EDEXCEL IAL BUSINESS UNIT 1 Summary

1.1

Market - where buyers and sellers come together

Marketing - techniques that sellers undertake

NICHE; small market with specific needs Charge premium prices

Avoid competition
NOT spreading risk
Larger firms can easily overrun

MASS; produce in large quantities to mass

Lower unit cost allowing economies of scale to be exploited Higher profit margins
High advertising costs
Fierce competition
Market size - value/volume. Calculated by total sales of business, fluctuate
Market share - sales/total sales X 100. Market leader influence strategy of others and
objectives
Brand - distinguish, differentiate, create image. Beneficial in mass market to be able to
charge premium prices
ONLINE RETAILING Consumer
Global fashion 24/7 (USP)
Distance is no object Delivery cost
Allientae markets, elderly Quality
Business
Save costs
Global market
Gather consumer info, be able to use direct marketing Website crashes, cause huge losses
Cannot tap into certain markets
Markets change because of:
1. SIZE, grow or shrink affected by PLC
2. NATURE, product/service providing, consumer perceptions and trends 3. NEW, develop
with technology
How businesses can adopt to change: Develop a niche
Continuous improvement Investment
Market research Flexibility
COMPETITION Business
Under pressure to get customers and can adopt methods such as

Lower prices, better quality, advertise and promote, offer extras adding value Reduce profit
potential
Make barriers into market
Consumer
Choice, in absence of competition consumers may be exploited
Risk - action taken by business and outcome unknown Uncertainty - external influences
beyond control
Product orientation - focuses on production process, products design, quality and
performance
Market orientation - continuously identifies, reviews and analyses consumer needs. More
engaged with effective marketing
Respond quickly to change
Confident in product launch
Anticipate change from research/trends Meet and compete with rivals
Influences of market orientation..
Nature of product
Policy decisions
Views of those in control Nature and size of market Degree of competition
THREE purposes of market research:
1. Identify and indicate customer wants and needs 2. Quantify likely demand

3. Insight into consumer behaviour

DATABASE - stores client info, easily searched and found facility SOCIAL NETWORKING -
global reach, cheap and analyses trends WEBSITE - surveys, cheap and available 24/7
QUALITATIVE RESEARCH - attitudes, beliefs and intentions QUANTITATIVE RESEARCH -
measured and satisticalised PRIMARY RESEARCH
Questionnaires Posta surveys Focus group Test marketing
SECONDARY RESEARCH Internal data External data
SEGMENTATION Geographic
Different needs depending on where they live and different wants culturally Demographic
Age, gender, income, social class, ethnicity, religion Psychographic
Attitudes, opinions and lifestyle, difficult to collect data type Behavioural

Loyalty or impulse
BENEFITS
Meet specific needs
Increase revenue
Avoid wasting resources Gain loyalty
Market positioning - conceptions consumers hold can use, benefits of products, USP,
attributes of product, origin or classification
Market map - two dimensional, helpful for individual brands not corporate. Can only
compare two features
Competitive advantage Design - differentiation
Quality - premium price
Promotion - personalise advertisement
Customer service - exceed and deliver encouraging sales Ethical stance - segment
Differentiation; gain competitive edge
Flexible pricing - create perceived high quality allowing premium pricing Recognition - more
appealing, higher sales revenue and less advertising Product range - each market
Brand development - use, overcome competitor
Adding value
Bundling
Customer service Packaging
Frequent buyer offers Customisation
1.2
Demand; is the amount of a product that consumers are willing and able to purchase at a
given price
FACTORS LEADING TO A CHANGE IN DEMAND Price of substitutes
Price of competency
Change in consumer income Fashion, tastes and preferences Advertising and branding
Demographics
External shocks
Economic climate
Social and environmental factors Government
Competition
Seasonalty
Supply; is the amount of a product which suppliers will offer to the market at a given price
FACTORS LEADING TO A CHANGE IN SUPPLY

Changes in cost of production Indirect taxes

Government subsidies Introduction of new technology Weather
Government
World events
Price of related goods
When demand are supply equal its called the equilibrium price also known as market
clearing Highlights total revenue = price x quantity
Excess demand: if the price is below equilibrium price, supply and demand are not equal.
The means there is a shortage of goods in the market
Excess supply: if the price is charged above the equilibrium price,supply and demand are not
equal. This means there are goods which remain unsold
PED = % change in Q demand / % change in price
This shows the relationship between the responsiveness of demand and a change in price;
price elasticity of demand
If the value of PED if less than 1 demand is inelastic. If the value of PED if greater than 1 it is
elastic
FACTORS
TIME. PED tends to fall the longer the time period this is because consumers and businesses
are more likely to turn to substitutes e.g cheaper
SUBSTITUTE COMPETITION. Some businesses face highly price elastic demand for products
due to being in a competitive market where their product is identical or little different from
those produced by other businesses

BRANDING. Stronger branding the less substitutes are acceptable to consumer reducing
elasticity of demand
PROPORTION OF INCOME SPENT ON PRODUCT. Inexpensive products where proportion of
consumer income spent on transaction is very small demand is likely to be inelastic. Vice
versa
Effect of PED on pricing...
Inelastic, rising prices is good strategy as less than proportionate fall in demand Elastic, not
good strategy
YED = % change in Q demanded / % change in income
This shows the relationship between the responsiveness of demand and change income;
income elasticity of demand
If the value of YED is less than 1 demand is inelastic If the value of YES if greater than 1
demand is elastic
FACTORS
NECESSITIES. Basic good therefore a consumer's need e.g food and water. Demand is
income elastic
LUXURY. Bought if can afford thm e,g air travel, fashion and leisure. It is a form of
discretionary expenditure
PRICE OF PRODUCT RELATIVE TO INCOME. Can influence income elasticity if its expensive
income elastic is cheap inelastic
Selling goods with high income elasticity means they are very sensitive to changes in income
and are often cyclical. As the economy grows, demand grows. Vice versa. Forecasting
demand for goods that are influenced by the business cycle are difficult
Selling goods with low income elasticity means demand is more stable as their income
inelastic. This means production planning and investment decisions are easier to make. In
countries where economic growth is steady, over a period of time demand for inferior goods
plus normal necessities tends to decline
Production planning, businesses that produce goods with elastic demand know income will
affect demand. If income expected to rise, future planning to meet capacity can occur and

vice versa. When income falls, demand for inferior goods rise
1.3
The design mix:
1. AESTHETICS. Provide sensory stimulation creating appeal. Designers should consider
appearance, size/shape, presentation and element/function. As costs fall overtime
aesthetics become more important.
2. FUNCTION. A product/service must be fit for purpose, reliable and work eetime and
be safe. Gain USP if has superior functionality. Manufacturers of consumer durables
offer long warranties to show offline in reliability and durability of product
3. COST. a well designed product/service is more economically viable. Businesses are
able to produce and sell for profit. Designers need to select materials and processes
to minimise costs. Businesses ofen compromise between design and cost - if costs
are high, product may be dropped
SOCIAL TRENDS
Design for waste minimisation Design for resume
Design for recycling
Ethical sourcing
BENEFITS OF ADAPTING...
Viewed as good corporate citizen Help market products
More popular = sell in larger quantities Lower costs = higher profis
USP
PROMOTION
1. Informative, increase consumer awareness
2. Persuasive, pressure consumers to buy a product from a certain brand over rivals
targeted at emotions e.g fear or use celebrity endorsement
3. Reassuring, aimed to existing customers
ABOVE THE LINE = MEDIA
BELOW THE LINE = DOES NOT INVOLVE ADVERTISING
Advantages and disadvantages of advertising in the media Media
Advantages
Disadvantages Television
Huge audiences can be reached
The use of products can be demonstrated Very expensive
Message may be short lived
Newspaper & Magazines
National and local coverage
Scope for targeting with specialist magazines Relatively cheap
No movement or sound
Individual ads may be lost in a ‘sea of ads’
Cinema
Can be used for local and national advertising Specific age groups targeted
Limited audience

Message may be only seen once

Message is short lives Radio
Minority audiences allow targeting Cheap production
Not visual
May be ignored
Posters & Billboards
Can produce national campaigns
Seen repeatedly
Only limited information can be shown Difficult to evaluate effectiveness
Internet
Can be updated regularly
Can be targeted
Hits and response can be measured
Some ads such as pop-up ads are irritating Possible technical problems
Sales promotion - Incentives used to encourage people to buy products. They are used to
boost sales in the hope that is new customers are attracted they will continue to buy the
product. They might be used to break into a new market. They might be used to reward
loyal customers and allow businesses to measure the impact of promotion, by counting the
number of returned coupons, as an example.
FREE GIFT ,COUPONS, LOYALTY CARDS, COMPETITIONS,BOGOF OFFERS, MONEY-OFF DEALS
Public relations (PR)
Some businesses communicate with stakeholders using public relations. The main purpose
of PR is to increase sales by improving the image of the business. A number of approaches
might be used by a business to attract publicity.
PRESS RELEASE,PRESS CONFERENCES,SPONSORSHIP,DONATIONS
Merchandising
Some business may arrange the point of sale so that it is interesting and eye catching, and
likely to encourage sales. This is called merchandising.
1. PRODUCT LAYOUT - the layout of products in a store is often planned very carefully
to encourage shoppers to follow particular routes and look at certain products.
Products that stores want you to buy are placed at prominent locations, such as the
end of aisles and at eye level.
2. DISPLAY MATERIAL - posters, leaflets and other materials may be used to display
certain products with the aim of persuading customers to buy. Lighting and other
special effects can improve the shopping environment. Window displays are
considered important by retailers as they can draw in customers.
3. STOCK - businesses must keep shelves well stocked because empty shelves create a
bad impression. Also, is items are out of stock customers may shop elsewhere.
Direct mailing
This is where businesses mail out leaflets or letters to households. Sometimes personal
letters are used. They may contain information about new products or details of price
changes, for example.Increasingly, email and text messages are being used to contact
customers rather than the postal system. The development of ICT and use of customer
databases has resulted in more use of personalised marketing.
Direct/personal selling
This might involves a sales rep calling at households or businesses hoping to sell products.
It could also be a telephone call from a call centre where a battery of sales staff is employed
to sell over the telephone. One advantages of this approach is that the features of the
product can be discussed.
However, people are often irritated by this approach because the callers have not been
invited.
Exhibitions & trade fairs
Some businesses attend the trade fair or exhibitions to promote their products. Businesses
set up a stand and promote their products face-to-face. Trade fairs can be attended by
commercial buyers or consumers or both. There are certain advantages of this method of
promotion:
Products can be tested out in consumers before a full launch

Some exhibitions are overseas and can be used to break into foreign markets Products can
be physically demonstrated and questions answered Exhibitions often attract the media
Customers can speak to business owners or senior personnel face-to-face
BENEFITS OF BRANDING ADDED VALUE
ABILITY TO CHARGE PREMIUM PRICES REDUCED PED
WAYS TO BUILD A BRAND EXPLOIT USP ADVERTISING
SPONSORSHIP
SOCIAL MEDIA SOCIAL TRENDS
VIRAL MARKETING SOCIAL MEDIA
PRICING:
Cost Plus Pricing
Adding a markup to unit costs. The markup is usually a % of the unit cost. This method is
common with retailers.
Ignores market conditions
Difficult to identify precisely all the costs associated with the production of a particular
product- particularly for a multi-product business.

Price Skimming
Launch a product into a market charging a high price for a limited period of time. The aim of
this strategy is to generate high levels of revenue with a new product before competitors
arrive, and exploit the popularity of a new product whilst it is unique.
It is a common method with technical products.
Helps such companies recover high development costs.
As the price is lowered, other customer groups are drawn into the market. The higher price
also helps to elevate the image of a product.
However, skimming can only be used if demand is price inelastic.
Penetration Pricing
Introduce a new product and charge a low price for a limited period. This strategy is to try
and help the business get a foothold in the market.
Businesses using this strategy hope that customers are attracted by low price, then repeat
buy when the price rises.
Penetration pricing has a number of benefits:
It is particularly beneficial when products are targeted at middle or low-income customer
groups as such groups are more likely to be responsive to low-price introductory offers.
Can grow sales of new product lines very quickly. Usually, the lower the introductory offer,
the faster the sales.
Fast growth in sales may allow a business to lower production costs by exploiting economies
of scale.
Can put pressure on rivals, they may have to lower their prices to make an effort to
differentiate their products.
Predatory Pricing
Predatory pricing or destroyer pricing aims to eliminate competitors from the market.
It involves charging a very low price for a period of time until one or more rivals leave the
market.
Some forms of predatory pricing are illegal in the UK and EU.

This is when a business is selling a product below the cost of production deliberately to
force a competitor out of the market. It is outlawed because in the long run it can lead to a
lack of competition in the market.
As a result of all the competitors leaving the market the predator is able to raise the price
beyond the initial level.
Such low-price strategies are allowed if low-cost businesses are prepared to endure low
profit margins for extended periods of times.
They can also be used to sell stocks that would otherwise remain unsold or as a means of
breaking into a new market.
Competitive Pricing
Operating in a fiercely competitive market.
One approach is to charge the same price as competitors. The advantage of this strategy is
that a price war is likely to be avoided. It is considered to be a safe pricing strategy.
Another approach is for the market leader to set the price and all others follow.
This is called price leadership. Price leaders are usually dominant within the market, they
may have developed their dominance through being a low-cost operator or perhaps by
building a strong brand over a period of time.
Psychological Pricing
Set the price slightly below a round figure- charging £99.99 instead of £100.
Consumer are “tricked” into thinking that £99.99 is substantially cheaper than £100.
This approach targets consumer who are looking for bargains. It is not likely to be used by
businesses selling “up market” products.
Factors that determine the most appropriate pricing strategy for a particular situation
Differentiation and USP
Price elasticity of demand Amount of competition Strength of the brand
Stage in the product life cycle

Costs and the need to make a profit Changes in pricing to reflect social trends
Dynamic pricing Auction sites Personalised Pricing Subscription Pricing
Direct selling to consumers Methods include the following:
1. THE INTERNET
2. DIRECT MAIL
3. DOOR-TO-DOOR SELLING 4. MAIL ORDER CATALOGUES 5. DIRECT RESPONSE ADVERTS 6.
SHOPPING PARTIES
7. TELEPHONE SELLING
Retailing
These are businesses that buy goods and sell them straight to consumers. They provide a
number of services:
1. They buy large quantities from manufactures and wholesalers, breaking-bulk.
2. They sell in locations that are convenient to consumers., supermarkets
3. Add value to products by providing other services. These might include help with
packing or delivery, repair services, information about products, warranties and gift
wrapping.
Wholesaling
Wholesalers usually buy from maugacotes and sell to retailers.

A wholesaler stocks goods produced by many manufacturers. Therefore retailers get to

select from a wide range of merchandise.
Agents & Brokers
The role of agents or brokers is to link buyers and sellers.
They are used in a variety of markers, for example travel agents sell holidays and flights for
holiday companies, airlines and tour operators.
Manufactures may also use agents when exporting.
Agents can reduce the risk of selling overseas because they have knowledge of the country
and the market.
Nature of the product
Different types of products may require different distribution channels. For example:
1. Most services are sold directly to consumers. It might not be appropriate for window
cleaners and hairdressers to use intermediaries. This is because unlike goods,
services cannot be held in stock
 2. Fast moving consumer goods like breakfast cereals, crisps and toilet paper cannot be
sold directly by manufacturers to consumers. This is because such goods could not
be sold effectively by manufacture in single units. Wholesalers and retailers are used
because they break bulk.
3. Businesses product high quality ‘exclusive’ products such as perfume or designer
clothes will choose their outlets very carefully. The image of their products is
important, so they are not likely to use supermarkets for example.
4. Products that needs explanation or demonstration, such as technology products or
complex financial products might need to be sold by expert salespeople or
specialists.
Cost
Cheapest distribution channels.
Prefer direct channels.
If intermediaries are used they will take a share of the profit.
Larger supermarkets will try to buy direct from manufacturers as they can bulk buy and get
low prices.

Independents are more likely to buy bulk from wholesalers and will have to charge higher
prices as a result.
Many producers now sell direct to consumers from their websites. This helps keep costs
down.
The market
Producers selling to mass markets are likely to use intermediaries.
In construct, businesses targeting smaller markets are more likely to target customers
directly.
Producers selling overseas markets are likely to use agents because they know the market
better.
Businesses selling goods to other businesses are likely to use more direct channels.
Control
For some producers it is important to have complete control over distribution.
For example, producer of exclusive products do not want to see them being sold in
‘downmarket’ outlets as this might damage their image.
Some products, such as heating systems, require expert installation and need to comply
with health and safety regulation. Producers of such products might prefer to handle
installation themselves and deal directly with customers. They can then ensure safe
installation more easily.
Despite the advantages to both consumers and businesses of online distribution, there are
some drawbacks for businesses.
1. They face increasing competitions, since selling online is relatively cheap method of
distribution. It can also be organised from any location in the world, at any time.
Meaning more overseas competition.
2. Lack of human contact, which might not suit some customers.
3. There is heavy reliance on delivery services where e-trailers often lack control on the
quality of delivery
4. Technical problems online. For example, websites can crash or be attacked by a virus
5. Security risk as computer hackers might gain access to sensitive information.
There are also drawbacks for consumers.
1. Cannot physically inspect goods before purchase
2. Risk of poor after-sales-service
3. Exclusion of customers without internet access or credit cards.
4. Bogus traders may be more difficult to identify online
5. People may have problems taking delivery of goods, for instance if they work all day
The Product Life Cycle
The product life cycle shows the different stages that a product passes through over time
and the sales that can be expected at each stage.
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Development
During this stage the product is being researched and designed.
During the development stage it is likely that the business will spend to develop the product
and costs will be high, as there is no sales there will be no revenue coming in.
Introduction
At this stage of production the product will be launched.
As the product is new to the market, sales initially are often slow. Costs are incurred when
the product is launched.
As the business is likely to spend on promotion to make consumers aware of the new
product it is likely that the product won't be profitable.
As a result of this pricesmay be set high to try and cover these costs, they could be set low
however to allow the product to break into the market.
Growth
Once a product is establish and consumers are aware of it, sales may begin to grow rapidly,
new customers will begin to buy the product and there is also repeat purchases.
Unit costs may fall as production increases.
Profitable.
If it is a new product there is a rapid growth in sales, competitors may launch their own
versions. This can lead to a slowdown of the rise in sales.
Businesses may need to consider their own prices and promotion.
Maturity and saturation
At some stage the growth in sales will level off.
The product has being established with a stable market share at this point.
Sales will have peaked and competitors will have entered the market to take advantage of
profits.
As more businesses enter the market it will become more saturated.
During the maturity and saturation stages of the product life cycle, many businesses use
extension strategies to extend the life of their product.
Decline
For the majority of products, sales will eventually decline.
This is usually due to changing consumer tastes, new tech or the introduction of new
products.
The product will loose it’s appeal to it’s customers.
At some stage it could be withdrawn or sold to another business.
It may still be possible to make a profit if a high price can be charged and little is spent on
promotion or other costs.
Product adjustments OR Promotion The product portfolio
The product portfolio will be made up of product lines. A product line is a group of products
which are similar.
Boston Matrix
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Market growth
How fast is the marker for the product growing? The market may be declining or may be
expanding. Sales of a product in a fast expanding market have a better chance of growing
than a product in a stagnant or decking market
Relative market share
How strong is the product within its market? Is it a market leader that other products
follow? To measure this the market share if a product is compared with the strongest rival
product.
Star
A star is product it's high market growth and a relatively high market share.
Stars are valuable to businesses.
The product will be in a strong position in its market as it has a high market share and the
business can take advantage of a fast growing market.
A star is already likely to be profitable as it has relatively high market share. But a business
will need to invest in the product to cope with a growing market and growing sales.
This could mean investing in new production facilities or promotion to fend off competition.
Net cash flow may be nearly zero. This is because although profits will be high, bringing
money in, investment spending will also be high, leading to outflows.
Cash cow
A cash cow is a product with relatively high market share.
It is therefore well positioned in the market and likely to be profitable.

But the market it is in will have weak growth. So there will be little chance of increasing
sales and profits in the future.
There will be little need for investment.
Cash does have strong positive net cash flow.
Money coming into the business from profits will not be taken out via investment.
Question mark
Question marks, sometimes known as problem children or wildcats, are products with a
relatively low market share in a fast growing market.
This can be problem for a business because it is unclear what should be done with these
products.
If a product is performing weakly it is unlikely to be profitable. But as it is a fast growing
market, there is potential to turn into a star.
Net cash flow is likely to be zero or negative.
Weak relative market share means that it will not be profitable. But investment will be
needed to cope with expanding sales in a fast growing market.
Dogs
These are products with a relatively low market share in a market with low growth. Dogs
have poor prospects for future sales and profits.
They may generate some positive net cash flow because they will need little investment but
may earn some profit. But if they make little or no profit, net cash flow may be Zero or even
negative.
How the Boston Matrix can be use to manage the product portfolio
Balancing product lines
Businesses must ensure that their product portfolios do not contain too many items within
each category. Naturally, they do not want lots of dogs but they should also avoid having
too many stars and question marks. Product on the top of the Boston matrix are in the early
stages of the product life cycle and are in growing markets. But the cost of developing and
promoting them will not yet have been recovered. This will drain resources. Balancing these
with cash cows can be used to support products in a growing market. The development cost
of cash cows is likely to have already

been recovered and promotional costs should be low relative to sales. This does not mean
though that a business would want lots of cash cows and few question marks and stars. This
is because many of the stars and perhaps some question marks might become the cash
cows of the future.
Taking appropriate decisions
Products in different categories in the matrix require different approaches
Stars have great future potential. They are future cash cows. A business will need to build
the brand of these products so that sales increase and competition is fought of successfully.
Cash cows might be milked for cash, which can then be used to develop other products. Or
the business may decide to spend just enough on promotion and developing to maintain
sales and the market share, known as holding.
For question marks a business has choices. It can build the brand, hoping to then it into a
star, harvest the product by raising price and cutting promotion so that profits are
increased, or divest itself of the product, withdrawing it or selling it because it not making
profit.
Dogs may be divested if they are not making a profit of in some cases harvested.
Marketing Strategies
Strategies for mass markets
PRODUCT - In a mass market there will be many products varying for customer attention.
Most of these products will be very close substitutes for each other. The most successful
businesses are likely to be those who can differentiate their product in some sort of way.
Developing a USP will help the product stand out. If a business can differentiate they will
have to rely on other elements of the market mix to compensate,
PRICE - The prices charged by a business in a market are likely to be similar. All businesses in
the market are likely to fear a price war because they usually reduce revenue for each
competitor. This helps to explain why businesses are happy to charge the “going rate” in the
market. Price leadership is common in mass markets where the dominant business, perhaps
the one with the lowest unit costs, sets the price and everyone else decides to follow.
PROMOTION - In the absence of price competition, firms look to non-price competition to
gain an edge. This means they are prepared to invest heavily in advertising and promotion
as it is such a vital part of the marketing mix in mass markets. An overwhelming majority of
TV adverts are laced by businesses selling into mass markets. Perhaps less than 5%of those
that see the adverts will buy the product but this is highly significant.
PLACE - Businesses serving mass markets will often use multiple channels to distribute their
goods. Businesses selling fast-moving consumer goods will target supermarkets,
wholesalers, independants and any other outlet which is suited to their particular products.
Some businesses pay supermarkets to display their goods in prominent places. The internet
is being used more and more by businesses to sell goods and services in mass markets. The
internet has allowed smaller businesses to enter and compete in mass markets.
Strategies for niche markets
PRODUCT - In a niche market the product is likely to have significant differences from its
rivals. PRICE - There is less competition in niche markets so higher prices can be charged
without losing a significant market share to rivals. Also consumers may be prepared to pay
higher prices if their specific needs are met effectively. PROMOTION - Since markets are
smaller there is less need to use national media when advertising. Businesses need to
identify their customer profile very accurately to ensure that advertising and promotion
expenditure is not wasted. Adverts would be placed in special places. PLACE - businesses
selling into niche markets are often more selective when choosing distribution channels.
They are more likely to use exclusive distributors or to handle distribution privately. They
will also use the internet if it is practical.
Strategies for B2B markets and B2C markets
Many businesses supply goods and services to other businesses.
The marketing strategies used by companies that sell to other businesses (B2B) are likely to
be different from those that sell to consumers (B2C).
In B2B marketing, one approach is to distinguish between outbound and inbound marketing
strategies.
Outbound marketing strategies
This involves directing marketing material at potential customers whether they are
expecting it or not.
This could include sending direct mail, email, telemarketing, sponsorships, targeted adverts
in specialist publications or trade shows.
However, there are some drawbacks using this approach.
People are increasingly ignoring adverts.
Also many people object to cold calling and other intrusive methods.

Persistence in the use of these could damage a brand's reputation.

Many of the leads obtained using these methods are poor quality, ‘fizzling out’ and wasting
resources.
It has also been reported that outbound leads cost significantly more to acquire than
inbound leads.
Inbound marketing strategies
This involves attracting potential customer to websites when they are looking for suppliers
or solutions to problems.
Some of the common inbound marketing techniques are:
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The use of inbound methods also has channels.
For example, it requires effort and resources to build up enough useful content on websites
to change visitors into leads.
Recruitment of experienced inbound marketers can be difficult, and if can be tricky to keep
the strategy up-to-date with rapidly emerging trends.
Hybrid strategies
This involves the combination of both outbound and inbound methods.
It is reckoned that inbound strategies take at least six months to generate results, so some
outbound methods can be employed in the short term.
Once inbound methods start to generate meaningful leads some of the less effective
outbound methods can be dropped.
This will help to recur exists and create sustainable growth in market share. Developing
customer loyalty
Communication Customer service Customer incentives Personalisation

Preferential treatment 1.4

Staff an an asset - value employee’s, concern for their welfare. They recognise managerial
efforts will help staff performance so productivity increase
Staff as a cost - minimise cost at every opportunity, leads to poor motivation and low
productivity. High staff turnover as staff can feel exploited/neglect
FLEXIBILITY
1. Part time and temp staff
2. Multi-skilling
3. Flexible hours + home working 4. Outsourcing
Advantages
Disadvantages
Allow to expand and contract quickly in response to changes in demand
Less loyal. Motivated by financial gain
Slim down quickly to reduce cost
Outsourcing could lead to poor quality resulting in damages reputation
Outsource for specialist jobs instead of full time employment for a rle only needed at certain
times. Also saves on training costs
Demotivation high due to being part of a constantly changing workforce More efficient
working
Costly
EMPLOYER/EMPLOYEE RELATIONS
The relationship can impact on performance
If happy = motivated and productive

Rates of pay
Employer wants wages suppressed
Employee wants higher wages for own personal standards of living
New technology
Employer wants it to increase output and efficiency
Employee fears it as could cause job losses or having to learn new methods of production
Flexible working
Employer wants s help manage production and can keep costs low
Employee find it an unpopular method Working conditions
Employer will provide whats needed
Employee will want better conditions through benefits
PROBLEMS? Solved by...
1. Individual approach, negotiation for personal gain however unfair ground 2. Collective
bargaining, where employee is represented by trade union
Collective bargaining
Agreements are transparent and binding
Rules and terms more likely to be respected
More equitable - power is equal between parties Favouritism and victimism may be reduced
Views aren't always reflect
Costs are high
Owners may feel freedom to manage compromise Can be length process

INTERNAL RECRUITMENT (vice versa for external)

Act as a motivator - want to perform well to impress management
Cheaper, no adverts
Familiar with procedures - be more productive in first year due to little training costs
Employee knows candidates qualities, abilities potential
Business could stay stagnant in market - no fresh ideas to innovate
Small choice
Methods for external recruitment... Word of mouth
Direct application
Advertising
Private employment agency Headhunting
Job centres
Gov funding training schemes
TRAINING PRO’S & CON’S ON-THE-JOB
Learning from other workers Mentoring
Job rotation Apprenticeships
Graduate training

Output being produced

Relevant learning that will be implemented Cheaper than alternative forms
Easy to organise
Output may be faulty
May be stressful for worker
Danger to other
Frustrated if not paid
OFF-THE-JOB
Outside the business
college/uni
Output wot be affected if mistakes are made
Workers learning cannot be distracted by work
Customers and image not put at risk
No output
Expensive is specialists are needed
Some asceps cant be taught away from work place
Trainees may feel some aspects are relevant turning off showing low motivation Timely to
organise
BENEFITS OF TRAINING MANAGERS
Workers confident, raise production
Motivation and satisfied make them more flexible
Improve image making more attractive to potential employees
EMPLOYEE’S

Reduce anxieties providing more confidence to fulfil role making more production Feel
valued, satisfies
Less stressed, enjoy wok meaning lower turnover
Develop range of skills
CUSTOMER
Better quality
Netter customer service
IMPLICATIONS OF STRUCTURES TALL
Span of control small, tighter control over subordinates making more easily supervised
Creates clear route for promotion acting as a motivator
Long chain of command creating poor communication
Messages distorted slowing down decision making
Leave unsatisfied customers FLAT
Better communication due to short chain of command Management costs are lower
Decision making faster
Empowered staff due to greater responsibility Managers lose control
Discipline may lack
Negative impact on productivity MATRIX
Expertise and skilled workers being productive Motivation increase

Flexible and fluid workforce

Expensive due to extra staff
Problems with coordinating departments Decision making can be slow
DECISION MAKING...
CENTRALISED
Decision made at the top of the hierarchy DECENTRALISED
Decision making throughout the business
Multi location markets
Control is maintained to keep consistency of customer experience and quality
Lower costs by exploiting economies of scale as duplication
Encourages layers creating higher costs
Act as demotivator for junior managers as they have no power
Customer - bad experiences cannot get decision quickly from management as has to be
approved by head office
Chain
Empowered and enabled staff
Deal with customer needs better Improved level of customer service Flatter hierarchy
creating lower cos Empowered means motivated Respond to legal citation
Not strategic
Harder to provide consistency

Financial uncertainty MOTIVATION

FINANCIAL INCENTIVES
1. PIECEWORK - Taylor; produce more get paid more. Only applicable where volume of
worker can be measured. However can cause equity to decline as workers rush
production to get more units made
2. PRP - extra pay for achieving targets. Performance reviewed and bonus is in line to
that. Acts to motivate staff however depending on the amou the bonus if may
insufficient to motivate, may be more beneficial for team bonus? Links to Maslow's
hierarchy of needs, feel undervalued if don't reach bonus or bonus offered is too low
3. BONUS - motivate staff to meet target, creates loyalty to the workplace and raise
productivity
4. PROFIT SHARING - Maslow; belonging. United workers and shareholders as they
want business
to improve as creates benefits for them. Only small share isn't the most successful
motivator tool
5. COMMISSION - pay for each unit produced links to Taylor. Produce more get more
pay.
NON-FINANCIAL INCENTIVES
1. JOB ROTATION
2. JOB ENLARGEMENT
3. FLEXIBLE WORKING
4. EMPOWERMENT
5. TEAM WORKING
6. CONSULTATION
THEORISTS TAYLOR
MONEY = MOTIVATION PAY BASED ON OUTPUT

USE QUICKEST METHOD

NOT ALWAYS BEST - QUALITY SUFFERS VIEW PEOPLE AS MACHINES
MAYO
WORKING CONDITIONS
SKILLS
FINANCIAL INCENTIVES
SEEN AS BIAS TO MANAGERS MANIPULATING EMPLOYEES COMMUNICATION DOESN'T
ALWAYS WORK
MASLOW PHYSIOLOGICAL
SAFETY
LOVE AND BELONGING
ESTATE
SELF-ACTUALIZATION
FIT MORE THAN ONE
KNOCK DOWNS CAN BE TAKEN HARD BY EMPLOYEES
HERZBERG
MOTIVATORS, PROMOTIONAL, SENSE OF ACHIEVEMENT, RESPONSIBILITY AND NATURE OF
ROLE
HYGIENE FACTORS, PAY, CONDITIONS, POLICY, TREATMENT AND DEVELOPMENT STYLE
ADVANTAGES DISADVANTAGES AUTOCRATIC
Manager sets objectives allocates tasks and insists on obedience. Group becomes
dependent on leader, members are often dissatisfied.

Quicker decision making, centralised with leader

Leader has complete control preventing efficiently because of the strict control/supervision
from leader
Little cohesion and constant supervision can damage motivation
Employees may feel alienated due to lack of consultation regarding decisions
PATERNALISTIC
Makes all decisions and expects them to be obliged too. Unlike autocratic a great deal of
emphasis is placed on employee welfare. Subordinates have no control over decision
making
absenteeism/labour turnover reduced as employees needs are met, Maslow - employee
loyalty
Open line of communication between managers and employees showing everyone is
important
Staff as asset
Motivation can suffer
Bad decisions from top can cause major dissatisfaction
DEMOCRATIC
Encourages participation in decision making.
Persuasive: decision already made but time is took to persuade others it is good
Consultative; leader consults before making decision and the decision will take into account
views
Encourages teamwork promoting harmony, improves quality
Promotes creaie environemnt, encouragin innovation and input of new ideas Workers might
be demotivated if their ideas are not used
Time consuming which can result in slow decision making
LAISSEZ-FAIRE
Hands off approach, provides others with resources. Leader gives little guidance and
direction promoting freedom. Can be effective when workers are skilled, experienced,
motivated and capable of independence. Not idea for workers who are vice versa. Satisfy
maslow theory of self actualisation
Workers feel empowered as given responsibility

Successful for skilled workers/specialists may motivate them

Helps retention rates
Productivity may not be maximised as workers have too much freedom Employees may not
understand their roles they receive little guidance from leader
1.5
Role of an entrepreneur; innovator, key decision maker and risk taker

Stages of setting:

Idea
Research
Planning
Financing
Location
Resources
Launch

Running/expanding:

Financial management
Admin
Purchasing
Managing people
Production

BARRIERS:

Lack of finance
Legal barriers
Becoming an employer
Lack of skills
Lack of ideas
Fear of failure

INTREPRENEURS carry non financial risk

Drive innovation creating comp edge = increase in profits
Satisfy self actualisation as per maslow theory of motivation therefore increasing
productivity Win awards enhancing image and promoting positive PR

MOTIVES & CHARACTERISTICS

Financial - profit maximization or profit satisfice

Non financial - ethical stance, social enterprise, home woking or independence

Characteristics
Self confidence
Self determination
Self starter
Judgment
Commitment
Persenvenice
Initiative
Skills
Organisation
Financial management
Communication
Decision making
ICT skills
Negotiating
BUSINESS OBJECTIVES

1. Survival
2. Profit maximisation - costs as low as possible or prices as high as possible; skim
pricing = AID GROWTH
3. Sales maximisation - raise profit = more output allowing larger market share.
4. Market share - common objective for large businesses. Increase revenue and profits
as raised output = lower unit costs
5. Cost efficiency - lower costs = higher profit margins giving business room for
competitive advantage. Other methods: delayer, new cheaper supplier, recycle
6. Customer satisfaction - loyalty
7. Social objectives

BUSINESS CHOICES

Opportunity cost = when business choosing between 2 alternatives, the OC is the benefit
lost from next best alternative to chosen one

What a business can do...

1. Obtain info
2. Balance short term with long term
3. Gauge support - staff

FORMS OF BUSINESS: Advantages Disadvantages

SOLE TRADER

One individual Aim - survival

Control
Flexible + adopt to change
Owner keeps profit
Unlimited liability
Struggle to raise finance
To small to exploit economies of scale

PARTNERSHIP

2 - 20 people
Aim - profit, growth and quality
Specialise in different areas
Shared burden
More owners more capital Doesn’t have to publish info Unlimited liability
Share profit
Disagreements
Limited growth
LIMITED PARTNERSHIP

Partners provide capital BUT take no part in management, such partner has limited liability

PRIVATE LIMITED COMPANY

Aim - growth, profit

Controlled by directors
Sell shares, sales of assets
Dividends retained profit
Limited liability
More capital more shares
Control cannot be lost to outsides
Pay less tax
More credible, confidence from suppliers act
Publish financial info
Profit shared
Cannot raise as large as public
Less flexible

PUBLIC LIMITED COMPANY

General public can buy shares on stock exchange

Aim - growth, market share
Huge amount of capital raised
More credible, confidence from suppliers etc
Exploit economies of scale lower costs, more competitive
Dominate market due to size
Setting up costs are high
outsiders can take control
Competitors use info to advantage
legislation

FRANCHISOR - owns idea

FRANCHISEE - right to trade under business name

FRANCHISEES

Low risk
Supported
Set up costs are predictable
Benefit from national advertising campaigns Shared profit
Contracts reduce independence
Expensive
Strict rules

FRANCHISOR
Fast method for growth
Cheaper as franchisee takes financial risk More motivated than employees
Profit shaed
Poor franchisee can damage brand
Cost of supporting can be high