Introduction to Small Businesses
- Understanding Customer Needs- Market Mapping- Analysing competitor strengths and weaknesses- Added Value- Starting up a new business
Types of purchases
Routine purchases
Limited decision
purchases
Extensive decision
purchases
Impulse purchases
Market research• Finding out what the customer wants
- who is the target market?- who are they?- what are they doing?- what are our competitors doing?- How can we do things better?
• Secondary research: Information that has already been collected before
• Primary research: Information that is newly created
Advantages Disadvantages
Secondary Research
Information is already available
Information may be out of date
It is cheap Can be difficult to make sense of
Can find out what competitors are doing
Information may not be relevant
Primary Research Obtain information that you want
Can be expensive
Information is up to date
Can take long to obtain
Competitors will not have the information
Difficult to obtain
Market segmentation
• Businesses sell to market segments which consist of consumers who buy similar products
• These then become the target market
Gender Regional/ geographical Age
Lifestyle Socio-
economic groups
Market Mapping• Is the tool to see how a market is segmented• Helps spot a gap in the market
Competitive Advantages
tastelocation
Customer service
Value for
money
Brand /
Image Facilities
Added Value• The increase in the benefits of a good or a
service which are created at each stage of production
• This means value can be added simply by making a product more appealing to customers
Changing raw materials into
products of use
Having packaging which
makes a product look unique
branding
No matter the method
of added value used,
the business should
charge more for a
product than the cost
of production to make
a profit
Calculating Added Value
• The value added at each stage of production is calculated by the formula:
Value Added = Value of Output - Value of Input
Franchises A Franchise is when a large company allows
smaller businesses to use their name
• Allows the use of their business name for an agreed length of time
Franchisor
• Must provide the money to start their business• Must make regular payment to the franchisor
Franchisee
Advantages of Running a Franchise
Disadvantages of running a Franchise
There is a good chance of success
Franchise can be removed
It’s easier to borrow money because of proven success
Franchisee cannot make all the decisions
Most problems would have been already overcome
Cannot sell the franchise without permission
Advertising is organised and paid for by the franchisor
Have to make royalty payments to the franchisor
Franchisees are usually small so can pay attention to detail
Supplies have to be purchased from the franchisor which may be expensive
Location, Location, Location
• Choosing where to locate a business is vital • There are numbers of factors to consider
Where the suppliers are
Where the competitors are
Government help
Cost and availability of
premises
Transport Links
Availability of workers
Where the customers are
History and tradition
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