Business Studies - Course Notes: May 2013

For a business to be successful they need to understand their customer needs and need to make sure these are met. A way in which you can find out what your customers needs are is by doing some Market Research and by researching what customer typically want in a service or in a product. Meeting your customer’s needs can give the buyer or customer of a product or business satisfaction and trust towards your business, this will mean they are more likely to repeat purchase and recommend your business or product to other people.

This will mean more money coming in for your business and a larger amount of buyers or customers. Doing market research can help you anticipate the needs of customers. This customer research can help you develop a more detailed picture of these people and can help you understand what they like. It can also help you anticipate where they will be and what they like.

Another important thing to understand if you want a successful business is The Marketing Mix. This is made up of four main stages Product, Price, Place and Promotion (The 4 P’s) and this is all aimed towards the businesses Target Market. Here are a few examples of each of the 4 P’s:

Product- This refers to the products or services the business offers. Some examples of decisions that should be made when deciding on what product or service to sell are the Brand Name, Functionality, Styling, Quality, Safety, Packaging, Repairs and Support, Warranty and Accessories and services.

Price- This refers to how the business should price their product and their suggested retail price. It also refers to the volume discounts and whole sale pricing, Cash and early payment discounts also apply for the price category. Other things that you should take into account when pricing your product/ service is seasonal pricing, Bundling, Price flexibility and Price discrimination. When pricing your product you should take into account how much profit you will be making and what expenses you have.

Promotion- This refers to how you should promote your business. When promoting your business you should have a strategy to how you are going to promote your business and how you are going to have success when advertising your business. You should also think about your target market and what sort of advert you are going to do and should consider using a marketing communications budget.

Place- This applies to were you place your business as getting this correct is very important to have a sustainable amount of customers in businesses such as cafes and restaurants. Another thing that could apply for this category is distribution, for example things like transportation and warehousing are very important if you are running a freighting business.

Questions

1: What of the 4 P's is focused on advertising your business?

Product Place Promotion Price

2: Which of these things can you do to find out a customers needs?

Census Market research Market Map Doing nothing

Obtaining finance

Long term sources of finance

Share capital –
Share capital is when people put money into the business and they own different percentages of the business.

Retained profit- This is the amount of money you keep back to give to the business. If you are an owner of a shop, you keep money for yourself for running the business. Or shareholders. Money that you give to your employees. Then retained profit is what you put back into the business, in order to make your business provide its goods. Or use it as dividend payment. The money could be made to make the business financially stronger.

Dividend- A share of the profits of a company received by shareholders who owns shares.

Leasing is when you rent equipment for your business instead of buying it

The advantage for this is that it is cheaper than actually buying the equipment

The disadvantage is that if it gets damaged then they charge you.

Shot term sources of finance

Trade Credit- When a business orders supplies, its suppliers usually will allow a period of time before the supplies have to be paid. This is called trade credit. Normally this time period is 30 days. (invoice) this is a form of short term borrowing because good and services do not always have to be paid for immediately.

Factoring-

TEXT BOOK DEFINITION- A source of finance where a business is able to receive cash immediately for this invoices it has issued from a factor, such as a bank, instead of waiting the typical 30 days to be paid.
MY DEFINITION- If your suppliers were a small business, then the bank would pay your suppliers for you for 30 days and at the end of those 30 days you would have to pay back the bank instead of your supplier.

Bank Overdraft – Balance of a bank account when funds withdrawn exceed funds deposited. The advantage of an overdraft is that money is only borrowed when needed which cuts down on the interest that has to be paid on borrowing. Some of the disadvantages of a bank overdraft facility are: you keep spending money even when you don't have enough cash to meet your spending and you pay an interest on the money you utilize as part of the overdraft.

Loans – A source of long-term finance. Ban loans to businesses tend to be for periods up to 5 years. Banks prefer to have security (or collateral as it is sometimes called) for a loan. Many small business owners offer their own home security. If they don’t repay the loan, the bank can force the house to be sold. The loan is then repaid from the proceeds of the sale. A loan is where property is offered as security is often called a mortgage. Bank loans have to be paid back with interest, usually in regular instalments at a fixed rate of interest, over a period of time. However, some bank loans have rates of interest which can change as interest rates in the economy change. The costs of these loans can go down or they can go up.

Grants – Some start up businesses are eligible for grants. Very small start-ups might get a grant from charities. Grants are also available through the government and the European Union particularly if the business is located in an area of high unemployment or where the government wants to encourage investment into the local economy. The advantage of a grant is that the money does not have to be repaid and there is no interest either. However, in some cases, there are conditions attached to getting and using a grant. For example, the business might have to promise to provide jobs for a number of people.

Which two of the following are examples of long-term finance for a high street chain of fashion shops? Select two answers:

A - An overdraft
B - Trade credit
C - A three year bank loan
D - New shares
E - A christmas sale

On which one of the followong would a business pay interest? Select one answer:

A - A bank loan
B - Shares
C - Personal savings
D - retained profit

Which one of the following is most likely to be an example of a type of finance where the lender can demand immediate repayment froma business which has borrowed the money?

A - An overdraft
B - A share
C - A bank loan
D - Retained profit

The business plan

The purpose of a business plan:

There are many purposes for creating a business plan. A business plan can help you prepare for life within a business. It also helps you prepare for what sort of things that can occur when setting up or moving on with your business.

If you are preparing to start your own business, you should first write a business plan. A good business plan acts as a dynamic blueprint for running and expanding your business.

A business plan is an effective means of defining your goals and the steps needed to reach them. It spells out your purpose, vision and means of operation. It explains your objectives to investors, partners, employees and. A good business plan clearly states the amount of capital you need to make the company work and where the investment is coming from.

What goes into a business plan:

In the following diagram it shows everything you need to include when creating your business plan. If you follow this draft then your business plan will be effective and help you in your business.

For more information watch this brief video about business plans.

Forecasting cash flows

Cash
What is cash flow
Outflows
Inflows
Net cash flow
Insolvency
Cash flow forecast
Opening balance
Closing balance
Cumulative cash flow
Cash flow problems
What affects cash flow?
The importance of planning

Estimating revenues, costs and profits

Estimating revenues:

Estimating revenue is when you predict the amount of revenue you will receive from various sources. For example: You could predict that you will receive £250 revenue in a month from ice cream sales, and £200 from soft drinks.

Estimating costs:

Estimating costs is similar to estimating revenue. But in this case you predict the costs you will have to pay. For example: you could predict that you will pay £50 on petrol and £200 on advertisements.

Sales volume:

Sales volume is the quantity of items you have sold. For example: you could have bought 20 ice creams and sold 15. The 15 you sold would be the sales volume.

Fixed costs:

Fixed costs are the costs that require the same amount of money each time you pay. For example: A fixed cost could be the cost for car insurance as it would cost the same amount each month. Therefore it is 'fixed'.

Total costs:

The total cost is the sum of all of your costs (variable and fixed). For example: If in one month your costs were £30 + £100 + £250 + £70, your total costs would be £450.

Variable costs:

Variable costs are costs that are likely to change every month. For example: Your water bill would be a variable cost as one month it could cost £100, and then the next month it could change to £70. In other words, the cost varies depending on certain variables.

Profit:

Profit is what you get if your revenue is higher than your costs. For example: If you had £100 revenue and £40 of costs, this would be a profit of £60 (revenue - costs = profit). Profit means that your business was successful during that month (or year) as you ended up with more money than you had before.

Loss:

Loss is the opposite of profit. Loss means that you had more costs than revenue. For example: If you had £50 revenue and £60 of costs, you have lost £10. Making a loss means that your business has not been successful in that month (or year) as you have ended up with less money than you had before.

Questions:

1. If a company has sold 4 bikes at £200 each, 20 bike helmets at £20 each and 10 bike pumps at £10 each, how much total revenue has the company received?

A) £1200 B) £1300 C) £1500 D) £900

2. This same company then spent £1400 on spare bike parts and paint. Has the company made a profit or loss?

A) Profit B) Loss

Qualities shown by entrepreneurs

Determination:
To be a successful entrepreneur you have to be determined, you have to want to acheive your goals and not give up when it gets hard.

Initiative:

An entrepreneur needs to show initiative, this means they need to be able to take control and take action to do what their instinct tells them. This could be the differnece between a business going bank rupt and a successfull international business worth millions of pounds.

Taking risks:

At times, entrepreneurs need to take risks in order to succeed. If you don't take risks, you'll never accomplish the ulimate rewards. A successful entrepreneur will take appropriate risks to get good acheivements. If you don't take risks you will only acheive the average rewards which aren't as good as the others.

Making decisions:

Entrepreneurs also have to make important decisions that could sometimes put the business in jeopardy and if the wrong choice would made there would be a risk of the whole business crashing. Where as if the right choice was made there could be an amazing prize. Sometimes it's easier said then done as there could be a tough choise to be made that are very similar.

Planning:

Another skill entrepreneurs would benefit from is the ability to plan efficiently and sustainably, taking into account all of the relevant factors to do with business. If you can do this, you will be able to almost predict the future of your business giving you an advantage when it comes to setting up your business and keeping it running.

Persuasion:

Persuasion is a useful skill for an entrepreneur to have as they can persuade customers to by their

services/products, they could also persuade their suppliers to give them a good deal meaning they save money. This could also be useful when applying for a loan from the bank.

Showing leadership:

Showing leadership is an important way to guide your business into success as it shows you're the leader and that you know what you're doing, it also comforts any share holders/employees as they can see you've got everything under control and that their business/jobs are safe and if you have happy employees they will take pride in their work and put more effort in.

Luck:
Luck is always a good thing to have but it can be even more appreciated when it comes to being an entrepreneur as it can help you when it comes to buying and selling products and getting more customers, it can also help to do with prices you pay for your products and the prices you can get away with selling them for, that will give you a higher profit. Luck could make you rich and help your business become very successful. But it could also turn the tables as it could be the reason behind you/your business becoming bankrupt.

Objectives when starting up

Financial Objectives - targets expressed in money terms such as making a profit, earning income or building wealth.

Non financial objectives - not involving financial matters.

Case Study
Jayne and David worked for a business that designed websites for the internet. David worked in sales and Jayne designed the sites. But after a few years, they decided they had had enough. They wanted to set up their own website design business. There was a number of reasons why they wanted to become entrepreneurs, running their own business.

Financial Objectives

Jayne and David wanted to earn more financially. They earned two salaries working for their present employer. But no matter how hard they worked, the amount they could earn was limited. So what were their financial objectives when they set up their own business?

Survival. Jayne and David were realistic about their new business. They knew that many businesses fail within the first few years. So, to start with, they just wanted to survive. It would take time to build up a base of customers. There would be heavy expenses at the start because they would need to buy computers. They would have to rent premises and buy office equipment. If they could get through this difficult time, they could then achieve the long term financial objectives.

Profit and Income. Jayne and David knew that in the first year or two, they would have to take a cut in income. But in the long term, they wanted to earn more than their present salaries. So they were motivated by the thought of higher incomes. Their business would pay them a wage. But on top of that, they would also get the profit made by the business.

Job Creation

Earning more than his previous job

As a result of a dare

Being in control of his hours of work

Using profits to fund a pension

To keep his family happy

To increase income

To get greater work satisfaction

To accumulate wealth

To maximize profit

Wealth. Jayne and David were also looking forward to their retirement. Their business, if it was successful, could be sold. The price they got for the business would be the value of the wealth they had built up in the business. A successful business would not only mean that they earned more but also that they would become wealthier. That wealth could be used to fund their retirement.

Financial security. Owning a business carries risks. Jayne and David felt that owning their own business would give them greater financial security in the long term. Financial security therefore was a long term personal objective for them.

Non-Financial Objectives

Money was one reason why Jayne and David wanted to set up their own business. But they had other, non-financial objectives too.

Personal satisfaction. Jayne and David looked forward to running their own successful business. They would feel proud and get a great sense of achievement. Building a business would be exciting. They would both get personal satisfaction.

Challenge. Jayne and David both enjoyed a challenge. Creating a successful business from scratch would be their ultimate challenge. Many entrepreneurs like David and Jayne find the challenge of running a business very satisfying.

Independence and control. Entrepreneurs like Jayne and David often enjoy the independence thr comes with owning a business.

• They can be their own boss.

• They don't have to ask anybody else's permission to take time off work.

• They have more flexibility to organize their lives compared to working for someone else.

This gives them more control over how they live their lives.

Helping others. Jayne designed posters for charities. Sometimes she would stop and have a chat when she delivered them. She admired how some people were more motivated to work to help others than to earn extra money. A friend of hers had actually helped set up a sports charity working with disadvantaged children on a local estate. Gemma spend most of her spare time unpaid with these children, coaching them in sports.

Multiple Choice Questions

- John Smith has recently set up in business on his own as a plumber. Which two of the following would be his financial objectives?

- Which one of the following would be a non-financial objective for individuals to start a business? Select one answer.

Important enterprise skills

Seeing opportunities

When your in a business you have to keep an eye out for opportunities for a big break.
In a business opportunities come up now and then. You have to think of the following things before you accept an opportunity..

Is it going to help you?
What are you going to be able to achieve from it?
Are there going to be any other opportunities in the future?

There are different types of opportunities you may encounter in a business. These could be..

An opportunity to sell a product.
An opportunity to attract new customers.
An opportunity to advertise.
An opportunity to buy a new product.

Effective planning

To plan effectively you need to think through what you are planning for before you start. Also if you are wanting to plan for an improvement you need to think more specific so it is more likely to happen. If you are planning for a team or as a team you have to be sure to discuss with others that are involved. Discussing planning with other members of a business is much more effective as it will lead to better benefits. For example;

It will open up more opinions.
It is easier to make sure you haven't missed any ideas out.
It enables you to agree on other peoples ideas which may be far better than your own.

Effective planning helps entrepreneurs or businesses as a whole, to create or find new paths in their future.

Thinking ahead

Thinking ahead means exactly what its called. To think ahead you need to think of something before you do it this could link in with effective planning. You may not realize it but everyone thinks ahead everyday. For example, when a motorist is coming up to a set of traffic lights or a yellow line they are going to be thinking what they are going to do when they get there. That is exactly the same as what you need to do in a business. An easy way to remember Thinking ahead is that you picture your business on a road and then picture an objective you would like to achieve at the end of the road.

Thinking ahead can be very helpful in anyone's case. If you think ahead and plan as you go along, you can minimize risks and avoid obstacles which will stop you from carrying on.

Drive and determination

When you are situated in a business you need two important things. These two things are drive and determination. Drive will help you move those steps forward to your objectives or targets. Determination will make you never want to give up trying to get to your targets. If you have determination it also means you are going to be trying your best to get past any obstacles.

Examples of drive:

You notice that your businesses profit is slowly decreasing, you take any action needed and you try and get it back to its original status.
Your objective is getting close and you are finding it tough to carry on. You drive will enable you to make it through to the end.

Examples of determination:

You are reaching the end of the year and your business has managed to keep the same profit through out each month. Determination will help you complete the year with the same profit.
You and your business have set your selves a target to reach. Determination will help you get to this target.

Making connections (Mind mapping)

Mind mapping is a great way for deciding on ideas or a good way to collect many ideas to decide from.

If your business is creating a new product or a new service then mind mapping is probably the way forward. If your business is to use a mind map then everyone will be able to get their ideas down and it will be much easier to decide from.

Here is an example mind map

As you can see this is a perfect example of a business mind map. You can use a mind map to find out what your customers may want from you. You could also use it to record results from primary and secondary research to help make a decision.

Two quick questions

What is one good reason to have determination?
What must you do before you go ahead with a new plan?

Taking a calculated risk

Risks and rewards

There are risks that are very common when setting up a business or when making a decision. The key to success is making the correct decision and in some cases taking a risk. They are likely to face some already existent competition from businesses that maybe selling the same sort of products, in this case then they will need to think about what sort of things they could do to get that edge forward of the competition, which could be creating a new product to sell that the customers could really take a shine to and this is possible to do by taking a calculated risk.

For Example if Bob wanted to expand his business he would take a calculated risk to attempt to make his business big, of course he would have to take into consideration of what sort of downsides and upsides there are.

The rewards can be very good as it could increase sales or popularity, this will then give the business more opportunity to expand their business, maybe make it into a franchise.

Downsides
There are so many things that could go wrong when making a risk, for example if you don't pay attention to what sort of products the customers buy then they aren't going to be interested in buying the products. This will then cause the business to lose sales, profit and will soon go into liquidation.

Upsides
The upsides is that it could increase sales, profit, customer satisfaction. making the right decisions can really improve your business for the better.

Making mistakes

This can affect your business greatly as it can decrease customer numbers which will then have an impact on profit, and we all know, no profit equals no sustainable business.

Questions:
-Which one of the following most accurately explains the purpose of attempting to calculate risk when making business decisions?
a) To make sure that a decision involving no risk at all is made
b) To attempt to make a decision involving the greatest risk and the least reward
c) To try and make a decision where the risks will be outweighed by the rewards
d) To make sure that all risks have been identified before a decision is made

-Which three of the following are most likely to be considered when attempting to calculate the risk of a business
decision?
a) What are the options that involve no risk to the business
b) What are the likely benefits for the business if the decision results in success
c) What options exist where success is guaranteed.
d) What are the likely costs for the business if the decision results in failure
e) What actions can managers take to remove any chance of failure
f) What are the chances of failure threatening the survival of the business

Invention and innovation

Invention
Innovation
Risk
Patents and copyright
Trademarks

Invention definition: The action of inventing something, typically a process or device.

Inovation definitions: The action or process of innovating.

Risk: A situation involving exposure to danger: "flouting the law was too much of a risk".

Patents: A Patent is a goverment grant given by the goverment.

Copyright: Copyright is a legal authourity given to protect your work from getting copied.

Trademarks: A Trade mark is a distinctive sign or indicator.

Inventions: A invention is when something new is created. It is a unique product.
It is a invention when it's brought to the money.

A car is an invention.
A plane is an invention.
A telephone is an invention.
Anything that is created by man is a invention.

Innovation

An innovation is a product that already exists but it has been changed to make a new product.
Every year new technology is being created so that means that there are going to be innovations all the time.

Here are some examples of Innovations:

Boats have been changed with innovation over the years.
The telephone was changed to a mobile phone.
Laptops to tablets.

Questions to be asked.

Scenario

Rachel Owen has worked as a sales manager for the past ten years for a car company. Her salary is reasonable, but Rachel finds the work boring. For the past twelve months, she has been thinking of quitting, to set up her own business, making and selling traditional sweets, biscuits and cakes. What questions should she ask herself as she explores and researches this change in her working life?

Asking these types of questions will help her in the long run if she should change her business or not, it will help her question if she does really want to leave the car company to pursue her passion of making sweets, biscuits and cakes.

Why?
The first question you need to ask yourself is why? So in Rachel’s case, why does she want to make her own business and also why may she want to leave her other job, we know why she wants to leave her job because she finds it boring but she will need to think about why she wants to pursue her passion.

Why not?

Rachel also needs to think about the question ‘why not?’ she may ask why not open her own car rental place but she may answer with that it’s not just the work she finds boring but the whole car rental thing in its self. She may find making traditional sweets, biscuits and cakes more exciting.

What?
She will need to think about ‘what?’ so like what time will she open in the morning? Or what age group will she sell her products for? She will need to think a lot about ‘what?’ because the questions will have an effect on her business.

She will then need to ask herself how? She need to ask herself how will she get the ingrediants? or how will she get everyone to know about her business? How is a very important question because it challenges' her ideas to see if her business is efficent.

Where?

Where is a good question because it asks where you will place your business and if where you will get your stocks from.

When?

She will also need to question herself when she will open her shop or maybe ask herself when she will need to start telling people about her business.

Exam Type Qustions:

Rachel needs to ask herself the question 'where?' give examples of what type of where question Rachel should ask herself?

If when Rachel gets asked 'why?' and does not have an anwser, what effect might this have on her future business plans?

Thinking creatively

Thinking creatively means coming up with a idea that does not already exist. Thinking creatively is important to a bussiness because it give you more advatage over competiton.

Blue skies thinking:

this is where you brainstorm with ideas and for people to throw out as many ideas as possible. also there is no right or wrong ideas. blue skies thinking goes on unitl people have run out of ideas and then they begin thinking about the ideas that have pontential to be a success.
deliberate creavity:
deliberate creavity is when an entrepenur is constantly thinking of new ideas for there bussiness.
lateral thinking:
the other name for lateral thinking is called thinking outside of the box. it is where you think of ideas that are not immediately obvious to people and unexpected.
6 thinking hats:

Neutrality (white hat)	this is where you look at all ideas and facts.
Feeling (red hat)	this is where entrepenurs use there gut feeling on ideas.
Negative judgement (black hat)	this is where you apply logic to find a negative judgement.
Positive Judgement (yellow hat)	this is where you apply logic to judge something postitvely.
Creative thinking (green hat)	this is where people can let ideas flow. This is the hat which encourages lateral thinking.
Process control (Blue hat)	this is where you think about thinking and consider other ideas.

What is enterprise?

The definition of enterprise is: A project or undertaking, typically one that is difficult or requires effort.

An enterprise is another word for a business or the name of someone actions who show initiative and take risks.

Enterprise is a skill. Put simply, enterprise is the willingness of an individual or organisation to: Take Risks, Show Initiative (make things happen) and undertaking to new ventures.

An example of enterprise skills is in Dragons Den.

Risk Taking- Setting up a new business is risky. Even if the entrepreneur has carefully researched the market, there's always a chance that customers may reject the product and that a loss will be made.

Showing Initiative- Successful entrepreneurs have the drive, determination and energy to overcome hurdles and launch new businesses.

Undertake New Ventures- An entrepreneur has to have the imagination to spot business opportunities that will fill gaps in the market.

Goods and Services- Goods are things that you can buy and that you can touch like a toothbrush or drink. A service is something you can purchase but can't touch like a haircut or a plumber.

Quick Questions

Is a frying pan a service or good?
Is a ambulance a good or service?

Franchising

Who's Who?

Franchisor- The business that gives the franchisees the right to sell its product or service.

Franchisee- A business that agrees to manufacture, distribute or provide a branded product, under licence.

Advantages of a Franchise-

-Access to tried-and-tested products.
- Specific support and training provided
- Possibly an established customer base
- Advertising all done, all ready well known
-Expensive marketing costs covered by the franchise

Disadvantages of a Franchise-

-No control over anything.

-You have to split your profit.

- Tied to suppliers

-Risks from others.

-Responding to the market.

Most franchises that open up tend to rent equiptment for their franchise.

Added Value

The definition of added value

When you purchase stock for what you are selling it comes with a set price, for example a box of 10 packets of crisps for £5.00 (this means 50p each) you would add 20p to each packet consiquently meaning you sell each packet for 70p and make £7.00 in total.

Original price including added value - Original price = profit
£7.00 - £5.00 = £2.00

The Creation of Wealth
Businesses are not only important because they provide us with our wants and needs but
in the process of using resources to provide goods and services, they add value to
those resources and create wealth.
For example, when you buy a pine table from a furniture shop, it has already gone through
a number of processes; at each stage value has been added to it, and wealth is being created
through payment to the factors of production.
Firstly the tree had to be grown and felled. This would then be taken to a saw mill where it would
be cut into planks. A furniture manufacturer would buy the timber and make a table from it
which they would sell to the retailer. The retailer would then sell the table. at each stage the money made from the production process will be used to pay the factors of production.

If the table was sold for £500 and the furniture retailer had paid the manufacture £300, it has added £200 of value to the product. It would use some of this value added to pay the wages of the shop assistants , pay the the rent on the store, pay its heating and lighting bills and keep some of it for profit.
The manufacturer paid the saw mill £100 for the timber, adding £200 to its value. The manufacturer will use this to pay workers' wages, various bills and make a profit.
The saw mill bought the wood from the forestry company for £50. It use the remaining £50 to pay wages, bills and make a profit.
It cost the foresty company £20 to grow the tree. It would use this money to pay for its factors of production.

Stage                                           Value added (£)

Forestry                                              30
Saw mill                                              50
Furniture Manufacturer                    200
Furntiture Retailer                            200

Competition

Competition

What is competition?
Competition occurs when two or more organisations act independently to supply their products to the same group of consumers. They try and win over each others customers.

Analysing the competition

Competitor Analysis is an important part of the strategic planning process. This revision note outlines the main role of, and steps in, competitor analysis.

Why bother to analyse competitors?

Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors. Many businesses are happy simply to track the competition, copying their moves and reacting to changes.

Competitor analysis has several important roles in strategic planning:

• To help management understand their competitive advantages/disadvantages relative to competitors

• To generate understanding of competitors’ past, present (and most importantly) future strategies

• To provide an informed basis to develop strategies to achieve competitive advantage in the future

• To help forecast the returns that may be made from future investme

nts (e.g. how will competitors respond to a new product or pricing strategy.

Product range
Product range: In order to attract and satisfy customers, companies need to produce products that are superior to their competitors.

Why is Product range important?
Product range is one type of hierarchy and it is highly related to product category management. It is very useful for sales managers to
manage products and review sales performance. It can help the business to achieve budgets and have higher profits.

Quality

The quality of products needs to be sufficient enough to be able to sell the good, but reasonable for the price. A high quality product needs to have a high price. A low quality product needs to have a low price. If you had high quality products that you were selling at a low price you would not make a profit or even make a break even profit. This is because you are not getting back the money you put into creating the product. Similar to if you sold a low quality product at a high price then you would still not make a profit because you will not sell your products. Your customers will not buy your products if they are at a high price for low quality.

Your price compared to quality will tie in and relate to your competition. You always need to find a gap in the market for your product.

Price: If there are several retailers, each retailer will lower the price in an attempt to win customers. It is illegal for retailers to agree between themselves to fix a price. They must compete for business.

Design

The design of your product needs to be appealing to your customers. It needs to be creative and eye catching. Be able to stand out from your competition.

The more creative your product and how it looks will depend on how many customers you will have. It will be even better if you have a Unique Selling Point (USP) A unique twist to your product that only your product will have and attract them. Advertising your product will help to beat your competition too!

Selling experience

Always try out your product a limited edition first. This way you will get a better understanding of what your customers expect and our looking for. You will experience the profit you will make. If you need to increase or decrease the price of your product. Does it stand out from your competition etc.

After sales service

After sales service is very important to your business and your customers. It will be one thing that determines your business reputation (brand image,see below). It is also important that you recognize the needs of your customers.

After sales service is how you treat your customers after you have served them. It is important that you treat your customers well.

Brand image

Brand image is how your business sees you. How your business is seen in the public eye. What the public think of you. It is important to show a good attitude to have a good reputation. The idea/impression/image that customers have in their minds about the brand.

Suppliers

Your products you buy from your suppliers will what be available on your shelves. It will also make a difference in the price of your product ( depending on your supplier) if you have a good make of products at a reasonable price Then they will be likely to buy them ( considering your product range.) Everything in a business will always relate back to money.

Multiple choice questions...

(1) Which two of the following methods are most likely to help reduce Kayleigh's costs in an effort to compete more effectively?

Select TWO answers.

(A) Increase its advertising in the local newspaper
(B) Provide better service by taking on more staff
(C) Increasing the range of its product
(D) Ordering cheaper shoes from its suppliers
(E) Making one member of staff redundant in order to be able to offer lower prices.

(2) A business makes bottled and canned soft drinks.Which of the following in itself is most likely to make it more competitive against its rivals?

Select ONE answer.

(A) the employment of two extra workers
(B) An increase in profit compared to last year
(C) The launch of a new range of drinks
(D) A rise in the price of its drinks range.