Business study sheet

Chapter 33: Market Research

Market research gathers data on customers and competitors to help

businesses make informed decisions.

Types:

Primary Research: Direct data collection (e.g., surveys, interviews).

Secondary Research: Using existing data (e.g., reports, statistics).

Importance:

Identifies customer needs and demand.

Analyzes competition and market trends.

Helps develop better products and strategies.

Chapter 34: The Importance of Marketing

Marketing promotes and sells products to meet customer needs

and grow a business.

Key Aspects (4Ps):

Product: Must meet customer needs.

Price: Competitive yet profitable.

Place: Available in the right locations.

Promotion: Advertising and sales strategies.

Why Marketing Matters:

Increases sales and brand recognition.

Helps adapt to market changes.

Guides business decisions.

Chapter35 : Market segment

Market segment : is part of a whole market where consumers have

similar characteristics and preferences.

Methods of market segmentation

1.​Location (geographical) segmentation

- Different customers group are likely to have different needs

depending on where they

live. People living in how climate have different needs than people
living in cool climate.

- E.g. Europe Sweaters, Tropical Countries Linen clothes

2.​ Demographic segmentation

- to divide markets according to

- the age, E.g. Baby, Children, Adult

- gender, E.g. Man Shaving razor, Woman Sanitary Napkin

3.​Lifestyle or psychographic segmentation

- e.g. TV broadcasters may target sports channels at sport lovers.

- Fine dining restaurants will target customers with a passion for

sophisticated menus.

- Adventure holidays may be targeted at outdoor types.

- Organic foods might be targeted at people who care more about

the environment.

3. Benefits of Segmenting a market :

• To produce different products to different group of customers

• Customers maybe more loyal to the business which provide

specialized products.

• Make marketing expenditure cost effective by producing a product

customers want.

• Get higher sales and profits, because of cost-effective marketing

Chapter 36 : Product

Marketing mix: is a term which is used to describe all the activities

which go into marketing a product or service to meet the needs of
customers. These activities are often summarized as the four Ps.

- product, price, place, and promotion.

2. Product development

Process of developing new products

1. Generate ideas

2. Analysis; deciding whether products are marketable, technically

possible, a fit with portfolio.

3. Development; developing samples

4. Test marketing; testing the product in small section of the total

market.

5. Commercialisation and launch; press conferences to launch their

products.

3. Goods and services

- Products : goods and services produced by businesses.

- Consumer goods : such as clothes, phone, food

- Producer goods : such as machines, tools and equipment

4. Packaging

Packaging: the physical container or wrapping for a product. It is

also used for promotion

and selling appeal.

5. The product life cycle

The product life cycle : products do not last forever. A typical cycle
for a product is as

follows :

1 Development Stage : The prototype will be tested and market

research

carried out before the product is launched on the market.

2 Introduction Stage: just launch products in the market.

• Sales revenue will grow slowly at first.

• Informative advertising is used until the product becomes known.

• Price skimming might be used if a product is new to the market.

3 Growing Stage

• Sales start to grow rapidly because of better reputation.

• Persuasive advertising is used to encourage customers to buy.

• Prices are reduced since there are higher competitors.

• Profits are made because development costs are covered.

4 Maturity Stage

• Sales growth increases at a declining rate. Intense competition.

• Using competitive or promotional pricing strategies.

• Profits are at the highest.

• A lot of advertising is used to maintain sales growth.

• Firm needs to develop new products.

5 Saturation Stage

• Sales is at the highest point.

• Competition is high but no new competitors.

• Using competitive pricing.

• Profit starts to fall because of a drop in sales and a fall in selling

price.

• Extension strategies : method used to lengthen the life of a

product.

6 Decline Stage

• Sales and price decrease.

• Advertising is reduced and then stopped.

• The product will usually be withdrawn from the market.

7 Extending the product life cycle

• When a product reaches the maturity, the business may adopt

extension strategies

to boost sales again.

• Extension strategies includes

1. Introducing new version of the original product

2. Creating a new advertising campaign

3. Selling in new market

4. Changing products’ design and packaging

5. Encourage more frequent use

6. Finding the new use of products

7. Managing and reviewing the product portfolio

Product portfolio: (product mix) range of products a business is

currently marketing.

Boston matrix: 2x2 matrix that describes products according to the

market share they

enjoy and whether the market has any potential for growth

The Boston matrix puts products in 4 categories.

1. Stars : are valuable products for a business. They have a high

market share and

potential for growth.

2. Cash cows : are mature products. They have a high market
share but market is not

growing. They generate a steady flow of income for the business.

3. Question marks : are products with low market share but the
market is growing.

4. Dogs : are at the end if their life cycle. They have low market
share and the market is

not likely to grow any more. Dogs are likely to be replaced with new
products.

Chapter 37 : Price

1.Pricing methods :

1) Cost-plus pricing: the cost of manufacturing the product plus a

profit mark-up.

2) Competition-based pricing: when the product is priced in line with

or just below competitors’ prices to try to capture more of the
market.

Predatory pricing or destroyer: setting a low price until rivals have

gone out of the business.

3) Penetration pricing: when the price is set lower than the

competitors’ prices in order to be able to enter a new market.

4) Price skimming: where a high price is set for a new product on

the market.

5) Promotional pricing: when a product is sold at a very low price for

a short period of time.
 Pricing Explanatio Example Advantage Justificatio
Method n s n

Cost-plus Price is set Single Easy to Useful if

pricing by adding a product calculate there are
profit business few
margin to competitors
the cost of .
production.

Competitive Price is set Gold Higher Consumers

pricing in line with (where demand if may not
or just branding price is buy at a
below and competitive higher price
competitors differentiati unless
’ prices. on matter) quality is
better.

Penetration Price is set Low price Helps Profit might

pricing lower than for a new achieve be low.
competitors product in a high market
to enter a competitive share
new market quickly
market.

Price High price Newly High profit Establishes

skimming is set for a developed and covers the product
new or products
 innovative with high developme as high
product. demand nt costs quality.

Promotiona Temporarily Clearance Reduces Sales

l pricing setting a sales stock, revenue
low price to renews might be
clear stock interest in low per
or attract product item.
customers.

Psychologi Pricing Setting $99 Increases Competitor

cal pricing strategy instead of brand s may also
based on $100 image and use this
consumer perceived strategy,
perception. value reducing its
impact.

Dynamic Different Airlines Maximizes Costs may

pricing prices for charging revenue increase as
different different and profit prices
customer fares based constantly
groups or on demand change.
times.

Chapter 38 : Place

Place: refer to the location where people can buy products.

Distribution channel: the means by which a product is passed from

the place of production to the customer or retailer.
Intermediary: person or organization that helps to arrange
agreements or
business deals between other people or organizations.

Wholesalers: persons or businesses that buy goods from

manufacturers and sell them
in small quantities to retailers.

Other Distribution Methods :

Method Description

Direct Selling Businesses sell their products

directly to customers.

Wholesaling Businesses buy goods from

manufacturers and sell them in
small quantities to retailers.
 Method of Retailing Description

Independents Small outlets selling

specialized products like
bicycles, jewelry, or toys.

Supermarkets Large grocery stores

selling fresh and packaged
food, greeting cards,
clothes, and non-food
products. Often located on
city outskirts with parking
space.

Department Stores Large stores divided into

sections selling different
product categories like
menswear, cosmetics, and
food.

Chain Stores Two or more stores with

the same name and
characteristics, controlled
by a central office
managing product
selection, layout, and staff.
Superstores/Hypermarkets Very large stores outside
towns selling a wide
variety of products at lower
prices than supermarkets.

Discount Stores Retail stores offering a

wide range of products at
discounted prices.

Superstores Large out-of-town stores

selling a wide range of
products.

Kiosks & Street Vendors Small outlets selling a

limited range of goods,
often found at transport
hubs like airports and bus
stations.

Market Traders Sell goods from market

stalls with lower overhead
costs than other retailers.

Online Retailers Sell products through

websites or online
platforms like Amazon.
2. E-Tailing // E-commerce:

E-commerce : is buying and selling of goods and services

using computer systems

linked to the internet.

There are 2 main types.

1) Business to consumers (B2C); selling of goods by

businesses to consumers such as

ticket of air, cinema, events, financial service.

2) Business to business (B2B); involves businesses selling

to other businesses online.

Benefits and disadvantages of online distribution

3. Other distribution methods

Agents or brokers : intermediary that brings together buyers

and sellers

4. Choosing appropriate distribution channels

1) the nature of product

- Eg. Services are sold directly to customers

2) Cost

- choosing the cheapest distribution channels.

- They will prefer direct channels as intermediates can

share profit.

3) Market
- If it is bought every day retail outlets could be used.

- Producers selling to mass markets are likely to use

intermediaries.

4) Control

- Some producers would like to complete control over

distribution to protect brand image.

Chapter 39 : promotion

Promotion

• There are 2 method of promotion

1) Above-the-line : involves advertising on TV, via the

internet and other form of madias

2) Below-the-line : involves sales promotion e.g. Coupon,

free gifts, but 1 get 1 free,

product placements in TV.

The aims of promotion

• To inform people about particular issues, often used by a

government.

• To introduce new products on to the market

• To compete with competitors’s products

• To create a brand image

• To increase sales
Above-the-Line Promotion (Advertising)

Advertising Advantages Disadvantages

Media

Television (e.g., Reaches a large Very expensive.

household audience; visually
products) appealing.

Radio (e.g., local Cheaper than TV; No visual

services) reaches a large message;
audience. relatively
expensive
compared to other
methods.

Newspapers (e.g., Target specific Often in black and

local events) groups; relatively white, making
cheap; permanent them less
and can be kept. eye-catching.

Magazines (e.g., Effective for niche Published less

golf) groups; colored frequently; more
ads for better expensive than
impact. newspapers.
Posters/Billboards Relatively cheap; Limited space for
(e.g., local events, seen by many. details; can be
airlines) missed by
passersby.

Cinemas, DVDs Visually impactful; Seen by a limited

relatively low cost. audience.

Leaflets Cheap; can reach May not be read;

a wide audience some consumers
on the street. find them
annoying.

Digital & Other Publicity Methods

Method Advantages Disadvantages

Internet Advertising Cheaper than TV; Limited access in

reaches a large some areas; high
audience; allows competition; security
targeting specific concerns.
customers.
Other Publicity (e.g., Very cheap form of May not reach the
T-shirts, delivery advertising. target market.
vehicles)

Product Placement Associates products Expensive to secure

(TV, Music, Movies) with entertainment product placement.
content.

3. Below the line promotion

1) Sale promotion
• aims at consumers to achieve short-term increases in sales. This
can encourage new,
existing consumers to buy the product.

• Price reduction: reduce price in shops at specific times of the year

and money-off
coupons to be used when a product is next purchased. E.g.
discount 20 percent after
spending 10,000.-

• Gift : is placed in the packaging of a product to encourage the

consumer to buy it.

• BOGOF (Buy one get one free)

• After sale service e.g. Warranty 1 years.

• Free sample : can be handed out in the shop to encourage the

consumer to try the
product and hopefully buy it.
2) Merchandising and packaging
• Some businesses may arrange point of sale that is eye catching to
encourage sales called merchandising

3) Direct mailing
• Is where businesses send households leaflets or letters or emails.

4) Direct selling or personal selling

Involve a salesperson calling at households or businesses hoping
to sell products.

5) Exhibitions and trade fairs

Some businesses attend trade fairs or exhibitions to promote their
products.

6) Public relations
• Press release: some information about the business may be
presented to the media

• Press conference: this is where representative face the media and

present information
verbally.

• Sponsorship: linking business brands with sporting events through

sponsorship.
Sponsorship means making a financial contribution to an even in
return for publicity.

4. Using technology in promotion

1) Online targeted advertising; it can be directed at people who are
likely to be
interested in the product.

2) Viral advertising: direct marketing technique in which a company

pursuades internet
users to forward its publicity material in emails or via social media

3) Social media; Facebook, twitter, instagram

Advantages of social media :

• Cheap
• Business can respond immediately
• Business can communicate directly with customers
• Business can reach out many customers
• Adverts can be accurately targeted

4) E-newsletters; it is sent to customers who have already

purchased some goods or
services or have expresses an interest in the company

5). Branding : Branding is used to

• Differentiate the products
• Create customer loyalty
• Help recognition
• Development an image
• Raise price

6) The use of promotion strategies in different market segment

1. Advertising
E.g. mass markets => use TV advertising or social media
E.g. niche market => specialist magazine or specialist website

2. Sponsorship
E.g. used int he markets where image or product positioning is
important such as Rolex,
sponsor of golf tournament

3. Product trials e.g. gym and fitness

4. Special offers; price discount on fast moving consumer goods.
Chapter 40 : economies and diseconomies of scale

1. Economies of scale : Financial advantages of producing

something in very large quantities. (Falling average cost when
producing more goods)

2. Diseconomies of scale : Rising average costs when a firm

becomes too big.

3. Internal economies of scale : the cost benefits that an individual

firm can enjoy when it grows.

The reasons why costs fall are summarised

1 Purchasing economies : Large firms that buy lots of resources get

cheaper rates. Suppliers offer discounts
to firm that buy raw material and components in bulk.

2 Marketing economies: Marketing economies can occur because

some marketing costs, such as producing a television advert, are
fixed. These costs can be spread over more units
of output for a larger firm.
3 Technical economies : There can be more specialisation and
more investment in machinery and therefore its average cost will
fall.

4 Financial economies : Larger firms can get cheaper money. They

also have a wider variety of sources to choose from. For example, a
large limited company can raise money by selling
shares.

5 Managerial economies: As firms expand they can afford specialist

managers. As a result, efficiency is likely to improve and average
costs fall.

6 Risk-bearing economies : Larger firms are more likely to have

wider product ranges and sell into a wider

4. External economies of scale : the cost benefits that all firms in

the industry can enjoy when the industry expands.

1 Skilled labour : As a result, training costs will be lower when

workers are recruited.

2 Infrastructure : If a particular industry dominates a region, the

roads, railways, ports will be shaped to suit that industry’s needs.

3 Ancillary and commercial services : An established industry in a

region will encourage ancillary supplier in that industry to set up
close by.

4 Cooperation : When firms in the same industry are located close

to each other they are likely to cooperate with each other so that
they can call gain.
5. Diseconomies of scale

1 Bureaucracy : Larger business rely more on bureaucracy (system

of administration that uses a
large number of departments and officials)

2 Labour relations: If a firm becomes too big, relations between

workers and managers may deteriorate. Management may fail to
understand workers and they may become demotivated.

3 Control and coordination : A very large business may be difficult

to control and coordinate.

6. Other limits to growth

1 Lack of finance : Some businesses would like to grow but are not
able to raise the finance needed
to expand.

2 Nature of the market : Some markets are too small to sustain very
large companies.

3 Lack of managerial skills : Some businesses may be prevented

from growing because the owners do not have the managerial skills
required to run a large business operation.

4 Lack of motivation : Some business owners do not want to grow

business. They may be happy running a small business.

Chapter 41 : Production and Productivity

Production : involves converting resources into goods and services.

These goods and services are provided to satisfy the needs and
wants of people. When making products businesses
may use different production methods.
1 Job production : method of production that involves employing all
factors to complete one unit of output
at a time. eg. Wedding dress

2 Batch production : method that involves completing one operation

at a time on all units before performing the next. Many products are
made using batch production, particularly in engineering the clothes
industry and food processing.

.3 Flow production : Large-scale production of a standard product,

where each operation on a unit is performed continuously one after
the others, usually on a production line

The main features of flow production are :

- Large quantities are produced
- A standardised product is produced
- A semi-skilled workforce, specialising in one operation only is
employed
- Large amounts of machinery and equipment are used

Labour intensive and capital intensive

1 Labour-intensive : production methods that make more use of

labour relative to machinery.

2 Capital-intensive : Production methods that make more use of

machinery relative to labour

Productivity : rate at which goods are produced, and the amount

produced, especially in relation to
the work, time and money needed to produce them.

Labour productivity = Total output/No. of workers

Capital productivity = Total output/Capital employed

Businesses will try to increase productivity because they will lower

costs and make more profit.

. Increasing labour productivity

1 The government invests more in education by providing more

equipment for schools and improving the quality of teaching.

2 People are better motivated at work.

3 Labour is organised and managed more effectively.

4 Labour is flexible.

Increasing capital productivity : Capital productivity usually

increases when new technology is introduced. This is because new
technology is more efficient. Productivity is also likely to increase
production becomes more capital intensive.

1 Downsizing : Process of reducing capacity usually by laying off

staff

2 Relocation : Businesses often relocate their operations to improve

efficiency.

3 Outsourcing : Work currently done by a business is given to

specialists who can do the same work at a lower cost.

4 Lean production : Reducing the amount of resources used.

Chapter 42 : lean production

What is lean production?

Lean production = approach to production aimed at reducing the
quantity of resources
used.

As a result, lean production :

- Raise productivity
- Reduces costs and cuts lead times
- Reduce the number of defective products
- Improve reliability and speeds up products design

Just-in-time production : production technique that is highly

responsive to customer orders and uses very little stock holding
This means that a business does not hold any stock of raw
materials or components-suppliers have to deliver resources
straight to the production line.

Produce any goods unless they have been ordered-this avoids hold
stock of finished goods.

Kaizen : is a Japanese work and refers to the practice of continuous

improvement

The importance of using resources effectively

This is important because the benefits of using resources

effectively are numerous.

1.​Financial benefits
2.​Improved competitiveness
3.​Positive environmental effects
4.​Improved customer service