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Unit 5
Business in Action
| Term | Definition |
|---|---|
| Idea Generation | systematic way of finding ideas for new products/services |
| Brainstorming | intensive discussion by small group with aim of coming up with new ideas for products/services |
| Internal sources of ideas | skills/interests, employees, R&D, import substitution, Agent |
| External sources of ides | customers, competitors, market research, state agencies, foreign travel, changes in society |
| Market research | gathering, recording and analysing of information relating to identifying, anticipating and satisfying customer needs |
| Desk Research | AKA secondary research, looking at information already available, e.g. CSO statistics, reports |
| Field research | AKA primary research, collecting information through surveys, panels and observation |
| Questionnaire | printed list of questions aimed at collecting data |
| Stages in product development | Idea Generation, Screening, Concept Development, Feasibility Study, Prototype Development, Test Marketing, Product Launch |
| Screening | spotting good ideas (potential) and dropping bad ones |
| Concept Development | turning idea into tangible product involves identifying USP |
| Unique Selling Point | USP, what distinguishes product from competitors |
| Feasibility study | investigates product's potential in term of can we make it (production feasibility) at a profit (financial feasibility) and is it marketable (size of target market) |
| Prototype Development | First working model of new product |
| Test Marketing | product sold to test market to determine customer reaction to new product |
| Product Launch | full-scale launch on market |
| Marketing | identifying, anticipating and satisfying customer requirements profitably |
| Marketing Concept | customer-oriented approach, customer driven, centred on satisfying the customer, responsive to customer needs |
| Market Segmentation | dividing market into segments of customers with common characteristics, can be done geographically, demographically |
| Target Market | market you are planning to sell your goods to |
| Niche Market | small, specialist market |
| Marketing Mix | Product, Price, Promotion, Place |
| Product | design, USP, Packaging, Branding |
| Design | performance, appearance, economy, safety |
| Unique Selling Point | what distinguishes it |
| Packaging | protects, promotes, provides information, convenience for storage & use e.g. microwave friendly |
| Branding | name/symbol that identifies good with a business & distinguishes it from competitors, creates loyalty |
| Product Life Cycle | stages product goes through, introduction, growth, maturity, saturation, decline |
| Factors that determine price | costs, competitors, stage in life cycle, legal requirements, buyer perceptions |
| Price | amount charged for good/service |
| Pricing Strategies | Cost Plus, Penetration, Skimming, Competitive, Loss Leader, Discriminatory, Promotional |
| Cost Plus Pricing | Cost of producing goods plus a profit mark up |
| Penetration Pricing | low price to capture market share (suitable for new products) e.g. Vodafone |
| Price Skimming | charge high price in short term e.g. flights go up during school holidays |
| Competitive Pricing | matching competitors' prices |
| Loss leader Pricing | certain products (bread/milk) sold at cost price to attract customers into the store |
| Discriminatory Pricing | Charging different prices to different groups e.g. OAPs, cinemas cheap tickets for off peak |
| Promotional Pricing | Reduced price for a particular reason |
| Promotion | all communication involved in bringing products to attention of customers & getting them to buy, involves advertising, sales promotion, PR, personal selling |
| Advertising | paid for of publication of information regarding a firm's goods/ services through newspapers, magazines, radio, internet, &TV which is designed to inform/remind/persuade customers to buy advertised item |
| Advertising Standards Authority for Ireland (ASAI) | self-regulating body, issues codes of practice, promotes highest standards of advertising |
| Sales Promotion | marketing techniques used to make good attractive by providing extra benefit "100% extra free" , include merchandising& direct marketing |
| Merchandising | best display & location of products, |
| Direct Marketing | making contact with customer (telesales) |
| Public Relations (PR) | planned & sustained effort to establish & maintain goodwill between business and public, sponsorship & press releases most common forms |
| Sponsorship | business provides financial support to a party/event /team etc |
| Personal selling | salesperson tries to persuade customer to buy product |
| Public Relations Officer | deals with media, customers, community, generates publicity & manages crisis |
| Place | various ways of distributing goods, includes channels of distribution, retailer, wholesaler and franchising |
| Channels of Distribution | network used in physical distribution of goods |
| Choice of channel | depends on good, market size, costs, security, distance |
| Wholesaler | buys in bulk and sells in small quantities, closer to customers than manufacturer |
| Retailer | buys from wholesaler & sells directly to consumer |
| Direst Selling | Manufacturer sells directly to consumer e.g. Ryanair, Dell |
| Agents | appointed by manufacturer to stock & sell products e.g. Toyota dealer |
| Break-even Analysis | examining relationship between price and costs |
| Break-even Point | where total costs = total revenue |
| Total Costs | Fixed Costs (rent) + Variable Costs (raw materials) |
| Total Revenue | Price X Quantity |
| Contribution | selling price per unit - variable cost per unit |
| Margin of Safety | amount by which a firm's sales can fall before break-even point is reached |
| Limits of Break-even | assume goods will sell, that fixed costs will remain the same e.g. firm might have to expand, assume no other stock for sale |
| Development cycle of a business | starting, surviving, growth, future |
| Benefits of starting a business | independence, circumstances, ambition, spot opportunity, profit, family tradition, security,interests |
| Problems in setting up a business | finance, location, customers, cash flow, competition, staff, paperwork, tax, insurance |
| Implications of raising finance | cost, risk, control tax, cash flow |
| Factors in choosing source | purpose, security, existing commitments, economic climate, cost, size (sole trader small amounts compared to company) |
| Ownership Options for start up | sole trader, partnership, private limited company |
| Sole trader | one person owns and runs a business, in law sole trader and business are the same e.g. Brady's Butchers, has unlimited liability |
| Advantages of sole trader | easy to form, quick decisions, keep profits |
| Disadvantages of sole trader | unlimited liability, may not have all required skills, short capital |
| Unlimited liability | Personally liable for the debts of the business including their personal assets should business go bankrupt |
| Partnership | 2-20 people, unlimited liability, extra capital losses /profits shared, disagreements, better decision making |
| Private Limited Company | 1-99 shareholders, limited liability, continuity of existence, low corporation tax, shares not traded |
| Production Options | job, batch, mass |
| Job Production | made to order, labour-intensive, specialist skills, once-off |
| Batch Production | Groups of identical items produced, same labour & machinery, used for producing range of goods e.g. blue shirts, then white shirts e.g. shoes in different sizes/colour |
| Mass Production | Large quantities of same product, automated using CAM e.g. calculators, toys, washing powder |
| Business Plan | sets out how business will achieve its objectives, outlines marketing, production, and financial plans. |
| Layout of Business Plan | Executive Summary, Company Description, Management, Marketing, Production, Financial |
| Business Expansion | acquiring more assets whilst selling to more markets |
| Reasons for expansion | sales/profit, eliminate competition, economies of scale, diversification, safeguarding raw materials, financial strength, security, synergy |
| Economies of scale | When a firm increases its production the unit cost reduces |
| Finance for Expansion | Equity Capital, Debt Capital Grants |
| Equity Capital | Share capital, retained earnings, Venture Capital, BES |
| Venture Capital | Finance for high risk ventures (seed capital), Venture capital companies take part ownership in new business |
| Business Expansion Scheme | Investors can invest in company and this is written off against the tax liability of investor company |
| Debt Capital | Long-term debt which has to be repaid with interest |
| Grants | Non-repayable sum given by government/EU once condiions are met |
| Methods of Expansion | Organic & Inorganic |
| Organic Growth | growth from within the business, increasing sales in existing markets, developing new markets & products, exporting, licensing, franchising |
| Licensing | Licensor grants permission to another firm to produce & distribute products under a trade name, for fixed period, common in manufacturing e.g. Coca Cola |
| Franchising | Business with established name, logo & track record allows others to supply its products using same successful formula e.g. McDonald's |
| Inorganic Growth | external growth through strategic alliance, merger, takeover (acquisition) |
| Strategic alliance | agreement between different firms to actively promote business interests which are benefit to both e.g. BBC & RTÉ co-produce some documentaries for global market |
| Joint Venture | form of partnership set up for a commercial purpose e.g. AIB & AVIVA venture on life pensions |
| Merger | Voluntary agreement to create new legal entity which both will benefit from e.g. Waterford PLC & Avonmore PLC to form Glanbia, permanent tsb |
| Takeover | buying of 51% of shares in another company, friendly/hostile |
Created by:
MsBradyBusiness