Business Studies Notes for IGCSE, GCSE, AS/A Level and O Level.

Unit 1: Marketing and People: 

1.3.1: Meeting Customers’ Needs 

The Market: 

Market: 

• Set of arrangements that allows buyers and sellers to communicate and trade in a particular range of goods and services. 

Marketing: 

• A management process involved in identifying, anticipating, and satisfying consumer requirements profitably. 

Mass market: 

• When a business sells into the LA competitors of the market where there are many similar products offered by competitors 

Niche Market: 

• Market that targets a smaller segment of a large market where customers have specific needs and wants. 

Market Size: 

• The size of a market can be estimated/calculated by the total sales of all the businesses in the market: 

Market value  

• Total money spent by customers buy products in money value. 

Market volume  

•  Physical quantity of products that are produced and sold. 

Market share  

• Describes the proportion of a particular market held by a business, product brand, number of businesses, products. 

Market share formula: 

Sales of a business/ Total sales in the market x 100 

Branding: 

Brand name: 

• Name, term, sign, symbol design or any feature that allows consumers to identify the goods and services of a business and to differentiate them from those of competitors 

Uses of branding: 

• Differentiates products from rivals. 
• Creates customer loyalty. 
• Helps with product recognition. 
• Develops an image. 
• Can charge a premium price when the brand becomes strong 

Dynamic Market: 

• One that is subject to rapid or continuous changes 

Online Retailing: 

• The retailing of goods online 

Adapting to change: 

1. Having flexible working practices 

1. Undertaking market research 

1. Investing in the business 

1. Continuous improvement – Kaizen 

1. Develop a niche. 

Competition and the market: 

Competition: 

• Rivalry amongst sellers trying to increase goals such as increasing profit, market volume and share. 

Consumers benefit to competitive market: 

• More competition = Higher/better quality products 
• Customers’ needs are met. 
• Lower prices as firms aim for efficiency. 
• More customer choice 

Businesses benefit to competitive market: 

• Forced to be more efficient = lowers costs 
• Forced to produce high quality products – customer loyalty. 

Difference between risk and uncertainty: 

Risk: 

• Possibility a business will have lower profits/ experience a loss rather than a profit. 

         Uncertainty: 

• Events that are completely beyond the control of businesses and can have an impact on the market. 

2) Market Research: 

Market Research: 

• The collection, presentation and analysis of information relating to the marketing and consumption of goods and services. 

Purpose: 

1. Identifies and anticipates customers’ needs and wants. 

1. Quantify likely demand. 

1. Get an insight into consumer behavior. 

Primary Market Research:  

• Gathering new information resting to the market and consumption of good and services 

E.g.: – Surveys – Questionnaires – F2F interviews – Focus groups 

Secondary Market Research: 

• Collection of existing data 

E.g.: – Social Media – Newspapers – Radio 

Database: 

• Organized collection of data stored electronically with instant access, searching and sorting facilities. 

Respondents: 

• people/organizations that answer questions in surveys. 

Target population: 

• Total numbers of consumers in each group 

Qualitative research: 

• Collection of data about attitudes, beliefs, and intentions 

Quantitative research: 

• Collection of data that can be quantified. 

Sampling methods: 

1. Random Sampling  

1. Quota Sampling 

1. Stratified Sampling 

Sample: 

• Small group of people that must represent a proportion of a total market when carrying out market research. 

1. Random Sampling: 

• Respondents are selected randomly for interviews. 

1. Quota Sampling: 

• Respondents are selective non-randomly where several groups share the same characteristics. 

1. Stratified Sampling: 

• Method where sample is divided into segment based on the population’s knowledge. 

3) Market Positioning: 

Market Positioning: 

• Views consumers have on quality, value for money and image of a product in relation to those of competitors. 

Market Orientation: 

• Approach to business which places the needs of consumers at the center of the decision-making process. 

Product Orientation: 

• An approach to business which places the emphasis upon the production process and product itself. 

Market Positioning: 

• Positioning the view consumers have about the quality, value for money and image of a product in relation to those of competitors. 

Factors that influence market positioning: 

1. Nature of product 

1. Business objectives 

1. Views of those in control 

1. Nature and size of the market 

1. Degree of competition 

Market Segmentation: 

• Part of a whole market where a particular customer group has similar characteristics. 

Differs by: 

1. Customers’ needs and wants. 

1. How customers pay 

1. Location of customers 

1. Knowledge and experiences of customers 

Types of segments: 

1. Geographic Segmentation: 

• By: nations, cities, and other territories 

1. Demographic Segmentation: 

• Age, religion, nationality, ethnicity 

1. Psychographic Segmentation: 

• Based on customers attitudes, opinions, and lifestyles 

1. Behavioral Segmentation: 

• Based on how customers relate to a product: Occasions, loyalty, usage. 

Market Mapping: 

• Two-dimensional diagram showing 2 qualities/characteristics of a brand and rival brands in the market. 

Competitive Advantage: 

• An advantage that enables a business to perform better than its rivals in the market. 

Ways to develop CA: 

1. Product design 

1. Product quality 

1. Promotion 

1. EOC 

1. Flexibility 

1. Delivery times 

1. Ethical stance 

1. Customer service 

Product differentiation: 

• Marketing strategy that strives to distinguish a company’s products/services from the competition. 

Purpose: 

• Ability to change/charge a higher price. 
• Recognition 
• Extend product range. 
• Brand development 
• Overcome competition. 

Added Value: 

• Difference between selling price and cost of materials 

Importance? 

• Helps pay other costs. 
• May be able to make a profit. 

Increasing Added Value: 

• Increase selling price. 
• Reduce cost of materials 

Uses of AV for businesses: 

• Bundling 
• Customer service 
• Packaging 
• Offers  
• Customization 

4) Demand: 

Demand: 

• Quantity of a product bought at a given price over a period of time 

Inferior goods: 

• Goods for which demand will fall if income rises or rise if income falls 

Normal goods: 

• Goods for which demand will rise if income rises and falls if income falls. 

Substitute goods: 

• Goods that can be bought as an alternative to others but performs the same function. 

5) Supply: 

Chapter 9.1 – Marketing objectives and strategy 

Marketing objectives: 

• Goals that a business attempts to achieve through its marketing objectives. 

Marketing strategies need to be: 

• S – specific 
• M – Measurable 
• A – Agreed 

• R – Realistic 
• T – Time period 

3 Main Marketing Objectives: 

1. Increase revenue. 

1. Increase Market Share 

1. Build a Brand 

Marketing strategy: 

• A set of plans that aim to achieve a specific marketing objective. 

Niche Marketing: 

Marketing Mix: 

Product: 

• Differentiated products. 
• Products will be very specific to customer needs. 

         Price: 

     – More flexibility in pricing 

     – The ability to charge a higher price 

Place: 

• Selective distribution channels 

• Exclusive distributors 

         Promotion: 

• Targeted promotion 
• Advertised are placed in specialized publications. 

Mass Marketing: 

Marketing Mix: 

Product: 

• Many products with close substitutes  
• If a business develops a USP they will gain an advantage 

         Price: 

     – Prices are like competitors 

     – ‘Price war’ can occur 

Place: 

               – Multiple channel distribution 

               – Competition for prominent places in shops and supermarkets 

         Promotion: 

• Absence of price competition, focus is all on promotion. 
• A lot of TV advertising 

B2B (back to business) and B2C Market Strategies: 

How do businesses develop customer loyalty: 

1. Communication 

1. Customer service 

1. Customer incentives  

1. Personalization 

1. Preferential treatment  

Marketing Objectives: 

The product life cycle: The different stages that a product passes through over time and the sales that can be expected at each stage. 

Chapter 9.2 – Marketing objectives and strategy 

The Boston Matrix: 

• A 2×2 model matrix model that analyses a product portfolio according to the rate of the market and the relative market share of products within the market.  

Question Marks: 

• Known as the ‘problem child.’ 
• Low market share 
• Fast growing market 
• Profits may be low – Weak market share. 
• Can turn into a star. 
• With investment can achieve increased sales 

Stars: 

• High market growth 
• High market share 
• Fast growing market 

• High profits  
• Businesses will need to invest to keep sales and profits high. 
• Net Cash Flow = Profits – Investments in production and promotion 

Cash Cows: 

• Low market growth 
• High market share 
• Slow growing market -> Saturation  
• Strong positive cash flow 

Dogs: 

• Low market share 
• Low market growth 
• Poor sales 
• Poor profits 
• May earn some profit with investment. 
• Net cash flow may be zero or negative. 

Benefits of the Boston Matrix Model: 

• Useful tool for analyzing product portfolio decisions. 
• Only a snapshot of the current position  
• Little to no predictive value 
• Focus on market share and market growth, ignores issues such as developing a sustainable competitive advantage.  

Value of the Boston Matrix Model: 

1. Concerning the firm’s portfolio of products. 

1. Focuses on cash flow from products. 

Chapter 10 – Product Service Design 

Definitions to learn: 

Product Design: 

• The process of creating a new product or service 

   1) Function 

1. The way a product works 

1. Does it do what it needs to do? 

1. Is the product reliable? 

Features of a product that successfully emphasizes the function in the design mix: 

1. More predictable and stable demand 

1. Longer product life cycles 

1. Lower promotional costs 

1. Built reputation for quality based on reliability (Ergonomics) 

1. Economic Manufacture through economies of scale 

2) Aesthetics: 

1. How the product appeals to the customer 

1. Based on subjective judgement of customer 

1. Popular way to differentiate a product. 

Features of a product that successfully emphasizes aesthetics in the design mix: 

1. High added value 

1. Demand fueled by customer aspiration. 

1. Shorter product life cycle 

1. Attraction imitation = need for design protection 

1. Need for greater promotional support. 

3) Cost: 

1. Does the design allow the product to be made and sold profitably?  

1. How much value is added during the production process? 

Features of a product that successfully emphasizes the costs in the design mix: 

1. Low added value 

1. Potentially shorter life cycle  

1. Lower quality 

1. Possibly inferior product  

Design mix and social trends: 

Benefits of adopting product designs to changes in social needs: 

1. Reduction in costs 

1. Popular with customers 

1. Could use their design changes as the USP. 

1. Businesses will be seen as good corporate citizens. 

Chapter 11 – Promotion and Branding 

Promotion: 

• The attempt to obtain and retain customers by drawing their attention to a firm or its products. 

Above the line promotion: 

• Placing adverts using the media 

3 types of adverts placed in the media: 

1. Informative 

1. Persuasive 

1. Reassuring 

Types of Above the line advertising: 

1. Television 

1. Newspapers/magazines 

1. Internet 

Below the line promotion: 

• Promotion that does not involve using the media 

Types of below-the-line promotion: 

1. Sales promotions  

1. Public relations 

1. Exhibitions, trade fairs 

Factors to consider when choosing a method of production: 

1. Cost 

1. Market type 

1. Product type 

1. Stage in the product life cycle 

1. Competitors promotions  

1. Legal factors 

Branding: 

Types of branding: 

1. Manufacture branding – brands created by products of goods and services. 

1. Own label brands – products that are manufactured for wholesalers/retailers by other businesses.  

1. Generic brands – Products that only contain the name of the product category rather than the company/product name. 

Benefits of strong branding: 

• Added value. 
• Ability to charge premium prices. 
• Reduced price elasticity of demand 

Ways to build a brand: 

1. Exploit a USP 

1. Advertising 

1. Sponsorship 

1. Using social media 

Changes in branding and promotion to reflect social trends: 

1. Viral marketing 

1. Social media 

1. Emotional branding