1.

​ ENTERPRISE

Factors of production:
●​ Land (land + the renewable + non-renewable resources of nature)
●​ Labour (manual + skilled labour)
●​ Capital (finance + capital goods - physical goods to aim in production
●​ Enterprise (the initiative + risk provided by entrepreneurs

Adding value is increasing the difference between the cost of bought-in inputs and the selling
price of the finished goods.

Opportunity cost is the next most desired option that is given up.

The dynamic business environment is constantly changing. Changes can be:

●​ New competitors entering the market
●​ legal changes (safety/who can buy a product)
●​ economic changes that leave customers with less disposable income
●​ technological changes that make products/processes outdated

Businesses succeed because of:

●​ good understanding of customer needs - leading to sales targets being achieved
●​ efficient management of operations - keep costs under control
●​ flexible decision-making to adapt to new situations - allows investment in new
business opportunities
●​ appropriate and sufficient sources of finance - prevents cash shortages and allows
for expansion

Businesses fail because of:

●​ poor-record keeping (deliveries, hours worked, payments…) - keep records on
computer but also on paper as back-up
●​ lack of cash (finance for day-to-day cash, holding inventories..) - keep cash flow
forecasts, good relations with the bank, sufficient start-up capital
●​ poor management skills (leadership, decision making, cash handling, planning,
marketing…) - gain management experience beforehand/training

Intrapreneur is a business employee who takes direct responsibility for turning an idea into a
profitable new product or business venture.
Entrepreneur is an individual who has the idea for a new business, starts it up and carries
most of the risks but benefits from the rewards.

Qualities of successful intra/entrepreneurs:

●​ Innovation (identifying a market gap, attract customer + promote - differentiate)
●​ Commitment and self-motivation (hours of effort + focus)
●​ Multi-skilled (technical/social/financial/management skills)
●​ Leadership skills (lead the employees + motivate)
●​ Self-confidence and an ability to bounce back (believe in themselves + bounce back
from setbacks)
●​ Risk-taking (e.g investing their own savings in the business)
Barriers to entrepreneurship:
●​ lack of a business opportunity (idea for the business + gap in the market)
●​ obtaining sufficient capital (insufficient savings, no knowledge of financial support or
a poor business plan to convince potential investors)
●​ cost of good locations (alternative - home, but, location with low market potential,
lack status, may cause family tensions, separating private/working life)
●​ competition (established businesses with greater resources and market knowledge)
●​ lack of a customer base (build up customers)​

Business risk is in all decisions of businesses.

Business uncertainty cannot be foreseen, measured or calculated.

Role of an enterprise in a country’s economic development:

●​ employment creation (unemployment level falls + after growth, jobs are also created
in suppliers businesses’)
●​ economic growth (increase GDP)
●​ business survival and growth
●​ innovation and technological change (dynamism to the economy)
●​ exports (improve international competitiveness)
●​ personal development (self-actualization)
●​ increased social cohesion

Role of intrapreneurship:
●​ injecting creativity and innovation into the business (increase sales + effective
marketing)
●​ developing new ways of doing business
●​ driving innovation and change within the business (motivation)
●​ creating a competitive advantage
●​ encouraging original thinkers and innovators to stay in the business

A business plan is a written document that describes a business, its objectives, its
strategies, the market it is in and its financial forecasts. (states executive summary,
description of the business opportunity, marketing and sales strategy, management team
and personnel, and operations)

BENEFITS LIMITATIONS

Obtain finance for the start-up - potential Does not guarantee a successful business
investors will not provide finance unless
details about the business proposal have
been clearly written down

Forces the owner to think seriously about Could create a false sense of certainty in
the proposal, its strengths and its potential business owners (it is forecasts and
weaknesses predictions)

Gives the owners and managers a clear The plan must be detailed and supported by
plan of action to guide their actions and evidence such as market research (doesn’t
decisions in the early times of the business reach standards for investors)
 2.​ BUSINESS STRUCTURE

Primary sector business activity is firms engaged in farming, fishing, oil extraction and all
other industries that extract natural resources so that they can be used and processed.
Secondary sector business activity is firms that manufacture and process products from
natural resources, including computers, brewing, baking, clothes-making and construction.
Tertiary sector business activity is firms providing services to consumers and other
businesses, such as retailing, transport, insurance, banking, hotels and tourism.
Quaternary sector business activity is businesses providing information services such as
computing, web design, ICT, management consultancy and R and D.

Industrialisation:

BENEFITS PROBLEMS

GDP increases and raising standards of Chances of work may lead to urbanisation -
living housing and social problems

Lower imports, higher exports Imports of raw materials might be needed -

increasing import costs

More jobs created Expansion of multinational companies -

negative impact on the economy

expanding and profitable firms = more tax Rising incomes + living standards = extra
to the government spending on services rather than goods

Value is added to the country’s output of Competition

raw materials

Consequences of deindustrialization (decrease in importance of 1st + 2nd sector)

●​ Job losses in agriculture, mining and manufacturing industries
●​ Movement of people towards towns and cities
●​ job opportunities in service industries
●​ Increased need for retraining programmes

Public sector are organisations accountable to and controlled by central or local government
(the state)
Private sector are businesses owned and controlled by individuals or groups of individuals.
Mixed economy are economic resources owned and controlled by both private and public
sectors.
Free-market economies are economic resources owned largely by the private sector with
very little state intervention.
Command economies are economic resources owned, planned and controlled by the state.
Public corporations: a business enterprise owned and controlled by the state.

ADVANTAGES DISADVANTAGES

They are managed with social objectives Can be a tendency towards inefficiency due
rather than solely with profit objectives to lack of strict profit targets

Loss-making services might still be kept Subsidies from the government can also
operating if the social benefit is enough encourage inefficiencies

Finance is raised mainly from the Gov. may interfere in business decisions for
government political reasons - popularity

Sole trader: a business in which one person provides the permanent finance, and, in return,
has full control of the business and is able to keep of all the profits

ADVANTAGES DISADVANTAGES

Easy to set up - no legal formalities Unlimited liability - all of the owner’s assets
are potentially at risk

owner has complete control - not Often intense competition from bigger firms
answerable to anybody else

owner keeps all profits owner is unable to specialise in areas of the

business that are more interesting -
responsible for all aspects of management

owner can choose times and patterns of difficult to raise additional capital
working

owner can establish close relationships with long hours are often necessary to make the
staff business pay

business can be based on the interests or lack of continuity - as the business does not
skills of the owner have a separate legal status , when the
owner dies, the business also ends
Partnership is a business formed by two or more people to carry on a business together, with
shared capital investment and usually shared responsibilities.

ADVANTAGES DISADVANTAGES

partners may specialise in different areas of all partners have unlimited liability
business management

shared decision making profits are shared

additional capital is injected by each partner no continuity

shared business losses all partners are bound by the decisions

made by one of them

greater privacy and fewer legal formalities not possible to raise capital from selling
than in corporate organisations shares

a sole trader, taking on partners, will lose

decision making independence

Private limited company is a business that is owned by shareholders who are often members
of the same family - this company cannot sell shares to the general public.

ADVANTAGES DISADVANTAGES

Shareholders have limited liability there are legal formalities involved in

establishing the business

the company has a separate legal capital cannot be raised by the sale of
personality shared to the general public

there is continuity in the event of the death it is quite difficult for shareholders to sell
of a shareholder shares

the original owner is still often able to retain end of year accounts must be sent to the
control government office responsible for
companies, and are available for public
inspection - less secrecy over financial
affairs

the company is able to raise capital from

the sale of shares to family, friends and
employees

the company has greater status than an

unincorporated business
Public limited company is a company whose shares are traded on a stock exchange and can
be bought and sold by the public.

ADVANTAGES DISADVANTAGES

Shareholders have limited liability formation entails legal formalities

The company has a separate legal identity there can be high costs of paying for advice
from business consultants when creating a
plc

there is continuity share prices are subject to fluctuation,

sometimes for reasons beyond a business’s
control (the state or the economy)

it is easy for shareholders to buy and sell there are legal requirements concerning
shares, encouraging investment disclosure of information to shareholders
and the public (annual publication of report
and accounts)

substantial capital sources can be accessed risk of takeover due to the availability of the
due to the ability to issue a prospectus to shares on the stock exchange
the public and to offer shares for sale
(called a flotation)

directors may be influenced by the

short-term objectives of the major investors

Legal formalities in setting up a company:

●​ Memorandum of association: stating the name of the company, the address of the
company through which it can be contacted, the maximum share capital for which the
company seeks authorisation and the declared aims of the business
●​ Articles of association: document covering the internal working and control of the
business, the names of directors and the procedures to be followed at meetings

Cooperative: a jointly owned business operated by members for their mutual benefit, to
produce or distribute goods and services - as in consumers’ cooperatives or farmer’s
cooperatives

ADVANTAGES DISADVANTAGES

Buying in bulk poor management skills, unless

professional managers are employed

working together to solve problems and capital shortages because the sale of
take decisions shares to non-members is not allowed

good motivation for all members to work slow decision-making if all members are to
hard as they will benefit from shared profits be consulted on important issues
Franchise: the legal right to use the name, logo, and trading systems of an existing
successful business.

ADVANTAGES DISADVANTAGES

Fewer chances of a new business failing A share of the profits or revenue have to be
because it is using an established brand paid to the franchiser each year
name and product.

Advice and training are offered by the the initial franchise licence fee can be
franchiser expensive

The franchiser pays for national advertising local promotion may still have to be paid by
the franchisee

Supplies are obtained from established and the franchisee cannot choose which
quality-checked suppliers supplies or suppliers to use

The franchiser agrees not to open another Strict rules over pricing and layout of the
match in the local area outlet reduce the franchisee’s control over
their own business

Joint venture: two or more businesses agree to work together on a particular project and
create a separate business division to do so.
WHY? costs + risks are shared, different strengths and experiences that combine, might
have major markets in different countries and they could exploit these more effectively.
RISKS: Styles of management and culture might be so different that the 2 teams do not
blend well together, errors and mistakes may lead to one company blaming the other for
mistakes and the business failure of one of the partners would put the whole project at risk.

Social enterprise: a business with mainly social objectives that re-invests most of its profits
into benefitting society rather than maximising returns to owners.
●​ directly produce goods/provide services
●​ have social aims and use ethical ways of achieving them
●​ they need to make a profit to survive as they cannot rely on donations as charities do
 3.​ SIZE OF BUSINESS

Measures of business size:

1.​ Number of employees - many employees means large business. However, capital
intensive businesses may be large, while employing few people.
2.​ Revenue (or sales turnover) selling price x quantity sold. The higher the revenue, the
larger the business (good for comparing businesses in the same industry, but not for
businesses in different industries)
3.​ Capital employed - the total value of all long-term finance invested in the business.
The greater the value, the greater the business (misleading if it is comparing
businesses in different industries)
4.​ Market capitalization - the total value of a company’s issued shares (current share
price x total number of shares issued) But can only be used for businesses that have
shares quoted on the stock exchange (public limited companies) + it is not a stable
form of comparison, as share prices tend to change every day.
5.​ Market share (total sales of business ÷ total sales of industry) x 100. If a firm has a
high market share, it is among the leaders in the industry and comparatively large.

Small businesses are businesses that employ few people and will have a relatively low
annual revenue.
Roles:
●​ Create employment
●​ Often run by dynamic entrepreneurs with new ideas for goods/services (create
variety and consumer choice)
●​ Create competition for larger businesses (without it larger businesses could exploit
consumers with high prices and poor service)
●​ Can be important suppliers to larger businesses (often supply specialist goods/
services)
●​ All great businesses were small once (the economy will benefit from large-scale
organisations in the future)
●​ They might have lower average costs than larger ones (tend to have lower
administration and management costs)

ADVANTAGES DISADVANTAGES

Can be managed and controlled by the May have limited access to sources of
owner - little risk of losing control finance

Able to adapt quickly to changing consumer owner carries a large burden of

needs responsibility

Offer personal service to customers to build owner/workers absent, other employees

up customer loyalty may not be as skilled to operate the firm

Informal business culture (family owned) Few opportunities for economies of scale -
average costs could be high
Started up with low capital investment

Easy to form manager-worker relationship

Family businesses are those that are actively owned and managed by at least two members
of the same family.

STRENGTHS WEAKNESSES

Commitment: The members show Succession/continuity problem: Lack of

dedication in seeing the business grow, skills and ability of later generations - failure
prosper and be passed on. And so, many to be sustainable in the long-term.
members identify with a company and have
the incentive to work harder and reinvest
profits into the business

Reliability and Pride: Because the family Informality: There is usually little interest in
name and reputation are associated with setting clear and formal business practices
the products, family businesses strive to and procedures - can lead to inefficiencies
increase the quality of their output and and internal conflicts.
maintain good relations with stakeholders.

Knowledge continuity: Families prioritize Tradition: reluctance to change systems

passing their accumulated knowledge and procedures, with family members
preferring to continue to operate the
business as it was run historically - lack of
innovation

Conflict: problems within the family may

reflect on the management and decisions of
the business - ineffectiveness

Importance of small businesses for the economy:

●​ Help generate economic growth (higher output)
●​ Jobs dependent
●​ innovative, creating competition

Role of small businesses in some industries:

●​ specialist services such as research, technical support, repair and maintenance.
●​ Undertake functions that the larger business wants to buy in rather than undertake
titself, such as recruitment and training of employees, or transport of supplies, this
allows the larger business to focus on their main or core activities and may reduce
their overall costs.

Business growth. Reasons for seeking it:

●​ Increased profits
●​ Increased market shares
●​ Increased economies of scale
●​ Increased power and status of the owners and directors - increased opportunities to
gain publicity or influence government policy
●​ Reduced risk of being a takeover target
Organic growth is the expansion of a business by means of operating new branches, shops
or factories (also known as internal growth)

External growth is business expansion achieved by integrating with another business by

either merger or takeover. Types of external growth:
●​ Horizontal integration is integration with a business in the same industry and at the
same stage of production

ADVANTAGES DISADVANTAGES IMPACT ON

STAKEHOLDERS

Eliminates one competitor Rationalisation may bring Consumers now have less
and increases market share bad publicity and choice and may have to pay
and power redundancies higher prices

There are potential There may be customer Workers may lose job
economies of scale opposition to less security as a result of
competition and less choice rationalisation:
●​ Suppliers may have
There is scope for May lead to a monopoly to offer lower prices
rationalising production, investigation if the combined ●​ Shareholder impact
concentrating all output on business exceeds certain depends on whether
one site instead of two market share limits profit rises or not
●​ Local communities
Increased power over may have job losses
suppliers to obtain lower
prices

●​ Vertical integration is integration with a business in the same industry:

●​ Forward vertical integration is integration with a customer business

ADVANTAGES DISADVANTAGES IMPACT ON

STAKEHOLDERS

The business is now able to Consumers may suspect Workers may have greater
control the promotion and and attempt to act job security as the business
pricing of its own products uncompetitively and react haves more secure outlets
negatively

Gives a secure outlet for the The business may lack There may be more varied
products of the business experience in this sector of career opportunities
and may now exclude the industry - a successful
competitors’ product from manufacturer does not
retail outlets make a good retailer

Consumers may resent the

lack of competition in the
retail outlet because of the
withdrawal of competitor’s
products
 ●​ Backward vertical integration is integration with a supplier business

ADVANTAGES DISADVANTAGES IMPACT ON

STAKEHOLDERS

Gives control over quality, May lack experience of Workers may have more
price and delivery time of managing a supplier career opportunities
supplies company

Encourages joint R&D into The supplying business may Consumers may obtain
improved quality of become complacent due to improved quality and
components having a guaranteed innovative products
customer
The business may now Control over supplies to
control supplies of materials competitors may limit
to competitors competition, and choice for
consumers

Profit might rise, benefiting

shareholders

●​ Conglomerate integration is integration with a business in a different industry

ADVANTAGES DISADVANTAGES IMPACT ON

STAKEHOLDERS

Diversifies the business There may be a lack of Workers may have more
away from its original management experience in career opportunities
industry and markets the acquired business
sector Profits could rise, benefiting
shareholders

Should spread risk and may There could be a lack of There may be more job
take the business into a clear focus and direction security because risks are
faster-growing market now that the business is spread across more than
spread across more than one industry.
one industry

A merger is an agreement by owners and managers of two businesses to bring them

together in a new combined business.

Takeover is when a company buys more than 50% of the shares of another company,
becoming its controlling owner.

Reasons why a merger/takeover might fail to achieve its objectives:

●​ Too big to manage/control effectively = diseconomy of scale
●​ Incompatibility of different business and management culture
●​ Rate of growth too rapid for the directors to manage effectively
 Problems of growth through Possible strategies to overcome problems
mergers/takeovers

FINANCIAL FINANCIAL

Takeovers can be very costly, stretching the Use internal sources of finance when
financial resources of the business possible, for example retained earnings

Additional fixed capital and working capital Raise finance from share issues
will be required quickly

A merger/takeover could lead to negative Offer shares, not cash, to pay for takeover
cash flow and an increase in long term
borrowing and interest payments

MANAGERIAL MANAGERIAL

existing management may be unable to New management systems and structures

cope with problems of controlling an are required: a policy of delegation and
operation which may have doubled in size employee empowerment should reduce the
overnight pressure on senior management

There may be a lack of coordination A decentralisation policy could provide

between the divisions of an expanding motivated managers with a clear local focus
business

the culture clash between the two A new management culture needs to be put
management teams may be very great in place rapidly

Joint ventures and strategic alliances are further forms of external growth.
Strategic alliance is an agreement between two organisations to commit resources to
achieving a specific objective while remaining independent.
4. BUSINESS OBJECTIVES

A business objective is a stated measurable target that a business plans to achieve.

By setting clear objectives, managers will:

●​ Create a sense of direction and purpose for employees, increasing motivation

●​ Provide specific targets for future business strategies to aim for
●​ Give means of assessing success or failure when actual business performance is
judged against the original objectives

Objectives of private sector businesses:

●​ Profit maximisation (rewarding investors + financing further growth)
●​ profit satisficing (achieve enough profit to keep the owners satisfied)
●​ Growth (less likely to suffer takeover + benefit from economies of scale)
●​ increasing market share (marketing strategies successful)
●​ survival (for start-ups)
●​ Corporate social responsibility (CSR) (considering interests of society: social
environmental and ethical issues - avoid adverse publicity + good reputation +
pressure groups)
●​ Maximising short-term revenue (salaries + bonuses)
●​ Increasing shareholder value

Objectives of social enterprises: (triple bottom line- the three objectives of social enterprises)
●​ Economic - make profit to reinvest back into the business and provide some financial
return to owners
●​ social - provide jobs or support for local, often disadvantages, communities
●​ Environmental- protect the environment and to manage the business in an
environmentally sustainable way

Objectives of public sector businesses:

●​ Provide an efficient, reliable service to the public, such as water supply or postal
service
●​ to encourage economic and social development, especially in deprived areas
●​ to create employment or prevent major job losses if the industry is making a financial
loss
●​ to meet financial targets set by the government, but not necessarily to make a profit.
●​ to achieve high environmental standards
●​ if they achieve social or environmental objectives, this helps the government achieve
its overall political objectives
SMART objectives

S Specific

M Measurable

A Achievable

R Realistic and Relevant

T Time - limited

Factors that influence/determine business objectives: Business culture, the size and legal
form of the business, private sector or public sector, the number of years in operation and
ethics.

Mission statement is a brief statement of the business’s core aims, phrased in a way to
motivate employees and to stimulate interest from outside groups.

BENEFITS LIMITATIONS

Inform groups outside the business what too vague and general, so that they end up
the central aim and vision are saying little that is specific about the
business cannot be used as actual targets

motivate employees, as they are associated just a public relations exercise to make
with the positive qualities the statement stakeholder groups feel good about the
refers to organisation

often include moral statements or values to virtually impossible to really analyse or

be worker towards, which might help to disagree with
guide and direct individual employees’
behaviour at work

help to establish what the business is too general and lacking in specific detail, so
about, for the benefit of the other groups two completely different businesses could
have very similar mission statements.

A business strategy is a long-term plan of action for a business, designed to achieve a

particular objective. While a tactic is a short-term action.

Objectives might change over time because of: a businesses satisfying the survival objective
after years, and now is wishing to suffice the objective of growth, the competitive and
economic environment may change e.g a powerful rival entering the market or an economic
recession, and if the short-term objective of growth in sales or market share might be
adapted to a longer-term objective of maximising profits to higher level of sales.

Ethical influences on business objectives and activities: (ethical code: rules or guidelines on
staff behaviour)
 ●​ ethical dilemmas e.g child labour, dangerous goods, polluting equipment, bribes,
testing on animals,

Following a strict ethical code can be expensive in the long-term:

●​ Using ethical and Fairtrade suppliers can add to business costs
●​ Not taking bribes to secure business contracts can mean failing to secure significant
sales
●​ Paying fair wages, raises wage costs
●​ limiting advertising of toys to just adults, so that children do not pester them to buy,
results in loss of sales
In the long term, there can be substantial benefits from acting ethically:
●​ Avoiding potentially expensive court cases can reduce the cost of fines
●​ acting unethically can lead to bad publicity, lost customer loyalty, and long term
reduction in sales, while ethical policies leads to good publicity + increased sales
●​ ethical businesses attract ethical customers, and as world pressure grows for CSR,
the group of consumers increase
●​ well qualified employees may be attracted to the most ethical and socially
responsible policies
5. STAKEHOLDERS IN A BUSINESS

These are owners, employees (internal stakeholders) customers, suppliers, local

communities, government, special interest groups (pressure groups), and lenders (external
groups)

Roles Rights Responsibilities

Customers ●​ purchasing ●​ receive goods ●​ to be honest - to

goods and and services pay for goods
services that meet bought ot
●​ provide local laws of services
revenue from health, safety, received
sales, allowing design and ●​ not to steal
the business to performance ●​ not to make
function and ●​ to be offered false claims
expand replacements, about poor
repairs or service,
compensation underperforming
in the event of goods or failed
failure of the items
product or
service to at
least the
minimum
levels laid
down by the
law

Suppliers ●​ to supply goods ●​ to be paid on ●​ to supply goods

and services to time as stated + services
allow the in the service ordered by the
business to agreement business in the
offer its product ●​ to be treated time + condition
to its own fairly + not to laid down by the
customers be exploited purchase
by the contract/
business suppliers

Employees ●​ to provide ●​ to be offered ●​ to be honest

manual and employment ●​ to meet the
other labour contracts that conditions and
services to the meet legal requirements of
business in standards the contract
accordance of ●​ to be treated ●​ to cooperate
the and paid in with
employment the ways management in
contract, to described by all reasonable
allow goods the contract requests
and services to ●​ to be allowed ●​ to observe the
be provided to to join a trade ethical code of
 customers union conduct

Local ●​ to provide the ●​ to be ●​ to cooperate

community labour services consulted with the
required by the about major business, if
business changes that reasonable to
affect it (e.g do so, on
expansion expansion and
plans) other plans

Local ●​ to provide local ●​ not to have ●​ to meet

government services + the reasonable
infrastructure to community’s requests from
the business to lives badly the business for
allow it to affected by local services
operate, the business’s such as public
produce + sell activities transport for
within legal employees +
limits waste disposal

Government ●​ to pass laws ●​ to expect the ●​ to treat all

that restrain business to equally under
many aspects meet all legal the law
of business constraints, ●​ to prevent unfair
activity such as competition,
●​ to provide law, producing could damage
order + only legal chances of
economic goods and to business
stability to allow pay taxes on survival
business time ●​ establish good
activity to take trading links with
place other countries

Lenders ●​ provide finance ●​ to be repaid ●​ to provide the

to the business on the agreed agreed amount
date of finance on the
●​ to be paid agreed date for
finance the agreed time
charges e.g period
interest

Managers ●​ to control, ●​ to have ●​ to report to

command and contract of stakeholder; to
direct employment; act legally and
resources to have ethically
sufficient
authority to
fulfil roles

Owners ●​ to provide ●​ to receive a ●​ to set targets for

/shareholders finance share of managers; give
profits; to managers
receive adequate time
accurate and resources
 reports on to meet targets
business
performance

Trade union is an organisation of working people with the objective of improving the pay and
working conditions of its members and providing them with support and legal services.

The increasing importance of Corporate Social Responsibility (CPS) shows businesses are
becoming more accountable to their stakeholders, they show more understanding of
stakeholder’s aims in their decision making.

The stakeholder concept is the view that businesses and their managers have
responsibilities to a wide range of groups, not just shareholders.
10. HUMAN RESOURCE MANAGEMENT

Human resource management is the strategic approach to the effective management of

employees so that they help the business gain a competitive advantage. It aims to recruit
capable, flexible and committed people. It manages and rewards their performance and
develops their key skills to the benefit of the organisation.

It focuses on:
●​ workforce planning - how many, and what skills are needed
●​ recruitment and selection of appropriate employees
●​ developing employees by appraising and training them
●​ preparing employment contracts for all employees
●​ dismissal and redundancy of employees
●​ taking responsibility for management and workforce relations
●​ monitoring and improving employee morale and welfare
●​ introducing and managing payment and other incentive systems
●​ measuring and monitoring employee performance

Workforce planning is forecasting the numbers of workers and the skills that will be required
by the organisation to achieve its objectives

Workforce audit is a check on the skills and qualifications of all existing workers/managers.

The number of employees required will depend on:

●​ forecast demand for the product
●​ the productivity level
●​ the objectives of the business
●​ changes in the laws regarding worker’s rights
●​ the labour turnover and the absenteeism rate

The skills of the workers required will depend on:

●​ the pace of technological change in the industry
●​ the need for flexible/multi-skilled workers as businesses try to avoid excessive
specialisation

Labour turnover is the rate at which employees are leaving an organisation

= number of employees leaving in 1 year

__________________________________ X 100

average number of people employed

 DISADVANTAGES OF HIGH LABOUR BENEFITS OF HIGH LABOUR
TURNOVER TURNOVER

Costs of recruiting, selecting and training low-skilled and less productive staff might
new staff be leaving and could be replaced with more
carefully selected workers

poor output levels and customer service new ideas and practices brought into an
due to staff vacancies before new recruits organisation by new workers
are appointed

difficult to establish customer loyalty due to high labour turnover can help a business
a lack of regular, familiar contact plan to reduce employee numbers, as
workers who leave will not be replaced
difficult to establish team spirit

Recruitment is the process of identifying the need for a new employee, defining the job to be
filled and the type of person needed to fill it, and attracting suitable candidates for the job.
Selection is the process by which candidates are interviewed, tested and screened to
choose the most suitable person for a vacant post. ➜ needed when the business is either
expanding or employees of a business are leaving and need to be replaced:

1.​ establishing the exact nature of the job and drawing up a job description
2.​ drawing up a person specification
3.​ preparing a job advertisement
4.​ making a shortlist of applicants
5.​ selecting between the applicants

Job description is a detailed list of the key parts about the job to be filled, stating all its key
tasks and responsibilities,
Person specification is a detailed list of the qualities, skills and qualifications that a
successful applicant will need to have.
Application form is a set of questions answered by a job applicant to give a potential
employer information about the applicant, such as educational background and work
experience.
Curriculum vitae (CV) is a detailed document highlighting all of a person’s professional and
academic achievements, work experience and awards
Résumé is a less detailed document than a CV, which states work experience, educational
background and special skills
Reference is a comment from a trusted person about an applicant’s character or previous
work performance.

Internal recruitment is when a business fills a vacancy from within its existing workforce
External recruitment is when a business fills a vacancy from an applicant from outside the
business.

Employment contract is a legal document that sets out the terms and conditions governing a
worker’s job.
Redundancy is when a job is no longer required, the employee doing this job becomes
unnecessary through no fault of their own.
Dismissal is being dismissed from a job due to incompetence or breach of discipline.

Employee morale is the overall outlook, attitude and level of satisfaction of employees when
at work.
Employee welfare is employees’ health, safety and level of morale when at work.
Most HR departments offer advice, counselling and others to employees who are in need of
support, this can reflect well on workforce relations, improve morale and loyalty to the
business.

Work-life balance is a situation in which employees are able to allocate the right amount of
time and effort to work and to their personal life outside work. HR assisting employees to
achieve this, reduces stress and increases employee efficiency. Through:
●​ flexible working
●​ teleworking
●​ job sharing (two people filling one full-time vacancy)
●​ sabbatical periods

Equality policy is practices and processes aimed at achieving a fair organisation where
everyone is treated in the same way without prejudice and has the opportunity to fulfil their
potential.
Diversity policy is practices and processes aimed at creating a mixed workforce and placing
a positive value on diversity in the workplace.

Equality creates:
●​ high employee morale + motivation
●​ develops a good reputation + the ability to recruit top talent based on fairness
●​ measuring employee performance through merit, not by any discriminatory factor

If a company is discriminatory, employees are likely to become discouraged and

unmotivated.

Diversity creates:
●​ capturing a bigger market share as consumes are attracted by a diverse sales force
●​ employing a more qualified workforce as selection is based on merit and not on
discrimination
●​ increasing creativity as individuals from different backgrounds approach
problem-solving in different ways
●​ achieving cultural awareness, leading to improved knowledge about foreign markets
●​ promoting diverse language skills, which allows businesses to provide products and
services internationally

Training is work-related education to increase workforce skills and efficiency

1.​ Induction training ➜ introductory training programme to familiarise new recruits with
the systems used in the business and the layout of the business site
2.​ On-the-job training ➜ instruction at the place of work
3.​ Off-the-job training ➜ training undertaken away from the place of work
Impact of training:

●​ ✅Untrained employees will be less productive, less flexible and less adaptable, and
so giving unsatisfactory customer services.
●​ Workers untrained in health and safety matters are likely to create accidents.
●​ Additionally, training motivates and satisfies workers, without being pushed to
achieve a higher standard and better skills, workers may become bored and
unmotivated
●​ Multi-skilling of workers is beneficial to a business, especially in times of rapid

❌
economic and technological change
●​ Can be expensive
●​ Can lead to well-qualified employees leaving for a better paid job once they gain
better qualifications - can discourage businesses from setting up expensive training
programmes.
●​ Workers may be less productive during the training programme (especially in
off-the-job training)

Employee appraisal is the process of assessing (giving feedback) the effectiveness of an

employee judged against pre-set objectives - done to increase staff development, and allows
the future performance of the worker to be linked to the business objectives (important
factors of Herzberg’s motivation factors, that can provide high motivation levels)

Employee development to encourage intrapreneurship

Many businesses have training and development programmes with the specific aim of
encouraging employees to become successful intrapreneurs. Most employees can
demonstrate intrapreneurship if they are:
​ ​ ​ ​ ​ ​
●​ encouraged to be independent thinkers and creative
●​ given opportunities to mix and work with other skilled employees from different
departments
●​ empowered with the authority and resources they need to introduce innovations
●​ assured that some failure is expected and acceptable. Removing the ‘don’t fail’ ethos
is important – intrapreneurs are meant to take risks and some of their ideas will not
work!​
●​ encouraged to start with small ideas and innovations – before moving on to the
bigger issues. ​
​ ​ ​ ​ ​ ​ ​
Benefits of cooperation between management and the workforce:
●​ Fewer days are lost through strikes and other forms of industrial action
●​ Much easier for the management to introduce change in the workplace (decisions)
●​ The contribution is likely to be recognised by management - pay levels + other
benefits
●​ Agreement on more efficient operations will increase the competitiveness of the
business
●​ Worker’s practical insight can contribute to more successful decisions
Impact of trade union involvement in the workplace:
●​ ability to engage in collective bargaining (negotiating terms of employment on behalf
of all the employees) putting employees on a stronger position than if they negotiated
individually to gain higher pay deals or better conditions
●​ Collective industrial action has much more influence over employees during industrial
disputes (rather than individual action)
●​ Unions provide legal support to employees who claim unfair dismissal/poor working
conditions
●​ Unions put pressure on employers to ensure that all legal requirements are met

Benefits of collective bargaining:

●​ Employers can negotiate with one trade union officer rather than with individual
workers
●​ Union officials can provide a useful channel of communication with the workers
●​ Unions can impose discipline on members - making industrial action less likely
●​ The growth of responsible partnership has given employers a valuable forum for
discussing issues of common interest and making new workplace agreements -
increased productivity, helping to secure jobs and raise profits

Disputes between trade union and management: Trade unions can use industrial action
during a dispute=
●​ continue collective bargaining
●​ go slow - working at the minimum pace demanded by the employment contract
●​ work-to-rule - refusing to do any work outside the precise terms of the contract
●​ Overtime bans - workers refuse to work more than the contracted hours of each
week
●​ Strike action - employees totally withdraw their labour for a period of time

Employers can use various methods to try to resolve an industrial dispute:

●​ Negotiations to reach a compromise solution
●​ Public relation campaign to gain public support and put pressure on the union to
compromise
●​ Threats of redundancies
●​ Lock-outs - short-term closure of the business to prevent employees from working
and being paid
●​ Closure - redundancy of all workers
11. MOTIVATION

Motivation gives workers the desire to complete a job quickly and well.

Well-motivated workers benefit the businesses they work for in several ways:

• The level of productivity will be high, increasing the competitiveness of the business.
• Workers will be keen to stay with the business, reducing the costs of labour turnover.
• Workers will be more likely to offer useful suggestions to help the business achieve its
objectives.
• They will often work hard to seek promotion and responsibility.

Motivation Theories:​

1.​ Taylor - Economic man (workers motivated by money alone)

2.​ Mayo - ‘Hawthorne effect’ - If employees feel valued and included, they will be
motivated
3.​ Maslow - ‘hierarchy of needs’ Employees are motivated by each level of the
hierarchy: Physical needs (food, shelter, water…), Safety needs (Job security, health
at work), Social needs (trust, acceptance, friendship), Esteem needs (respect from
others, status) and Self-actualisation (reaching one’s full potential)
4.​ Herzberg - Hygiene factors: which are company policy and administration,
supervision, salary, relationships with others and working conditions. And motivators:
which are achievement, recognition for achievement, the work itself, responsibility
and advancement.
5.​ Mcclelland - Motivational needs: Achievement motivation (need for achievement)
Authority motivation (need to have power) and Affiliation motivation (the need for
relationships and interactions)
6.​ PROCESS THEORY: Vroom - employees behave in ways they believe will lead to
results they value.

Financial motivators:

✅
●​ Time-based wage rate: payment per hour
Offers some security over pay levels + different rates can be offered to different types of

❌
workers
no incentive to increase output as pay level is not linked to output + labour cost per unit
will depend on output, which may vary
✅
●​ Piece rate: fixed wage for the production of each unit

❌
Motivates workers to increase output + easy to calculate the labour cost per unit
Quality might fall + no security over the level of pay + workers may become stresses and
unwell trying to earn more

✅Offers security of a pay level + different salary levels for different grades of workers +
●​ Salary: fixed amount of money

suitable for jobs where output is not measurable + labour costs are easier to forecast (often

❌
fixed for one year)
Not directly linked to output - quality + may led to low achievement/motivation if the effort
of the employee is not regularly checked with appraisal

✅It creates the incentive to increase sales + it may be in addition to a basic salary so it
●​ Commission: a payment for a salesperson for each sale made

❌It discourages teamwork amongst sales employees + it may lead to pressurised selling
could offer some security of pay too

which damages customer relationships

✅
●​ Bonus payment: pay in addition to their contracted wage or salary
Paid to individuals for outstanding work or to teams for reaching targets +creates the
incentive for employees to do well + it is an addition to basic salary, so offers some security

❌
too
Can cause resentment if the bonus is not received + damages team spirit if some
members receive a bonus and others do not + reduces motivation if no bonuses are paid

✅Individual bonuses for meeting predetermined targets may encourage workers to work
●​ Performance-related pay: addition if performance is good

hard to meet these targets + target setting can form part of the hierarchy of objectives to

❌
meet the company’s aims
Requires frequent target setting and appraisal interviews + if the bonus is low, it may not
lead to greater effort as motivation will not be increased + managers might show favouritism
to some employees by giving generous bonus payments

✅aims to increase the commitment of the workforce to make the business profitable + it
●​ Profit sharing: a bonus for staff based on the profits of the business

❌might only be a very small proportion of total profits so is not motivating + shareholders
might lead to suggestions for cost cutting and ways to increase sales

might object as it could reduce profit for them + it reduces profit retained for expansion
 ●​ Share-ownership schemes: a scheme that gives employees shares in the company

✅
they work for or allows them to buy shares at a discount
reduces the conflict of objectives between owners and workers + encourages an
increased sense of belonging and commitment + workers are more likely to participate in

❌
decision making aimed at business success
may be a very small number of shares so is not motivating + shares might just be sold so
there is no long term commitment + managers often receive more shares so there may be
workforce resentment

Fringe benefits: benefits given, separate from pay, by an employer to some or all employees
They are non-cash forms of reward (e.g company cars, free insurance, pension schemes,
private health insurance, discounts on company products or low interest rate loans) - used to
give status to higher level employees and retain and recruit the best staff.

Non-financial motivators:

✅
●​ Job rotation: a scheme that allows employees to switch from one job to another
May relieve the boredom of doing one task + can give the worker more skills, making the

❌
workforce more flexible + workers are more able to cover for a colleague’s absence
It is more limited in scope than job enrichment + does not increased the empowerment or
responsibility for the work being performed + does not necessarily give a workers complete
unit of work to produce, but just a series of separate tasks of a similar degree of difficulty

●​ Job enlargement: an attempt to increase the scope of a job by broadening or

deepening the tasks undertaken - made more interesting/challenging

●​ Job enrichment: aim to use the full capabilities of workers by giving them the

✅
opportunity to do more challenging and fulfilling work
Complete units of work are produced so that the worker’s contribution can be identified
and more challenging work can be offered + direct feedback on performance, allowing

❌
workers to have an awareness of their own progress + new skills acquired
Lack of training to cope with the greater task depth can result in lower productivity +
workers may see enrichment as an attempt to get them to do more work + if they cannot
cope they may be frustrated and demotivated
 ●​ Job redesign: the restructuring of a job to make the work more interesting, satisfying
and challenging

●​ Training and development: the gaining of new or advanced skills and knowledge as

✅
well as opportunities to apply what is gained
Improving and widening skills can increase the productivity and flexibility of the workforce
and its ability to deal with change + may increase the status of workers and give them
access to more challenging, and probably better paid jobs within the business + it
encourages employees to reach their full potential, increasing opportunities for
self-actualisation + incentivises employees to stay in the business as they are recognised

❌
and appreciated
Training can be expensive + the programmes take employees away from their work, so
other employees may need to cover for them + it can lead to employees leaving the
business as they become better qualified to gain employment in other companies

Employee participation in management and the control of business activity:

The benefits of participation include job enrichment, improved motivation and greater
opportunities for workers to show responsibility. In addition, better decisions could result
from worker involvement as they have in-depth knowledge of operations, whereas some
managers lack this.

The limitations of participation are that it may be time-consuming to involve workers in every
decision. Autocratic managers would find it hard to adapt to the idea of asking workers for
their opinions. Such managers may set up a participation system but have no intention of
actually responding to workers’ input. This approach could eventually prove to be very
demotivating for workers.

Teamworking: production is organised so that groups of workers undertake complete units of

work

ADVANTAGES DISADVANTAGES

Teams are empowered by being given Not everyone is a team player and some
decision making authority individuals are more effective working
alone. Training may need to be offered to
Workers will not want to let down other those who are not used to team working +
team members - absenteeism would fall some may feel left out at team meetings

Workers are likely to be better motivated as Teams can develop a set of values/attitudes
social and esteem needs are met which may conflict with the organisation’s,
especially if there is a dominant person in
Better motivation increases productivity and the group - they need clear goals (ensure
reduces labour turnover they are following the organisation goals)

It makes full use of all the talents of the Will require training to improve employee
workforce flexibility - can be costly

Can lead to lower management costs as There may be disruption to production as

employees manage each other teams establish themselves
Empowerment: the giving of skills, resources, authority and opportunity to employees so that

✅
they can take decisions and be accountable for their work:
leads to quicker problem solving, no time wasted in referring them to managers + higher
levels of motivation and morale as workers feel recognised + higher levels of involvement
and commitment improve two-way communication and help reduce labour turnover +

❌
managers able to focus on bigger issues as they are released from routinely issues
Lack of experience increases risk - employees must be trained + reduced supervision and
control might lead to poor decisions + there may be lack of coordination between workers as
different take different approaches to problems + some employees may be reluctant to
accept more accountability but feel they have to in order to keep their job secure

Quality circles: a voluntary group of workers who meet regularly to discuss, and try to

✅
resolve, work related problems and issues
Workers have experience of work problems - good solutions + results of the meetings are
presented to management, adopting the best ideas + effective method of participation of all

❌
employees (Herzberg’s workers accepting responsibility + challenging tasks)
Meetings can be time consuming and reduce the time available for production + not all
employees will want to be involved, preferring to get on with their job + QCs may not have th
management power to make the changes they recommend, if management ignores the
proposals, employees will become discouraged and unwilling to participate
12. MANAGEMENT

Management is the organisation and coordination of activities in order to achieve the defined
objectives of the business.

Managers are the people responsible for: Planning, Organising, Directing and Controlling so
that business objectives are met

The role of managers

FAYOL MINTZBERG

He defined 5 functions of management, To carry out their functions, managers have

necessary to facilitate the management to undertake many different roles:
process: ●​ Interpersonal roles: dealing with and
1.​ Planning: thinking ahead, and motivating employees at all levels of
planning to put objectives into effect the organisation
2.​ Organising resources to meet ●​ Informational roles: acting as a
objectives: employees need to be source, receiver and transmitter of
recruited carefully and encouraged information
to take some authority + ●​ Decisional roles: taking decisions
accountability. and allocating resources to meet the
3.​ Commanding, directing and organisation’s objectives
motivating employees: Guiding,
leading and overseeing employees Mintzberg believed that Fayol’s division of
to make sure objectives are met. managerial tasks into 5 functions was too
Employee development to motivate closed and limited.
employees to use all of their abilities
and managers should motivate a
team and encourage employees to
show initiative
4.​ Coordinating activities: ensure
consistency and coordination
between different parts of the
business. The goals of each branch,
division, region and employee must
be welded together to achieve a
common sense of purpose
5.​ Controlling and measuring
performance against targets

The contribution of managers to business performance. Effective management indicators

are:

●​ Business regularly meets its objectives

●​ high levels of customer satisfaction
●​ high employee motivation levels and low labour turnover
●​ a respected brand image
●​ high regard from external stakeholders such as environmental and social pressure
groups
●​ excellent communication both within the business and with external stakeholders
Types of management:

MAIN FEATURES: LIMITATIONS POSSIBLE

APPLICATIONS/USEFULNESS

Autocratic: ●​ demotivated workers ●​ defence forces and police

Leader takes all the who want to contribute where quick decisions are
decisions, little info. ●​ decisions do not needed and the scope for
given to workers, benefit from employee discussion must be limited
workers supervised input ●​ in times of crisis when
closely, only one-way ●​ workers become decisive action might be
communication dependent on needed to limit damage to
managers - low the business or danger to
initiative others

Democratic: ●​ consultation with ●​ in businesses that expect

participation workers can be workers to contribute fully to
encouraged, two-way time-consuming the production + decision
communication, allowing ●​ quick decision making making processes
feedback from workers, may be required ●​ an experienced and flexible
workers given info. ●​ some business’ issues workforce will likely benefit
may be too from this style
sensitive/secret to ●​ in situations that demand a
allow involvement new way of thinking,
employee input = valuable

Paternalistic: ●​ some workers will be ●​ used by managers who have

managers do what they dissatisfied with the a real concern for workers’
think is best for workers, apparent attempts to interest, but feel that
some consultation may consult, while not managers know best in the
take place, but final having any real power ends
decisions are taken by or influence and true ●​ when workers are
the managers, participation in young/inexperienced this
managers want workers decision-making may be the appropriate style
to be happy in their jobs

Laissez-Faire: ●​ workers may not ●​ when managers are to

managers delegate appreciate the lack of busy/lazy to intervene
virtually all authority and structure and direction ●​ may be appropriate in
decision making powers, in their work - loss of research institutions where
very broad criteria or security experts are more likely to
limits might be establish ●​ lack of feedback may arrive at solutions when not
for the staff to work be demotivating constrained by narrow rules
within or management controls

McGregor’s:
Theory X managers believe that works can derive as much enjoyment from work as from
rest and play, will accept responsibility and are creative.
Theory Y managers believe that workers: dislike work, will avoid responsibility and are not
creative.
The management style used will depend on:
●​ the training and experience of the workforce and the degree of responsibility that they
are prepared to accept
●​ the amount of time available for consultation and participation
●​ the attitude of managers, or the management culture of the business. This is
influenced by the personality and business background of the managers, such as
whether they have always worked in an autocratically run organisation.
●​ The importance of the issues under consideration. Different styles may be used in
the same business in different situations. If the business is at risk, resulting from poor
or slow decisions, then it is more likely that management will make decisions in an
autocratic way.
​ ​ ​ ​ ​
Democratic leadership − involving participation and two-way communication – is increasingly
common for a number of reasons. Working people are better educated than before and have
higher expectations of their experience from work. They expect their higher-level needs to be
satisfied at work. Many managers realise that the rapid pace of changes at work, as a result
of technological and other factors, has increased the need to consult workers and involve
them in the process of change. People find change less threatening and more acceptable if
they have been involved in some meaningful way in managing it. ​
​ ​ ​ ​ ​ ​ ​
17. THE NATURE OF MARKETING
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Marketing is the process of identifying, anticipating, and satisfying customer requirements
profitably. Involves:​

●​ market research
●​ product design and packaging design
●​ pricing, advertising and distribution
●​ customer service

Marketing objectives:

●​ increase in the market share

●​ increase total sales
●​ increases avg. number of items purchased per customer visit
●​ increase frequency of shopping by loyal customers
●​ increase % of customers who return
●​ increase number of new customers
●​ increase brand identity

Marketing objectives should coordinate with the following departments:

1.​ Finance: will use the sales forecast of the marketing department to help construct
cash flow forecasts and operational budgets + will have to ensure that the necessary
capital is available to pay for the agreed marketing budget for promotional
expenditure
2.​ Human resources: sales forecast will be used by HR to help prepare a workforce
plan e.g additional workers needed in sales teams + HR must ensure the recruitment
and selection of qualified and experienced workers
3.​ Operations: market research data will play a key role in new product development +
will use sales forecasts to plan the capacity needed, the purchase of the machines
and the raw material inventories required for the higher output level

Meeting consumer wants profitably means that managers need to know how markets
operate in determining prices. If the business can produce the product at a cost below its
market price, it should be profitable. In free markets, the equilibrium price is determined
when demand equals supply.

Demand varies with price, for normal goods, the quantity bought rises with a price falls.
Demand also varies with: consumer incomes, prices of substitute/complementary goods,
population size and structure, fashion and taste and advertising and promotion spending.

Supply varies with price, businesses will be more willing to supply more if the price of that
product rises. Supply is determined by costs of production. govt. taxes imposed on suppliers,
govt. subsidies to suppliers, weather conditions/natural factors, and advances in technology.
The price level at which demand = supply is the equilibrium price. If the price is higher than
the equilibrium price, there will be unsold inventory - excess supply. If the price is lower than
the EP, there is excess demand, as inventories will run out. Supplies receive a higher profit
by raising the price to the equilibrium level

Market is where buyers and sellers meet to engage in exchange.

An industrial market deals with products bought by businesses (machinery, office supplies…)
A consumer market deals with products bought by the final users of the product (clothes,
phones…)​

Customer orientation requires market research and market analysis to measure present and
future demand. Customers and their needs come first. Benefits of consumer orientation:

●​ Chances of newly developed products failing in the market are reduced - as a

consequence of market research
●​ Products based on consumers’ needs will have a longer lifespan and be more
profitable than those that are sold using a product-led approach
●​ Constant feedback from customers will allow the product and the method of
marketing it to be adapted to changing tastes

Product orientation, is fast disappearing, but it still exists to a limited extent:​

●​ Product-oriented businesses invent and develop products as they believe they will
find customers to purchase them. There is still the belief that if a business produces
an innovative product of good enough quality, then it will be purchased (e.g dyson’s
bagless vacuums)
●​ Product-oriented businesses concentrate their efforts on efficiently producing high
quality goods. They believe quality will be valued above market fashion. Such quality
driven firms still do exist, especially in areas where quality/safety is of great
importance such as the manufacture of advanced medical equipment.

Market size can be measured in two ways: quantity of sales (units sold) , or the value of
products sold (revenue) It is important as:​

●​ it allows a marketing manager to assess whether a market is worth entering or not

●​ it allows a business to calculate its own share of the market
●​ the growth or decline of the market over time can be identified

The rate of market growth depends on several factors:

●​ a country’s rate of economic growth

●​ changes in consumer incomes
●​ development of new markets and products that reduce sales in existing markets and
products
●​ changes in consumer tastes
●​ technological change
Consequences to a business from a change in market growth:

INCREASED MARKET GROWTH REDUCED MARKET GROWTH

Sales will increase if the business’s market Sales will increase more slowly even if the
share remains the same business’s market share remains the same

It may be possible to increase prices and Competitors might reduce prices to

profit per unit increase sales in a slow-growing market

Increased sales could lead to cost savings Lower prices might result in lower profit per
unit

More businesses might be attracted to the Businesses might consider expanding into
market, increasing the level of competition faster-growing markets

Market share:

The product with the highest market share is called the brand leader.

Implications of:

AN INCREASE IN MARKET SHARE A FALL IN MARKET SHARE

Sales are rising faster than those of Sales are likely to fall unless there is rapid
competitors, leading to higher profits market growth

Retailers will be keen to stock and promote Retailers will be less keen to stock and
the best selling brand - brand image better promote the product

The business with the brand leader may be Larger discounts to retailers may have to be
able to reduce the discount rate to retailers offered
- higher profitability

Brand leader can be used in advertising The product may no longer be brand leader,
other products - consumers are often keen so promotions will not be able to state this
to buy from the most popular brands

B2C Business to consumer

B2B Business to business

The key differences between selling to businesses rather than consumers are:​

●​ Most industrial products, such as equipment for power stations, are much
more complex than many consumer products so specialist sales employees
and support services will be more important with B2B selling.​ ​
​ ​ ​ ​ ​
 ●​ Industrial buyers often have much more market power and are better
informed than the average consumer. They need to be sold products by
well-trained and experienced sales employees.
​
●​ Industrial buyers will rarely buy on impulse. They will only purchase after long
consideration and detailed analysis of alternative products. A business selling
B2B needs to keep in regular contact with industrial customers.​
​ ​ ​ ​ ​ ​ ​
●​ Traditional mass media advertising and sales promotion techniques are not
used in most industrial markets. Selling can be via trade fairs or direct contact
with industrial buyers, often, initially, via websites.​
​ ​ ​ ​ ​ ​ ​
●​ Mass marketing in consumer markets is a common strategy but in most
industrial markets there are relatively few buyers. Products may need to be
adapted to meet the needs of a particular business buyer. An example of this
would be a specialist elevator system for a very tall hotel building.

Mass marketing is selling standardised products or ranges of products in the same way to
the whole market.

ADVANTAGES DISADVANTAGES

A mass-market strategy with high sales of a Lack of differentiated products and

standard product can lead to lower average marketing does not appeal to many
costs of production customers

Cost advantages can lead to lower prices to The focus on low prices does not help
consumers - helping reinforce the position establish a premium brand image for the
of the product in the market product

Can result in extensive publicity for the Technological or other changes could lead
business and its product leading to clear to a fall in demand for the standardised
brand identity product - and so overdependence on it is
risky

Niche marketing is identifying and exploiting a small segment of a larger market by

developing differentiated products to suit that segment​ ​

ADVANTAGES DISADVANTAGES

By using niche marketing, small businesses Small market niches do not allow for
can survive and thrive in markets that are economies of scale
dominated by larger businesses

An unexploited niche has no competitors - Limited scope for business growth if the
offers the chance to sell at high prices and niche has few customers
so, get high profit until competitors enter

Niche products can be used to create status If selling in a niche deems profitable,
and image competitors will be attracted - less profit
Market segmentation is the identification of different groups of customers with common
needs within a market and the marketing of different products or services to those customer
groups. (For success, requires market research , to identify the specific consumer groups
that exist within the market)

Methods:​

1.​ Geographic differences: variance in consumer tastes between areas resulting from
cultural, social and climatic differences