Business and Economics Revision: 2011

Thursday, 15 December 2011

Market Analysis

Market orientation
When firms base their planning on the customers needs and wants this can be based on trailing and testing.

Product orientation
When firms based their planning on its own requirements, it doesn't base any of its decisions on customers.

Asset-led marketing
When a firm bases its planning on customer needs and wants and its own strengths.

Adding Value
A company bases it prices in relation to the benefits it may have for the business. When a business adds value is the amount of benefits something will have in comparison to its price. This means that it doesn't necessarily have to be cheap but if it is good value for money then it will be worth it for the customer.

Sales of the product X 100%

Total market size

Markets

Market-Any place or process bringing buyers and sellers with a view to agreeing a price.
The bases of how an economy operates- through production and subsequent exchange.

The difference between a Geographical and non-geographical market?

Considerations for starting business in a market

Types of market
Size of the market
Cost of resources/ overall costings
Marketing mix( Product, price, place, promotion)
Pricing strategies
Promotion
Distribution
E-commerce( selling online)
Cost to break-even
Target Market
Advertising- sponsorship
Tax implications
Promotional activities- Above/ bellow the line
Running cost e.g. Electricity, Gas, Water
Copywrite
Customer Satisfaction- Measured through quality
Morals/ ethics(fair trades)
Stakeholders e.g. Government, community, customers
Wages for staff/ training of staff(minimum wage)
Laws- health & safety, government laws (discriminantion)

Entrepreneur- A person who is willing to take risk to ensure the success of their business.

Examples of Entrepreneurs:
Alan Sugar
Richard Branson
Bill Gates

Market Analysis
Niche in the market
Competitors
Market Share/ Market Growth
Time periods
Investigator Price
Start up, market cost ( product/price)
Bank Conditions(Economy)

Effects recession has on smaller business'

Less competotrs
less profit/ lower prices
less investments
Smaller variety of products
less customers
lack of demand
more cost (overheads, running cost)
change pricing strategies
more likely for banks not to lend
more owner's funds used
higher failure rate (75% of smaller businesses fail)
resources more expensive
prices for supplies increase
less trade credit- minimize risk

Business start-up

passion/hobbie
to make a profit
gap in the market
work on hours
own boss (independance)
Improve circumstances
Enjoy feeling of risk
Cashing in on a business idea
Discovery of a gap in the market
Providing assistance to the economy
New business idea- provide a legacy
Jobs for unemployed

Possible problems with ( start-up)

Lack of investment
Competitors(too much competition)
Lacks of risks
Location
Inflation( prices to high)
lack of security
employment
market mix( product, prices, place & promotion)
Marketing
Economies of scales

Customers & Sales- Big vs Small

Small

Smaller cost
Lower tax rate
Less variety
less sales
Better quality product( job production)
More customer loyalty

Big

Larger income
Higher tax rate
More sales
Retain smaller percentage of profit
Higher market shares

The size of the market

Profits made by business
Market share of business
Value of Sales
Number of employees
Volume of sales

A large market means lots of potential customers.

A small market means potential profits could be limited.

Market Share & market growth

Market share- Worked out as a percentage.

Firms with large market shares have greater power over suppliers and distributions.

They can demand preferential treatment & better rates.

Market growth

Market growth refers to an increase in the size of the market for a particular product.

If the market is shrinking, how would it effect competitors?

Less competition
Fierce competition
Larger opportunity profit
Price increases
Liquidation of companies
Less room for venture

Why enter a growing market?

More chances of success

More money to be made

Higher demand

Less fierce competition

Less chance of failure

Benefit from economies of scale more

Room for expansion

Expansion

Company develops
Overseas(multi-national)
More products
Sales increase
More customers
More employees
Location
More brand awareness
More accessible

Market Segments

A market segment is an identifiable group with similar needs and want wants within a market.

Examples:- Age- Based on a particular age group e.g. over 18's

Gender- Differs between male & females and unisex
Income- E.g. Rolex and Porsche highly priced
Socio- economic groupings- Based on income and jobs e.g. A,B,C,D,E
Demographics- Area you live in (Poverty/rich area) Religion
Purchase occasion- Bought on occasion e.g. flowers, birthday cards.

Eurozone Crisis

Many people around Europe have fears that the EuroZone is likely to collapse but there is more likely speculation that the EuroZone will go into a recession one again. Some reports from Sky News suggest that there will only be a 0.1% growth for the whole of the next year as well as unemployment rising to 10% before 2015. The article also highlights that the Euro has fell to 84 pence against the pound and $1.30 against the Euro.

There are additional fears amidst the European Conference as Britain was the only country out of 27 countries not to sign the treaty for tighter regulations around Europe. This had affects around the remaining of the world as Asian markets were down on average by 1.7% relating to concerns about the result of the treaty. Country around the world fear that because a treaty wasn't signed it may cause more problems in terms of trade around the world as Europe debt may further increase.

Wednesday, 9 November 2011

How has the British economy changed over the last year? and Ansoff's Matrix

In recent times, it has been rather concerning for the British and Global economy, most economist find it hard to predict future outcomes of the economy. In particular to the past, it has been very difficult to view the state of the economy simply because the country and the world were amidst being in and out of a recession.

In 2010, the government had to make many decisions due to the recessions in terms of cut backs in various departments involving their budget. For the start of the year VAT had been significantly decreased by 2.5% to 15% but at the beginning of 2010 these tax rates went back up again. This VAT decrease was to encourage people to buy more products in the market as they would benefit by having slightly more to spend with lower markets and this would hopefully encourage growth in the market. This caused the market to make significant progress and begin to recover as around the third-quarter in the year Britain came out of a recession. However, on 4^th January 2011 the government announce that there would be a future 2.5% increase in VAT from 17.5% to 20%. This would have bad impact on the economy a BBC report showed that George Osborne predicted it will add an extra £13 billion to government spending. However, in my opinion it will make people less likely to spend in the current climate because some people don’t have a lot of money to spend whilst the British economy’s growth is slow. A report by Kelkoo showed that they predicted a £2.2 billion decrease in the number of sales revenue due to the VAT increase.

Another important factor in terms of the economy is the average GDP per person. This is value that is the average amount of income for the average person in the country, the higher the average earner the more the person will spend in the market. In 2010, the estimated GDP for the average person in Great Britain was $36,000 which was the 26^th highest at the time in comparison to other countries. Currently the average GDP stands at $39,604 giving Great Britain a ranking of 17^th in the world. In comparison to one another it shows that the average earner in Britain earns slightly more in comparison to the previous year. This is positive signs for the economy because people will earn slightly more on average their average spending should also increase. In addition, it means that they are more likely to have more money to save which could be beneficial with bank interest on a yearly basis. Finally, it can benefit the economy because when people spend more due to higher incomes with a VAT increase it means that the government have more money saved in case of another recession. On the other hand, the higher salaries could be due to inflation, this would have a negative impact on the economy because when inflation occurs, prices of normal standard of livings increases.

Finally a key measure of change in the British economy comes solely down to the amount of inflation that occurs, normally over a certain period of time the inflation continues to rise. In 2010, the economy saw an increase of a 0.6% increase of inflation from 2.9% to 3.5%. Since these figures in 2011 the economy saw a sharp rise of 1.7% from 3.5 to 5.2% inflation. This means that the economy may suffer because of these increases in inflations because consumers have to pay more for essentials in the market. In addition, it means that the country may suffer from exporting fewer goods abroad because businesses may struggle to manufacture goods for the same price of other demanding neighbouring countries.

The ansoff’s matrix

The ansoff’s matrix is four types of marketing strategies used to determine the stages and a product can go through. The four categories are market development, new product development and diversification.

Market penetration- Trying to gain more of your market e.g. cutting prices of launching a new advertisement campaign.

Marketing development- Sell your existing products in a new market e.g. new segment of the market- Johnson’s talcum powder for babies + Adults.

New product development- Pursuing a strategy of development new products to sell to existing customers (Modification).

Diversifications- Offer new products in a new market, this has high risks attached to it but can pay its dividends e.g. CAT products industrial employment + clothes.

Thursday, 22 September 2011

Week 1

Less competotrs
less profit/ lower prices
less investments
Smaller variety of products
less customers
lack of demand
more cost (overheads, running cost)
change pricing strategies
more likely for banks not to lend
more owner's funds used
higher failure rate (75% of smaller businesses fail)
resources more expensive
prices for supplies increase
less trade credit- minimize risk