OCR Level 1/2 Cambridge National in Enterprise & Marketing Notes

OCR Level 1/2 Cambridge National in Enterprise & Marketing

OCR level 1 / 2 Cambridge National in Enterprise & Marketing Enterprise and marketing concepts Unit no. R067 - exam unit Revision guide (40% of the total qualification grade) Name: Tutor: Class:

Contents Page

Page 1CONTENTS PAGE Topic Area 1: Characteristics, risk and reward for enterprise Page 3: Entrepreneurs and their characteristics Page 4: Rewards and risks for entrepreneurs Topic Area 2: Market research to target a specific customer Page 5: The purpose of market research Page 6: Primary market research Page 7: Secondary market research Page 8: Types of data (quantitative data and qualitative data) Page 9: Market Segmentation Topic area 3: What makes a product financially viable Pages 10 - 11: Fixed costs and variable costs Pages 12 & 13: Calculating costs Page 14: Revenue Pages 15 - 17: Profit / Loss Pages 18 - 24: Break Even Page 25: The importance of cash Topic Area 4: Creating a marketing mix to support a product Pages 26 - 27: The marketing mix Pages 28 - 30: Types of advertising medium used to attract customers Pages 31 - 32: Sales promotion techniques Page 33: Public relations Page 34: How businesses sell goods / services to the consumer Pages 35 - 36: The product life cycle Page 37: Extension strategies for products in the product life cycle Page 38: Factors to consider when pricing a product to attract and retain customers Page 39: Types of pricing strategies and the appropriateness of each Topic Area 5: Factors to consider when starting up and running an enterprise Pages 40 - 41: Appropriate forms of ownership for business start-ups Pages 42 - 43: Source(s) of capital for business start-ups and expansion Pages 44 - 45: Support for enterprises Page 46 - Exam preparation

Topic Area 1: Characteristics, Risk and Reward for Enterprise

Entrepreneur Definition

Page 2Topic Area 1: Characteristics, risk and reward for enterprise 1 Entrepreneur - definition An entrepreneur is someone who takes the risk to start-up their own business idea. Starting up your own business is very risky as new businesses can easily fail. Not everyone has the characteristics or right motives to set up their own business.

Characteristics of Successful Entrepreneurs

1.1 Characteristics of successful entrepreneurs Not everyone can be entrepreneurs; successful ones usually have these characteristics: Confidence to set up a business, gain investment from banks / investors, and be able sell to customers. Without investment and customers, a business will struggle to succeed. Creativity to be able to come up with a new business idea that is unique and will work in the area. Being unique will allow the business to be more successful. Determined to put in the extra hours of work that can be the difference between being successful or not. They will not have a boss telling them what to do, therefore, they must be determined to make sure all jobs are complete. Innovative to be able to think on their feet. Coming up with solutions to sudden problems and keep the customer interested in the business by keeping the business relevant. Characteristics Risk taking. Entrepreneurs risk losing their own savings to start a business. Also, they may have left their old jobs losing secure wages to start a business. Negotiation: Being able to make deals with supplier to get discounts and reduce costs. Negotiate with investors to get funding, and with customers to make sales. Being able to convince others is very important for success. Communication: Be able to deal with customers, suppliers, and investors professionally. Being an effective communicator will give off a professional image and allow the business be seen more positively by customers, investors and suppliers.

Rewards for Risk Taking

Page 31.2 Rewards for risk taking The rewards for risk taking and running a successful business are: Financial: Running a business allows the entrepreneur to eventually make more sales, profit, and can pay themselves high wages than working for an alternative business. Independence: Entrepreneurs are their own boss, they decide on the working hours, the jobs to complete and how to run the business. Self-satisfaction: The joy that an entrepreneur will gain in coming up with a business idea and making money from it will give them a lot of self-satisfaction. They may become a role model in the local area. Rewards Making a difference / change: Lots of entrepreneurs set up businesses to make their community / the world a better place. For example, creating more opportunities to young people, creating environmentally friendly alternatives.

Risks for Risk Taking

1.3 Risks for risk taking There are also lots of risks when trying to set up and run a business including: Financial: Entrepreneurs will use their savings to fund a new business. They may also have to give up their job to set up a business full-time, losing guaranteed wages. There is no guarantee the business will be a success. Health / Well-being: Entrepreneurs work many more hours running their own business than working for someone else with so many more tasks to complete. They will experience stress and worries if the business is failing to cover its costs / pay its bills. Work-life balance: Entrepreneurs work many more hours running their own business than working for someone else. Even when hiring employees to share the workload, they must make sure all employees are doing their jobs correctly, increasing workload. Risks Personal relationships: Having less time for friends and family because of continuously running the business can affect personal relationships of the entrepreneur. Imagine setting up your own restaurant from scratch rather than working as a chef in an already established restaurant. Think of all the additional tasks you would have to do to set up and run your own restaurant. Can you apply all of these risks and rewards to running your own restaurant rather than working as a chef in someone else's restaurant?

Topic Area 2: Market Research to Target a Specific Customer

Purpose of Market Research

Page 4Topic Area 2: Market research to target a specific customer 2.1 The purpose of market research Market Research involves collecting information about customers, competitors, and trends in the market. Why complete market research?

1. To understand customers views that will help the business develop a product / service the meets their needs at a suitable price.
2. To understand rival firms and helps the business spot a gap in the market to create a product / service better than the rivals.

When complete market research?

1. A new business should research their potential customers and competitors before launching the business in order to help plan for a successful business start-up that is different, better and suitable for its customers.
2. Businesses should regularly conduct research to find out changes in customer opinions and competitor actions to keep on top and stay relevant.

Reduced risk of failure: Having a better understanding of customer wants and rival sellers. To understand how a good / service compliments others on the market: Be able to spot ways to promote the business and create deals with businesses selling complimentary goods / services. To aid decision making: Based on customer opinions and understanding what competitors sell/offer. The purpose of market research Inform product development: To help create new products based on customer views and rival products. To understand the market: Understand what rival businesses offer, so the entrepreneur can match or better them. To gain customer views: So the entrepreneur can create products . services based on customer needs / wants.

Market Research: Primary Research

Page 52.2. Market Research: Primary Research Primary research involves collecting brand new information first hand. Questionnaire / survey / interviews: This is when a business creates questions made up of quantitative and qualitative questions (see 2.4). The workers ask these questions to potential customers to gain an idea of their opinions. Interviews allow for more detailed responses; however, it takes longer to conduct, and fewer customer responses are gained compared to questionnaires/surveys which can be answered more quickly and in open spaces. However, customers may not like to be stopped in the street to answer the questions. Focus Group: This is when the business invites a small group of potential customers into a meeting room who discuss the business idea and its products. Workers from the business can make notes on customer's detailed opinions (qualitative research). It allows for detailed feedback, but from a limited range of customers in the room. Observations: This is when the workers / entrepreneur watches rather than ask questions. They make notes on things that they see. E.g., Workers can observe the times of the day when certain areas of the town centre are at its busiest for certain customer groups. Customers will not be hassled; however, this only gains quantitative research as no opinions are gained from the customers. Primary Research methods Customer trails: This is when a small group of customers are given the good / service and use it / try it out. They will then provide feedback on their experiences with the good / service and recommend detailed qualitative improvements to make it better. However, these customer views may not reflect the views of everyone. Test marketing / pilots: The good / service is released / sold in a small area first to gain feedback to help improvements before a full launch. It can be costly, and result in negative publicity if the good has lots of faults. The advantages and disadvantages in using Primary Research

Advantages and Disadvantages of Primary Research

Advantages Disadvantages Primary research is brand new research that has just been collected, so it is up to date and is based upon the current market situation. (Current customer views and competitor actions) Primary research is specific to the business's needs. The business will only research questions and topics they need information on and so it is more relevant for them. It can take a lot of time and cost a lot of money to research many potential customers. The business may have to pay extra for workers to carry out the research. The results are only reliable if a large sample of customers have taken part in the research. Customers / other businesses may not be willing to answer questions, talk over the phone or be observed.