1.1 Explain the characteristics of different business markets.

The four main types of business markets are producer markets, reseller markets, government
markets and institutional markets. Producer markets are markets in which companies buy
goods and services, i.e. raw materials, which they transform into sellable products to be then
retailed to the consumer with the purpose of making profit. Producers include manufacturers
and farmers. Reseller markets consist of companies that purchase finished products and
resell them to other companies or the consumer without altering the products. Resellers
include brokers, wholesalers and retailers. In Government markets businesses sell goods
and services to the government. Governments are in most countries the biggest buyers of
goods and services therefore transactions are bulky. Governments however often require
sellers to submit bulky bids and to provide proof of the companies’ cooperate status.
Institutional markets consist of schools, hospitals, prisons and other institutions that offer
goods and services to the persons in their care. These markets are characterised by low
budgets and confined patrons. The lower the cost of the products or services the more people
they serve.

1.2 Explain the nature of interactions between businesses within a market.

Interactions within business markets are often extensive due to them involving more people
in the decision making process in regards to the purchase of the goods and services. This
leads to prolonged business relationships resulting in heights of brand loyalty and repeat
sales.

1.3 Explain how an organisation’s goals may be shaped by the market in which it
operates.

Goals are essential in any business. It is however of great importance that a business analyses
the wants and needs of a market and thereafter realign their goals according to those wants
and needs. A more agile business stands a better chance at capitalising on market demands.
Changes in government or economical circumstances are some of the factors to constantly
look out for as a business in order to determine changes that need to be made to the goals of
the business.

1.4 Describe the legal obligations of a business.

All businesses have to conform to the laws affecting them. There is a number of legal
obligations that a business needs to meet. In the UK, company law sets out what the
responsibilities of the business to the law are. The Companies Act(2006) states key
obligations ,acts, edicts and codes. Within the company law are a few aspects. Corporate
governance covers the legal obligations of a company’s executives, stakeholders, employees
and lenders. A company’s executives are legally obliged to perform their duties honestly an
competently. Corporate finance covers funding of business by equity finance or loans. In
accordance with the UK insolvency law an administrator is appointed in the case where a
company is unable to repay its debt with the goal of saving the company.

2.1 Define business innovation.

Innovation can simply be defined as the introduction of something new. In business,

innovation entails implementation of new and more effective ideas to improve the quality of
existing product or service or creation of new and more dynamic goods or services.

2.2 Explain the uses of models of business innovation.

Models of business innovation help in creating substantial difference between a business and
its competitors. Goods or services from an innovative and agile company will always be
distinct due to new and better means of production or service provision.

Models of business innovation help create new opportunities for a business to grow and
increase profit. An innovative company has better chances of venturing into new and
untapped markets increasing the chances of better turnover.

2.3 Identify sources of support and guidance for business innovation.

In the modern world there are a number of sources for help and support in regards to business
innovation. These sources include: local councils, banks, private stakeholders, benefactors
along with other business incubation services.

2.4 Explain the process of product or service development

The process of product or service development takes place in eight key stages. The first stage
is idea generation which entails coming up with new inventive ideas. The second stage is
idea evaluation which entails deciding what ideas are or are not worth taking forward. The
third stage is the feasibility testing where likely buyers are presented with the new product
idea to determine initial purchase intentions. The next stage is Business analysis where the
profitability of the new product is examined. This is often done through a feasibility study.
Product development is the fifth stage in which a prototype of the new product is made and
thereafter refined to suit the market requirements. The sixth stage is market testing where
the product is refined according to feedback from the target market. This involves
observation of buyer behaviours. The seventh stage is commercialisation where the product
price is determined. The last stage is product launch where the product is introduced into the
market.

2.5 Explain the benefits, risks and implications associated with Innovation.
Innovation can help a business grow in yield as well as profitability. It increases the
competence of a business in the market. Innovative products are usually more appealing and
unique giving them an advantage over regular products.

Innovation involves a lot of risk. For an innovation to produce positive returns there needs to
be adequate apportionment of money and time and other resources. Success however, is
never guaranteed.

3.1 Explain the importance of financial viability for an organisation

Any business’s finances ought to be prudently managed in order to make sure the business
has access to enough funds to pay its bills and continue conducting business. A financially
viable business has steady control over its insolvents and creditors.

3.2 Explain the consequences of poor financial management.

Poor financial management leads to poor control over the liabilities of a business and its
debts. A business that cannot pay its debts is likely to go into liquidation. When an
administrator is appointed in order to save the business the directors of the company lose
control of all the company’s assets.

3.3 Explain different financial terminology.

 Turnover – The volume of business measured over a particular period of time. It is a

simple quick determinant of the size of a business.
 Gross Profit – The profit made by a company after deducting the costs of making the
product. It is also known as sales profit or gross income and is calculated using the
following formula.

(Revenue – Cost of producst sold=Gross profit)

 Net Profit – The total amount of profit after deducting expenses, taxes and stock
dividends from the company’s revenue.
 Debt – An amount of money that is owed to someone for monies borrowed, usually to
be paid with interest. A business acquires debt in order to use the money borrowed for
operation needs or capital.
 Credit – A contractual arrangement where a borrower takes something valuable now
that they are supposed to pay for in the future, often with interest.

4.1 Explain the uses of a budget.

A budget allows a business to function within its own means. It is also a plan using which the
performance of the business can be monitored.

4.2 Explain how to manage a budget.

One way to manage a budget is by use of a Budget Control Chart (BCC). A BBC enables
companies to monitor business activities against the planned budget.

5.1 Explain the principles of marketing

The key elements of marketing are making profit and creating value. Marketing can be
defined as ‘bringing your product to market profitably’ (Ultimate Performance). The
principle of marketing is basically getting the right goods or services to the right person. The
focus on the customer is vital.

5.2 Explain a sales process.

The sales process involves three stages. The first stage is information gathering. This is where
the needs or wants of the buyer are established leading to the next stage which is matching
the features of a product with the needs and wants of the buyer. The last stage is closing the
sale which basically means requesting for the trade.

5.3 Explain the features and uses of market research.

Market research involves two types of data. Primary information which is data you collect
yourself and secondary information which is data already collected and organized.

Market research is used to collecting data concerning a particular market. Data that can be
used in supporting marketing decisions.

5.4 Explain the value of a brand to an organisation.

A brand is an identifying symbol or name, or a combination of both that is used to identify a

particular product and differentiating it with its competitors. An example is the Adidas three
line symbol. People identify the brand name and symbol even if they don’t own any Adidas
product.

5.5 Explain the relationship between sales and marketing.

Sales and marketing are two different concepts that are often dependent on each other. In
order to make sales people have to know of and about your product which is the work of the
marketers.