Pearson Edexcel A-level Business summary notes that cover the whole of Theme 1 (Marketing and People) and are structured using the Edexcel specification.
SECTION 1.1 Brand: a characteristic that differentiates a product or service from that of it competitors
Market: refers to all of the buyers and sellers that trade a particular type of product in a particular place
+ Can add value allowing premium prices to be charged
Mass market: a market that’s aimed at a large group of buyers, where there are many similar, undifferentiated products offered by + Strong branding makes the price elasticity of demand for a product less price elastic
competitors + Consumer perceives the product to be of a higher quality or more desirable than any substitutes and is prepared to pay a
premium price = they’ll be loyal to the brand and make repeated purchases
+ Wide appeal = high volume of sales = large scale production = economies of scale = lower average unit costs + Having a well known product brand could be transferable to other products which can increase sales further
+ High revenue can be reinvested into research and development - Expensive and time consuming due to more marketing and better customer service
+ Less need for market research as the entire market is targeted = increased brand awareness - Difficult to maintain as customers have a perception of what to expect
+ Small product range = increased operational efficiency = economies of scale = lower average unit costs - If a single product suffers a problem business’s reputation may suffer and also the sales of its product range
+ Mass marketing is straightforward
- High levels of competition Competition: when a business operates in a local, national or global market but there are other businesses providing similar products
- Less able to meet every customer need and want = less added value = less ability to set high prices and maximise profit and services
- Homogeneous products need to be differentiated through marketing which can be expensive
- High volume production not flexible to demand changes Impact of competition on business decision making:
- Mass marketing is expensive = requires finance to implement it
❏ Lower prices - enables to remain competitive = lower revenue
Niche market: a subset of the main market which caters to a particular segment of the market where customers have specific needs and ❏ Differentiate products/service - USP/competitive advantage = higher costs
wants ❏ Improve quality/customer service - meet customer needs/increase sales = higher costs = higher price
❏ More convenient location - provide more outlets/website = higher fixed costs = higher break even point
+ Better meet customer needs = high levels of customer satisfaction = build brand loyalty ❏ Wide product range - target a wider audience = lower economies of scale/higher storage costs
+ Customers tend to be more loyal = ability to charge higher prices = higher profit margins ❏ Increase promotional campaigns, advertising, branding - retain customers = increase brand awareness = higher sales
+ Small scale production can be flexible and follow trends
+ Employees build up specialist skill and knowledge = higher quality and brand reputation Impact of less competition:
+ Less competition
- High risk = vulnerable to market changes therefore demand may not be constant ➔ Higher sales
- Risk of over dependence on a single product or market ➔ Higher prices
- Likely to attract competition if successful ➔ Higher revenue
- Lack of economies of scale = higher costs = higher prices = lower demand
Competition affects the market as:
Market size: a measure of the total value or volume of sales in a market over a certain time period (number of units sold x price)
❏ Battle for market share - threat of new market entrants
Uses of market size: ❏ Price wars - stronger competitors often set the market price
❏ Battle for competitive advantage - product differentiation is a key part of competition
❏ Indicates the potential sales for a firm
❏ Businesses can look at data and decide if the market is expanding or contracting Business risk: when a business is aware of the potential outcomes of a decision e.g. health + safety, cyber security
Market share (%): the proportion of a market that’s taken by a business, product or brand (Sales of one firm / total market sales) x 100 Risks can be managed:
Market growth: the percentage rate of growth in market size over a period (new-old/old x 100) ➔ Business plan
➔ Market research
This can be measured in two ways: ➔ Training staff
➔ Diversification
● Volume of sales (quantity of products sold)
● Total value (amount spent by customers) Uncertainty: when a business is unable to predict none of the outcomes in advance e.g.
Dynamic market: a market that is constantly changing to suit customers needs and wants ➔ Economy
➔ Competition
External dynamic forces affecting businesses: ➔ Cultural changes
➔ Changes in exchange rates
● Competition ➔ Changes in legislation
● Consumer preferences ➔ Political factors e.g. if a new political party is elected it may make changes to taxation, funding, regulation
● Changes in technology
● Changes in economy Product orientation: when a business develops products based on what it is good at doing rather than what consumers really wants
● Changes in legislation
● Consumers have become more environmentally conscious + Internal efficiency as the firm produces it is familiar with, production facilities set up already = lower costs and higher quality
● Innovation means that new products or processes emerge - Does not take into account changing trends, might be outdated and may not sell
Online retailing: the sale of goods and services via the internet Market orientation: when a business responds to the needs and wants of customers, designing products accordingly
+ Shops are open 24/7 when traditional retailers are closed + Allows the business to better meet customer needs giving them exactly what they want = Increased customer satisfaction =
+ Shops can reach international markets more easily competitive advantage = consumers willing to pay a premium price and may even switch loyalties
+ Lower costs as there is no need for physical shops or hire as many staff + Firms can charge a premium price as demand may become price inelastic = higher profit margins
+ Stock can be easily updated and withdrawn to keep up with dynamic market - Focuses on customer demand rather than prediction for shaping them with innovative products
+ Consumers can easily compare prices between different firms to find the lowest price - Increased market research cost = lower profit
- Increased competition - retailers may try making the shopping experience on their website better e.g. saving payment and
delivery details so it's easier for customers to make repeat purchases Innovation: bringing a new idea to the marketplace
- Some consumers like to see products before they buy and some like to speak to staff e.g. offer free returns to encourage
consumers to purchase and online chat services Economies of scale: the more units that are produced by the business, the lower the unit cost of producing one item
- Businesses need to make sure their customers’ personal details are protected from cyber criminals and they aren't
processing fraudulent transactions - maintaining security is expensive and having an insecure site can damage reputation Unit cost: the total cost of production on one unit e.g. variable costs plus fixed cost per unit
,Market research: gathering information to help understand the market in which the business operates in
Primary research Secondary research
❏ To identify gaps in the market
❏ To identify and understand customer needs and wants Observations: where customers are watched in a normal shopping Internet e.g. competitor websites
❏ To improve decision making to reduce risk environment or get an insight into their behaviours. This can be
❏ To identify and understand competitor strategies time consuming but provides specific information about the
❏ To gain insight into aspects of the business environment that could affect the market e.g. economic factors behaviour of particular groups
Established businesses conduct market research to: Questionnaires or surveys via post, phone, internet or in person: Trade magazines and market reports: contain quality
used to ask pre-set questions to large groups of people to gain information on business pages and supplements that often
➔ Monitor their performance quantitative data feature particular industries
➔ Discover changes in the market
➔ Test new products/ideas Interviews: focuses on a small number of individuals who give Government statistics: data is collected from a variety of
detailed and precise information about their views on a product sources for many different purposes, these include useful
New businesses conduct market research to: data about changes in population, local + national trends
➔ Find out if a business idea is possible in a market
Focus groups: a small group selected from a wider population and
➔ To confirm all the details of how, where + what they’ll sell sampled by open discussion for its members' opinions about a
particular product or service
Qualitative research: non numerical data that gathers and explores feelings and thoughts about a product from consumers
Test marketing: involves selling a new product in a small section of
+ Provides in depth data as responses can be more flexible so helps to understand an issue in depth
the market in order to assess customer reaction
+ Highlights potential issues
+ Effective way of testing elements of the marketing mix
+ Trends to provide more in-depth and valuable research information Customer data: monitor spending patterns of customers at
+ By gaining this information, promotion can be effectively targeted and the business' brand can be built particular time of the day or week e.g. loyalty cards
- Time consuming
- Expensive to collect and analyse as it requires specialist research skills Use of ICT to support market research:
- Risk that sample size is not representative
- Difficult to make decisions from Social networking: the use of internet-based platforms to make connection with people
Quantitative research: produces numerical data + Surveys are easy to set up and analyse results in real time
+ Firms can pay sites to post survey questions about products on consumers' news feeds
+ Produces data that can be statistically analysed which makes analysis quicker and easier + Can be used to gain insight about emerging trends
+ Able to examine larger samples so more statistically valid + Software can quickly highlight what customers are saying about a product or brand
+ Numerical data provides insight into relevant trends + Tools that analyse the demographics of followers + which other pages a firm’s followers are interested in
+ Easier to make decisions from - Not all consumers use the same social networks
- May lack reliability if sample size and method is not valid
- Tends to collect a much narrow data set and so results are limited and are unhelpful if a business wants to understand an Websites:
issue in depth
❏ Businesses can look at competitor websites to gather information about their new products, prices
Primary research: data collected first hand for a specific purpose ❏ Businesses can read reviews about their products that have been written on other websites
❏ Businesses can use its website as a platform to conduct short surveys or by analysing the activities of people using the site
+ Data is specific to the purpose it’s needed for = more detailed insights e.g. what times of day/year the website is used the most or how likely it is that visitors will buy products via the site and how
+ Data is exclusive to the business who research it, so competitors can’t benefit from it much they’re likely to spend
+ Up to date
- Time consuming - needs to be collected + analysed Databases:
- Expensive and labour intensive
- Risk of survey bias is high so any information collected may be inaccurate and not representative ❏ Loyalty cards allow firms to form a database of customer names, addresses, and their preferences based on what they buy,
this information can be used to target customers likely to buy at the store
Secondary research: data already collected by someone for a different purpose ❏ Other databases can be accessed online for a fee and can provide information about trends, businesses and consumers in
a particular market, these databases are a quick and cheap source of information but the data is mostly quantitative
+ Often free and easy to obtain
+ Good source of market insights Market segmentation: breaking the market into smaller sections in which customers share common characteristics
+ Quick to access and use
+ May be gathered on much larger scale than possible for the business + Increase customer satisfaction - increased brand loyalty
- Can quickly become out of date + Repeat customers
- Not tailored to business needs and so may be unsuitable and not applicable + Increased revenue
- Specialists reports often quite expensive + Reduces price sensitivity therefore the business can increase prices
- Unreliable - Increased costs
- Wider product range therefore the business is less able to exploit economies of scale
Sampling: involves the gathering of data from a sample of respondents, the results of which should be representative of the population
as a whole Demographics: statistical data relating to the population and particular groups within it e.g. age, gender
+ Using sampling before making marketing decisions can reduce risks and costs
+ It’s flexible and relatively quick
+ Provides useful research insights
- Risk of bias in research questions
- Less useful in market segments eher customers tastes and references are changing frequently
- If the sample size isn’t large enough then the data has no statistical validity leading to incorrect conclusions
Bias: when research findings cannot be trusted because of the way the research has been carried out
, Market mapping: the process of positioning competition within a market by plotting the key variables that differentiate products within the Factors affecting the demand of a product:
market against each other
❏ Change in income - as income rises demand increases for normal goods at the same price
+ Identifies gaps in the market ❏ Changes in tastes/fashion - as a product or service becomes more fashionable the demand will increase
+ Helps to analyse competition, helping the business to plan its marketing strategy ❏ Availability of credit - if it becomes easier/cheaper to gain credit the demand will increase
+ Can show how much customers expect to pay, helping the business to plan its pricing strategy ❏ Seasonal factors - seasonal peaks and troughs in production/sales
+ Identifies areas in the market which may be overcrowded, helping businesses to avoid poor investment ❏ Price of substitutes - a fall in the price of one product makes it cheaper compared to substitutes = increased demand
- No guarantee of success, there may be a low demand for products and services ❏ Price of complementary products - if the price of a product falls the demand will increase
- Only two variables, therefore can't handle more complex markets ❏ External shocks e.g. pandemic, extreme weather
- Poor accuracy of market mapping may result in poor decisions ❏ More effective advertising - aims to increase demand for a product or encourage existing consumers to be loyal to the
- Can oversimplify things product + repeatedly purchase the product
❏ Changes in legislation
Competitive advantage: the ability of a business to add more value for its customers than its competitors allowing the business to ❏ Changes in demographics
compete successfully with rival products
Substitutes: an alternative product that serves the same function
Ways of achieving competitive advantage:
Complementary products: a product used in conjunction with another good or service e.g. printer ink cartridges
❏ Product innovation - improve product design, feature, quality
❏ Product differentiation - USP Seasonal variation: the extent to which sales are affected predictably and unpredictably by seasonal and weather factors
❏ Good customer service - polite, knowledgeable staff = repeat purchases and charge a higher price = good reputation
❏ Convenience - offer product or service in a more convenient location e.g. next day delivery Supply: amount of goods that producers are willing and able to produce at a given price
❏ Marketing - strong brand image = brand awareness
❏ Reduce costs - lower price = increased sales
❏ Reliability and quality - more reliable and better quality = good reputation
When price is low - a business will supply less as it is less profitable
Product differentiation: act of distinguishing a product/service from competitors to make it more attractive to a particular target market
When price is high - a business will supply more as it is more profitable
Unique selling point: a feature that differentiates a product from its competitors
+ Gain competitive advantage
+ Build brand image
+ Increased brand loyalty and retention
+ Add value through differentiation = ability to charge a higher price
- Higher costs - increased marketing
- Product may not be attractive to the mass population if too differentiated Factors affecting supply:
- Level of competition in the area may lead to the use of competitive pricing
❏ Price of the good e.g when price is low businesses supply less
Added value: the difference between the price of the finished product/service and the cost of the inputs involved in making it ❏ Costs of production e.g. costs decrease = more supply
❏ New technology - can lower production costs + increase efficiency
Ways of adding value: ❏ External shocks e.g. war, pandemic, extreme weather
❏ Indirect taxes
● Create brand image ❏ Subsidies
● Deliver excellent customer service
● Operate efficiently (delivery) Tax: government may put tax on a product in order to raise revenue or to discourage the consumption of certain products
● Design such as new technology, USP
● Production - quality, efficiency, lower cost of inputs Direct tax: tax that a person or organisation pays directly to the entity that imposed it e.g. income tax, corporation tax
+ Product stands out from rivals = competitive advantage = repeat purchases Indirect tax: tax that is levied on goods and services before they reach the customer who ultimately pays the indirect tax as a part of
+ Better design, more convenient = customers less price sensitive = charge higher prices market price of the good or service purchased e.g. VAT, excise duties
+ Larger profit per unit = lower breakeven output so higher margin of safety = lower risk
+ Increases market share Excise duty: tax that has to be paid by customers on products which are considered to have a negative effect on society
+ Increased costs
+ Minimises profit per unit sold Subsidy: a payment from the government to encourage a business to increase supply of certain products
SECTION 1.2 Equilibrium: when the price at which the consumers demand coincides with what businesses are prepared to supply
Market place: any situation where buyers and sellers are in contact in order to establish a price
Effective demand: the ability to buy something at each quantity and price
Increase in customer demand - shifts the demand curve to the right
Decrease in customer demand - shifts the demand curve to the left
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