Y12 models 2/4 the shit Flashcards
(36 cards)
What is meant by Place and Distribution?
Place = how a product is delivered to customers (distribution).
Distribution = process of getting a product to market.
Three methods:
Through intermediaries (e.g. wholesalers, Amazon)
Direct (e.g. Nike.com, manufacturer-owned stores)
Both (multi-channel, e.g. Apple selling via its website and third-party retailers)
Different strategies suit different business models, e.g. direct suits bespoke/premium brands, while intermediaries suit FMCG brands.
What are the benefits of using different distribution methods (including multi-channel)?
Direct: Higher margins, more control, better customer data (e.g. Gymshark)
Intermediaries: Access to larger markets, customer convenience, lower fixed costs
Multi-channel: Combines strengths of both – reaches more customers, improves brand accessibility, tracks customer behaviour across platforms
Adaptable to market trends (e.g. rise of mobile shopping)
What are the drawbacks of various distribution strategies?
Direct: Costly logistics and tech infrastructure; difficult for small firms to scale
Intermediaries: Lower profit margins, less control over brand/customer experience
Multi-channel: Costly, complex to manage; channel conflict risk
Effectiveness depends on product type, consumer habits, and business positioning
Why doesn’t it make sense for all businesses to sell only online?
Budget retailers (e.g. Poundland) can’t absorb delivery costs
Premium brands rely on in-person experiences (e.g. fragrance, cars)
Some goods/services need physical inspection (e.g. houses, tailoring)
Online-only can alienate certain customer groups or limit brand visibility
How does Avon use distribution and why?
Uses direct selling due to personal customer relationships and brand heritage
Flexibility in combining personal reps with online platforms
Highlights trade-off between profit margin (direct) vs reach (multi-channel)
Illustrates importance of aligning channel strategy with target audience and product nature
What is price skimming and why might a business use it?
Setting a high price for a new product initially, then lowering it
Benefits: High margins early, cover R&D, appeal to early adopters, perceived quality
Creates an aspirational image and premium positioning
What are the drawbacks of price skimming and when is it suitable?
Drawbacks: Requires inelastic demand, risk of excess stock, fast competition
Customers may delay purchases expecting price drops
Best when: Strong brand loyalty, premium tech/novelties (e.g. iPhone, Tesla)
Unsuitable if similar rivals exist or price transparency is high
What is penetration pricing and why use it?
Setting a low initial price to gain market share rapidly
Encourages customer trial and adoption
Can lead to brand loyalty if followed by consistent value
Useful for new firms entering competitive markets
What are the drawbacks of penetration pricing and when is it effective?
Drawbacks: Low margins, risk of unsustainable pricing, may undermine premium positioning
Customers may expect permanently low prices
Best when: High elasticity, large target market, low fixed costs, financial backing
What is dynamic pricing and how does it work?
Prices change in real time based on demand, location, time, and competitor prices
Uses AI and big data to adapt prices dynamically
Common in travel, events, ride-sharing, and e-commerce (e.g. Uber, airlines)
What makes dynamic pricing effective or not?
Useful for services with demand spikes (e.g. flights)
Increases revenue and responsiveness to demand
Depends on:
Competition
Product nature (suitability for flexible pricing)
Tech capabilities
Customer perception (fairness, trust)
Risk of alienating customers or triggering price wars
What are the two forms of business growth?
Organic growth = expansion through internal strategies (e.g. new products, increased sales, entering new markets). Slower but more controlled.
External growth = expansion via joining with other firms through:
Mergers: Two firms combine voluntarily to form a new entity
Takeovers (acquisitions): One firm purchases another (can be hostile or agreed)
External growth is faster but can lead to challenges (e.g. cultural integration, redundancies)
What are the benefits of growth for a business?
Economies of scale:
Cost advantages a business gains by increasing the production volume of a single product, which lowers average unit costs. This happens by spreading fixed costs over more units, buying in bulk, or using more efficient production techniques.
Economies of scope:
Cost savings achieved by producing multiple different products that share resources (e.g., facilities, staff, marketing). The business becomes more efficient by spreading costs across a broader range of outputs, not just more units of one product.
Synergy: Combined businesses may perform better than separate ones
Experience curve: Greater efficiency as workers and processes improve with scale
Stronger market power: More influence over suppliers and customers
Access to new markets/resources via mergers or takeovers
What are the main HR objectives for a business?
Employee Engagement: Employees care about doing their job well & achieving goals.
Talent Development: Developing skilled employees for future leadership.
Diversity: Valuing varied perspectives/experiences to improve creativity and problem-solving.
Alignment of Values: Employee values align with organisational culture for consistency.
Training: Onboarding and skill-building reduces costs, improves motivation, and aids retention.
What are key HR performance metrics and what do they show?
Labour Productivity = Output / No. of employees → ↑ training, experience = higher output
Labour Cost per Unit = Total labour cost / Output → ↑ productivity → ↓ cost per unit
Labour Cost as % of Revenue = Labour cost / Revenue × 100 → Lower % = more efficient
Labour Turnover = No. leaving / Total staff × 100 → ↓ turnover = better morale, ↑ retention
What do recruitment, training and redeployment involve?
Recruitment: Attracting and selecting staff with values and skills that fit the role.
Training: Induction (onboarding) + development (skills, career planning).
Redeployment: Moving employees to different roles/locations with similar or different duties.
What are employee rights during redundancy and key reasons it happens?
Reasons: Closure/relocation, restructuring, tech change, economic downturn
Rights:
Redundancy Pay: Statutory minimum: 1 week/year (under 41), 1.5 weeks/year (over 41), 2+ years service required
Consultation: Must consult employees/representatives before redundancies
Suitable Alternative Employment: Must offer if roles exist
Notice Periods: Statutory minimum (e.g., 1 week per year of service after 2 years)
Fair Selection: Must use objective criteria (e.g., skills, attendance)
Voluntary Redundancy: Used to reduce compulsory redundancies
Redundancy = Last Resort: Explore all alternatives first
Define authority, span of control, and hierarchy. Why are they important?
Authority: Power to make decisions
Span of Control: No. of direct reports. Wide = less control, Narrow = more control
Hierarchy: Layers of management. Tall = promotion routes; Flat = quick communication
Impacts communication, efficiency, promotion, decision speed
What is delegation and how is it evaluated?
Manager gives responsibility to subordinates
Benefits: ↑ motivation (Herzberg), ↑ speed of response, ↑ strategic focus for managers
Effectiveness depends on staff ability/willingness, task type, prior success of delegation
What is centralised structure and when is it useful?
HQ makes key decisions
Benefits: ↓ costs, fast decisions, consistent policies, bulk buying
Suits: low-skill jobs, hard HR strategies, functional structures (grouped by specialism)
What is a decentralised structure and when is it useful?
Power distributed to regions/departments
Benefits: local adaptation, ↑ morale, faster local decisions, improved responsiveness
Suits: product-based (organised by product lines), regional (organised geographically), matrix (cross-functional teams)
Why is HR important for business success?
Strong HR ensures motivated, productive, skilled workforce aligned with company goals
Helps with retention, lower costs, training, culture fit, leadership pipeline
Success depends on: leadership style, organisational values, business strategy (cost or differentiation), and HR approach used (hard or soft)
What is unit cost and why does it matter?
Unit Cost = Total Costs / Output
Lower cost = ↑ profit margin or ↓ price (competitive)
Key to cost leadership & added value (price - cost)
What is operations margin and how does it relate to added value?
Ops Margin = Ops Profit / Revenue × 100
Lower costs + steady revenue = ↑ margin
Added value = Price - Unit Cost → essential for profitability
