AS Business Studies

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AS Business Studies by Mind Map: AS Business Studies

1. Pricing Strategies (with links to Product Lifecycle)

1.1. Predatory Pricing- (Illegal..... if you get caught). Prices are deliberately set a very low price so other competitors cannot compete with the price of the product

1.2. Penetration Pricing- This Pricing Strategy is mostly used in the introduction and growth phase of the Product lifecyle. using this strategy, it can help a business gain market share over competitors and gain popularity from consumers.

1.3. Skimming Pricing- Skimming involves setting a high price before other competitors come into the market. This is often used for the launch of a new product which faces little or no competition – usually due to some technological features.

1.4. Loss Leader- The use of loss leaders is a method of sales promotion. A loss leader is a product priced below cost-price in order to attract consumers into a shop or online store. The purpose of making a product a loss leader is to encourage customers to make further purchases of profitable goods while they are in the shop.

1.5. Psychological Pricing- The aim of psychological pricing is to make the customer believe the product is cheaper than it really is. Pricing in this way is intended to attract customers who are looking for "value".

2. Inflation, interest rates and government spending

2.1. Inflation: This is a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase.

3. Legislation and it's effect on business

3.1. The way in which a business can operate is controlled by legislation. Laws can be imposed by the UK or European Union courts and government. Legislation mainly acts as a constraint on business.

4. Causes of Business Failure, DANIIIIII

4.1. In most situations especially in the first year will tend to fail, one of the main reasons for business failure is due to poor management of cash flow and finance. This tends to be the case especially for new smaller businesses as they struggle to balance the capital between their sales and their payments they make for the business. Another reason that their cash flow may be the reason for their business failing could be due to the fact that they are in debt and are unable to afford to pay this back which may be due to the fact they are not making the sales that they need to be able to pay this back.

4.1.1. However a business who is struggling with their cash flow can do some methods to reduce the risk of the business failing. For example if you are struggling to pay for stock you could potentially use some form of finance whether this be a bank loan or a capital.

4.2. Another reason that a business may fail could be to management itself, the reason the management could lead to business failure could be due to fact that they firstly do not make a business plan or one that is not stronger enough. they have not have a clear understanding of the market they are in and the customers that they need to target for and finally they may not be driven or motivated which will lead to any employees to also be demotivated. These factors can lead to failure as if you don't have a business plan it may mean that you are not as driven and if you do not understand the market you are in and struggle to advertise appropriately you may struggle to gain any customers in the first place.

4.2.1. If this is the case and you need methods as a resolution, firstly before starting up ensure that you as a manager are aware of the importance of a strong business plan which will help to drive you and ensure that you are aiming to achieve what you said you was.

5. Methods of Production (job, batch and flow)danii bagsy

5.1. Job production, sometimes known as one off production, this is where products are made individually and the product will be completed before the next is started. Niche market products such as designer dresses and wedding cakes usually use this method.

5.1.1. Advantages, quality tends to be higher, can easily meet customers needs, usually a greater satisfaction, businesses can charge higher prices and finally products are more unique meaning the usp is stronger.

5.1.2. Disadvantages, it will take more time and effort to produce these products, cost of producing the product will be higher, will require more skill and training and finally economies of scales can not be used therefore you do not benefit from reducing costs.

5.2. Batch production, this is when a small batch of similar products are made at a given time. Each batch will need to be completed before the next is started. Bakers who make cakes tend to use this method as it more efficient as quicker than using job production.

5.2.1. Advantages, it can help to reduce the unit costs, tends to use specialist equipment meaning its usually more efficient and faster, productivity tends to increase and finally you will be able to benefit from economies of scales.

5.2.2. Disadvantages, employees can soon become demotivated due to the fact their work can be repetitive, quality of work can be reduced due to this demotivate from employees, machinery can be expensive to buy and repairs will need to be made to machinery again increasing costs.

5.2.3. Disadvantages, workers may be demotivated if work becomes repetitive, quality will not be as high as it is with job production, equipment will need to be monitored and checked to ensure that it is working efficiently and goods will need to be stored until they are sold meaning it can cost more.

5.3. Flow production, flow production involves continuous movement. The items will need to be identical and produced on an assembly line. Employees who work where flow production is taking place will usually have a small specific job to keep the production going.

5.3.1. Advantages, time can be saved due to the fact the production is continuous, goods can be produced for a cheaper capital due to the size of the bulk, quality of products will be consistent and labour costs will usually be lower, costs for customers will be cheaper because its made in bulk and the business will be compatible for economies of scales.

5.3.2. Disadvantages, one of the disadvantages is that it can demotivate staff as work can soon become repetitive, also machinery can be pricey to buy so start up costs can be high and finally quality of products may be lacking due to fact is being made so quickly in such large quantities.

6. Capacity Utilisation and Productivity

7. Price and income elasticity of demand

7.1. Income Elasticity of demand

7.1.1. Measures how elastic a product is to a change in income - you can tell if a product is normal or inferior.

7.2. Price Elasticity of Demand

7.2.1. %Change in QTY Demanded / %Change in Income

7.2.2. %Change in QTY Demanded / %Change in Price of the product.

7.2.3. Measures how elastic a product's quantity demanded is to a change in price. An elasticity of MORE THAN ONE means that a change in price will result in a LARGER change in demand. An elasticity of LESS THAN ONE means that a change in price will result in a SMALLER change in demand.

8. B2B and B2C Marketing Strategies

8.1. B2B - Where businesses trade with other businesses e.g. business banking, wholesaling and commercial property.

8.1.1. Relationships between businesses are important.

8.1.2. Buyers are more sophisticated, and so needs are more specific- for example certain specialised machinery.

8.1.3. Promotion is very informative, branding less important.

8.2. B2C - Where businesses sell products to the end customer e.g. retailing, personal banking or tourism.

8.2.1. Products are more important than relationships.

8.2.2. Buyers less sophisticated, often purchases are made on impulse – point of sale promotion important.

8.2.3. Branding very important for differentiation.

9. Exchange rates and their impact on business-AlexH

9.1. The exchange rate measures the quantity of foreign currency that can be brought with one domestic currency.

9.1.1. The rate of appreciation is often given as a percentage.

9.2. If the British pound is strong than that allows for good importers. But if the currency if weak then it is better for exporters

9.3. Appreciation= is the increase in value of an item. example of this is house prices. Each year, the value of a house increases, so this is its value appreciates.

9.3.1. Depreciation= Is the decrease in value of an item. A common example of this is a car price. Each year, the value of a car decreases, so we say that its value depreciates. In other words a decrease in the value of a currency relative to other currencies.

9.3.2. How to calculate Depreciation E.g. A new family car costs £13,000. The car loses 10% of its value during the first year and 15% of its value during the second year. A television worth £1500 would depreciate in value to £900 in the 3 year period. Year 1 depreciation: 10% of £13,000 = £1300 car value = £13,000 - £1200= £11,800 Percentage calculation of Appreciation/ depreciation

9.4. Exchange rates

9.4.1. Measures the amount of foreign currency that can be brought with one unit of domestic currency.

9.4.2. Appreciation: when the value of the pound rises. This means the pound can buy more dollars or euro This is good for traveling abroad and import products E.g. if £1 pound was worth $1.60 dollars , now it would buy you $1.80 dollars.

9.4.3. Depreciation: is a fall in the value of the pound. It can buy fewer dollars or euros E.g. if £1 pound was worth $1.30 dollars, now it would buy you $1.15 dollars.

10. Market Research

10.1. Primary/Secondary - Field/Desk

10.2. Primary -

10.2.1. Primary research is new research, carried out to answer specific issues or questions. It can involve questionnaires, surveys or interviews with individuals or small groups. Secondary research makes use of information previously researched for other purposes and publicly available

10.3. Secondary

10.3.1. Usually free or significantly cheaper, to obtain than primary research. Can be easily found and usually instantly available. Useful for looking at the whole market, and analyzing past trends. Not always relevant to what the company wants to find out. Not specifically about the company's products. May be out of date.

11. Kaizen and Quality Control

11.1. Kaizen = This is a Japanese business philosophy of continuous improvement of working practices and efficiency

11.1.1. Advantages: Promotes the idea of teamwork, not individualism. Advantages: Increased efficiency. Helps to train new employees. Advantages: Increased employee satisfaction. All workers help each other and support projects.

11.1.2. Disadvantages: Bringing this idea in will require a lot of change within a company and can be costly. Disadvantages: The initial excitement of this change will fade away quickly which could make Kaizen useless.

11.2. Quality Control = This is a system of maintaining high standards in manufactured products. This is normally done by testing a sample of the output, against the original specification.

11.2.1. Advantages: It helps to prevent faulty products reaching the consumer. Advantages: Highly trained inspectors check a sample of the item.

11.2.2. Disadvantages: Individuals are not encouraged to check the quality of their own work. Disadvantages: Rejected products can be expensive for a company. Disadvantages: Can be time consuming and is normally not very efficient.

12. The Boston Matrix

12.1. Cash Cow- Good Money maker which requires little investment. They are low growth products with a high market share. They are successful products with little need for investment. This generates strong cash inflow for the business. They are also used to provide funds for stars.

12.2. Star- These are good all rounders. These stars are high growth products competing in markets where there are other strong products in the same market. Stars often need heavy investments to sustain growth. In the future, stars will become cash cows.

12.3. Problem Child- These are good products thatt don't make