A* revision notes for Edxcel Business Paper 1
Covering Themes 1 +4 which makes up paper 1
Notes Include:
- Definitions of keywords/ concepts
-Concise & Bullet pointed Key information for each topic
-Practise Questions
- Economies of scale due to large - Competition
scale production = lower average
unit costs
- Large sales volume = higher - Homogenous(similar) products need
revenue differentiating through lots of
expensive advertising
Niche markets
Advantages Disadvantages
- Can charge premium prices - Risky - Demand may not be
constant
- Less competition - No economies of scale
Online retailing
Advatnatges Disadvantage
- Online retailer is opne 24/7 - many - Entrepreneurs may not posses the
stores many nto match this level of IT skills necessary to set up online
service
- Cheap and easy to start because of - Easy for competition to stay aware
low fixed costs of business’ model /products/prices
- Flexible / can run business from -Also technical problems such as dealing
anywhere with fruad, spam, viruese
Innovation and market growth
- Markets change in size and nature because:
- Economic growth/ world has more money to spend so willing consumer pay more
and demand other goods
, -Change in legislation - New laws can affect markets eg environmental legsialtions
helped the growth in renewable energy
-Innovation - can create new wants and needs
Adapting to change
- If a business does not adapt to change, they are likely to lose market share
- What might help a business adapt to market changes?
-Flexibility / develop a culture of flexibility within the workforce/ staff have trained in a
variety of skills/ help business serve customers more effectively
-Market research - Business must keep in touch with development in the market
-Develop a niche - If the business is unable to diversify / it may survive by serving a
niche for loyal customers
How competition affects the market
- Competition puts pressure on a business to innovate because:
-competition
may lower price
-make products appear different to rivals
-offering better quality products
Formula:
Market share:
Sales of a business × 100
Total sales in the market
Market size:
Sales value/sales volume of firm × 100
Market share of firm
1) What is the difference between a mass market and a niche market?
2) What is the key advantage of selling in a niche market?
3) State two disadvantages of selling in a niche market?
, 4) How is market share calculated?
5) State three advantages of giving products brand names?
6) State two advantages to customers of online retailing?
7) What is meant by a dynamic market?
8) How might the nature of a market change over time?
9) State three reasons why a market might grow?
10) Describe two ways a business might adopt to changes in markets?
1.1.2 Market research
Product orientation
Advantages Disadvantage
- Focuses on quality / product is - Waste money marketing products
specific for its needs that dont meet customer needs
- outsourcing / one product is - No competitive advantage / lose
replicated customer to competitors who offer
more relevant products
- Economies of scale - product is - Narow market focus / prevention of
produced efficiently and in mass looking for new market opportunites
quantities
Market orientation
Advantages Disadvantages
- Continuos improvement - Expensive market research may be
required
- Gain competitive advantage through - Hard to respond quickly to market
market research changes
- Respond to change when needed - Ineffective data collection could lead
to wrong decisions being made
Advantages Disadvantages Examples
Primary Research - Gain a competitive -Time consuming -Survey
advantage -Generally more -Questionaire
-Relevant and up to expensive -Focus Groups
date data -Observation
, Secondary -Less time -over reliance can -Internet
Research consuming lead to poor -Newspapers
-Generally cheaper decisions / outdated -Competitiors
data
Qualitative Data -Detailed data about - Difficult analysis -focus groups
behaviour -often done in a -observation
-allos for expansion small scale
-can ask anything
Market research Limitations
- Human behavoiur changes
- Biased market research samples
Use of ICT to support Market research
- Wesites - conduct surveys
- Social networking - attract volunteers to take part in a survey
- Databases - to store research easily
Market segments
Advantages Disadvantages
- Differenation means that higher - Approximations - there could be
prices can be charged differnt behaviours
- Understand who you are targeting - Identifying your intended target
market segment could be difficult
Market segments need to consider:
Geographic - Region,urban
Demographic - Age,Gender, social class
Psychographic - Attitudes, opinions, lifestyles
Behavioural - Loyalty
Knowledge Check
1)How might market research reduce the risk in business?
2)State two benefits that a market orientation business might enjoy?
3) State three advantages of primary research?
4) What is meant by desk research?
5) State four sources of data for secondary research?
6)What is meant by quantitative market research?
7)Why might qualitative data be open to different interpretations?
8)How might a business use social media to conduct market research?
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