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Land - raw material, rent, mortgage (coal, timber and oil)
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...
Capital - manufactured resources used to start/run the business over time, as in creating
or producing products
...
Enterprise - management of the other 4 business inputs (decision making)
Inputs:raw material/knowledge/skills
Process: manufacturing/organization/planning
Outputs: final product
4 Business Functions:
● Human Resources - employee organization, organizational culture
● Finance and Accounts - manage and report in the economic sustainability of a business
● Marketing - responsible for customer interest and awareness
● Operations Management - manufacturing process of the product
Economic Sectors:
1
...
Secondary - process raw material into product
3
...
Quaternary - information technology, and information services
Changes in economic structure = sectoral change

Starting a business:
Entrepreneur ​- someone who takes the financial risk of starting and managing a new venture
Intrapreneur ​- someone within a large corporation who takes direct responsibility for turning an
idea into a finished product
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Qualities and skills needed for entrepreneurs:
● Innovative
● Committed
● Self-motivated
● Multi-skilled
Impact on business activity:
● Employment creation
● Economic growth

● Leadership skills
● Self belief
● Risk-taker

● Firms’ survival and growth
● Innovation and technological change

Problems faced by start-ups:
● Competition
● Lack of record keeping
● Lack of finance and working capital

● Poor management skills
● Changes in business environment

Business Plans: ​a written document that describes a business, its objectives and strategies, the
market it is operating in and its financial forecast

Importance of Business Plans:

● Important to create interest towards investors
(provides start-up capital)
● Planning process: needs a purpose, direction,
marketing strategies, and employee recruitment policy
● Financial forecast and other forecasts can be used as
targets

Users of Business Plans:

● Potential investors
○ Shareholders
● Employees, used for specific objectives and targets
● Updated versions can be used for additional founding
(capital)
● Financial forecasts acts as budgets and controlling
benchmarks
● Suppliers, to see if a longterm relationship could be
established
...
2 Types of Organizations
Public Sector:​ owned and operated by the government, financed by taxpayers
...
Purpose, mostly to generate profit (profit maximisation/satisfaction)
Privatization: a public organisation is sold to a private organization
...


Public Sector Enterprises:​ ​a business enterprise owned and controlled by the state/gov’t
...

Advantages
● Social objectives rather than profit based
objectives
● Loss-making service form the government,
might operate if social benefits are great enough
● Finance raised by the gov’t, not responsible to
other investors (banks and shareholders)

Disadvantages
● Tendency towards inefficiency, due to
lack of strict profit targets
● Subsidies from gov’t can encourage
inefficiencies
● Gov’t may interf for political reasons

3

​For-profit Organizations:
Sole Trader: ​a business in which one person provides the permanent finance, and in return,
has full control of the business and is able to keep all profits
Advantages
● Easy to set up - no legal formalities(?)
● Owner has complete control - not
answering to anyone
● Owner keeps profit
● Freedom in time and patterns of work

Disadvantages
● Unlimited liability - all owner’s assets
are potentially at risk
● Intense competition from larger firms
(they might benefit from economies of
scale)
● Difficult to raise additional capital

Partnership: ​a business formed by two or more people to carry on a business together, shared
capital investment and, usually shared responsibilities
...
The company
itself, as a legal entity, is liable for the rest
...

Private Limited Companies (Ltd): ​a small to medium-sized business that is owned by
shareholders who are often members of the same family
Advantages
● Shareholders have limited liability
● Separate legal identity
● Continuity in the event of the death of a
shareholder
● Greater status than an unincorporated business

Disadvantages
● Legal formalities involved in
establishing the business
● Capital cannot be raised by
sales of shares to the general
public
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Public Limited Companies (plc or Inc): ​a limited company, often a large business, with legal
right to sell shares to the general public; its share price is quoted on the national stock
exchange
...
g
...


Cooperatives:​ a group of people acting together the meet the common needs and aspirations
of its members, sharing ownership and making decisions democratically
...


Public-private Partnership (PPP): ​involvement of the private sector, in the form of

management expertise and financial investment, in public sector projects aimed at benefiting the
public
...

Uses private sector methods and techniques to be as
efficiently as possible
...
Known as private finance initiative
(PFI)
...


Government Directed

Government directed but with private sector funding
and management
...
This could lower costs
compared to being operated by the
state/gov’t
...

● Differences in objectives and management

Non-government Social Enterprises: ​any organisation that has aims other than making
and distributing profit, and which is usually governed by voluntary board
...


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Characteristics:
●
●
●
●

Independent from gov’t
...


Charities: ​an organization set up to raise money to help people in need or to support causes
that require founding
...

● Dependent on private contributions

1
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It is shared widely
with internal and external stakeholders to inform them about the businesses aims and purpose
...
Usually changed every 5 year
...
Shared widely with internal and external stakeholders to
inform them about the businesses aims and purpose
...

● Motivate employees
● Guide decisions
● Common purpose for the whole
firm

● Too Vague and general, ends up
saying little about specific future
plans
● Virtually impossible to analyze or
disagree with
● Unrealistic
● Time consuming

Aims, Objectives, Strategies, Tactics:
1
...
Objectives:​ ​Medium to long term goals the firm would like to achieve (1- 5
years)
3
...
Can effect
the department or the entire firm's decisions
...

4
...

(<12 Months)

SMART goals:
S: Specific
M: Measurable
A: Achievable
R: Realistic/Relevant
T: Time Specific

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Divisional/operational objectives:
● Cross functional between all divisions
● Must be achieved for the businesses to attain its corporate aim
● Short/medium- term goals
● Specific

Objectives are often changed:
● Previous goals are reached à new ones needed
● Competitive environmental change (laws, population, economy, trends)
● Technology may change (develop)
● Current objective not being reached (current strategy not working)

Corporate Aims​ – long term goals which a business hopes to achieve

Common Corporate Aims:
● Profit maximization
● Profit satisficing
● Growth
● Increase market share
● Survival
● Maximising short-term sales revenue
● Maximising shareholder value

Strategy

Tactic

Long term

Short/medium term

Hard to reverse

Reversible (cost involved)

Taken by directors

Delegated authority

Cross-functional

Often only one department

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Operations Management: ​the process of producing the right amount of products
(goods/services) in the right quantities and at the right quality level, all in the most timely and
cost-effective manner
...

Added value=output(price) – inputs(costs)
Ethics:​ moral guidelines that determine decision-making
...

Involves:
o Ethical treatment of workers
Costumers
Suppliers
Environment
Community members
o Honesty
Ethical code: ​a document detailing a company’s rules and guidelines on staff behavior that must
be followed by all employees
...


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Ethical Objectives:​ ​are targets based on a moral code for the business
Strengths

Weaknesses

● Improve corporate image

● Compliance costs

● Increase customer loyalty

● Lower profits (short term)

● Reduce long term costs

● Stakeholder conflict

● Improved staff motivation/morale
● Improved recruitment

Ethical Dilemma: ​The ethical conflict that results when facing ​two​ courses of action
...

Strengths

Weaknesses

● Image improved

● Short run costs increase

● Employee attraction improved

● Loss of cost/price competitiveness

● Higher long term profits

compared to rivals without a CSR
approach
...


Social Audits: ​an independent report on the impact a business has on society
...
A social audit can cover;
● Pollution levels

● Sources of suppliers

● Health and safety records

● Customer satisfaction
● Contribution to the community

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Strengths

Weaknesses

● Sets targets for improvement

● Time and money → if not legally

● Gives direction for action plans to

required, is it a necessity?
● Does not prove that they are socially

reach their objectives
● Improves image if results are good
→ can be used for marketing

responsible
...


S
...
O
...
W
...
T Analysis: ​A SWOT analysis is the process of identifying, analyzing, and assessing key
internal strengths and weaknesses, and the external opportunities and threats that will affect the
future direction and success of a business
...


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Ansoff Matrix: ​Ansoff matrix is a chart used by executive and managers in order to show the
degree of risk associated with the growth strategies of: Market penetration, market development
and diversification
...

Ansoff Matrix For Company XYZ Co
...
4 Stakeholders
Stakeholder concept: ​the modern view that businesses and their managers have responsibilities
to a wide range of groups, not just shareholders
...
A stakeholder conflict is inevitable and unpreventable, but resolvable
...
6 Growth and Evolution
Scale of operation:​ the maximum output that can be achieved using the available inputs
...

● Communication problems
● Alienation of workforce
● Poor coordination
● Slow decision making
Small versus Large Organizations
Small

Large

● Can be managed and controlled by
owners
● Average costs may be low due to no
diseconomies of scale
● Often able to adapt quickly to meet
changing consumer needs

● Can afford to employ specialist
professional managers
● Might be able to set prices competitors
may follow
● Benefits from large scale production
● More likely to afford R&D into new
products and processes

● Limited access to sources of finance
● Unlikely to benefit from economies of
scale

● May suffer from slow decision making
● Diseconomies of scale might occur

Appropriate Scale of Operation:
● Owner’s objectives
● Capital available
● Size of market the firm operates in
● Number of competitors
● Scope for economies of scale

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Business Growth
Possible reason for seeking growth:
● Increased profits
● Increased market share
● Increased economies of scale
● Increased power and status of the owners and directors
● Reduced risk of being a takeover target
Internal Growth: expansion within the business (opening new branches, shops or factories)
External Growth: expansion achieved by means of merging with or taking over another business
Merger:​ an agreement to bring two firms together
Takeover:​ when a company buys 50% of the shares of another company and becomes the
controlling owner

Horizontal Integration

Firm in the same industry at the ​same stage
of production

Forward vertical Integration

Firm in the same industry, but a ​customer​ of
the existing business

Backward vertical Integration

Firm in the same industry, but a ​supplier​ of
the existing business

Conglomerate Integration

merger/takeover of a business in a different
industry

Joint Venture: ​two or more businesses agree to work closely together on a particular project
and create a separate business division to do so
Strategic Alliances: ​agreement between firms in which each agrees to commit resources to
achieve an agreed set of objectives
Franchise: ​a business that uses the name
...

Why?
● Closer to main markets
● Lower cost of production
● Avoid import restrictions
● Access to local natural resources
Potential problems:
● Communication with headquarters
● Cultural barriers - language, and legal differences
● Skill level of local employees might be low, need training
★ Multinationals have huge impacts on their host countries

1
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Used by individuals or
groups during and before decision-making and determines how to possibly change and
overcome problems
...

● Shows the range of possible causes
...


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FORCE-FIELD ANALYSIS
An analytical tool used to map the opposing forces within an environment where changes
take place
...
These forces can be internal or external and qualitative and quantitative
...

● Reduce impact of opposition
...


● Requires full-participation of
everyone involved → if not the
picture might not be realistic
...

● Based on assumptions, not facts
...
Helps a firm use their resources effectively and reduces risk
...


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DECISION TREES
A diagram that sets out the options connected with a decision and the outcomes and
economic returns that may result
...

STRENGTHS
● Visual representation of possible
outcomes and different decisions
● Forces managers to consider
financial outcomes and the
decisions chance of failure/success
...

● Circumstances changeà possibilities
of an outcome accruing
...
2 Costs & Revenue
Fixed Cost

Costs that do not vary with output in the short run

Variable Cost

Costs that do vary with output

Revenue: ​Income received from the sale of a product
Total Revenue:​ quantity x price

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3
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8 Investment Appraisal
-

Evaluating the profitability or desirability of an investment project

Opportunity Cost:​ the best alternative that is dismissed when taking any action or decision
Payback Method
Payback Period: ​length of time it takes for the net cash inflows to pay back the original
capital cost of the investment
Advantages
● Quick and easy to calculate
● Results are easily understood by
managers
● Can be used to eliminate projects that
are not desirable or profitable
●

Disadvantages
● Does not measure the overall
profitability (stops after the payback
period)
● Short term approach may cause
businesses to reject very profitable,
but long term investments
● Does not consider the timing of the
cash flow during the payback period
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Average Rate of Return (ARR)
Average rate of return: ​measures the annual profitability of an investment as a percentage of
the initial investment
Advantages

Disadvantages

● Uses all of the cash flow
● Focuses on profitability
● Easily understood

● Ignores the timing of the cash flow
● Since all inflows are included, the
long term cash flows may be
inaccurate

ARR(%) = (annual profit / initial capital cost) x100
★ Always use two or more investment appraisal methods

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4
...
Successful marketing is tailored to meet changing market needs and wants,
therefore no single marketing approach or strategy will succeed in all markets at all times
...
Can be measured in two
ways:
1
...
Sales (units sold)
Market Growth: ​The percentage change in the total size of the market (volume/sales) over a
period of time
...

Homogeneous Products: ​Goods that are physically identical or viewed identically by
consumers
...

Segmentation: ​Dividing a market into distinct groups of consumers who share similar tastes and
requirements and will respond similarly to marketing activities
...

2
...
)
Psychographic (interest)

3
...


Geographic
Product-benefit
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Target Marketing: ​Focusing marketing activity on particular segments of the market
...

Consumer Good: ​Tangible physical product marketing to consumers
...

● Consumed immediately
● Cannot be take back or repaired

→ Marketed differently
o Building trust
o Deliverability

● Harder to compare services than
goods
● The people are very important

o Relationships
o Time for delivering the service

Marketing Approaches
Market Orientation: ​An outward-looking approach basing product decisions on consumer
demand, as established by market research and market analysis to indicate present and future
consumer demands
...

Benefits
● Constantly feedback from
consumers
● Chances of a new products failing
in the market is reduced (not
eliminated)
● If needs are met with appropriate
products the products are likely to
survive longer

Limitations
● Hard to respond to every change in
trends in the market
...
“Always a market for the
product they make”
...

- Risky, slow to change or adopt, and little concern about the consumer
Social Marketing: ​A type of marketing campaign that is designed to help promote beneficial
social change rather than sell products for a profit
...


Market Share and Market Leadership
Market Share: ​The percentage of sales in the total market sold by one business
...


Benefits
● Sales are higher than any of your
competitors (possibly higher profits
à reinvest/satisfy stakeholders)
● Retailers wants to stock and sell
best-selling brands

● Can be used in advertisement
campaigns or other promotional
material
...


Importance of market share and market leadership:
● Strong bargaining position with both suppliers and retailers
...

Difficulties:
● Pressure to keep up or improve
● Media will always look for any signs of slippage in position and will report on losing
market share
...

For-profit Organizations
● Increase in market share → possible
market leadership
● Increase in total sales (value/volume
or both)

● Number of new customers
● Customer satisfaction
● Customer loyalty

o Provides a sense of direction
o Progress can be monitored against these targets
o Objectives have an impact on strategies

Non-profit-making Organizations
1
...
Does not distribute dividends, all profits are retained by the organization as a source of
further capital
3
...

Marketing Objectives: Maximize revenue, increase recognition and promote the work and aims
of the organization
...

● Innovation
● Ethical Consideration
● Cultural differences

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4
...

Marketing Mix

-

The key decision that must be taken on the effective marketing of a product
...

Most appropriate marketing mix:
Targeted at the appropriate consumers
Coordinated and consistent with each other
Based on marketing objectives
Market Segment: ​A sub-group of a market made up of consumers with similar
characteristics, tastes and preferences
...

Target Market: ​The market segment that a particular product is aimed at
...

Market Segmentation: ​Identifying different segments within a market and targeting
different products or services at them
...
Connect to Demographic,
Psychographic,Geographic and consumer profiling

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Consumer Profile: ​A very clear picture of the consumers in the target market it is aiming to
sell in
...

2
...
)
Psychographic (interest)

3
...


Geographic
Product-benefit

Niche Market: ​A small and specific part of a larger market
...

Mass Market: ​A market for products that are often standardized and sold in large quantities
(mass marketing)
...


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Product Positioning

Product Positioning map: ​A graph that analyses consumer precipitations of a group of
competing products in comparison between two characteristics
...

1
...
Easily if to see if repositioning is required
3
...
​“What you have that the
competitors don’t”
...
Low/lowest price
+ Low price attracts customers
- Does low price integrate with the marketing mix / low quality
2
...
Ethical stance
+Consumers might want to support ethical firms “pay the difference”
- Some markets Prefer low price over ethics
4
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- Widespread → difficult to gain long-lasting differentiation
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3 Sales Forecasting
Sales Forecasting:​ predicting future sales levels and sales trends
Potential benefits:
● Operation department - how many units to produce, the quantity of materials to order,
and the appropriate levels of stock to hold
● Marketing department - how many products to distribute, and if changes in the marketing
mix is needed to increase sales
● HR department - workforce plan would be more accurate, this leads to a more appropriate
number of workers and employment contracts (temporary/permanent)
● Finance department - plan cash flow with much greater accuracy and they can create
much more accurate profit forecasts
...
Overall,
better informed
Variations:
Seasonal

Regular and repeated variations that occur in sales data within a period of 12
months or less

Cyclical

Variations in sales occurring over periods of time much more than a year →
related to the business cycle (recession or expansion(growth)

Random

May occur at any time and will cause unusual and unpredictable sales figures

Trend: ​underlying movement of the data in a time series
Benefits
● Useful for identifying and applying
seasonal variations to sales forecasts
● Reasonably accurate for short term
forecasts
● Outlines seasonal variations, helps the
HR department with the workforce
plan
● Helps a firm predict potential sales
which then allows a firm to prepare
for the level of output so that supply
matches consumer demand

Limitations
● Newly established businesses will
have insufficient data
● Forecast more than 1-2 years into the
future becomes less accurate as the
prediction is based on data from the
past
...
4 Market Research
Market Research: ​process of collecting, recording and analysing data about customers and the
market
Why?
●
●
●
●

To reduce risk associated with new product launches
To predict future demand changes
To explain patterns of sales of existing products and market trends
To assess the most favoured design, flavours, style, promotions and packages for a
product
● Identify the correct elements of the marketing mix

Primary Research

The collection of first-hand data that are directly related to the firm's
needs
...
Use and analysis of
data that already exists
...


4
...


Extension Strategies: ​marketing plans that extend the maturity stage of the product before a
brand new one is needed
...
Consumer might not
“buy into” a slightly revised
product

Repackaging

Relatively cheap and quick

Consumers might quickly
realize that the product is the
same

Discount the price

Lower income consumers
might now afford the product

Impact on long-term image
might be bad
...


Product and promotions may
need to be redesigned
...

High Risk according to ansoff
Matrix market development
theory

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Boston Consulting Group Matrix:
- A method of analysing the product portfolio of a business in terms of market share and
market growth

Position

Market share Market growth

Strategy

Problem child/question
marks

Low​ market share high​ market growth

Building - ​supporting problem childs
with additional advertising or finance

Stars

High​ market share high​ market growth

Holding - ​continued support of star
products so they can maintain their
market position

Cash Cows

High​ market share low​ market growth

Milking - ​taking positive cash flow
from established products (cash cows)

Dogs

Low​ market share low​ market growth

Divesting - ​stopping the production of
dogs

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Relevance
● Analysing the performance and
current position of existing products
● Planning actions to be taken with
existing products
● Planning the introduction of a new
product

Limitations
● Cannot on its own tell what will
happen next → helps guide decisions
● Only a planning tool, and its
simplifying a complex set of factors
● Assumption that high rates of profit
are directly related to high market
shares

Price
★ Impacts consumer demand
Factors determining the price decision:
● Cost of production
● Competitive conditions in the market
● Competitors’ prices
● Marketing objectives
● Price elasticity of demand-The degree to which demand for a good or service varies with
its price
...

● New or existing product

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Pricing Strategies:
Cost-based Pricing:
Cost-plus pricing

Adding a fixed mark-up for profit to the unit price of a product

Market-based Pricing:
Penetration Pricing

Setting a relatively low price often supported by strong
promotion in order to achieve high volume of sales

Market Skimming

Setting a high price for a new product when a firm has a unique
or highly differentiated product with low price elasticity of
demand

Psychological Pricing

Setting prices that take into account of consumers’ perception
of value of the product

Loss Leader

Product sold at a very low price to encourage consumers to buy
other products

Price Discrimination

Occurs when a business sells the same product to different
consumers at different prices

Promotional Packaging

Special low prices to gain market share or sell off excess stock

Price Leadership:
Price Leadership Pricing:

Exists when one business sets a price for its product and other
firms in the same market set the same or similar price

Predatory Pricing

Deliberately undercutting competitors prices in order to try and
force them out of the market (illegal, but hard to prove)

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