Business Summary PDF

Businesses: businesses are systems, they have have inputs, processes, outputs, and feedback. Inputs: inputs can be physical, financial, human. Processes: the four main processes in a business are: Human Resource Management: makes sure employees are well skilled and treated ethically in...

Businesses: businesses are systems, they have have inputs, processes, outputs, and feedback. Inputs: inputs can be physical, financial, human. Processes: the four main processes in a business are: Human Resource Management: makes sure employees are well skilled and treated ethically in line with the law. Finance and Accounting: makes sure the business is financially stable and has enough money to continue its business. Marketing: makes sure that the business is selling the right product to the right customers at the right place and time. Operations: makes sure that production is going smoothly. Outputs: there are two outputs in a business, they are: Goods: tangible products, they are physical and can be measured, for example cupcakes, papers, and tables. Services: intangible products, they aren’t physical and can’t can’t be measured, for example health care, education, concert. Feedback: feedback is one of the most important parts of the system but it’s sometimes overlooked and thrown. Feedback loops, happen when the output of a system becomes an input to the same system. Negative feedback helps keep systems stable and businesses use feedback from customers, suppliers, employees and the community to make improvements to the product or organisation. Positive feedback, on the other hand, is reinforcing. It moves systems and processes in the same direction. Doughnut Economics: a model that outlines the social foundation (human needs) and ecological ceiling (planetary boundaries) that economic activity needs to respect to find the safe and just space for humanity. The goal is to meet human needs while respecting the health of the planet. Planetary boundaries: the outer ring of the Doughnut Economics Model is focused on the natural environment. Social foundation: the production and consumption of goods and services to meet human needs and wants. Economy: refers to a system for producing and distributing goods and services among a group of people. Embedded Economy Model: inputs of living matter and materials from the Earth are used by society and the economy to satisfy human needs and wants. Households: important care services are provided between people with strong relationships. State: provides fundamental goods and services that everyone can access. These goods and services are provided often at no or a low price. They are funded mainly through taxes; Commons: provides shared goods and services produced by society, or provides resources from Nature. Markets: provides goods and services produced by businesses. Sectors in Economy: economists identify four main sectors, or parts, of the economy. Primary Sector: the primary sector refers to the extraction, or production, of raw materials from the Earth. Secondary Sector: the secondary sector refers to manufacturing and processing, where raw materials are made into products for sale. Tertiary Sector: the tertiary sector refers to any business that sells a service. Quaternary Sector: the quaternary sector is a relatively new sector, it refers to services that focus on knowledge/data. Supply Chain: the steps involved in creating finished goods. Integrated Businesses: businesses whose activities involve two or more sectors. Starting A Business: A business has a good chance of success when: 1) there is a skilled and collaborative team of employees in place 2) there is enough funding to run the business 3) the marketing has been researched well 4) the operations are efficient and resilient Reason For Starting: new business idea passion to make change market need earning a living greater financial reward control work life balance Challenges For Starting: lack of fund strong competition market to small/no market unskilled employees or lack of collaboration poor management skills economical, environmental or political shocks Steps: 1) refine the idea 2) make a business plan 3) decide a legal structure 4) register the business 5) find a location 6) hire employees 7) get fundings SWOT Analysis: simple tool for a business to analyse its internal strengths and weaknesses, and external opportunities and threats. STEEPLE Analysis: provides a useful way to remember factors to consider in your analysis. It stands for the following factors, which will be explained in more detail below: S-Sociocultural T-Technological E-Economic E-Environmental P-Political L-Legal E-Ethical Business Plan: 1) Description of the solution to the problem you have described. This would include: a product description the legal structure of the business the human resources needed the location and facilities the value that your product will bring and how your business will positively affect multiple stakeholder groups and the environment. 2) Description of the market and competition or partners 3) Marketing plan 4) SWOT Analysis 5) Cash flow forecast and budget 6) Sources of finance, or request for financing if appropriate Sectors: there are two sectors in a business, they are Private Sector: are owned and controlled by private individuals, can be small businesses, owned and run by one person, or they can be huge multinational companies. Public Sector: organizations are created, owned and controlled by the government, they are not profitable to provide, or are unaffordable (inaccessible) to some members in society. The government uses tax revenue to provide these services to the public. Multinational Companies: a company that operates in at least two countries, one of which is not the company's home country. Share holders: Someone who owns part of a business, the possession of a single share gives the shareholder the right to: vote at the Annual General Meeting, where decisions may be made regarding the management of the company receive a part of the company’s profits in the form of dividends if these are paid (however not all companies pay dividends every year) For-Profit Commercial Enterprises: a type of business that earns profits, which are distributed to owners or shareholders; profits may have prioritity over other objectives. There four main types of ownership structure in the context of for-profit commercial activity: sole traders partnerships for-profit privately held companies for-profit publicly held companies Sole Trader: a business owned and run by one person; there is no legal separation between the owner and the business. Pros: easy to set up fast decision making profit personal services financial records are private Cons: unlimited liability difficult to finance high risk lack of continuity high work load possibility of higher taxes Partnership: involves the creation of a business by two or more individuals, or partners. To have a partnership you need a partner ship agreement, this usually contains the following: the amount of money put in by each partner the sharing of profits and losses by each partner the roles and responsibilities of each partner the rules of accepting new partners or removing existing partners the procedures for ending the partnership Pros: easy to set up greater access to finance greater efficiency and productivity financial records are private Cons: Unlimited liability longer time for decision making and potential disagreements legal and financial responsibilities lack of continuity Companies: a business owned by multiple shareholders who have limited liability; can be privately held or publicly held. Have limited liability. There are two types of companies, they are 1) Private Companies: A company that is privately owned and often has family or friends as the shareholders; the shares are not sold to the wider public and are not traded on a stock exchange. Pros: control and ownership greater access to finance limited liability financial records are private Cons: profits are split long decision making shares can’t be traded publicly to raise finance privacy expensive 2) Private company: a company that is publicly owned and and has many shareholders who can buy and sell their shares through a stock exchange. A privately help company can do this by initial public offering (IPO). This is a situation where a company sells all or part of the business to external shareholders for the first time. Pros: finance lower risk continuity limited liability Cons: shared profit high cost loss of control accounts are held publicly For-Profit Social Enterprises: a type of social enterprise that earns revenue and profits, but integrates social and/or environmental impact directly into its business model Main Features: profits might be little they also have sole traders, partnerships, and companies judged less on their profits and more on their multi-stakeholder impact/value to the community There are three types of for-profit social enterprices, they are the following: 1) Private Sector For Profit Social Enterprices: A type of social enterprise that produces goods and services that are typically sold in markets for a price by for-profit businesses. 2) Public Sector For Profit Social Enterprices: A type of social enterprise that produces goods and services that are typically provided by the public sector. 3) Cooperatives: A business owned and operated by its members, who share the profits. Pros Of A For Profit Social Enterprices: positive impact on the world make profits in a more economicly stable way have more custormers and investors Cons Of A For Profit Social Enterprices: funding credibility measuring impact managing a complex supply chain remaning true to purpose Non-Profit Social Enterprise: a type of social enterprise that produces goods and services to meet human needs, but where any surpluses earned must, by law, be reinvested back into the business. Pros: limited liability have no taxes as they don’t have any revenue rely on volunteers receive donations Cons: spend a lot of time and energy gaining donations low pay a lot of paperwork Non-Governmental Organizations(NGOs): a type of non-profit social enterprises that have a purpose or mission to benefit society or the environment. As the name implies, NGOs are not controlled by governments however they can receive government funding. Vision Statement: a long term goal, a dream or understanding of what the future should look like. Mission Statement: a short statement that defines what the organisation does, right now, in order to achieve its vision. Value: all the benefits that a business creates for the stakeholders involved. Normative: a way of thinking about how the world should be or how to value actions or situations. Value By Stakeholders: Owner: they bring ideas, finance, ideas, enterpreneurship. They receive all the profits. Consumers: they bring pay, promotion by word-of-mouth in the community. They receive the goods they paid for, conveint opening times, and place for social interaction, and presence in neighbourhood. Employees: they bring quality products, good customer service, give feedback. They receive wages, health and retirement plans, positive work culture, skill development, and stable employment. Suppliers: they brinf raw materials, help production, and employment in the supply chain. They recieve payment and stable long term contracts. SMART Goals: business objectives can be stated with SMART goals, it is an acronym for: S-Specific M-Measurable A-Attainable R-Relevant T-Time Focused Value Extraction: the capturing of value from other stakeholders, either outside or inside the business. Corporate Social Responsibility(CSR): businesses actively seeking ways to improve society and the environment through core business activities and business designs. Pros: higher value for customers customers are more likely to stay loyal, pay high prices, and promote most likely have motivated talanted employees. can persue long term objectives Cons: hard to switch culture and follow CSR increase cost of production reputational risk Social Responsibilities: the social responsibilities of a business are related to the human needs in the ‘social foundation’ of the inner ring of the Doughnut Economics Model Local-social responsibilities: provide secure employment and adequate income to its employees and attend to other basic needs of the social foundation at the local scale. Global-social responsibilities: pay suppliers fairly and ensure that the workers are producing supplies receive a living wage and work in good conditions. Ecological Responsibilities: relating to social responsibilities, CSR relates to environmental responsibilities. These responsibilities are found at both the local and global scales. Local-Ecological Reponsibilities: how it can support and regenerate nature in its immediate area Global-Ecological Reponsibilities: how it can support global area and consider planetary boundaries Strategies: a plan that an organisation creates in order to reach a specific goal, strategic planning involves: knowing and linking to the business’s vision and mission researching the market and products related to the strategy thinking about how plans affect local and global areas, as well as social and environmental aspects analyzing strengths, weaknesses, opportunities, and threats (SWOT) tied to the strategy finding funding to carry out the plan setting milestones to track progress and adjust the strategy if needed Tactics: a smaller action that a business takes to reach its goals Linear Production: taking resources from the Earth, making products with them and then disposing of the products Circular Production: a production model that reduces waste by ensuring outputs of the production system feed back into the system as inputs. Circular production creates circular economy, some principles of circular economy are: 1) Eliminate waste and pollution 2) Circulate products and materials 3) Regenerate nature Circular Business Model Types: Circular Supply Model: a business model that enables businesses to reduce new material inputs, replacing them with recovered or bio-based materials. Resource Recovery Model: business models thata are focused on collecting(materials produced from house holds), sorting(each material is sorted in diffrent places, and processing(where waste is transformed into materials) waste materials to be used as inputs in the production process. Product Life Extension Model: business models that focus on extending the time that a cunsumer uses products. Its designed to be durabale, reused and repaired, and remanufactured. Sharing Models: a business model that allows consumers to share the use of products with strangers, reducing the new imputs needed for products that might be underutilized by the consumer. There are two types, co-ownership, lending like tools, or co-access sharing like cars.  Product Service System Model: business models that involve selling the service for using a product rather than selling the product instead. There are two types product-oriented service model, focus on selling product, user-oriented, rent items for a termporary time. Limitations: undevelped system for waste recovery increased use of bio-bases materials negitive unintended consequences rebound effect many not conter growth-oriented business models may not address social issues Shareholder: a individual or group that affects, or is affected by an orginisation. There are two types shareholders: 1) Internal Stakeholder: an individual or group that affects, or is affected by, an organisation and is directly involved inside the organisation. There are many types of internal stake holders, for example: Managers Employees Shareholders 2) External Stakeholders: an individual or group that affects, or is affected by, an organisation, but who is not directly involved inside the organisation. Suppliers Government Labour Unions Banks And Financial Institutions Society Shareholder Alignment: stakeholder groups usually understand that the fulfilment of their interests is constrained by the interests of other stakeholders. Stake holders are ussualy in the long term not short term. Most shareholders aim to see: Economical Sustainability Sociocultural Sustainability Enviromental Sustainability Shareholder Alignment: with so many diverse interests, stakeholders are bound to come into conflict. Although most stakeholders do not wish the company ill, they may prioritise their own interests over those of other stakeholders. Some examples are: Managers And Employees: management may wish to maximise productivity, while employees may prefer to work under less stressful conditions. Shareholders And Managers: managers may sometimes look after their own interests rather than those of the shareholders. Shareholders And The Government: governments expect businesses to pay their fair share of taxes, according to the law of the country in which they operate. Local Community And Shareholders: shareholders often want to maximise returns on investment, while the concerns of the local community and/or environmental groups often focus on sustainability. Managers And Unions: managers may oppose unions’ intervention in the relationship between managers and employees at a particular firm. This is because unions can assist employees in obtaining better wages and benefits from management than employees might otherwise negotiate on their own. Customers And Suppliers: customers demand high quality and low prices, which may be in conflict with suppliers’ interest in being paid fairly. Pressure Groups And Employees: pressure groups may oppose certain projects that have the potential to harm the environment. Environmental, Social, and Governance (ESG): ESG standards and have proactively sought to align their internal practices with ESG criteria. Aligning with ESG criteria is one way to improve corporate social responsibility. Some examples of ESG can be: eliminating harmful pollutants improving community relations and encouraging diversity promoting corporate transparency Adopting the ESG framework helps businesses align with stakeholder needs. Other strategies include: Aligning Manager Compensation: linking compensation to long-term performance ensures alignment with sustainable business objectives. Implementing Flexible Work Policies: Adjusting policies to accommodate employee needs enhances productivity and satisfaction. Engaging with Communities: Incorporating community input ensures projects align with stakeholder expectations and minimizes potential conflicts. Market Share: the value of a single company's sales or revenues compared with the sales of all businesses in a market. Growth: growing a business means expanding the business. It can be measured in many ways, for example: Growth In Sales Revenue: increasing the money earned from selling the product; this is calculated by multiplying the prices of products by the number of products sold. Growth In Profit: increasing the amount of money left over after costs of production have been subtracted from revenues. Growth In Market Share: increasing the percentage of a given market represented by a business’s sales. Growing Impact: increasing the positive social and environmental consequences of the actions of the business. Growing A Resilient Business Ecosystem: generating opportunities for other businesses to grow and to strengthen their relationships with a wide range of stakeholders, distributing more of the value of the business to them. Advantage Of Growth: a business can achieve economies of scale to reduce costs. as businesses grow, new customers and markets are reached, increasing market share, sales revenue and profit. being a large business allows the company to influence the prices of products and services. businesses that are able to grow are in a better position to face competitors and external changes in business environment. businesses that are growing often attract talented employees because they can offer good salaries, diverse experiences and opportunities for professional growth. Disadvantages Of Growth: there may be problems with cash flow. there may be problems with quality. Increased output, particularly if not well planned, can impact the quality of the product negatively. loss of control of the business, s businesses grow, tasks and organisational structure become more complex. larger businesses may face higher labour turnover if human resources are not managed well. If a business grows and it does not recruit additional skilled workers, productivity and motivation of the current staff may fall and employees may decide to leave the business. Advantages Of Growth Nationally And Globally: higher levels of output produced by companies generate more tax revenue for local and/or national governments. higher levels of output also reduce the rate of unemployment and increase incomes. related to the previous point, higher income levels can increase consumption and improve living standards at both the local and global level. Disadvantages Of Growth Nationally And Globally: higher output levels lead to greater tax contributions for local and national governments. greater output creates more jobs, reducing unemployment and boosting income levels. higher incomes drive increased consumption, improving living standards locally and globally. Economies Of Scale: economy of scale refers to a situation where the unit of cost of production decreases as the level of output increases. Economies of scale can be either internal or external. Internal Economies Of Scale: cost reductions experienced by a business when it expands its output. Purchacing Economies Of Scale: lower costs of production that occur when a business is able to buy large quantities of inputs and negotiate lower prices for the inputs. Managerial Economies Of Scale: lower costs of production that occur when the cost of hiring a manager is spread over a larger output. Technical Economies Of Scale: lower costs of production that occur when a large business is able to purchase equipment that makes the business more efficient. Financial Economies Of Scale: lower costs of production that occur when a large business takes out a larger loan, with a lower interest rate, for investment. External Economies Of Scale: Cost-saving benefits of large businesses in their region or industry that are not under the control of the business. Innovation: This is when an industry becomes significant for society. Infrastructure: A good transportation network supports quick delivery of products and helps workers arrive at work on time, increasing productivity. Specialisation: This takes place when companies, suppliers, and workers start to focus on a particular industry due to its size. Diseconomies Of Scale: the increase in the per-unit production cost as a business grows. DisEconomies of scale can be either internal or external. Internal Diseconomies Of Scale: the increase in per-unit production cost as a business grows, usually explained by the difficulty of managing internally large operations. Managerial issues: it can be difficult to efficiently run an enterprise once it gets too big, it is challenging for a single leader to set a direction and be followed by thousands of employees. Increase in size of the workforce: it can be challenging to control a large workforce. the growing size of the company may necessitate the creation of a complicated organisational structure, with many levels of hierarchy. Communication: as organisations grow and become more complex there may be several layers of management between the CEO and employees. External Diseconomies Of Scale: The increased unit cost of production for a business due to the expansion of the industry in which the business operates. Limited natural resources: when businesses grow their output, they need more inputs of natural resources. When this happens on an industry-wide scale, demand for raw materials may increase. Limited infrastructure: when an industry expands, businesses will use infrastructure more often. Increased regulation: when an industry expands and has more power, governments will pay more attention to the businesses in that industry. Pollution: it is clear that the carbon dioxide emissions from business activity across all industries is causing climate change. Internal Growth: Expansion of a business with its own resources. Benifits Of Internal Growth: Internal growth is less expensive than external growth: when businesses grow internally, it costs less and they often decide to use internal sources of finance, such as retained profit, for expansion. Internal growth is less risky than external growth: when a business grows with its own resources, no other party is involved. Internal growth maintains more control of the business than external growth: with internal growth, as there is no need for external sources of finance, the owner of the company can keep control over the decisions of the company. Internal growth can respect the company’s values more than external growth: With internal growth, the culture of the company can be maintained since there is no risk of a third party changing it or imposing different values. Limitations Of Internal Growth: Internal growth can cause cash flow problems: growth can be expensive and if businesses do not see an increase in revenues right away, they may have cash flow problems. Internal growth is slower than external growth: growing only with the resources of the company may take a long time Internal growth can be limited: if a business operates in a small market, it may not be able to reach a size that results in acceptable profits. Strategies Of Internal Growth: Increasing production and gaining market share: Businesses can increase the output of their current products if the market demands it. Developing new products: Using market research, businesses can develop new products or improve their existing products to satisfy the target market and increase sales revenue. Finding new markets: Businesses can sell their existing products or services in a new location or to a new group of people. External Growth: expansion of a business by relying on external resources, typically with another organisation. Mergers: a form of external growth where two businesses combine to form a new business; the new business replaces the two that existed company before the merger. Acquisitions: company purchases another company with permission of the board of directors Company A thereby becomes the parent company and Company B becomes its subsidiary. In some cases, Company A acquires 100% of Company B. In other cases, the parent company acquires a majority stake (over 50%), rather than 100% of the subsidiary. In any case, both companies continue to exist as legal entities, but A 'controls' B due to its ownership interest. Takeovers: a form of external growth where one company purchases another company; typically hostile, or not wanted by the company being taken over. Needless to say, for the purchasing company, a takeover will be more difficult and risky than an acquisition. Joint Ventures: a form of external growth where two businesses create, own and operate a third organisation. The companies involved in a joint venture split the costs, risks, control and profit that the project produces according to an agreement made by the parties. Strategic alliances: a form of external growth where two or more businesses work together to achieve common objectives but do not create a new enterprise. In some cases, forming a strategic alliance can be the beginning of cooperation between two companies, which later results in an even closer working arrangement through the creation of a joint venture or even a merger. Pros Of External Growth: Faster than external growth Potential for economies of scales Can create increase employee talent pool, widen range of experise In case of marger, aquisitions, or takeovers competiton can be eliminated Cons Of External Growth: Riskier than internal growth Hard to srealise cost reduction if firms are diffrent Culture clash between organisations Information and technology could be lost Franchising: a form of external growth where a franchisee buys the rights to use the name and business model of a franchisor. Reasons For Staying Small: Avoiding risk, maintaining control Small market size Limited access to sources of finance Sustainability Strong social networks Biomimicry: the process of mimicking nature’s forms, processes and systems to solve human problems. Regenerative/Genrative Business: a business that aims to strengthen its social and environmental ecosystems by creating opportunities for other businesses and communities to develop, and by restoring the natural environment. The business enjoys a network of mutual benefits and increased resiliency. Characteristers Of Regenerative/Genrative Business Knowledge Sharing: they openly share their expertise and know- how with other businesses, enabling others to learn from their experiences. Stakeholder Networks: they nurture strong networks of relationships among stakeholders. Collaboration and Interdependence: they foster interaction and interdependence within these networks to promote mutual growth and success. Focus on Widespread Thriving: their practices are designed to ensure benefits and sustainability for the larger ecosystem, not just for themselves. Ansoff Matrix: ansoff grouped the different options for growth into four categories, based upon combinations of two criteria: products and markets. The matrix can be used with both internal and external growth strategies. The four are: Market penetration: a low-risk growth strategy that involves selling more of the same products and services to the same customers, or to the same types of customers; achieved through changes to price, promotion or distribution. Product development: a medium-risk growth strategy that involves selling new products to the same customers. Market development: a medium-risk growth strategy that involves selling existing products in new markets. Diversification: a high-risk growth strategy that involves involves selling new products in a new market. Force Field Analysis: The force field diagram that Lewin developed can be used to study the factors that support or promote change (driving forces), and those that oppose or resist change (restraining forces). Driving Forces: factors that support or promote change. Restraining Forces: factors that resist change. Pros: Easy to undrstand Management can plan how to reduce or eliminate restraining forces Cons: Requires weights for qualitative factors Depicting stakeholders as restraining forces may cause conflict Multinational Componies(MNC): a company that operates in at least two countries, one of which is not the company's home country. Reasons For The Growth Of MNC: Larger customer base Brand recognition Technology Tax incentives Avoiding trade barriers Cost of production Lack of regulation Spreading risks Impact of MNC On Host Contries: The sheer size of many multinationals means that they inevitably impact the communities in which they operate. Multinationals can impact host countries both positively and negatively, depending on why they enter a country, what they do when they are there and whether their commitment is long term or short term. Their impact will also depend on the conditions imposed by the host countries themselves. A host country is any country that permits a multinational to operate in its territory/markets. Positive Impact Of MNC On Host Contries: Employment opertunities Local business can supply MNC with goods Construct infastructure Govermant benifits from tax Negitive Impact Of MNC On Host Contries: Not safe, parmanent, formative, and paid well May not meet the standards of country Can drive up the price MNC are strong competitors for local businesses Market: a market is a place where buyers and sellers come togther or internact, has a location, a type of product. Marketing: all the processes involved in identifying and satisfing customers needs. Businesses need to plan all the aspects of mixed marketing. Mix Marketing: The decisions of a business regarding its product, price, promotion, place, people, processes and physical evidence. The 7 P's are: Product: goods or services that the business is offering the customer. Price: the amout of money the business is charges for the product or service. Promotion: an orginization in order to increase public awerness of sales. Place: how the products are traveled from the producers to customers. People: everyone who works in the business and has contact with the customers. Processes: how a service is delivered to customers, how they pay for the order, delivery system, and customer feedback. Physical Evidence: every tangible aspect of the service or product. Product Orientation: a situation where a business prioritises research and development of high quality, specialised products, rather than prioritising market research. Pros: USP And Quality: business can be distinguished from its competitors by having a high quality product or a unique selling point(UTP). Monopoly Power: new products may recive patent. Lack Of Competition: developing a new product means there is little to no competition. Cons: High Risk: there may be no customer intrest in the product if it was not trageted at an identified need. High Cost: product orientation may require large sums of investments to research the market needs. Market Orientation: a situation where the sole focus of a business is on the needs and wants of a market segment. Pros: Low Risk: not a new market or product so it has low risk Repeat Customers: as your selling the same product, busimess will repeat. Social Enterprise: meet human needs or solve problems for society. Cons: No USP: other companies sell the same product. Market Reasearch: market research could result in poor product delepment. Agility: businesses must be reponsive to change market conditions. Market Share: the value of a single company's sales or revenues compared with the sales of all businesses in a market. Market Share is calculated by: Market Share=product sales\total market sales x 100=...% or Market Share=number of units sold\total number of units solf in the market x 100=...% Market Growth: the increase in sales revenues or sales volume in an individual market over time. Market Growth=(total market sales(T2)-total market sales(T1))/ total previous market sales(T1) x 100=...% Market Leadership: the product or brand with the highest market share are the leader of the market. Advantages Of Market Leadership: Accessing Distribution Channels: businesses sell to there customers through distibution channels. Distibution channels are the network used to move a product from the manufacturer to the end users. Brand Recognition: market leader are more likely to get recognized by the people. Economies Of Scale: market leaders produce in mass causing the CPU to decrease. Price Leadeship: can price there products at a high price as they are the market leaders. Disadvantages of Market Leadership: For the Business: Lack of Innovation: Market leaders may lose the incentive to innovate, which can make them less competitive over time. Attracting Competition: High profits can attract new competitors who innovate faster. Diseconomies of Scale: Growth beyond an optimal point can increase costs, reducing profitability. For the Economy, Society, and Environment: Reduced Competition: Market leadership may create barriers for new entrants, reducing market competition over time. Unfair Legislative Influence: Dominant companies may lobby for laws favoring them, weakening labor rights, environmental protections, and antitrust measures. Exploitation of Workers: Resistance to trade unions and efforts to prevent fair wages and working conditions. Tax Avoidance: Use of loopholes to minimize tax payments, reducing funds available for public services. Pros For Customer: Networks: product may become more valuable the more people use it. Price: may reach economies of scale lowering the production cost. Innovation: achieve high sales to put into the business. Cons For Customer: Networks: may abuse theyre power. Price: even though they reach economies of scale, there is no guarantee it will lower the prices. Economies Of Scale: may have little competition and wont want to innovate. Boston Consultinf Groups (BCG) Matrix: a matrix that classifies the products of a business into high and low market share and market growth categories. Cash Cow: has a high market share, low market growth. Cash cows are successful products in mature, slower-growing markets. Dogs: has a low market share, low market growth. Dogs may be at the end of their product cycle, or they can be a niche product. Stars: has a high market share, high market growth. Stars are market leaders and have high sales, needs alot of investment to sustain growth, marketing attract new customers. Problem Child: has a low market share, high market growth. Problem child(question mark) products are often recently launched in reponse to the rapidly growing revenue of competitors. Uses and Limitations of the BCG Matrix Uses: Portfolio Analysis: helps businesses assess and categorize products based on market share and market growth. Strategic Guidance: identifies which products may require investment and which may need reevaluation. Resource Allocation: guides investment decisions by highlighting where funds may be most effective. Revenue Potential: assists in recognizing products with the potential to generate the highest revenues. Limitations: Subjectivity: classifications may be unclear or subjective if accurate data on market share and growth is unavailable. Oversimplification: does not account for external factors, such as market trends or competitive pressures, that influence product success. Questionable Classifications: focuses only on market share and growth, ignoring other important aspects like profitability or customer loyalty. Lack of Context: ignores other critical factors like the product life cycle, external environment, and internal business strengths or weaknesses. Marketing Plan: A document that outlines a company's entire marketing process. the marketing objective the marketing budget segmentation and the target market market research marketing strategies control tools Marketing Objectives: the reason they make the marketing. Marketing Budget: the amout of money they will spend on marketing. Segmentation And The Target Market: who they are trying to aim for including age, gender, needs, location, and more. Market Research: gathering information about custojmers needs, tastes, and habits. Marketing Strategies: long-term actions that aim to achieve markeing objectives. Control Tools: gathering qualitative and quantitative data. Segmantaion: there are three main types of segmentation, they are: Geographic Segmentation: a way of dividing potential customers based on their geographic location. This includes region and continent, country, and state and rural setting. Demographic Segmentation: dividing consumers into target groups according to characteristics such as age, gender and occupation. Psychographic Segmentation: A way of dividing the population according to lifestyle and personal interests. Advantages Of Segmentation: identify gaps and opportunities in markets design suitable products for specific groups in order to increase sales and profits reduce the waste of resources diversify and spread risks targeting different consumer segments Targeting: selecting the most appropriate market segment for a marketing campaign. Product Positioning: to compete against other brands within a market, companies need to differentiate themselves, positioning their brand to meet the needs of their selected target market. Product Positioning Map: distinguishing a brand from its competitors. Uses: identifying market segments that need to be fulfilled. establishing gaps and opportunity in the market for new products. helping a business to understand who and what their closest competitors and threats are. Niche Markets: niche market is a small market of a larger market, customers in the niche market have special needs or want diffrent thinsg than the larger market. Examples of a niche market are: luxury goods within the larger clothing market. niche sports, such as wakeboarding or horse riding. equipment designed for people who are left-handed (such as left-handed golf clubs). local shops that have a close relationship with their customers. Mass Markets: mass market is a market for goods that are produced in large quantities, it is cheaper than niche markets and is the oppisite of niche markets. Some examples are: Colgate toothpaste Nescafé coffee Pantene shampoo Lay’s crisps Niche Marketing Versus Mass Marketing: Mass Marketing: Pros: large market low CPU Cons: high cost more competition Niche Marketing: Pros: less competition suitable for small businesses Cons: high CPU less reach Types of USP: Differentiation by product USPs: innovative products Differentiation by price USPs: low cost Differentiation by promotion USPs: promoate a product effectivly can lead to customer loyalty Differentiation by place USPs: distribution Differentiation by people USPs: customer service Differentiation by physical evidence USPs: layout, stryucture, etc Differentiation by process USPs: shipping, manifacturing, etc Competitve Advantage: Most businesses face competition from other businesses that offer the same or similar products to consumers. A condition in a business that enables it to offer better products, or products at lower production cost, than its rivals. Porter's Generic Strategies Matrix: A matrix that identifies cost and differentiation strategies for a business looking to gain a competitive advantage. Cost Leadership: A situation where a business becomes the low-cost producer in the industry; one of Porter's Generic Strategies. Differentiation: A strategy where a business is producing a specialised or differentiated product for a broad market; one of Porter's Generic Strategies. Cost Focus: A situation where a business becomes the low-cost producer in a niche market; one of Porter's Generic Strategies. Differentiation Focus: A strategy where a business is producing a specialised or differentiated product for a niche market; one of Porter's Generic Strategies. Sales Forecasting: A quantitative technique used by businesses to predict future sales, measured in product quantity or total revenue. It helps manage expected growth by increasing inventory, hiring staff, or boosting production capacity, allows businesses to prepare for declines by reducing production, reallocating resources, or increasing marketing budgets, and Used to evaluate staff performance and set employee targets; but Forecasts are not always accurate; businesses must remain flexible to adapt to changes. Causal Models: a quantitative representation of real-world business dynamics, showing the causal relationship between an independent and dependent variable. It also uses scatter diagrams, lines of best fit, and extrapolation for predictions. Time Series Analysis: a statistical technique used by businesses to identify trends in historical data, such as sales revenue figures of previous years recorded at proper intervals in the past. There are three types of vaeiations, they are: 1. Seasonal variations: products that experience higher sales volumes and variations at certain times of the year. 2. Cyclical variations: variations in data due to cyclical changes in economic activity. Sales of the same items may decline during recessions, when incomes decline and unemployment increases. 3. Random variations: variations caused by irregularities and changes in factors that have not been anticipated by the business. Qualitative Techniques: businesses should use qualitative analysis, such as market research before forecasting sales. A business that relied only on quantitative data from past sales to make decisions during the COVID-19 pandemic, for example, would have failed very quickly. Uses And Limitation Of Forecasting: Uses: based on past data effective future planning increase bugets to increase sales better ability to decide Limitations: not enough data changing markets flexibility use of diffrent methods to pridect Simple Linear Regression Analysis: a mathematical method to sort out the possible factors that can have an impact on future sales. They use two variables, the are: Dependent Variable: the main factor that the business is trying to predict. Independet Variables: the factor that the business suspects has an impact on its dependent variable Scatter Diagrasms: a scatter diagram is a special type of graph designed to show the relationship between two variables. With simple regression analysis, you can use a scatter diagram to see if the data given in terms of X and Y are linearly related. Some pros and cons of a scatter diagram are: Pros: easy to plot shows relationship between two variables non-linear pattern easy to observe and interpret pattern max and min values are easy to see Cons: cant give the exact correlation cant take more than two variables only depicts quantitative data and not qualitative Line Of Best Fit: The line of best fit is a line through a scatter plot of data that captures the relationship between the independent and dependent variables. The line of best fit should be sketched in a way that is closest to the most number of points in the scatter diagram. It uses the mean to do this. Positive Correlation: as the value of the independent variable increases, the value of the dependent variable also increases. Negitive Correlation: as the value of the independent variable increases, the value of the dependent variable decreases. Time Series Analysis Moving Analysis: helps smooth out fluctuations in sales data by calculating the mean of groups of data. Makes it easier to identify overall trends and draw a line of best fit. 7 P's Of Marketing: Product-Based Research: when a company tests a new product, it releases the product to a specific area for a limited time. This enables the company to gain large amounts of information about how closely the product meets the needs of its target market. Price-Based Research: in highly competitive markets, new companies may be forced to base their prices on those of their competitors. Promotion-Based Research: it is important for companies to understand which media their target market accesses. Place-Based Research: selecting the right distribution channels – the ways to distribute the product – can be the difference between success and failure. People-Based Research: it is important that people representing a brand are well trained in how best to inform and support the customer. Process-Based Research: rocess-based research focuses on how to implement an appropriate process for delivering the service. Physical Evidence-Based Research: market research around physical evidence involves researching the sensory and visual experiences of the customer. Primary Market Research: research (in a market) that involves creating new information that is gathered through surveys, interviews, observations, focus groups, camera studies or other methods. Secondary Market Research: research that involves using evidence (about a market) gathered by others. Types Of Primary Research: Survey: research that involves using evidence (about a market) gathered by others. Some examples of surveys are: online surveys sent out by email, or website evaluations surveys by phone, asking customers to rate the service they have received from a telephone call centre face-to-face surveys, which may take place on crowded streets or in shopping malls Interviews: carrying out personal interviews is a lengthier surveying method and allows researchers to gain large amounts of qualitative data. Focus Groups: a focus group is an interview conducted with a small group of individuals, usually with similar characteristics Observations: observations allow for natural reactions of customers to be studied. Types Of Primary Research: Market Analysis: if companies want in-depth market research information of a particular market, they can either pay a market research agency to carry out new research, or they can purchase a market analysis report that has already been published. Academic Journals: academic journals contain articles on new research and academic theory. The articles are published by academics from leading universities. Government Publication: governments from all over the world regularly publish data covering topics such as population statistics and economic conditions. Media Articles: Media articles are published in both printed and electronic newspapers and magazines. They are updated regularly and provide current local and/or national information. Other Online Content: Online content is a general category, as most of the sources above are also available online. Other online content that may be useful includes: social media and social media analytics, such as Instagram Analytics company websites that look at the space and the competitors data on share/currency/fund pricing e-commerce sales data from businesses’ pages investor relations pages, including press releases and company reports Primary Research: Uses: provides direct information provides information about reasons for purchase provides unique information for competitve advantage Limitations: can be expensive and time-consuming to carry out staff may need training to carry out the research can be difficult to construct effective questions and experiments Secondary Research: Uses: provides information at lower cost than primary research provides broader contextual information about the whole economy, population or general trends published information is often already available Limitations: the business must rely on the research methods of others information that the business wants may not exist existing information may not be fit for the business’s purpose; it could relate to a different issue, different subject or different target market Quantitative research: the collection of numerical data and information that can be counted. Qualitative research: the collection of non-numerical data, such as opinions. Blending Quantitative And Qualitative Research: One key difference between quantitative and qualitative research is their sample sizes. Quantitative research will seek to gather a relatively small amount of information from a large number of respondents. Qualitative research is the opposite; sample sizes are smaller, but much more information is gathered from each respondent. Sampling Method: to get an understanding without polling everyone, businesses select a representative group called a sample for their research. This sample is expected to represent all customers of a specific product, referred to as the population. Sample choice and size are also very important. If you base your research on a very small sample size, the information you gather may not be a good representation of the entire population. However, using a very large sample size will increase the cost and the complexity of the market research. Examples of sampling are: Random Sampling: a sampling method where by everyone in the population has the same chance of being selected to take part in the research. Quota Sampling: a sampling method that involves dividing the population into strata (layers) based on a given characteristic; a proportional sample is then taken from each stratum. Convenience Sampling: a sampling method where the sample is made up of whoever is willing to take part in the research. Bais In Sampling: Researchers often talk about bias in sampling, meaning some groups have a higher chance of being selected than others. Descriptive Statistic: descriptive statistics are tools that may help you present and interpret the data that you have collected. You should be familiar with most from your Mathematics course. Descriptive statistics studied in this course include: Mean: an average number found by adding all the numbers in a set together and then dividing by the total number in the set. Mode: the most frequently occurring value in a set of values. Median: the middle value in a list of ordered numbers. Standard Deviation: Standard deviation – sometimes written using the Greek letter sigma (σ) – looks at the dispersion of data around its mean. A high standard deviation indicates that the data is spread out Pie Charts: a pie chart is a circular graph in which segments of the circle represent percentages of the total. Bar Charts: a bar chart is a chart with rectangular bars showing the values represented.  Infographics: an infographic is a graphic representation of information. It is used to show research findings or to break down data in a visual way. Quartiles: One of four equal groups into which a set of data is divided. Problems With Data Presentation: The title of the diagram: Take the time to read and understand the title of the diagram. Titles may be misleading, sometimes intentionally. Axes and scale: At first glance the first graphic appears to show significant growth and the second graphic appears to show no growth. In fact, the two diagrams show the same data but with different scales chosen for the y-axis. Year range of data: Sometimes data is ‘cherry picked’ by year. This means that only the data that is convenient to the writer is presented. Correlation versus causation: Correlation is a statistical term outlining a relationship between two variables, which may or may not be a causal one. Remember that just because events are correlated, it does not mean that one is caused by the other