Flashcards in Chapter 1, 2, 3, 5, 6, 7, 8, 9, 10 Deck (75)
What is a monopoly?
- A monopoly is a single producer in the market, one business having 100% of the marketplace, this is known as pure monopoly.
- Monopolies can be formed by patents, the mergence of two or more firms to cancel out competition, or government grants (eg royal mail)
What is an Oligopoly?
- Many businesses but only a few dominate the market.
- each business tends to have its own brand identity
- prices are reletively stable
- High start up costs occur in relation to manufacturing
- economies of scale and high profit
What is Perfect Competition?
- There are a large number of businesses competing and no one business is large enough to influence the activities of others
- there are no market leaders and price leaders
- Products are homogenous, no way of telling goods apart from other companies
What's monopolistic competition?
- a large number of relatively small businesses in competition with each other
- there are few barriers to entry
- products are similar but differentiated from eachother
- brand identity is relatively week
- businesses have a limited degree of control over the prices they charge
Why do people start up their own businesses?
- To gain a profit, the motive for profit is generally the main reason for starting a business
- To turn a hobby or a pastime into a business, a specialist cake store is most likely owned by someone who has a deep passion for cake baking.
- To be their own boss, they have control of their own destiny, not being underappreciated by a large corporation
- To use redundancy money, some new business people are forced into setting up a business because of redundancy. losing a job, with little chance of finding another one in the near future, is often reason enough to start a business. People will use their redundancy payments as capital to start up their own business
What is a Need?
- Peoples needs are limited. They include things which are needed to survive, such as food, warmth, shelter and security. human's also have psychological needs eg recognition and love
What is a want?
Wants, are infinite. People constantly aim for a better quality of life, might include better housing, healthcare, education etc.
What is a Business?
A collective that provides a good or service to customers to gain profit, usually.
Businesses are here to meet our needs and wants
What is a Good?
A good is tangible eg food and clothes
What is a service?
A service is not tangible eg taxi ride or haircut
What's an entrepreneur?
Someone who has a business entreprise, With success equating to profit and failure leading to personal ruin.
What are characteristics of entrepreneurs?
- Risk takers, entrepreneurs sometimes have to risk capital and their own time to try to create profits. They may remortgage the house, borrow from family and friends to pursue their business idea.
- Having creativity and being innovative, creativity in business means the ability tocome up with innovative ideas and concepts
- Being hard working, successful entreprenuers are, generally hard working, it is estimated that entrepreneurs in the UK work around 52 hours a week compared with the average 38 hours for an employed person.
- Being determined and having perseverance, entrepreneurs also need to be determined, as new businesses have low success rates. Entrepreneurs must also have considerable perseverance, and be willing to keep trying if initial fails
- Be an effective organiser, entrepreneurs have to organise effectively, considering factors like labour, buying inputs, raw materials etc.
What's included in a business plan?
- Executive summary, description of the business idea
- Marketing plan, market research into the needs of the business, size of the market, and the level of competition.
- Operations plan, Where the business will be located, production methods and any equipment needed. in addition, information on the costs of production and where the business will buy supplies may also be included.
- Human resources plan, Number of employees and the skills, experience and qualifications they require will be outlined.
- the financial plan, will include a sales forcast indicating potential revenues, a cash flow forecast for the first 12 months.
- a profit and loss and balance forecast for the end of the first year.
- a break even analysis
What are the benefits of a business plan?
- When complete the business plan presents the business owners with a clear set of instructions on how to run the business.
- Writing a business plan forces the entrepreneur to look at every key aspect of the future business equally.
- A comprehensive business plan will allow business owners to check progress against objectives, monitor cash flow.
- A business plan is also needed for potential investors or when seeking finance from banks. without a business plan it is highly unlikely that capital could be attracted from people or institutions outside of the business.
What are the potential drawbacks of a business plan?
- Market research costs time and money, resources which might be better spent elsewhere in the business.
- How do you predict what your income will be? Market research can only provide an estimate, how reliable is the data?
- An inaccurate business plan with unachievable objectives can give entrepreneurs false hope, leading to failed investments.
What is mass marketing?
- When a business aims at appealing to the whole market
- It aims at a product that everyone can consume
- With mass marketing, economies of scale can be taken advantage of because of higher production output and capacity
- Widespread distribution, heavy promotions and market leading brands
- The costs to set up competing in a mass market can be high and competition can be fierce such as coca cola and pepsi
What is niche marketing?
- one or more specific segments of the market are targetted with niche marketting.
- a higher price can be charged, customers are prepared to pay for expertise and tend to be loyal
- there must be a full understanding of the desires of the niche
- niche marketing concentrates on its strengths
- lower start up costs help niche markets in their early stages
- temperamental in the fact that they can disappear due to economic conditions, fashion or taste
- mass market businesses could target the niche
What are the rules of market segmentation?
- Segments must be recognisable. they must differe enough from other segments to make producing for that segment worthwhile.
- Segments ,ust have critical mass. They must be big enough or produce enough sales value to make the productionof products or services targeted at the segment worthwhile.
- segments have to be targetable. Having their own identity means that they can be promoted to, and have marketing directed towards them.
List some different ways that markets are segmented?
- demographically (gender, social class, age)
- psychographically (lifestyle/personality)
- behaviourally (how they act, buy on impulse or want high quality products)
What are the benefits of market segmentation?
- businesses understand their consumers better
- might allow a business to market a wider range of differentiated products
- prevent products being promoted to the wrong people
- develop customer loyalty
What is global marketing?
Global marketing is about selling goods or services to overseas markets. Marketing strategies are different and thus different strategies are applied for packaging, pricing and promotional.
What is the advantage of global marketing?
- Higher earnings
- spread risks, decline in one market and you still have another to fall back on
- saturation of home market (competition too high at home)
- economies of scale
What is the law of demand?
- The law of demand states that the higher the price, the lower the quantity demanded
- On a graph, the result is a downward line
- Movements along the demand curve are caused by changes in price
What is the supply curve?
- Movements along the supply curve are therefore caused by changes in price
- supply is the amount of a product which suppliers will offer to the market at a given price
- as the price of the item goes up, suppliers will try to maximise their profits by increasing the quantity offered for sale
- the supply curve increase as price goes up, so does quanitity
What is equilibrium?
Equilibrium is where the demand curve and the supply curve intersect, we have a point where the consumers are willing to purchase that matches the quantity the suppliers are willing to supply at a given price. From this we can derive market price and quantity.
Factors that affect demand?
- increase in consumer income will shift the demand curve to the right
- change in fashion/taste
- change in price of other complimentary goods e.g dvds and dvd player
- successful advertising
- changes in populations
- government legislation, govt leg for child booster seats
Factors that affect supply?
- change in costs
- introduction of new technology
What's the concept of elasticity?
- Knowing how sensitive a product is in demand to a change in price
PRICE ELASTIC/PRICE SENSITIVE
- elasticity of demand is likely to be higher in markets approaching perfect competition, a change in price will cause a more than proportional change in the quantity demanded.
PRICE INELASTIC/PRICE INSENSITIVE
-if a good has inelastic price elasticity of demand then a change in price causes a less than proportional change in the quantity demanded. if price goes up, demand falls just a little. if price goes down, demand increases a little.
How can businesses make their goods more price inelastic?
- encourage consumer loyalty
- reduce or restrict competition in the market
- increase brand value