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BTEC Tech Award > Component 3 > Flashcards

Component 3 Flashcards

1
Q

What are the 2 broad categories of markets that enterprises target?

A

B2C (business to consumer) and B2B (business to business)

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2
Q

What features differ in a B2B market?

A

A business customer might negotiate price more, a business customer might be buying in bulk, you might need to customise your order for a B2B customer, B2B customers might expect trade credit

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3
Q

What is meant by the term ‘market’?

A

Any place where buyers and sellers meet to trade.

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4
Q

Give examples of tyoes of market

A

Physcial, virtual, local, national, global

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5
Q

What is market segmentation?

A

ividing the market into different sections (segments) to enable the business to specifically target customers with the most appropriate products and promotions

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6
Q

Give 4 types of market segmentation

A

Demographic, Psychographic, Geographic, behavioural

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7
Q

Give 4 characteristics used in psychographic segmentation

A

social class, attitudes, lifestyle and personality characteristics

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8
Q

Name 9 charactersistics used in demographic segmentation

A

age, race, religion, gender, family size, ethnicity, income, education level, socio-economic group

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9
Q

Name 5 characteristics in behavioural segmentation

A

spending, consumption, usage, loyalty status and desired benefits

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10
Q

What type of segmentation looks at the social and economic characteristics of individuals and households?

A

demographic

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11
Q

What classifications are given in socio economic segmentation?

A

A, B, C1, C2, D, E

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12
Q

What type of segmentation looks at consumer’s personality traits?

A

Psychographic

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13
Q

What types of charactersitics are used in psychographic segmentation?

A

people’s attitudes, lifestyles and personality types

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14
Q

Which segmentation technique uses people’s hobbies?

A

Psychographic

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15
Q

Which type of segmentation uses consumers loyalty or product usage or frequency of consumption?

A

behavioural

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16
Q

Give 3 benefits to the enterprise of using market segmentation

A

Able to adapt the product, able to adapt the marketing, able to focus on and dominate one particular segment

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17
Q

Name 5 pricing strategies

A

Cost plus, skimming, premium, penetration and competitive

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18
Q

What is the difference between skimming and pricing stategies?

A

Skimming starts high and then drops the price, premium stays high

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19
Q

What is an advantage of skimming?

A

Gain high revenues to cover development costs

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20
Q

Who does skimming target?

A

Early adopters (people that are open to being the first to try something)

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21
Q

How does cost plus pricing work?

A

Set the price based on the cost + a fixed percentage for profit

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22
Q

Give an advantage and disadvantage of cost plus

A

Adv = predictable rate of profit because the price always has a fixed mark up. disadv = might lose revenue because the price is higher than competitors

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23
Q

Give a disadv of competitor pricing

A

It could result in a price war if competitors try to lower their prices

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24
Q

How does competitor pricing work?

A

Set the price around the level of the competition and then find a different way to differentiate your product

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25
Q

Give an advantage and disadvantage of penetration pricing

A

Adv= should get high sales because the price is low disadv = small profit margins because price is low so very little flexibility if costs go up.

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26
Q

What are the 5 stage of the product life cycle?

A

Development, Introduction , Growth, maturity, decline

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27
Q

What happens in the development stage?

A

No sales, just research and development. So high costs and no profit

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28
Q

What happens in the introduction stage?

A

Customers try the product for the first time so use advertising to raise brand awareness and sales promotion strategies. Sales not yet high, costs are high

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29
Q

What happens in the growth stage?

A

Sales grow rapidly. Businesses try to get loyalty and repeat sales as well as new customers. Advertising high, loyalty cards. Profit is high

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30
Q

What happens in the maturity stage?

A

Customers are now loyal but competition increases. Need to retain customers. Bring out new features. Use loyalty.

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31
Q

What happens in the decline stage?

A

Sales drop. Some profit still because marketing costs are very low. Decide whether to sell off the brand or extend the product with a relaunch.

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32
Q

Why does a business want to know its Product Life Cycle?

A

To help decide what the marketing priorities are at each stage, eg sales promotions in the introduction phase at get customers to try it.

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33
Q

What is a brand?

A

the unique and recognisable identitiy of the company. It can include logo, colour, slogan

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34
Q

Why is brand important?

A

It helps you to stand out from competitors. Customers get to know what you stand for. You can bring out other products in the same brand for your loyal customers.

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35
Q

What is a brand personality?

A

A human characteristic given to the brand eg Chanel is sophisticated

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36
Q

What is a USP?

A

Unique Selling Point. An attribute that can’t be copied by a rival eg a patent, your brand, a recipe

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37
Q

Name the 5 strategies in the promotional mix

A

Advertising, sales promotion, personal selling, direct marketing and public relations

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38
Q

What is the purpose of advertising?

A

To persuade and inform

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39
Q

What is the purpose of sales promotion?

A

To offer an incentive to customers

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40
Q

What 2 aspects of advertising must be planned?

A

Medium and message

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41
Q

What is meant by the ‘medium’ of advertising?

A

The channel used to coummincate

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42
Q

What 5 mediums are there for advertising?

A

Digital, audio, ambient, print and moving image

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43
Q

Name 6 methods of sales promotion

A

Buy one Get one Free, discounts, coupons, competitions, money off, loyalty incentives

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44
Q

Give 4 methods for Personal Selling

A

Face to face, telephone, email, video/web conferencing

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45
Q

What is meant by Public Relations

A

promoting a produce/service, brand or enterprise by placing information about it in the media without paying for the time or media space directly.

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46
Q

Give 3 methods of public relations

A

Sponsorship, exhibtions or press releases

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47
Q

What is direct marketing?

A

Establishing a personal relationship between the enterprise and the customer, addressing the customer by name

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48
Q

Name 4 methods of direct marketing

A

Junk mail, catalogues, magazines and telemarketing (telephone)

49
Q

When advertising, what name is given to what an enterprise to trying to communicate

A

message

50
Q

What is the ambient channel of advertising?

A

unusual methods in public spaces eg guerilla advertising

51
Q

Give 6 ways the size of the enterprise will effect the promotional mix

A

size of the market being targeted, amount of finance available to spend on promotion, whether they have a dedicated marketing team, marketing expertise within the enterprise, type of promotional methods used, frequency of promotions

52
Q

What word, beginning with ‘c’ is a limit to this amount of money that therefore limits the promotional methods the enterprise can use?

A

constraint

53
Q

What promtional strategy is more likely to be used in B2B?

A

Direct marketing and Personal Selling

54
Q

How might a local business chose to segment its market?

A

Geographic, choosing to use advertising through local mediums such as local radio and papers

55
Q

What promotional strategies might have high impact on a small budget?

A

guerilla advertising

56
Q

What promtional strategy might be easy to update regularly on a low budget?

A

digital advertising

57
Q

What promotional strategy might be used to support a local cause?

A

Public Relations through sponsorship

58
Q

What promotional strategy might be used to atract local B2B customers?

A

Local trade fairs like the Chamber of Commerce and direct marketing through cold calling

59
Q

What promotional strategies might be suitable for a small, local business targetting tourists?

A

vouchers in local outlets, leaflets distributed in the Tourist Information or local hotels, print advertising on bus stops

60
Q

It is cheaper for an enterprise to keep hold of customers rather than win new customers. How does this influence the promotional mix?

A

Invest in sales promiotions that use loyalty schemes

61
Q

What is the difference between a debit card and a credit card?

A

A debit card immediately takes payment out of your account but a credit card takes payment out at the end of the month

62
Q

What is a direct debit?

A

It is an instruction to the bank to pay a 3rd party directly from your account on a specified date in the month.

63
Q

What is an advantage of a direct debit?

A

It means you will not miss a payment as it is automatically taken out each month

64
Q

What is a disadvantage of a credit card?

A

It means you could overspend (up to the amount on the card’s credit limit) because the money isn’t immediately being taken out of the account

65
Q

What is the advantage of a credit card?

A

it allows the user to delay the payment until the end of the month or to pay it off gradually but interest on the credit may be charged.

66
Q

What do the letters SOFP stand for as a financial document?

A

Statement of Financial Position

67
Q

What is an asset?

A

Something a business owns

68
Q

What do you call something a business owes?

A

A liability

69
Q

When a SOFP uses the term ‘current’, what is meant?

A

used in less than 1 year

70
Q

Give 3 examples of current assets

A

Cash, debtors and stock

71
Q

Give 3 examples of current liabilities

A

Overdraft, tax and creditors

72
Q

Give 2 examples of fixed assets (non current)

A

Buildings and machinery

73
Q

Give an example of a non current liability

A

Bank loan

74
Q

What is meant by working capital?

A

Money used in the day-to-day running of the business

75
Q

How do you work out Working Capital?

A

CA-CL (current assets - current liabilities

76
Q

What does CA/CL tell a business?

A

Current ratio or the proportion of assets to liabilities

77
Q

How do you work out Net Assets?

A

Total assets - total liabilities

78
Q

What two sources of finance always balance out the Net Assets?

A

Profit reserves and share equity

79
Q

What is share equity?

A

Money invested by shareholders

80
Q

What is meant by liquidity?

A

The proportion of current assets to current liabilities, ie the ability to get hold of cash

81
Q

What are the 2 performance measures for liquidity?

A

current ratio and liquid capital ratio

82
Q

How is liquid capital ratio worked out?

A

current assets - stock / current libilities

83
Q

How does profitability differ from profit?

A

profitability is the proportion of profit from each sale while profit is the total left over from sales (revenue) after all expenses are taken away

84
Q

How is profitability measured?

A

Gross and Net Profit Margin

85
Q

How is Gross Profit Margin worked out?

A

GP/Revenue x 100

86
Q

How is Net Profit Worked out?

A

NP/Revenue x 100

87
Q

How is Gross Profit calculated?

A

Revenue - Cost of Sales

88
Q

Net Profit Formula?

A

Revenue - all costs/expenses

89
Q

What is the term used to describe when the actual budget is better than the expected budget?

A

Favourable (F)

90
Q

What is the term used to describe when the actual budget is worse than the expected budget?

A

Adverse (A)

91
Q

Give 3 types of budget an enterprise can draw up

A

Expenditure, Revenue and Profit budgets

92
Q

On a budget, what does the term variance mean?

A

The difference between the expected and actual budget figures

93
Q

What is meant by budgetary control?

A

Checking the actual figures are what the business expected and making changes

94
Q

Explain the term cash flow

A

The money in and the money out of a business over time

95
Q

How do you work out Net Cash Flow?

A

Cash In - Cash out

96
Q

How do you calculate Closing Balance on a cash flow forecast?

A

Net Cash Flow + Opening balance

97
Q

How does an enterprise use a cash flow forecast?

A

To ensure that future payments will be covered with cash in the bank.

98
Q

How do CREDIT sales and CREDIT purchases effect your cash flow?

A

Credit means that the payment is delayed so the inflow or outflow must be adjusted to the correct month.

99
Q

What is break even?

A

The point where Total Revenue exactly covers Total Costs (TR=TC), in other words no profit is made, but neither is loss made

100
Q

What is the formula for Break Even?

A

Fixed Costs / Selling price - Variable Cost

101
Q

Where on the diagram is profit and loss?

A

Profit is the triangle to the right of the Break even point and loss is the triangle to the left

102
Q

Which two lines cross at the break even point?

A

Total Revenue and Total Cost

103
Q

Explain the difference between break even value and break even units?

A

Break even value is the amount of money needed to break even, break even units is the number of sales to break even.

104
Q

Explain the margin of safety

A

Margin of Safety is the additional (spare) units sold beyond break even. It is actual sales - break even sales.

105
Q

How might a business use break even?

A

To set targets on how many units to sell.
To decide a price to set to achieve their break even point.

106
Q

On a break even graph, revenue is always plotted starting at which point?

A

0

107
Q

On a break even graph, total costs is always plotted starting at which point?

A

The point where fixed costs is drawn from the Y axis (£)

108
Q

Describe the fixed cost line on a break even graph

A

A straight, horizontal line because the cost does not change with the level of sales

109
Q

Give 3 internal sources of finance

A

Sale of assets, retained profit, personal savings

110
Q

Give 3 short term external sources of finance

A

Bank overdraft, crowdfunding, trade credit

111
Q

Give 3 long term external sources of finance

A

mortgages, share capital, taking on new partners

112
Q

Give 3 medium term sources of finance

A

hire purchase (HP), leasing, loans, peer-to-peer lending (P2P), investment from business angels

113
Q

When you are deciding the advantages and disadvantages of the different sources of finance, what can you usually talk about?

A

Interest payments on the finance
How much money is available through that source of finance

114
Q

What is hire purchase?

A

When a business pays a rental sum each month for the equipment but then has the right to make a final payment to own the item at the end of the contract. Interest payments are high. eg mobile phones

115
Q

What is leasing?

A

Paying a monthly rental sum but there is no right to buy at the end. Interest payments are high. eg a car

116
Q

What is peer-to-peer lending?

A

A loan from another business. Like a loan, there is interest to pay.

117
Q

What is share capital?

A

Money raised by selling part of the business to a share holder. Shareholders expect dividend back which is a share of the profit. Shareholders also get a vote in the business each year.

118
Q

Whats is trade credit?

A

An arrangement with a supplier to delay your payment by 30-90 days. This may have a bad effect on the relationship with your supplier as they are having to wait for their money.

BTEC Tech Award (2 decks)

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