Alike anything a product also has a life cycle. A product life cycle has five stages, introduction, growth, maturity, saturation and decline. Introduction is the most difficult and expensive stage. It is when the product has to launch itself and has a small market; having lesser sales and lesser profit. However, growth stage is when the business gains more profit and expands itself. Saturation is when a product has made a mature position in the market and gain consistent profit. However, there is a decline stage, where a product starts to shrink. It could be through other competition or because the product might be outdated.
Tag: Business Studies
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Marketing Mix: 4Ps of Marketing.
A marketing mix is the combination of product, price, place and promotion in order to make a perfect product. In order to start a business, the producer needs to create a product, which fits the needs the needs and wants of the people. While creating a product many product decisions are to be made, and these decisions put an affect on the marketing mix. Before putting a product in the market, pricing is very important. Major consideration in pricing is the costing of the product, the advertising, marketing expenses, any price fluctuations in the market and distribution costs etc. Changes in pricing put a major effect on the marketing mix. Place where the product is to be sold or the distribution channel where the product is sold. Distribution has a huge effect on the profitability of a company, hence a major effect on the marketing mix. Promotions in the marketing mix includes the complete integrated marketing communications. Promotions are dependent a lot on the product and pricing decision. All these 4Ps of the marketing mix, create a product. Taking note of all these factors, creates a perfect product.
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Market Research: Primary Research and Secondary Research.
Market research is the systematic gathering and interpretation of information about individuals or organisations using statistical and analytical methods and techniques of the applied social sciences to gain insight or support decision making. There are two types of market research; primary and secondary market research. Primary research is the research carried out to answer specific questions, and is conducted by the researcher himself/herself. Such a research can be conducted via questionnaires, surveys and interviews. Secondary research is the type of research which is made on the basis of information by previously made researches, e.g:reports by the government, newspapers, journals, magazines, and radio and TV stations.
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Communication: Effective communication and barriers.
Communication can be defined as the process by which a message is exchanged from a sender to a receiver. It can be either internal or external. Internal communication is the one one done within the business, and external is the one done outside the business. Internal communication is very important as it ensures that all employees follow the same goal, and it is also used to motivate employees to increase productivity. Examples of internal communication are; Formal meetings and briefings, e-mail, conference calls & webinars, message boards and training packs (e.g. induction materials). External communication is made in order to keep contact with the stakeholders. It can be made through press releases, social media feeds, marketing materials (e.g. adverts, brochures, direct mailings), published financial information (e.g. accounts), letters, emails and telephone conversations with customers and suppliers and reports to government and other agencies.
Effective communication is one of the most important factors, for a successful business. However, there are some barriers that hinder effective communication. Communication through a wrong channel. There are several channels for communication, but not all cannot be used, in all situations. Business which fail to communicate according to the situations, face failure. For effective communication, ensuring that the message is understood is very important. Communication is not only delivering a message/ information, but also ensuring that it is understood by the receiver. In a process of communication, the receiver holds immense importance as it is the target audience. If a business doesn’t receive a feedback from the receiver, it may also be a barrier to effective communication. While communicating the audience needs are also supposed to be met in order to keep it effective. Businesses often communicate messages to employees without understanding the employees’ level of awareness, understanding or concern about a particular issue. This may result in ignorance of the topic of concern. In order to keep communication effective, it should take care of the needs, feedback and understanding of the audience. -
E-Commerce: Benefits and Drawbacks.
E-Commerce is a digital market where goods and services are sold. It has many benefits and drawbacks too. It is an easier and convenient way, and people use it to save time and energy. People can also compare prices, instantly, and can invest in the better and economic product. It is beneficial for both supplier and consumer as it has instant payment techniques. However, people don’t trust online shopping or e-commerce as they don’t want to invest into a completely unknown company. People can also not feel the products and test quality and gave to trust the claims made by the companies themselves. As a whole, in the modern age, e-commerce is a convenient source of shopping.
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Interest Rate
Interest rate is the cost of borrowing. Interest rate usually set on loans by banks. Interest rate is determined the rate of demand and supply, rate of inflation and decisions of the government.If there is an increase in the demand for credit, the interest rates will increase, while a decrease in the demand for credit will decrease interest rate. An increase in the supply of credit will reduce interest rates while a decrease in the supply of credit will increase the rate. Inflation is a major component effecting the interest rate, the higher the inflation the higher the interest rate due to the increase in demand of credit by lenders/ the bank. At the end, the government is the one deciding the increase or decrease in the interest rate, as it handles the monetary policies.
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Objectives of a Business and their importance.
Business objectives are the set aims and goals of a business. A business is always set up in order to gain profit. If a business is successful in gaining profit, it is considered a successful one. Productivity is also a major objective of a business, which includes employee training, equipment maintenance and new equipment purchases. Once established, growth, marketing, brand establishment, costumer loyalty and core values are the other significant feature of a business.
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The Break-even Chart
A break-even chart is a line graph used in break-even analysis to estimate when the total sales revenue will be equal to the total costs, or the point where loss will end and profit will begin to accumulate. Usually, the number of units are plotted on horizontal ‘X’ axis and total sales dollars on vertical ‘Y’ axis. The point where the two lines or curves intersect is called the break-even-point. The break-even chart is also called the break-even graph
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The 4P’s of Marketing
The marketing mix is a business tool used in marketing and by marketers. The marketing mix is often crucial when determining a product or brand’s offer, and is often associated with the four Ps:
▪️ Price: What the price of the product should be.
▪️ Product: A product that satisfies the wants and needs of the consumers.
▪️ Place: Where the product or service should be sold.
▪️ Promotion: Ways to let consumers know that that product or service exists and can be bought. -
Equilibrium Price, Equilibrium in the Market
The equilibrium price is where the supply of goods matches demand or the price at which the quantity of a product offered is equal to the quantity of the product in demand. Equilibrium is the state in which market supply and demand balance each other and, as a result, prices become stable. Generally, when there is too much supply for goods or services, the price goes down, which results in higher demand. The balancing effect of supply and demand results in a state of equilibrium.
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Methods of measuring a business
Following are the methods of measuring a business:
▪️ Amount of sales turnover
▪️ Amount of profit
▪️ Capital employed
▪️ Stock market valuation
▪️ Number of employees
▪️ Number of shops/officesThese methods however are not always completely accurate as a small business for niche’ products can sell products at absurdly high prices but not a lot in number. That does not make it a large business regardless of the profit it makes.
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E-Commerce
E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the Internet. These business transactions occur either business-to-business, business-to-consumer, consumer-to-consumer or consumer-to-business. E-commerce allows consumers to electronically exchange goods and services with no barriers of time or distance. Electronic commerce has expanded rapidly over the past five years and is predicted to continue at this rate, or even accelerate. In the near future the boundaries between \”conventional\” and \”electronic\” commerce will become increasingly blurred as more and more businesses move sections of their operations onto the Internet.
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Entrepreneurs
Entrepreneurs occupy a central position in a market economy. Entrepreneurs seek disequilibrium, a gap between the wants and needs of customers and the products and services that are currently available. The entrepreneur then brings together the factors of production necessary to produce, offer and sell desired products and services. They invest and risk their money to produce a product or service that can be sold at a profit. Entrepreneurs are future oriented; they believe that success is possible and are willing to risk their resources in the pursuit of profit. They’re fast moving, willing to try many different strategies to achieve their goals of profits. And they’re flexible, willing to change quickly when they get new information. Entrepreneurs are skilled at selling against the competition by creating perceptions of difference and uniqueness in their products and services.
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Joint Ventures
A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture each of the participants is responsible for the profits, losses and the costs associated with it. However, the venture is its own entity, separate and apart from the participants’ other business interests.
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Franchise Businesses
A franchise is a business system in which private entrepreneurs purchase the rights to open and run a location of a larger company. The franchising company, or franchiser, signs a contractual agreement with the franchisee, explaining in detail the company’s rules for operating the franchise. Franchises are a very popular method for people to start a business, especially for those who wish to operate in a highly competitive industry like the fast-food industry. One of the biggest advantages of purchasing a franchise is that you have access to an established company’s brand name; meaning that you do not need to spend further resources to get your name and product out to customers.
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Limited Companies
A limited company is an organisation that someone can set up to run their business, it’s responsible in its own right for everything it does and its finances are separate to the owners’ personal finances. Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits. Every limited company has ‘members’ the people or organisations who own shares in the company. Directors are responsible for running the company. Most limited companies are ‘limited by shares’. This means that the shareholders’ responsibilities for the company’s financial liabilities are limited to the value of shares that they own but haven’t paid for. Company directors aren’t personally responsible for debts the business can’t pay if it goes wrong, as long as they haven’t broken the law.
There are two types of companies, Private Limited ones and Public Limited ones. In Private Limited companies directors or shareholders financially back the organisation up to a specific amount if things go wrong while in Public Limited companies, the company’s shares are traded publicly on a market. -
Business Partnerships
A partnership is a single business where two or more people share ownership. Each partner contributes to all aspects of the business, including money, property, labor or skill. In return, each partner shares in the profits and losses of the business. Because partnerships entail more than one person in the decision-making process, it’s important to discuss a wide variety of issues up front and develop a legal partnership agreement. This agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership (bring in new partners or buy out current partners) and how to dissolve the partnership. Although partnership agreements are not legally required, they are strongly recommended and it is considered extremely risky to operate without one.
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Sole Trader
A sole trader is the simplest form of business structure and is relatively easy and inexpensive to set up. A sole trader is legally responsible for all aspects of the business. They make all the decisions about starting and running your business. The sole trader is also effected by any profit or loss the company makes. Being a sole trader is risky because of unlimited liability, which means that a sole trader’s personal assets can be taken away if they are late on payments and/or things go wrong. But it is relatively easy to change business structure if the trader’s business grows or if they wish to wind things up.
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Problems with Business Growth.
Majorly, the purpose of a business is to gain profit, hence expansion is inevitable. However, while expanding a business might face many problems. Usually, businesses try to expand as quickly as possible, and face diseconomies of Scale, which are the factors which cause a large firm to produce at increased average. When a business is way too big it may be difficult to manage. However, in order to manage a large business, should use specialization. Specialization is a process when people are assigned with tasks they are good at, and work is divided into different units.
Most large businesses lead to poor communication, causing trouble in decision making. In order to improve it businesses use expensive latest IT equipment telecommunications, which increase the total cost of the business, and can make the company/firm may end up bankrupt.
Mismanagement is a very common yet the most important factor of integration. Integration with other business may create problems due to different ways of management experienced by each business. -
Ways to Grow a Business
The growth of a business is either internal or external. Internal growth occurs when a business expands its existing operations, however external growth is when a business takes over or merges with another business. An example of internal growth would of a fast food restaurant, which would expand itself by opening another branch in another part of the city or country. External growth is divided in three different ways of expansion; horizontal integration, vertical integration( forward and backward) and conglomerate integration.
Horizontal integration is when one firm merges with or takes over another firm in the same industry at the same level of production, e.g when a textile mill takes over or merges with another textile mill. This type of integration is beneficial to the firm because it creates more opportunities for economies of scale. It also reduces competition, and it has a bigger share of the total market.
Vertical integration is when one firm merges or takes over another firm of the same industry but at a different stage of production. This type of integration is divided into forward vertical integration and backward vertical integration. Forward vertical integration is when a firm merges or takes over a firm in the same industry which is at a later stage of the production i.e closer to the consumer. Forward vertical integration benefits a business as it assures an outlet for the product. Also, the profit margin of the retailer increases. Backward vertical integration is when a firm merges or takes over a firm in the same industry which is at an earlier stage of production i.e closer to primary production. This merger or take over assures the supply of raw materials or important components. It also increases the profit margin of the supplier. It may also prevent the supplier from supplying other manufacturers. It can also control the cost of supplies for the manufacturer.
Another way of integration or growth is, conglomerate integration. It is when one firm takes over or merges with a completely different industry. It is also known as diversification. This is a very expensive form of expansion, as it has more activities. However, there might be a transfer of ideas between the two industries in some certain fields, allowing more room for vast ideas. -
Needs, Wants and Scarcity.
The concept of needs, wants and scarcity is the basis of Business Activity. Their is a slight difference between needs and wants. Needs are essential things one needs to survive, yet wants are the things that people believe they need but are put under the category of luxuries. For example, a person needs water for survival,but it does not need soda; yet he/she believe that soda is also something he/she needs.
This difference between needs and wants is well elaborated by the concept of scarcity. It describes the ratio of needs and wants. It explains that people have more wants yet lesser resources o fulfill them. -
Value Added Concept
When something is manufactured, a sum of money is spent on it, usually for the raw materials. That is the production cost. The enhancements a company adds to it’s products before offering it to the final consumer adds value to it and because of these enhancements the company or firm can sell the product at a higher value. This value is called the added value. In other words it is the difference between the sale price and production cost.
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Value Added Concept
In the business world, the value added concept explains a basic feature of a business.This concept explains that a primary product can be sold for a higher price after some advancements are made to it. For example, if you buy a book for Rs.500 and spend Rs.200 to get it wrapped in a customised wrapping, you would sell it for Rs.750,in order to gain profit. In this case Rs.200 is the added value.
This concept is usually used by sole traders, as they have less room to expand their business, yet it also helps them gain profit.