business studies review

Review for Final

Marketing

Role of Marketing•Identify customer needs•Satisfy customer needs•Maintain customer loyalty •Gain information on customers•Anticipate changes in customer needs•A mass market is –where there is a very large number of sales of a product.

•Niche market is –a small, usually specialised, segment of a much larger market

Market segmentation• Divide the market into smaller, more specific groups (age, gender,

lifestyle, wealth)• Customers in these groups will have similar needs and characteristics• Advantages:• Advertising is directed towards the right consumers so cost effective

(don’t waste money advertising to the wrong customers)• Cost effective marketing means higher sales and profits• Can identify a segment which has needs that are not met =

opportunity

Disadvantage: higher advertising costs as need a different advertising campaigns for each segment

Market Research

•Market research is –the process of gathering, analysing and interpreting information about a market

Market Research Data

Primarya) Questionnairesb) Interviewsc) Focus Groupsd) Observation…

Secondarye) Government stats.f) Newspapersg) Internet

Types of Product

Consumers goodsConsumer servicesProducer goodsProducer services

Successful product

•Satisfies needs•Provides Added Value •Distinctive/different USP•Not too expensive to produce

Types of pricing

•Cost-plus pricing•Competitive pricing•Psychological pricing•Penetration pricing•Price skimming•Promotional pricing•Dynamic pricing

Sales promotion

Price reductionsGiftsBOGOFCompetitionsPoint-of-sale displays >>After-sales serviceFree samples

Distribution channel 1

Producer Consumer


Producer Retailer Consumer


Producer Wholesalers Retailer Consumer


Producer – agent – Wholesalers - Retailer - Consumer

Methods of distribution

•Department stores•Chain stores•Discount stores•Superstores•Supermarkets•Direct sales•Internet (e-commerce)

Marketing strategy

Definition: a plan to combine the four P’s to achieve an objective

E.g. Objective: increase sales in a niche market

Product: hand made suitsPrice: Psychological PricingPlace: luxury retailersPromotion: After sales service

Motivating workers

• Financial Rewards• Non-Financial Rewards

Financial rewards

•Wages•Time rate•Piece rate•Salaries•Commission•Profit sharing•Bonus•Shares

Non-financial (fringe benefits)

Company carDiscounts on productsHealthcareEducationExpensesPension

Business activity and Stakeholder Objectives

Economic problem

There are unlimited wants but limited resources to make goods to satisfy our wants. There’s scarcity.

Why? There are not enough factors of production

•Land•Labour•Capital•Enterprise

Opportunity cost

The next best alternative given up by choosing

Holiday or car?

Machine A or machine B?

New road or new school?

Specialisation

When people and businesses concentrate on what they are good at.

How?

Division of labour: when the production process is split into different tasks.

Business activity

Combine scarce resources to make products to satisfy people’s wants.

Attempt to add value

The difference between the selling price and the cost of bought in materials.

Increasing added value

Increase the priceReduce the cost of the materials

Business Objectives

Business survivalProfitReturns to shareholdersGrowth of the businessMarket share increaseService to the community

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StakeholdersAny person or group with a direct interest in the activities of the business

Different Stakeholders

OwnersWorkersManagersGovernmentCommunityBankConsumers

Case Example• Vietnam resort town (Dalat) concerned nuclear reactor could hit tourism.

Monday, March 31, 2014 11:48 (Thanh Nien News)

Stakeholder Objectives

Owners/Investors: dividend, growth, increased valueWorkers: regular pay, security, satisfactionManagers: high salary, security, growthCustomers: safe product, value, reliabilityGovernment: Development, tax, jobs, rule of lawCommunity: jobs, environmentally friendly, safe productsBank: interest paid back, liquidityConsumers: Good Product, Low Price

Stakeholder conflict

•All stakeholders have different objectives, inevitably, there is conflict.

•It is no longer enough to follow the law. Businesses increasingly have be more sensitive to the needs of all stakeholders.

•(i.e. Nike, http://www.businessinsider.com/how-nike-solved-

its-sweatshop-problem-2013-5)

Public Sector Objectives

•Financial – meet govt. targets•Service to public •Social – create jobs

Production and costs

Costs

Fixed costs (don’t vary with output)(sometimes called overhead)

Variable costs (Vary with output)

Total costs = (FC + VC)

Average cost per unit = (total cost/total output)

Break-even (no profit/no loss)

Case Example

Truc’s Tra Sua Truck

Case Example

Truc’s Tra Sua TruckFixed Costs = $3000 Variable Costs per unit = $1Selling Price = $2

What would profits be if actual sales at 5,000 units?New B-E point if selling price increased to $2.50?

Case Example

0 1000 2000 3000 4000 5000 6000 7000 80000

2000

4000

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8000

10000

12000

14000

Truc's Tra Sua Truck

Units

Dol

lars

($)

Contribution

Selling price – variable cost = contribution

Break even output = fixed costs/ contribution

Production Vs. Productivity

Production: the level of output

Productivity: output/inputUnits Produced/Number of EmployeesUnits Produced/Number of Machines

A measure of efficiency

Increasing productivity

•Improve quality control•Less waste•Use machines•Motivate•Train•Technology•Good inventory control

Efficiency benefits

Increased Productivity (outputs to inputs)Lower costs per unitBetter QualityHigher Profits

Lean production

Techniques to decrease waste and improve efficiency

•Lowers costs•Decreases waste•Lower prices•Decrease Inventory

Kaizen

Continuous improvement through the elimination of waste. • Flow of products and materials• Workers motions• Processes• Everybody!!

Just in Time theory

•Reducing or eliminating inventories

•No Waiting (materials, process, or people)

•Supplies arrive just when they are needed

Methods of production

Job production (made to order, 1)

Batch production (made in groups)

Flow production (continuous production, mass)

Technology in production

Automation (computer control)

Mechanisation (machines operated by people)

CAD (computer aided design)

Economies of Scale

Purchasing economies (buying in bulk)

Financial economies (cheaper interest)

Managerial economies (best managers)

Technical economies (large machines/ best tech)

Diseconomies of Scale

Poor communication

Less motivated as large company

Slow decisions

Finance

Sources of finance

•Owners savings•Retained profit•Bank loans•Overdraft•Issue of shares•Selling debentures•Trade credit•Factoring of debts •Sale of assets•Sale of inventory•Grants

Cash flow

The movement of money in and out of a business

Inflows – money in

Outflows – money out

Forecast is an estimate of future inflows and outflows

Only show cash, no credit

Income statements

Records income and costs. Shows profit.

Balance sheet

Shows the value of the businesses assets and liabilities.

Balance Sheet

Balance sheets

Working capital = current assets – current liabilities.

Capital employed = shareholders funds + non- current liabilities

Profitability Ratios

Return on equity = net profit/sales revenue (how much profit for investment)

Gross profit margin = gross profit/revenue x100(how much gross profit on sales)

Net profit margin = net profit/revenue x 100(how much net profit on sales)

Liquidity Ratios

Current ratio = current assets/current liabilities(shows the ability to pay off short term debts with current assets)

Liquid ratio = current assets – inventories/current liabilities

(shows the ability to pay off short term debts with cash and debtors cash)

Users/uses of accounts and ratios

Managers use them for taking decisions

Shareholders, banks and other creditors use them to check on company performance

Government use them to calculate tax

Managers use them for controlling the operations of a business

Other companies use them for comparing performance.