Edexcel GCSE Business: Spotting a business opportunity and customer needs (1BS0) – Revision Notes

These notes condense Theme 1, Topic 1.2 Spotting a business opportunity (items 1.2.1 to 1.2.4) of the Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0) specification, Issue 2, July 2022. For full explanations and worked examples read the study guide. Formulae are listed in Appendix 3 of the specification and are not provided in the examinations, so learn the ones you need.

Course links: the Business hub, the printable checklist and the free diagnostics. Then use the practice questions.

Key terms

Term	Meaning
Customer needs	What customers want from a purchase: price, quality, choice, convenience
Market research	Gathering and studying information on customers, rivals and the market
Primary research	New, first-hand information collected for the business’s own purpose
Secondary research	Existing information collected by someone else
Quantitative data	Data in number form: counts, percentages, prices
Qualitative data	Descriptive data, such as opinions, feelings and reasons
Reliable data	Data the business can trust to reflect the market
Market segmentation	Dividing a market into groups of customers with shared characteristics
Market mapping	Plotting businesses on two axes to see the competition and any gap
Gap in the market	A customer need that no business meets well
Market share	Its sales shown as a share (%) of everything sold in the market

1.2.1 Customer needs

The four needs named in the specification:

Need	What the customer wants	Business response (example)
Price	A fair amount to pay	Value ranges, discounts
Quality	A product that works and lasts	Better materials, checks
Choice	A range to pick from	More flavours, sizes or styles
Convenience	Easy, quick buying	Late opening, delivery, online ordering

Why identify and understand customers (two reasons from the specification):

• Generating sales: offering what customers want means more of them buy.
• Business survival: a small business cannot afford to make something nobody needs.

Method for a context question: name the need, say who has it (use the customer in the stem), then link it to a sales or survival outcome.

1.2.2 Market research

Purposes (four)

1. Identify and understand customer needs.
2. Identify gaps in the market.
3. Reduce risk (not remove it).
4. Inform business decisions.

Methods

Type	Methods in the specification	Main strength	Main weakness
Primary	Survey	Reaches many people	Time and cost
Primary	Questionnaire	Same questions for all	Poor wording, low returns
Primary	Focus group	Detailed reasons	Small group, can be swayed
Primary	Observation	Real behaviour	Does not show why
Secondary	Internet	Fast, cheap	Source may be weak
Secondary	Market reports	Wide market view	May cost money, may be general
Secondary	Government reports	Trusted, large scale	May be out of date or not local

Primary versus secondary at a glance: primary is tailored to your question but takes more time and money; secondary costs less and is faster but was gathered for a different reason.

Quantitative versus qualitative data

	Quantitative	Qualitative
Form	Numbers	Words and opinions
Shows	How many, how much	Why, how people feel
Example	42% would buy	“The packaging feels cheap”
Weakness	Can miss the reason	Harder to measure and compare

Social media

• Helps: cheap and quick; polls, comments and reviews; reaches people who would not answer a street survey.
• Limits: followers already like the business; anyone can vote; replies may not match the target market.

Reliability: five checks

• Sample size is large enough.
• The sample is representative of the target market.
• Questions are not leading.
• Data is up to date.
• The source is trustworthy.

1.2.3 Market segmentation and market mapping

Bases for segmentation

Basis	Example segment
Location	Residents within three miles of the shop
Demographics	Families with young children
Lifestyle	Keen runners
Income	Higher earners
Age	Teenagers aged 13 to 17

Why segment? To aim the product, price and promotion at the group most likely to buy, instead of spending on everyone.

Market mapping in steps

1. Choose two axes that matter to customers, often price and quality.
2. Plot each competitor.
3. Look for empty areas: these may be gaps.
4. Look at crowded areas: this is where the competition is strongest.
5. Test the gap with primary research before acting. An empty area may mean no demand.

Small ASCII example of a map with a gap in the top middle:

Quality high |  Rival C                      Rival D
             |            (gap)
             |  Rival A      Rival B
Quality low  +-------------------------------------
                low price            high price

1.2.4 The competitive environment

Five factors for judging competitors

Factor	Strength looks like	Weakness looks like
Price	Lowest in the market, or good value	Dearer than similar rivals
Quality	Strong reviews	Complaints about faults
Location	Close to customers, or good online reach	Hard to reach
Product range	Wide choice	Narrow choice
Customer service	Helpful, reliable	Slow, unfriendly

How competition affects decisions

• Price: match, undercut or stay above rivals.
• Quality and service: improve if rivals are better.
• Range: widen to fill a gap, or specialise.
• Location: pick a site near or away from rivals.
• Promotion: highlight what makes the business different.

Calculations you may need

Skill	Formula (standard form)	Example
Percentage	part ÷ whole × 100	36 of 90 = 40%
Mean (average)	total ÷ number of values	five scores totalling 20.0 give 4.0
Percentage change	change ÷ original × 100	960 to 1,200 is +25%
Market share	business sales ÷ total market sales × 100	£21,000 of £140,000 = 15%

The formula for market share is given here in its standard form; it is not one of those listed in Appendix 3 of the specification. Always show working for a Calculate question, because the specification says workings should be given.

Command words to know

Command word	What the specification says it requires
Define	Give the meaning of a term from the content
State	A one-sentence answer picked from information given in the question
Identify	Select the correct answer from a graph or table
Calculate	Use mathematical skills on the data; give workings
Outline	Two linked points, placed in the context
Explain	One fact plus two developing points; no context
Analyse	Extended answer, with expansion, placed in context
Justify	Extended answer recommending one of two options, using the information provided
Evaluate	Extended answer using specification content to reach a conclusion that is backed up

Quick self-test

1. Define market research.
2. Name the four customer needs listed in the specification.
3. In a survey of 90 customers, 36 chose convenience as their main need. What percentage is that?
4. Give two examples of primary research and two of secondary research.
5. Is the comment “the box felt flimsy” qualitative or quantitative? Explain in one sentence.
6. Five rival shops have review scores of 3.2, 4.5, 3.8, 4.1 and 4.4. Calculate the mean score.
7. A business has sales of £21,000 in a market worth £140,000. Calculate its market share.
8. Give two checks on whether research data is reliable.
9. Name the five bases for market segmentation in the specification.
10. A rival’s weekly sales rose from 960 units to 1,200 units. Calculate the percentage increase.
11. Name the five factors you can use to compare competitors.
12. A questionnaire is sent to 60 customers and 9 reply. What percentage replied, and why might this matter for reliability?

Answers

1. Gathering and studying information on customers, rivals and the market.
2. Price, quality, choice, convenience.
3. 36 ÷ 90 × 100 = 40%.
4. Primary: any two of survey, questionnaire, focus group, observation. Secondary: any two of internet, market reports, government reports.
5. Qualitative, because it is a description of an opinion, not a number.
6. Total = 3.2 + 4.5 + 3.8 + 4.1 + 4.4 = 20.0; 20.0 ÷ 5 = 4.0.
7. 21,000 ÷ 140,000 × 100 = 15%.
8. Any two of: large enough sample, representative sample, no leading questions, up-to-date data, trusted source.
9. Location, demographics, lifestyle, income, age.
10. (1,200 - 960) ÷ 960 × 100 = 25%.
11. Price, quality, location, product range, customer service.
12. 9 ÷ 60 × 100 = 15%. A low reply rate means the replies may come from a small, unusual group who do not represent all customers.

Where marks are usually lost

• Learning a definition but leaving it unapplied to the business named in the question.
• Writing “it is cheaper” for secondary research with no second point, when an Explain answer is likely to need a statement plus two expansion points.
• Saying primary research is “better” without saying what it is better for.
• Confusing qualitative with quantitative: a rating out of five is a number, a comment is not.
• Leaving out working in a Calculate question, or forgetting the percentage sign or the pound sign.
• Naming a gap in a market map without saying whether customers would buy.
• Describing a rival’s strength with no factor named, such as “they are good”.
• Giving a Justify answer that picks no option, or an Evaluate answer with no conclusion.

Frequently asked questions

What are the four customer needs in Edexcel GCSE Business? The 1BS0 specification names price, quality, choice and convenience. Identifying them matters because it helps a business generate sales and survive.

What is the difference between primary and secondary research? Primary research is new information collected first-hand, through surveys, questionnaires, focus groups or observation. Secondary research uses existing information such as the internet, market reports and government reports, which is cheaper and faster but may be dated.

What is the difference between qualitative and quantitative data? Quantitative data is in number form, such as counts, percentages and ratings, and is easy to compare. Qualitative data is descriptive, such as opinions and reasons, and explains the numbers but is harder to measure.

Does market research remove risk? No. Market research reduces risk by showing demand before money is spent, but it cannot remove risk altogether.

Official syllabus

Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0), Specification, Issue 2, July 2022, published by Pearson Education Limited. Theme 1: Investigating small business, Topic 1.2 Spotting a business opportunity, items 1.2.1 to 1.2.4.