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Business component 1


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Tom Elvidge


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Job enlargement
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An increase in the number, as opposed to level, of responsibilities that an employee has in order to increase motivation

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Business component 1 - Details

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Job enlargement
An increase in the number, as opposed to level, of responsibilities that an employee has in order to increase motivation
Enterprise
A business who's purpose is to produce and sell goods and services- involves risk taking by an entrepeneur
SME
Stands for small and medium sized enterprise as measured by number of workers, turnover or value of the business
Needs
Human requirements which must be satisfied for survival
Wants
Human desires which are unlimited
Entrepeneur
A person who has an idea for a business, develops the idea and orgaises the recourses to see the idea through, they create and build business enterprises
Primary sector
First stage of production that involves the extraction of raw materials
Secondary sector
Second stage of production that involves the manufacture and assembly of goods. Raw materials are converted into finished goods
Tertiary sector
Third stage of production that involves the commercial services that support the production and distribution process eg-insurance, transport,advertising
Stakeholder
Anyone with interest in a business and affected by the activity of a business
Business plans
A written document that describes a business-covers objectives and strategies sales and financial forecast
Market
Where buyers and sellers are able to interact and bring about an exchange
Competition
Where businesses strive against one another to capture a alrger market and increase their market share. This may involve price or non price competition.
Local market
Products or services exchanged by groups within a limited geographical area such as a town or county
Global market
Products/ services are exchanged by groups internationally
Mass market
A product appeals to an entire market and the business uses with one basic marketing strategy utilising mass distribution and mass media
Niche market
Products that sell to a very small market, often specialised goods that require specific marketing strategies to attract the target market
Trade market
Business to business selling of goods or services
Consumer market
Business to consumer selling of goods or services
Product market
The selling of tangible items that are sold to consumers/other businesses
Service market
The selling of non tangible items that are sold to consumers and other business such as cleaning
Seasonal market
The selling of goods or services at partuclar times of the year due to high demand
Market size
Often measured in terms of sales value (revenue) or sales volume
Makret share
The percenatge of all sales within the makret that are held by business product or brand
Market trends
The overall patterns of data that are revealed when considering sales or growth within a market
Market segmentation
The process of breaking down the market into sub groups with similar characteristics
Monopoly
A pure monopoly exists when one firm has full control over a market so one seller exists. A legal monopoly is where one firm controls 25% or more of the market share.
Oligopoly
A few main firms dominate the market e.g 4-5 firms may have 80% of the market share between them. They have differentiated products with strogn brand image. they are price makers as they have a degree of market power, barriers to entry are high
Monopolistic competition
A large number of reltively small business in competition with each other. there is some product differentiation, low barriers to entry
Perfect competition
A large number of small firms in the market selling homogenous goods. There are no barriers to entry or exit, firms are price takers
Consumer protection
A group of laws and organisations designed to ensure the rights of consumers as well as fair trade, competition, and accurate information in the marketplace
Demand
The amount of a commodity that consumers are willing and able to purchase at any price.
Supply
The amount of a commodity that producers are willing and able to sell at any price.
Equilibrium
Where demand and supply curves intersect, at this point there is no excess demand or excess supply in the market and the market price is found.
Price elasticity of demand
Measures the responsiveness of demand to a change in price. If demand is inelastic: demand responds less than proportionately to a change in price e.g. bread. If demand is elastic: demand responds more than proportionately to a change in price e.g. new cars
Income elasticity of demand (YED)
Measures the responsiveness of demand to a change in income. If demand is inelastic: demand responds less than proportionately to a change in income e.g. soap. If demand is elastic: demand responds more than proportionately to a change in income e.g. foreign holidays.
Inferior goods
Consumers demand less of these goods as incomes rise as they trade up to better products e.g. value baked beans, public transport.
Normal goods
Consumers demand more of these goods as incomes rise e.g. DVDs, books, cinema tickets.
Luxury goods
Consumers demand proportionately more of these goods as income rise. These goods are luxuries such as designer accessories, restaurant meals
Market research
The systematic collection, collation and analysis of data relating to the marketing and consumption of goods and services. This can include both primary and secondary methods of market research.
Primary research
The gathering of ‘new’ data which has not been collected before, questions are set by the business so that all questions are relevant to their products. Primary research is therefore collected first-hand e.g. questionnaires, interviews, focus groups
Secondary research
The collection of data that already exists and has been collected for another purpose. It can be internal data such as sales data or external data such as government publications, research reports, newspaper articles
Qualitative data
The collection of data that uses pre-set questions to question a large sample size to provide statistically valid data. Usually derived from questions asking closed questions where a box can be ticked for the answer. Examples include questionnaires and surveys
Quantitative data
In-depth investigations into the motivations behind consumer behaviour or attitudes. Often conducted by highly trained staff among small groups such as focus groups or one-to-one interviews.
Sampling
Researching a selection of part of the population as it is too costly and time consuming to research the whole population. Usually the larger the sample size the more representative it will be of the population and therefore the more valid the results
Random sampling
Each person has an equal chance of being selected. E.g. a business may use a computer program to generate a random list from the electoral roll
Quota sampling
The population is segmented into a number of groups which share specific characteristics. For example, a researcher might ask for a sample of 100 females, or 100 individuals between the ages of 20-30
Private sector
Any business activity that is owned and controlled by a private individual or group of individuals, including shareholders. These are usually for-profit organisations.
Public sector
Any business activity that is owned and controlled by the central or local government e.g. fire service, NHS, state schools, local libraries. These are usually not-for-profit organisations that focus on providing a service.
Aims
What a business intends to achieve in the long-term – its purpose. Ultimately it is what the business is striving to achieve such as profit maximisation, shareholder value, survival, growth.
Sole trader
A business owned and controlled by one person. In reality many sole traders, although small businesses, employ others to help them so they are not entirely one-man businesses, for instance they may employ sales staff e.g. plumbers, electricians, window cleaners, mobile hairdressers
Partnerships
More than one owner, where there is shared ownership and shared controlled. Unless a sleeping partner who invests money but takes no role in running business. They generally tend to have specialist, highly skilled workers e.g. include doctors, accountants, vets, solicitors, architects
Deed of partnerships
A legal document that records who partners are and money invested. States procedures for profit distribution, decision making, how partners can leave/join Its purpose is to help prevent disagreements and ensure that the business runs smoothly
Private limited company
Companies owned by shareholders and run by managers/directors. Private limited cos have ltd at the end of their name and they sell their shares to known investors i.e. family of the original founders, managers, workers e.g. Cheltenham Cheese Company Ltd, Fairview Design Ltd
Public limited company
Companies owned by shareholders and run by managers/directors. Public limited cos have plc at the end of their name. Plcs sell their shares to the general public and their shares are traded on the stock exchange e.g. M & S plc, Tesco plc, BP plc.
Unlimited liability
Owner is liable for all of the businesses debts. Should the business go bankrupt they may have to sell their personal assets if business assets are insufficient to meet these debts
Unincorporated
Means a firm has not applied to the Register of Companies for incorporation as a joint-stock company. This signifies that the business has unlimited liability and the business and the owner do not have separate legal status
Limited liability
The liability of the owners of the business, the shareholders, to pay off business debts is limited to the amount of money that they have invested in the business when buying shares. Should the business become insolvent (unable to pay debts), the owners personal assets will be protected.
Incorporation
The process of becoming a corporate body that is establishing a business as a separate legal entity. This ensures limited liability i.e. the owners are not personally liable for the debts of the business.
Social enterprise
A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.
Charities
Organisations with very specialised aims. They exist to raise money for good causes and draw attention to the needs of disadvantaged groups in society. E.g. Oxfam raises money to support people living in poverty. Charities rely on donations for their revenue and often run fund-raising events and run charity shops to raise more money.
Consumer cooperative
A business owned and controlled by its members. Members can purchase shares which entitles them to a vote at the AGM. The members elect a board of directors to make overall business decisions and appoint managers to run the business day-to-day. Any surplus made by the co-operative is distributed to members as a dividend according to levels of spending.
Worker cooperative
A business owned and controlled by those who work in it. Workers will share in the decision-making process, share the profits and provide some capital when buying shares in the business.
Societies
Societies are a business that don't have shareholders or other owners. They exist only to serve their "members".
Location factors
Any factors that influence where a business may decide to locate or relocate to. Factors may include: labour supply, cost of land rental, nearness to suppliers and/or market
Revenue
The amount of money a business raises from its sale of goods/services. It can also be known as turnover
Profit
The excess of revenue once all costs have been deducted. Profit = Total Revenue – Total Costs
Fixed cost
Costs that do not vary with output e.g. rent, insurance, admin expenses
Variable cost
Costs that do vary directly with output e.g. cost of raw materials and packaging
Semi-variable cost
Where an element of the cost is fixed but there is also a variable component
Direct cost
Costs that arise specifically from the production of a product or the provision of a service.
Indirect/overhead cost
Costs that do not directly related to production or service provision.
Total cost
Total costs combine all the costs in running a business. Total costs = Fixed costs + variable costs
Contribution
Contribution per unit = P – VC Total contribution = (Contribution per unit x Output) Total contribution is the excess of revenue once variable costs have been deducted. This is the amount of money that contributes to fixed costs and hopefully profits.
Breakeven
The output level where no profit is made but no loss is incurred either. Break-even output is found where Total Revenue = Total Costs Break-even output = Fixed Costs Contribution
Margin of safety
The difference between actual (or budgeted) sales and break-even output. The higher the result, the safer the business is as they are unlikely to fail even if sales drop
Marketing
The management process responsible for identifying, anticipating and satisfying customer requirements profitably
Market orientation
An approach where a business reacts to what customers want. The decisions taken are based around information about customers' needs and wants, rather than what the business thinks is right for the customer
Product orientation
A product orientated approach means the business focuses on the product and the production process. The business believes consumers will want the product and that is will sell in the market
Asset-led marketing
An asset-led strategy uses the strengths of the business to satisfy consumer needs and expand the business. Business strengths can be many and include aspects such as reputation, brand image, and global distribution
Marketing mix
The combination of elements within a business’s marketing strategy that are designed to meet the needs and wants of customers in order to generate sales
Product
Any good or service offered for sale to customers
Product portfolio
A range of products that a business is marketing and selling. These products are likely to be at different stages of the product life cycle
Brand
A brand is a name, term, sign, symbol or design which identifies a seller’s products and differentiates them from competitors’ products. Usually a brand is a product consumers rely on, for quality, value and service
USP
Where the product or service has a feature or features that can be used to separate it from the competition. This could be the result of a technological advantage
Differentiation
The process of distinguishing a product to make it more attractive to a particular target market. This involves differentiating it from competitors’ products as well as a firm’s own product offerings
Product life cycle
Shows the different stages that the sales of a product go though over time. The main stages are: development, introduction, growth, maturity, saturation and decline
Extension strategy
Techniques used by businesses to lengthen the life of a product to prevent sales going into decline. The objective is to maintain and hopefully increase sales and profits of the product e.g. new product features, new packaging
Boston matrix
The classification of products based on market share and market growth. There are four product classifications: star, cash cow, problem child and dog
Penetration pricing
Setting a low price for a new product to encourage high sales quickly. Once the product is established in the market, the price will be increased to raise profits
Skimming price
Setting a high price for a new product that is unique to the market in some way (has a USP). Once sales have been maximised at that price, the price is lowered to attract the next market segment (skimming process) and so on until the market has been saturated
Cost plus pricing
This involves adding a mark-up to the average cost of the product to determine the price. This should ensure a profit if sales targets are reached.
Competitive pricing
Setting a price at the same level as existing competitors (going rate pricing) to ensure customers are not deterred by pricing too high in the market.
Psychological pricing
Setting a price just below a round figure to make the product look slightly cheaper such as £9.99 rather than £10. This helps to attract customers and increases sales.
Contribution pricing
Setting a price that is greater than the variable costs involved in making the product so that a contribution is made to fixed costs and thereafter to profit
Promotion
An attempt to draw attention to a business or product to retain existing customers and attract new customers. Examples include advertising, sponsorship, sales promotions (BOGOF) and merchandising
Above the line promotion
Promotion through independent media that allow a business to reach a wide audience easily. This is paid for communication and, though it can be targeted, it can also be seen by anyone outside the target audience. It is considered impersonal to customers
Below the line promotion
Promotional methods where the business has direct control over the methods used. They are short-term incentives, largely aimed at the target market and is far more personal. It does not involve mass advertising techniques
Place
Involves business decision making to ensure that products are available where and when customers want to go and buy products
Distribution channel
The methods by which a finished product can reach the consumer such as selling directly or selling via an intermediary