Flashcards · YBS11 · AS Topic 1

Marketing and people (AS Level) flashcards

68 cards on AS Topic 1, subtopics 1.3.1 to 1.3.5. Pick a subtopic or study them all.

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1.3.1 Meeting customer needs

Mass market vs niche market: Mass market: a large number of customers, a standardised product and competitive pricing. Niche market: a small, specialised segment with lower volume and often a higher price.
Market size vs market share: Market size: total sales of all firms in the market, by value or volume. Market share: one firm's sales as a percentage of market size (firm's sales ÷ total market sales × 100).
Market growth formula, with an example: Market growth = change in market size ÷ original market size × 100. Example: a £4.0m market grows to £4.4m: 0.4 ÷ 4.0 × 100 = 10%.
How can a firm's sales rise while its market share falls?: If the market grows faster than the firm. Example: sales up 6% in a market growing 10%, so share falls even though sales rise.
Risk vs uncertainty: Risk: an outcome whose chance can be estimated from data (for example seasonal sales history). Uncertainty: an outcome whose chance cannot be reliably estimated. Research can reduce risk, not uncertainty.
What is a dynamic market?: One that keeps changing through new technology, shifting tastes, new entrants and online selling. Firms must watch the market and update products, channels and costs.
Three purposes of market research: Identify and anticipate customer needs and wants; quantify likely demand; gain insight into consumer behaviour.
Primary vs secondary research: one strength and one weakness of each: Primary (collected first-hand, e.g. surveys, focus groups, test marketing): specific and current, but costly and slow. Secondary (already exists, e.g. reports, websites, databases): cheap and fast, but possibly dated or off-target.
Quantitative vs qualitative research: Quantitative: numerical data (how many). Qualitative: opinions, attitudes and reasons (why).
Random, quota and stratified sampling: how each works: Random: everyone has an equal chance of selection (may miss small groups). Quota: fill set numbers from chosen groups (choice within the quota is not random). Stratified: groups in proportion to the population, chosen randomly within each.
Stratified sample: how many over-60s in a sample of 60 from 1,500 customers, 300 of them over 60?: Group size ÷ population × sample size = 300 ÷ 1,500 × 60 = 12.
Product orientation vs market orientation: Product orientation: make what the firm can make, then look for buyers. Market orientation: find out what customers want through research, then design the product to meet it.
Market map: what it shows and its limitation: A chart plotting competitors on two attributes (e.g. price and quality), showing crowded areas and gaps. Limitation: a gap shows no rival, not proof of demand; serving it may be unprofitable.
Competitive advantage, differentiation and adding value: Competitive advantage: something that lets a firm outperform rivals persistently (cost, brand, service, uniqueness). Differentiation: making a product distinct so buyers do not compare on price alone. Adding value: raising the gap between input cost and selling price.

1.3.2 The market

Name four factors that shift the demand curve: Price of substitutes (rise → demand rises); price of complements (rise → demand falls); income (rise → demand for normal goods rises); fashion, tastes, advertising and branding; demographics; external shocks and seasonality.
Name four factors that shift the supply curve: Costs of production (lower → supply rises); new technology (supply rises); indirect taxes (raise → supply falls); subsidies (supply rises); external shocks such as a crop failure (supply falls).
Movement along vs shift of the demand curve: A change in the product's own price causes a movement along the curve. A change in any other factor (income, substitutes, tastes…) shifts the whole curve.
Equilibrium, and the effect of demand shifting right: Equilibrium is where quantity demanded = quantity supplied. If demand shifts right, equilibrium price and quantity both rise.
Effect on equilibrium of supply shifting left (e.g. costs rise): Price rises and quantity falls. (Supply shifting right does the reverse: price falls, quantity rises.)
Price elasticity of demand (PED): formula and interpretation: PED = % change in quantity demanded ÷ % change in price. Usually negative. Ignoring the sign: above 1 elastic, below 1 inelastic, equal to 1 unitary.
Price cut from £2.50 to £2.00; sales rise from 8,000 to 9,200. PED and revenue effect?: Price −20%, quantity +15%. PED = 15 ÷ −20 = −0.75 (inelastic). Revenue falls from £20,000 to £18,400.
PED and total revenue: the rule: Inelastic demand: a price rise raises revenue, a price cut lowers it. Elastic demand: a price rise lowers revenue, a price cut raises it (but profit still depends on costs).
Five factors that make demand less price elastic: Few close substitutes; the product is a necessity; it takes a small share of income; strong brand loyalty; a short time period.
Income elasticity of demand (YED): formula and classification: YED = % change in quantity demanded ÷ % change in income. Positive = normal good (above 1 income elastic, 0 to 1 income inelastic). Negative = inferior good. Keep the sign.
Income rises 5% and demand for premium bikes rises 10%. YED?: 10 ÷ 5 = +2.0: a normal good, income elastic. Sales will be hit hard in a downturn.
Why does elasticity matter to a business?: With inelastic demand, a firm can raise price to lift revenue, so firms brand and differentiate to reduce PED. High-YED products suffer most in a downturn; inferior goods may gain when incomes fall.
Exam trap: base for percentage change: Percentage change = (new − old) ÷ old × 100. Always use the original figure as the base.

1.3.3 Marketing mix and strategy

Marketing mix: The combination of marketing decisions (product, price, promotion, place) a business uses to meet its marketing objectives. The mix must be consistent.
Three marketing objectives named in the specification: Increase market share; increase revenue; build a brand.
Product life cycle: the five stages: Development (no sales, costs only); introduction (low, slowly rising sales); growth (sales rising fast); maturity (sales flat); decline (sales falling).
Extension strategies: examples and how to judge them: New packaging, new market, new use, new promotion, price change, new variant. Judge by whether the strategy fixes the cause of the stalled sales.
Boston Matrix: the four categories: Star: high growth, relative share above 1. Question mark: high growth, relative share below 1. Cash cow: low growth, relative share above 1. Dog: low growth, relative share below 1.
Relative market share: formula and example: Product's share ÷ largest rival's share. Example: 18% ÷ 36% = 0.5. With market growth above the cut-off, that is a question mark.
Design mix: the three elements: Function (does the job reliably); aesthetics (appearance, feel, packaging); cost/economic manufacture (can be made at a cost that allows profit at an acceptable price).
Three benefits of strong branding (specification list): Added value; ability to charge premium prices; reduced price elasticity of demand.
Types of branding: Corporate (family): one name across all products. Individual: a separate name for each product. Own-label: a retailer's own brand.
Price skimming vs penetration pricing: Skimming: a high launch price, lowered later; suits strong USPs, inelastic demand, a strong brand. Penetration: a low launch price to gain share; suits elastic demand, many rivals, scale economies.
Cost-plus price: formula and example: Price = unit cost × (1 + mark-up %). Unit cost £30 with a 50% mark-up: 30 × 1.5 = £45.
Predatory vs competitive pricing: Predatory: price below cost to force a rival out; needs a firm that can afford losses. Competitive: price close to rivals' prices; common in mature markets with similar products.
Mark-up vs margin: Mark-up is profit as a percentage of cost. Margin is profit as a percentage of the selling price. Example: cost £42, price £63: mark-up = 21 ÷ 42 = 50%; margin = 21 ÷ 63 ≈ 33.3%.
Shorter vs longer distribution channel: Channels: four stage (producer → wholesaler → retailer → consumer), three stage, two stage (direct). Shorter: more income per unit and more control, but the producer takes on storage, delivery and service. Longer: wider reach, but each middleman takes a margin.

1.3.4 Managing people

Staff as an asset vs staff as a cost: Asset: people are a source of advantage worth investing in (training, pay). Cost: people are an expense to minimise, which risks low morale and high turnover.
Ways to create a flexible workforce: Multi-skilling; part-time and temporary contracts; zero-hour contracts; flexible hours and home working; outsourcing.
Dismissal vs redundancy: Dismissal: the contract is ended for a reason about the employee (fault-based). Redundancy: the job itself no longer exists, so the worker leaves through no fault of their own.
Internal vs external recruitment: Internal: cheaper, faster, a known person, but a narrow choice and it leaves another vacancy. External: a wider pool and new ideas, but dearer and slower to settle in.
Induction, on-the-job and off-the-job training: Induction: introduction to the firm for new staff. On-the-job: learning at the workstation. Off-the-job: learning away from work, such as a course.
Span of control vs chain of command: Span of control: the number of people reporting directly to one manager. Chain of command: the route by which instructions pass down and reports pass up the hierarchy.
Tall vs flat structures: Tall: many levels, narrow spans; close control and clear promotion steps, but slow and costly. Flat: few levels, wide spans; quick and cheaper, more responsibility, but fewer promotion steps and risk of overload.
Centralised vs decentralised; matrix structure: Centralised: key decisions at the top. Decentralised: decisions pushed down. Matrix: project teams draw people from several departments; shares skills but staff may have two bosses.
Taylor and Mayo: key ideas: Taylor: break work into simple tasks, supervise closely and pay by output (piecework). Mayo: workers have social needs; attention and teamwork raise motivation.
Maslow's hierarchy of needs: the five levels: From the bottom: physiological, safety, social, esteem, self-actualisation. Managers should meet the lowest unmet need.
Herzberg: hygiene factors vs motivators: Hygiene factors (pay, conditions, supervision) prevent dissatisfaction but do not motivate by themselves. Motivators (achievement, recognition, responsibility) create satisfaction. So fix pay first, then enrich the job.
Financial methods of motivation: Piecework (paid per unit); commission (percentage of sales); bonus (for hitting a target); profit share; performance-related pay. Example: 3% commission on £80,000 sales = £2,400.
Job enrichment vs job enlargement vs job rotation: Enrichment: more responsibility and challenge (depth). Enlargement: more tasks at the same level (breadth). Rotation: switching between tasks.
Four leadership styles: Autocratic: leader decides alone. Paternalistic: leader decides but explains and cares for staff. Democratic: staff are involved in decisions. Laissez-faire: leader sets broad aims and staff decide how.

1.3.5 Entrepreneurs and leaders

The roles of an entrepreneur: Creating and setting up a business (spot an opportunity, plan, raise finance); running it; expanding and developing it.
Intrapreneurship: Employees acting like entrepreneurs inside an existing business, developing new ideas or products.
Barriers to entrepreneurship: Lack of finance, lack of experience, red tape, competition, and fear of failure.
Characteristics and skills of an entrepreneur: Risk-taking, creativity, determination, self-confidence, organisation, communication and opportunity spotting.
Profit maximisation vs profit satisficing: Maximisation: aiming for the highest possible profit. Satisficing: aiming for a satisfactory profit that leaves the owner content, rather than the highest possible.
Non-financial motives of entrepreneurs: Ethical stance, social entrepreneurship, independence, and the chance of home working.
Survival as an objective: Common for new or struggling firms, where the priority is managing cash flow so the business keeps trading.
Sales maximisation vs profit maximisation: Sales maximisation aims for the highest sales revenue, which may mean lower prices and margins. Profit maximisation aims for the highest profit, which is hard to identify in practice.
Other business objectives besides profit and sales: Market share, cost efficiency (lower unit cost), employee welfare, customer satisfaction and social objectives.
Opportunity cost, with an example: The next best alternative given up. Two uses of £20,000 earn £3,000 and £2,600 a year; choosing the first has an opportunity cost of £2,600 (not the whole £20,000).
Trade-off: Having more of one aim means accepting less of another, for example growth against short-term profit.
Moving from entrepreneur to leader: As the business grows, the founder must delegate, trust managers and put systems in place. This is hard for someone used to controlling everything.
Management vs leadership: Management: planning, organising, coordinating and controlling. Leadership: setting direction and inspiring people.