Edexcel A level
Business
Paper 1
Theme 1 &
4
Revision
booklet
Page 1 of 70
,1.1 Meeting customer needs
1.1.1 The market:
Market – Where buyers and sellers interact.
Mass and niche markets:
Mass market – An unsegmented market in which products are offered to every customer
through mass retailers or independent stores and promoted through mass media.
Cheaper goods so attract larger audience.
Economies of scale, due to mass production lowering average cost per unit.
High sales figures.
Standard quality.
Lack of customer loyalty due to many suppliers.
No USPs, so hard to stand out.
Niche market – The subset of the market in which specialist and specific products are
offered to small and specific group of customers.
Specific, so businesses can charge higher prices -> Brand loyalty with inelastic PED
Unique and high quality.
Less competition.
Higher costs due to specifications.
Small range of customers, forces business to constantly innovate and improve to
retain customers.
Formula for market share:
Sales of business
----------------------- x 100
Total market sales
Dynamic market – A market that is constantly and quickly changing.
Examples of changes: Technological advancements, consumer preferences in a
market, marketing techniques(eg E-commerce) , product differentiation
Competition encourages dynamism, as businesses don’t want to do nothing and
lose market share in a market where there are many suppliers.
Risk – When the potential outcomes of a decision are known
Uncertainty – None of the outcomes are known in advance
Page 2 of 70
,1.1.2 Market Research
Market research – Gathering information about consumers' needs and preferences.
Purpose of research:
Identify customer needs and make products accordingly -> Higher customer satisfaction
and brand loyalty
Reduce risk of business failure and prevent wastage of resources
Qualitative data – Data that observes non-numerical values. More opinions and subjectivity
Methods of gathering qualitative data: Open Questionnaire, survey, interviews, focus groups
-------------------------------------------------------------------------------------------------------------------------
Quantitative data – Data that observes numerical values. More objective
Methods of gathering quantitative data: Questionnaire, statistics(census), technology.
-------------------------------------------------------------------------------------------------------------------------
Primary research – Research conducted by the business/entrepreneur themselves with the aim of
finding new data.
Examples of primary research: Questionnaires, surveys, focus groups, observation.
--------------------------------------------------------------------------------------------------------------------------
Secondary research – Research found via external sources using existing data.
Examples of secondary research: Internet (websites), graphs and charts (databases), old surveys
and questionnaires.
-------------------------------------------------------------------------------------------------------------------------
Limitations of conducting different types of research:
Data may outdated/inaccurate -> Misunderstanding of customer preferences and market
prices -> Cost outweighs benefits and business unable to gain exposure -> Opportunity cost and
short-term financial strain
Cost of conducting primary research -> Requires extensive work and funding to carry out
with large scale project -> Demotivating for entrepreneur due to greater financial risk and longer
working hours -> Cost may outweigh benefit -> Less commitment
Sample size may not be reflective of entire population/market -> Product/marketing
strategy only appeals to limited group of people within mass market -> Restricts business sales
potential -> Difficult to strengthen brand in long term
Data may be subjective -> Polarising issues with regards to preferences among customers ->
Risk of alienating proportion of the customer base by making a decision -> Reliance on retaining
other part of customer base -> Constant innovation required -> High financial cost
How to avoid bias:
Larger sample size
Page 3 of 70
, Market Orientation:
A business can either be product orientated or market orientated:
Product oriented – Whereby they focus on the product they want to make and sell. E.G Model T Ford.
Motivated to create product -> Full commitment and passionate -> Higher productivity and quality of
product -> Increased customer satisfaction -> Strengthens brand loyalty
Invention of potentially revolutionary idea -> Disrupts status quo of the market and stands out from
competition -> Higher demand for product -> Increased customer loyalty -> Strengthens brand loyalty
creating price inelastic demand
Cost and time of inventing a new product -> Requires significant time planning and investment to
fund -> Market may have changed by the time product has been made or invention may have been
taken -> Significant risk and potential opportunity cost
May not meet customer demands and expectations -> Risk of product failing due to lack of customer
consideration -> Costs outweigh benefits -> Opportunity cost with large financial strain
Market oriented – Whereby they focus on what the market wants from a product. E.G Nike custom shoes.
Meets customer expectations and demand of the market -> Higher customer satisfaction and
retention -> Strengthens brand loyalty and ability to charge higher prices (price inelastic demand)
Customers will give feedback based on the product they’ve asked for -> Enables business to improve
product quality via modifications and innovation in order to improve customer satisfaction ->
Increased customer satisfaction and retention sales -> Strengthens brand loyalty
Less motivated to create product as it may not be what entrepreneur wants -> Reduced productivity
and potentially fall in product quality due to less commitment -> Lower customer satisfaction ->
Reduced brand loyalty and market share
Customers may demand product that requires extensive investment and research -> Maximises
consumer welfare but not business profits -> Financial strain on business -> Upward pressure on
existing product lines -> Fall in sales if loyalty is not strong -> Detrimental to business’ performance
What dictates the orientation a business will pick:
The nature of the product.
The views of those in control.
The nature and size of the market.
The degree of competition.
Why businesses are moving to market orientation:
Customers know more about what they want.
Internet – E-Commerce to sell to wider range of customers.
Risky to be product orientated.
More competitors – Business need to sell what is in demand.
Product that the business may want to make and sell may be in a saturated market.
Expensive creating new innovative products.
Patent issues with other businesses who may also be innovating.
Page 4 of 70
Business
Paper 1
Theme 1 &
4
Revision
booklet
Page 1 of 70
,1.1 Meeting customer needs
1.1.1 The market:
Market – Where buyers and sellers interact.
Mass and niche markets:
Mass market – An unsegmented market in which products are offered to every customer
through mass retailers or independent stores and promoted through mass media.
Cheaper goods so attract larger audience.
Economies of scale, due to mass production lowering average cost per unit.
High sales figures.
Standard quality.
Lack of customer loyalty due to many suppliers.
No USPs, so hard to stand out.
Niche market – The subset of the market in which specialist and specific products are
offered to small and specific group of customers.
Specific, so businesses can charge higher prices -> Brand loyalty with inelastic PED
Unique and high quality.
Less competition.
Higher costs due to specifications.
Small range of customers, forces business to constantly innovate and improve to
retain customers.
Formula for market share:
Sales of business
----------------------- x 100
Total market sales
Dynamic market – A market that is constantly and quickly changing.
Examples of changes: Technological advancements, consumer preferences in a
market, marketing techniques(eg E-commerce) , product differentiation
Competition encourages dynamism, as businesses don’t want to do nothing and
lose market share in a market where there are many suppliers.
Risk – When the potential outcomes of a decision are known
Uncertainty – None of the outcomes are known in advance
Page 2 of 70
,1.1.2 Market Research
Market research – Gathering information about consumers' needs and preferences.
Purpose of research:
Identify customer needs and make products accordingly -> Higher customer satisfaction
and brand loyalty
Reduce risk of business failure and prevent wastage of resources
Qualitative data – Data that observes non-numerical values. More opinions and subjectivity
Methods of gathering qualitative data: Open Questionnaire, survey, interviews, focus groups
-------------------------------------------------------------------------------------------------------------------------
Quantitative data – Data that observes numerical values. More objective
Methods of gathering quantitative data: Questionnaire, statistics(census), technology.
-------------------------------------------------------------------------------------------------------------------------
Primary research – Research conducted by the business/entrepreneur themselves with the aim of
finding new data.
Examples of primary research: Questionnaires, surveys, focus groups, observation.
--------------------------------------------------------------------------------------------------------------------------
Secondary research – Research found via external sources using existing data.
Examples of secondary research: Internet (websites), graphs and charts (databases), old surveys
and questionnaires.
-------------------------------------------------------------------------------------------------------------------------
Limitations of conducting different types of research:
Data may outdated/inaccurate -> Misunderstanding of customer preferences and market
prices -> Cost outweighs benefits and business unable to gain exposure -> Opportunity cost and
short-term financial strain
Cost of conducting primary research -> Requires extensive work and funding to carry out
with large scale project -> Demotivating for entrepreneur due to greater financial risk and longer
working hours -> Cost may outweigh benefit -> Less commitment
Sample size may not be reflective of entire population/market -> Product/marketing
strategy only appeals to limited group of people within mass market -> Restricts business sales
potential -> Difficult to strengthen brand in long term
Data may be subjective -> Polarising issues with regards to preferences among customers ->
Risk of alienating proportion of the customer base by making a decision -> Reliance on retaining
other part of customer base -> Constant innovation required -> High financial cost
How to avoid bias:
Larger sample size
Page 3 of 70
, Market Orientation:
A business can either be product orientated or market orientated:
Product oriented – Whereby they focus on the product they want to make and sell. E.G Model T Ford.
Motivated to create product -> Full commitment and passionate -> Higher productivity and quality of
product -> Increased customer satisfaction -> Strengthens brand loyalty
Invention of potentially revolutionary idea -> Disrupts status quo of the market and stands out from
competition -> Higher demand for product -> Increased customer loyalty -> Strengthens brand loyalty
creating price inelastic demand
Cost and time of inventing a new product -> Requires significant time planning and investment to
fund -> Market may have changed by the time product has been made or invention may have been
taken -> Significant risk and potential opportunity cost
May not meet customer demands and expectations -> Risk of product failing due to lack of customer
consideration -> Costs outweigh benefits -> Opportunity cost with large financial strain
Market oriented – Whereby they focus on what the market wants from a product. E.G Nike custom shoes.
Meets customer expectations and demand of the market -> Higher customer satisfaction and
retention -> Strengthens brand loyalty and ability to charge higher prices (price inelastic demand)
Customers will give feedback based on the product they’ve asked for -> Enables business to improve
product quality via modifications and innovation in order to improve customer satisfaction ->
Increased customer satisfaction and retention sales -> Strengthens brand loyalty
Less motivated to create product as it may not be what entrepreneur wants -> Reduced productivity
and potentially fall in product quality due to less commitment -> Lower customer satisfaction ->
Reduced brand loyalty and market share
Customers may demand product that requires extensive investment and research -> Maximises
consumer welfare but not business profits -> Financial strain on business -> Upward pressure on
existing product lines -> Fall in sales if loyalty is not strong -> Detrimental to business’ performance
What dictates the orientation a business will pick:
The nature of the product.
The views of those in control.
The nature and size of the market.
The degree of competition.
Why businesses are moving to market orientation:
Customers know more about what they want.
Internet – E-Commerce to sell to wider range of customers.
Risky to be product orientated.
More competitors – Business need to sell what is in demand.
Product that the business may want to make and sell may be in a saturated market.
Expensive creating new innovative products.
Patent issues with other businesses who may also be innovating.
Page 4 of 70
