decision making
+ easier to show to strong leadership
+ most appropriate when workers have low skill and managers have high levels of knowledge
- more bureaucratic
- local managers more likely to understand customer needs than those at the top
- may reduce manager motivation due to the lack of authority
- lack of flexibility and speed of local decision making
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Decentralised structure
Decision making is distributed throughout and individual managers have the power to make decisions.
192
Advantages and disadvantages: decentralisation.
+ improved customer service as managers understand local customer needs better
+ allows for flexibility
+ improved employee motivation
+ helps train junior managers while relieving senior managers of workload
- decision making is not necessarily strategic
- harder to ensure consistency across different locations
- harder to achieve tight control
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What are the four motivation theories?
- taylor (scientific management)
- mayo (human relations theory)
- maslow (hierarchy of needs)
- herzberg (two factor theory)
194
Outline Taylor's scientific management theory.
Workers don't enjoy work and therefore need close supervision and guidance (autocratic leadership style). Workers should get paid on a piece rate basis.
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Outline Mayo's school of human relations.
Paternalistic style of management where workers have valid opinions and feedback. Social needs must be met for optimum output and workers benefit from working in teams.
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Outline Maslow's hierarchy of needs.
Focuses on psychological needs of employees, combining Taylor and Mayo's theories. Proposed five levels in a hierarchy of human needs that employees need to have fulfilled.
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What are Maslow's five layers?
1. physiological - basic needs like food and shelter
2. safety - safe working environment (the first two levels are linked with survival)
3. social - feeling wanted, sense of belonging, part of a team
4. esteem - self respect, level of status
5. self actualisation - intellectual needs, achieving targets, fulfilling potential
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Outline Herzberg's two factor theory.
Argued that there are factors that will directly motivate employees and factors that won't motivate them if present however will demotivate them if absent (hygiene factors). Democratic approach that should provide job enlargement, enrichment and empowerment.
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Name two motivators.
- promotions
- good leadership
- good manager relationships
- constructive feedback
- personal growth
- recognition
- clear direction and support
200
Name two hygiene factors.
- poor pay
- poor compensation
- poor working conditions
- lack of promotions
- lack of job security
- poor benefits
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Job Enlargement.
Workers given greater variety of tasks to perform, although they may not necessarily be more challenging.
202
Job Enrichment.
Involves workers being given more complex and challenging tasks around a unit of work. Should provide workers with a sense of achievement.
203
Name two financial methods of motivation.
- bonus
- commission
- piecework
- profit share
- performance related pay
204
Advantages and disadvantages: piecework.
+ offers incentive to increase output
+ increases efficiency as efficient workers earn more
+ appropriate for production work
- workers may overlook quality in favour of producing more units
- slower workers may fall under the national minimum wage, reflecting poorly on the business
205
Advantages and disadvantages: commission.
+ offers incentive to generate more sales
+ typically seen in service based industries, therefore it will lead to increased customer service
- unsteady income
- temptation to pressurize customers into buying which would reflect poorly on the business
- risky in a recession
206
Advantages and disadvantages: bonuses.
+ incentive to perform well to gain a bonus
+ links to overall performance of the business
- if the business isn't profitable employees won't get bonuses
- not all staff are motivated by financial incentives (applicable for all financial motivators)
- short term as employees may leave once bonus is received
207
Advantages and disadvantages: profit sharing.
+ encourages employees to keep costs down (by not overspending budgets etc)
+ encourages loyalty as they have a share in the business
- reliant on profitability of the business
- won't necessarily motivate individual employees as dividends are received on the basis of profitability not induvial performance
208
Advantages and disadvantages: performance related pay.
+ enhance productivity
+ encourages reflection of work
- expensive if employees continuously meet targets
- performance can be subjective so difficult to regulate
209
Name four non-financial motivation methods.
- delegation
- consultation
- empowerment
- team work
- flexible working
- job enrichment
- job rotation
- job enlargement
210
Advantages and disadvantages: empowerment, consultation and delegation.
+ employees feel valued
+ employees have the ability to make their own decisions
+ employees can influence business decisions
+ can aid in delayering and cutting costs
- may slow decision making
- some employees may lack skills and experience required to make decisions
- may actually demotivate managers as they have less work and responsibility
211
Advantages and disadvantages: team working.
+ helps meet employees social needs
+ encourages a sense of belonging
+ sharing and bettering of ideas on projects or across departments
- harder to assess individual performance
- not everyone enjoys working in teams
- tensions can occur among members
- stronger voices may overpower other individuals
212
Advantages and disadvantages: flexible working.
+ better work-life balance
+ can reduce labour costs
- difficult to ensure productivity
- harder to build team spirit and a communal company culture
213
Advantages and disadvantages: job enrichment, enlargement and rotation.
+ variety can be motivating
+ increased opportunity for both personal and professional development
+ prevents boredom
+ aids multiskilling
- may reduce short term productivity as employees learn new skills
- employees may not reach an adequate skill level in new tasks, reducing overall quality
214
Name two things to consider when choosing a motivation method.
- skill of employees
- costs
- attitudes of managers
- nature of organisation/jobs
- skill level of managers
215
Managers vs leaders
Leaders inspire and empower employees whereas managers simply supervise and direct. The leader in a workplace may not necessarily be the manager.
216
Outline the four types of leadership?
- paternalistic: manager decides what is best for employees, they are consulted but manager has final say
- autocratic: employees follow manager's instructions and their advice is not valued
- laissez faire: high levels of delegation and employees given the power to make their own decisions
- democratic: employees have greater involvement in decision making
217
Advantages and disadvantages: autocratic management.
+ helps direct low skilled workers
+ speeds up decision making process
+ suitable for implementing a clear leader's vision
- employees may feel undervalued
- employees may have insightful feedback which is not taken into account
218
Advantages and disadvantages: democratic management.
+ builds team spirit
+ employees feel valued
+ can gain insight from employees
- slows down decision making
- employees may be driven by self interest and not see the bigger picture
219
Advantages and disadvantages: paternalistic management.
+ employees feel taken care of
+ attention to employee welfare may improve productivity
- employees have no stake in the business and decisions ultimately come from the manager
220
Advantages and disadvantages: laissez faire management.
+ increased independence can be motivating
+ can lead to increased creativity
- lack of control over workforce
- employees may miss deadlines and targets
- tasks may be poorly coordinated
221
Name two benefits of businesses to society.
- creates job opportunities
- helps develop human capital
- drive innovation through R&D and new products
- boosts economy
- pays taxes
- creates wealth by providing returns on investments
222
What are the 7 steps in starting a business?
1. the idea
2. research
3. planning
4. financing
5. location
6. resources
7. the launch
223
Name two functions of an entrepreneur.
- financial management
- purchasing
- administration
- marketing
- production
- human resources
224
Intrapreneurship
Refers to employees within a business who have the freedom to develop ideas and use their creativity to innovate.
225
Name a barrier to success (personal).
- risk averse
- lack of self esteem
- lack of concrete business idea
- lack of skills
- fear of failure
226
Name a barrier to success (financial).
- taxes
- legal fees (copyright etc)
- lack of start up capital
- lack of cheap labour
- lack of investment
227
Name a barrier to success (political).
- unstable political landscape
- legislation
228
Name two reasons someone may start a business.
- to generate wealth
- to be one's own boss
- to adopt an ethical stance
- have a flexible schedule
- personal satisfaction
- because they notice a gap
229
Name two financial objectives.
- survival
- profitability
- growth
- sales maximisation
- market share
- shareholder value
- cost efficiency
230
Name two non-financial objectives.
- personal satisfaction
- customer satisfaction
- brand recognition
- sustainability
- employee welfare
- social objectives
231
What factors influence objectives?
- business size
- market
- sector (e.g. public sector)
- ownership (e.g. plc)
- owner's characteristics
232
Why do business objectives change?
- one objective has been achieved and they know need another
- change in leadership
- change in financial position
- a new competitor may alter objectives
- change in economic environment
- technological change
- pressure groups
233
Social Enterprise
Not-for profit organisations that are focused on changing the world for the better
234
Lifestyle Business
Organisation that helps sustain a particular way of life for its owners. Often linked to a particular hobby or interest such as yoga.
235
Opportunity cost vs trade off.
- opportunity cost is the cost of missing out on the next best alternative
- trade offs involve the loss of/compromising on another aspect e.g. prioritising productivity may result in a loss of quality
236
Name 3 skills and attributes an entrepreneur needs to acquire to become a leader.
- delegation
- trusting others
- open mindedness
- listening
- proactive not reactive
- emotional intelligence
237
Name a method of overcoming challenges to becoming a leader.
- adopting a mentor
- educating themselves
- delegating and trusting others to lighten their workload
- use other methods of stress management
