Topic 1.1 Revision

Business

A Business is an organization
that is involved in the trade of goods, service, or both to consumers. Businesses
are important in capitalist economies, where most of them are secretly owned
and administered to make service to customers for profit. Businesses may also
be not for profit or state owned. A business owned by two individuals may be referred to as a company, however that term also has more precise meanings.




Understanding what customer needs

Market Mapping

A study of various market conditions that is plotted on a map to identify trends and corresponding variables between consumers and products. Market mapping can help companies locate problem areas and figure out the source of problems by examining related variables.

Competition

In order to attract and satisfy customers, businesses need to be competitive and make products that are superior to their rivals.  Product variety may help a company to stand out in a competitive market. A competitive market will have many businesses trying to win the same customers. A monopoly is either the only supplier in a market, or a large business with more than 25% of the market.  

#333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">Competition can make markets work better by improving these factors:

#333333; FONT-SIZE: 10pt; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol">·         #333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">Price#333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">: if there is only one retailer, products may not be competitively priced. If there are several retailers, each retailer will lower their prices in an attempt to win customers. It is illegal for retailers to agree between themselves to fix a price - they must compete for business.

#333333; FONT-SIZE: 10pt; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol">·         #333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">Product range#333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">: in order to attract customers away from rivals, businesses launch new varieties of products they believe to be superior to their competitors.

#333333; FONT-SIZE: 10pt; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol">·         #333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">Customer service#333333; FONT-SIZE: 10pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial">: retailers that provide a helpful and friendly service will win customer loyalty.

Adding Value

A business adds value when the selling price of an item produced is higher than the cost of all the resources used to make it. Think of a pair of designer sunglasses which sell for £100. If the cost of the materials, employees, marketing and all other inputs used in making one set of sunglasses is just £20, then £80 worth of value has been added by the firm during production.

Franchise

An entrepreneur can opt to set up a new independent business and try to win customers. An alternative is to buy into an existing business and acquire the right to use an existing business idea. This is called franchising. A franchise is a joint venture between:A franchisee, who buys the right from a franchisor to copy a business format. And a franchisor, who sells the right to use a business idea in a particular location. Many well-known high street opticians and burger bars are franchises. Opening a franchise is usually less risky than setting up as an independent retailer. The franchisee is adopting a proven business model and selling a well-known product in a new local branch.

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