Taxation

Reduces disposable income and make people feel poorer. Income tax is the governments biggest individual source of income. Income Tax is based on the amount money of that people earn and any additional income. Businesses collect Value Added Tax (VAT) for the government by adding tax to prices while also paying corporation tax on their profits and tax their employees. Lower tax for firms has been aimed in the UK in order to attract more business to the country. Governments will use fiscal policy to balance or more often imbalance, between taxation and public spending to influence output, employment and inflation levels. This surplus entails taking more out of the private sector in tax than the government is putting back in by spending. A public sector deficit will add to private sector incomes, expected to stimulate more spending and activity. 

Unemployment

Is being willing to work and available for work but unable to obtain a job. High unemployment  is associated with people being less secure about future incomes and become reluctant to spend. During a economic period of recession, income falls and unemployment begins to highly rise leading to people to be less willing to spend their money. If consumers buy less, firms will tend to produce less leading to businesses making redundancies which increase unemployment. However high levels of unemployment can make it easier for businesses to recruit workers.

Inflation

Measures the rise in the general level of prices over a 1-year period and is a sustained rise in the general level of prices. Hyperinflation is an extreme form of inflation where prices rise so rapidly that people lose confidence in money, with a typical rise of a 100%-1000% in prices per year. Rapid inflation can cause many businesses to be uncertain about how costs will change and their ability to pass on on rising costs to their inputs to customers. It is likely to make consumers more cautious and perhaps reduce their spending however in contrast to this rising levels of inflation can cause a wealth effect on people which is when people feel  they have become wealthier because the value of their assets e.g. their house, has risen in price, leading to people spending more.

Inflation is measured by the Retail Price Index or the Consumer Price Index (the more common one used). The consumer price index, CPI, is based on a collection of prices tp represent typical consumer spending and is directly used for adjusting pensions and other benefits to compensate for the effects of inflation, and less directly it also has a factor on influencing price setting and wage negotiations.

Interest Rates

Are a charge paid by borrowers to lenders. Interest rates in the UK are based upon the Base Rate which is set monthly by the Monetary Policy Committee (MPC) of the Bank of England. The MPC are a team (of nine) assembled by the Bank of England to take monthly decisions on the base rate, which heavily influences other interest rates in the UK. The Base Rate acts as an indicator which other interest rates in the economy are set around. 

When the base rate goes up, the purpose is to counter inflation. Higher interest rates mean that mortgage interest payments will go up for many house buyers. In addition to this rising interest rates are taken as a sign that economic conditions will grow more difficult, making people less optimistic, causing large purchases to be postponed or cancelled as they are usually funded by borrowing. The overall effect of higher interests rates will be to reduce the aggregate demand (AD), which is a measure of all spending in the economy by consumers, firms, government and overseas buyers of export.

When the base rate goes down the purpose is to increase the demand and activity in the economy by businesses and consumers, which is generally done when there are signs of the economy going into a recession. This known as monetary policy which is when the use of the Bank of England base rate is to influence economic and business activity, targeting 2% inflation by the consumer price index.

Supply

Market Supply is the combined quantity that all producers of a product will want to sell at a particular price. The biggest impact on supply is the costs, as a business will want to sell a product that delivers a high profit return.
In the short term (a period of time in which a business cannot change fixed costs) existing firms will use spare capacity and introduce overtime or other immediate ways of increasing the output of supply.
Supply can change more in the long run which to economists is the time it takes to make a change in the fixed assets of a business.

On the Supply Graph, if the supply curve moves to the right it means supply has increased and alternatively a move to the left means supply has fallen, perhaps due to industry shrinkage or a rise in costs.

Demand

A market will grow if there is sufficient demand to make supplying an item profitable. Demand is a measure of how much of a product or service consumers actually buy in a market. Population structures of regions can effect the level of demand, in Britain for example has an ageing population which is increasing in number which means that businesses are going to focus their product appeal on this large sector of the population which offers a higher mount of sales revenue and profits.

Tastes can have an affect on demand as consumer preferences for products or types of proucts will change the level of demand for products, generally tastes or trends shift over time due to the influence of advertisers who can successfully persuade us to want a certain product. Advertising is one form of non-price competition, which businesses use to be competitively ahead of rivials, by the means of using a factor other than price e.g. quality, innovation, differentiation,promotion. Successful nonprice competition can often lead to healthy profit margins.

On a Demand Curve,  if the demand curve shifts to the left it means that demand has decreased and if the curve shifts to the right it means that demand has increased.

Motivations of Entrepreneurs

Entrepreneurs can be motivated solely on Profit and the prospect of growing rich. It is suggested that this type of motivation from entrepreneurs will result in them working to satisfy consumer demands in order maximise revenue, producing higher profits.

Another motivation for entrepreneurs is if they are a Satisficer, which is someone who targets a reasonable  performance rather than pushing hard for maximum success while also looking for comfort and relaxation alongside income. This in some cases can provide significant advantages over profit motivation as Satisficers are likely to enjoy their work then profit motivated entrepreneurs.

Other entrepreneurs can be motivated by ethical factors that are morally correct. As they may want produce  something useful for the community while also treating staff, suppliers and customers well. If large businesses are found to be producing products unethically, it can have harsh effects on profits if consumers do not approve it. This is why many large businesses have to have corporate responsibility, which involves taking into account fairness and considerations towards their stakeholders by behaving ethically.
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Scarcity & Abundance

Scarcity is when there is a very small supply of products that cannot keep up with demand. This can affect a market by causing prices of products to rise, becoming more expensive and causing consumers to make alternative choices i.e. opportunity costs. The market will become more competitive in acquiring products from suppliers who will have the upper hand in getting the price they want. Dis-economies of scale will occur

In contrast, Abundance is when there is a large supply of products that can more than keep up with demand. This can affect a market by causing prices to stay low and at a constant level. Markets will become less competitive as supply will be easy to gain allowing easy access for businesses. Economies of scale will occur.

Price Elasticity of Demand

Price Elasticity of Demand is a measurement of the responsiveness of quantity demanded to a change in price through how much the quantity will change.

Is measured by     % change in quantity demanded   

                                      % change in price                                                 

Supply and demand Graphs

Are when the demand and supply curves are bought together on the same diagram to help to determine the price's of the economy's goods and services.

On every supply and demand graph there is a point at which the curves cross each other, this is called the equilibrium point. At this point the quantity demanded is the same as the quantity supplied. At the equilibrium price there will be no unsold stocks and customers will be able to buy all they demand at that price.

Margin of safety

Is the difference between the actual level of output and the break-even level of output by showing how much sales can fall before the business makes a loss.
Is calculated by the actual sales - break even point

Effective demand

Is when demand of a product is high when the price of a product is low and if rates were high then demand for a product or a service will go down, this will usually be in comparison to the consumer's able and willingness to purchase at what they see as a reasonable and acceptable price.

McGregor's Theory X and Y

Theory X managers think that the workforce dislikes work and needs direction and control. Without this and the threat of punishment they will avoid work; believing that people would rather follow others than lead and that people are relatively unambitious and just want security without responsibility.

Theory X managers think the opposite; the workforce is capable of enjoying work and can be trusted to get on with things without close supervision.  The managers will assumes that people do not to be controlled and directed to ensure that the work is done, they respond well to praise and incentives, people are happy to lead and enjoy responsibility and that people are ambitious and will not only accept responsibility but also seek more.

Leadership types

Autocratic- Managers make all the decisions;they give orders without consulting anyone else. The communication of the business will be top down, one way only system (dictatorial). The advantages of it is that it can be useful for guiding new employees, and swift decisions are made which can be crucial in a crisis. The disadvantages of it are, useful decisions from employees are not heard and staff may resent it and become demotivated

Democratic- Managers listen to other people's ideas and opinions before reaching a decision. The communication is a two way system, tasks and responsibilities are delegated.  The advantages of it are that consultation increases motivation and all ideas are considered helping to motivate employees-es. The disadvantages are that lengthy decision making occurs and final decisions may be a compromise and not necessarily the best one.

Paternalistic- Managers act like a father towards their employee-es, thinking they know best and although there is some consultation, the manager ultimately takes responsibility and has the final word on what happens.  Communications are mostly top down but with some two way dialogue. The advantages are that there is some delegation and the needs of staff are looked after, leading to better decisions. The disadvantages are that leadership is still mostly autocratic and some staff will not like it but be more motivated then in an autocratic leadership.

Return on Capital Employed calculation

The return on capital employed (ROCE) ratio, expressed as a percentage, complements the return on equity (ROE) ratio by adding a company's debt liabilities, or funded debt, to equity to reflect a company's total "capital employed". This measure narrows the focus to gain a better understanding of a company's ability to generate returns from its available capital base.

Formula:

Components:

Break Even Contribution method calculation

This method work out how much each unit produced and sold contributes to covering the fixed costs.

By calculating the contribution of each product to fixed costs it is possible to know how many units will be needed to be produced and sold to cover all the fixed costs and therefore breakeven.

The formula

Break even = Fixed costs

Selling price – variable costs


E.g. 
selling price =£15 
variable costs per unit of £11.
Fixed costs = £20,000

Therefore £20,000 = 5,000 units
£15- £11

Short, medium and long term finace

Short term finance are sources of payments that only last 1-3 years, examples of this are trade credit and overdraft. Medium term fiance are sources of payments that last between 3-10 years, examples of this are leasing, hire purchase. Whereas long term term payments last over 10 years examples of this are loans, denatures and venture capital.  

Different sources of finance for business start-up

Owner's equity- The money that the owner(s) have available to put into the business
Advantages- Does not have to be repaid-no interest
Disadvantages- Starting a business is risky as the owner may lose lose all their savings/wealth

Trade credit- The period of time allowed by a business after supplying another business with goods or services before payment is due, commonly 30 days. In this time the receiving business can use the money internally before finally paying the bill
Advantages- No interest rates
Disadvantages- Limited amounts and only a short term solution-if payment is delayed too long supplier may cut off credit.

Overdraft- A facility from the bank that allows a business to spend more than it has in its account up to an agreed limit. A flexible and useful form of finance that is particularly suited to cash flow problems. Interest is only paid on the amount borrowed and the time it is used.
Advantages- Flexible as the business only has to pay on the amount borrowed for as long as the overdraft is needed.
Disadvantages- Interest charges usually higher than the loan
                      - Not suited for long term or large amounts

Leasing- A long term rental agreement that allows businesses to use assets without having to pay for them, thereby freeing up funds for other uses. Often used for vehicles, machinery, photocopiers etc.
Advantages- Assets obtained without large expenditure-often with maintenance included
                  - New modals regularly updated
Disadvantages- More expensive than buying outright in long term
                      - Assets never yours
                      - Interest paid regular monthly repayments

Hire purchase- Similar to leasing except that at the end  of the agreement the assets become property become of the business.
Advantages- Assets obtained with out large expenditure
                  - Yours to keep at the end of the rental period
Disadvantage- More expensive than buying outright in long-term
                    - Interest paid, regular monthly repayments

Loan- The use of someone else's money for a period of time. Usually involves regular repayments and additional payments of interest.
Advantage- Fixed sum available
                - Easy to plan for fixed repayments
Disadvantages- Interest paid, regular payments must be made regardless of cash flow
                      - Usually need security in case of defaulting on loan

Venture capital- Funding provided by a specialist firms or individuals (like Dragon's Den) in return for a proportion of the company's shares. Venture capital investments are seen as relatively high risk because they are unsecured. They also involve a higher rate of interest to compensate for the risk involved.
Advantage- Immediate cash injection
                - If given given in exchange for share of business does not need repayment
Disadvantage- They may want share of the business in return for (loss of control for owner) or charge higher rates to compensate for increased risk.

Share capital- Fiance raised by selling shares in the company. This can apply to both private and public limited companies.
Advantages- Immediate cash injection, does not need repayment
Disadvantage- Loss of control as more people own a share of the business
                    - Need to share profits or make dividend payments

Debenture- A form of external fiance for a business that takes the form of a long term loan often secured on the company's property. It is the business equivalent of a mortgage.
Advantage- Immediate sum available
                 -repayments spread over a long time
                 -interest rates can be lower
Disadvantages- Secured against property
                      - Interest paid
                      - Regular payments must be made regardless of cash flow

The differences between public and private sector

The public sector  is industries or services provided or funded by the government and not owned by a private individual. Whereas the private sector is part of the economy which is both run for private profit and is not controlled by the state, it is owned by individuals.

Privatisation- The sale or return of a publicly owned enterprise to private ownership and control. An example of a business that has become privatised is the British Rail service.

Multinational

Is an enterprise operating in several countries but managed from one country (base). Generally, any company or group that derives a quarter of its revenue from operations outsides its home country is considered a multinational corporation.

Franchise

Is a privilege given to a business under such privilege, granting them to make or market a good or service under a patented process or trademarked name.

Public and Private limited companies

Each type of company has its own identities in law and has to pay different co-operation tax on its profits. The companies owns it's own assets and employs it's own but not it's owners. The company will operate until it becomes liquidated.

Benefits (Public)-

• Limited liability 
• Increased capital as public can buy shares
• Minimum of two directors and two shareholders
• Shares increase in value if company is successful
• Operating large scale can cause economies of scale to occur

Drawbacks (Public)-

• Many regulations to comply with 
• Accounts (and problems) are public knowledge
• Shareholder may sell shares if dividends are poor
• Original owner may lose overall control 

Benefits (Private)-

• Limited liability 
• Minimum of one director and one shareholder
• Easy to set-up/affairs are private
• Easier to raise capital/borrow from banks

Drawbacks (Private)-

• Cannot sell shares to public
• More regulation to comply with
• Accounting procedurs may be costly
• Death of a shareholder has no effect on the company
• Share transfers need agreement of all benefactors in the company

Partnership

When two or more people start a business together and have unlimited liability. Partners are jointly responsible for the running of the business.

Benefits-

• Easier to raise capital 
• Problems/ideas can be discussed 
• Greater range of skills/expertise
• Cover for the holidays/sickness

Drawbacks- 

• Unlimited liability 
• Profits are shared
• May be disagreements
• Decisions/ actions legally binding on all partners
• Death of a partner means a share need repaying

Unlimited and Limited liability

Unlimited liability-The owner(s) of a business is (are) responsible for all the debts of a business if it should fail. This applies to sole traders and partnerships.

Limited liability is when a business is in financial problems and threat of closure, the responsibility for any outstanding debts is limited to the original investment.

Sole Trader

The simplest form of business organisation that is owned and operated by an individual. The owner has unlimited liability.

Benefits-

• Easy to set-up and give a personal service 
• Owner independent-can make quick decisions
• Minimum amount of paperwork
• Knows the customers-helps to avoid bad debts

Drawbacks- 

• Unlimited liability 
• Long hours, no cover for holidays/sickness
• Capital may come from savings
• Needs business skills
• Business ends on death

UK PLC Borrows Less As Tax Revenues Grow

There has been a welcome boost on the public finances for the Chancellor, as the economic downturn threatens his plans to slash borrowing. Britain's budget deficit narrowed by more than expected last month, with public sector net borrowing falling to £18.093bn from £20.36bn in November 2010. Analysts were forecasting a figure of £19.6bn but higher tax receipts, amid the new levy on banks and the increase in VAT to 20%, helped drive it lower. The figures revealed that the Government's tax haul in the month rose 7.1%, whereas its spending rose 0.8% as its austerity measures increasingly kick in. It is a positive development for the Treasury, given the pressure on credit ratings, as it looks to largely eliminate the budget deficit which stood at 10% of GDP last year.

But while George Osborne's largely on course to meet the full-year borrowing target of £127bn set by the Office for Budget Responsibility, forecasts that the UK economy is at risk of recession risks hitting tax earnings over the coming months. Net borrowing in the financial year to date is now at £88.3bn, which is £10.4bn lower than the previous year. But despite the progress being made, the Government's debt rose to a fresh record of £977.1bn, which is 62.8% of GDP.

Successful entrepreneurs

Alan Sugar is a successful entrepreneur who built up a multi-million corporation from literally nothing from selling scraps. What made him succeed was that he was passionate and determined to succeed, through his experiences over the years knows the market and ability to cope with risk and initiative of new ideas.

Theo Pathatus is a successful entrepreneur who started to make money from a young age and had the determination to succeed in order to provide money for his family and offer them a high quality of life he never had as a child, today the company he is associated to the most is his chain of Ryman stores. His passion, knowledge of the market, people skills and persuasive abilities helped him to succeed.

Entrepreneur

Is someone who makes a business idea happen, either through their own effort, or by organising others to do the work.

The skills and qualities a successful entrepreneur  needs to have is initiative, understanding the market, determination, passion, persuasive abilities, the ability to cope with risk, the ability to take risks, the ability to build relationships with the network of people needed for success such as suppliers and customers.

UK house prices gain 1.1% rise

(As stated on Sky news website)


Nine out of 13 regions in the UK recorded a house price rise over 2011, in a year that saw a low level of both buyers and sellers. In the best-performing city, Bradford, the average cost of a property rose by 10% year-on-year according to Nationwide. Meanwhile a rise of 15% was recorded in one London borough - Islington - while properties in the city as a whole gained 7%, as did homes in Cambridge. The figures contrast sharply with the UK's worst-performing city, Belfast, where prices slumped by 19% year-on-year. Carlisle and Edinburgh also had a poor 2011, with average prices falling by 8% and 6% respectively. Across the nation as a whole, the annual increase was a "surprisingly resilient" 1.1%, pushing the price of a typical home to £163,822 over the year, despite a 0.2% month-on-month fall in December. 


With the UK economy struggling to gain momentum, labour market conditions are likely to remain challenging in 2012, deterring buyers from entering the housing market which may tip the supply and demand balance in favor of buyers. However, there are few indications that a flood of properties is about to hit the market, so tight supply conditions will continue to provide some support for prices which has been the result of house prices to rise over the year in the 9 regions. Taking into account regional changes over the year, homes in Northern Ireland are regarded as the most affordable in the UK.

Region, average price and percent change

London: £298,216, 5.4%
Outer Metropolitan: £247,058, 3.6%
Yorks & Humberside: £134,467, 1.6%
Outer South East: £198,363 1.6%
Wales: £135,308, 1.5%
East Anglia: £167,900, 1.5%
East Midlands: £139,669, 0.6%
South West: £184,316, 0.6%
West Midlands: £146,109, 0.3%
Scotland: £136,347, 0.8%
North: £115,716, -1.0%
North West: £135,427, -1.2%
Northern Ireland: £113,614, -8.9%

UK at risk of a double dip recession

(As stated on Sky news website)


Britain's economy is a real risk of returning to recession during 2012. The only good news for consumers is an expected fall in inflation, which will ease the squeeze on spending power in households which remain in work. With no solution found yet for the euro zone crisis and many European economies already back in recession, the risk is that a mood of austerity will stunt the UK's growth too, the institute's chief economist Tony Dolphin says in a New Year message.

In the case of a double-dip recession, a return to growth will be possible only with a boost in public spending, a substantial increase in demand for British goods and services from overseas, or if UK consumers and businesses are given a reason to spend more, he adds.

UK service sector gives boost to the economy

(As stated on Sky news website) 

Britain's powerhouse services sector picked up pace in December, dampening fears that the economy is heading back to recession.

The Purchasing Manager's Index showed activity in financial services, hotels, restaurants, hairdressers, transport and communications, grew at its fastest pace since July.The figures highlight estimated GDP growth of up to 0.4% in the final quarter of 2011.The December upturn in the sector, which makes up 75% of GDP, surprised economists, who feared a negative fourth quarter given the weak retail sector. It comes on top of better-than-expected performances for the manufacturing and construction sectors in December.

The latest data was released as the pound hit a 16-month high against the euro, suggesting even further that there is still life in the UK economy. But that growth may prove short-lived with the PMI data showing companies are worried about the coming year. Markit economist Chris Williamson said the UK is not in the clear yet with expectations of future business growth slipping to the joint-weakest since March 2009.He added that firms have said they are most anxious about the impact of the euro zone crisis. "Uncertainty remains unusually high, and companies look to be hunkering down for a tough year in 2012," he said. "But the upturn in services activity in December provides some encouraging news that the UK economy is showing some resilience among the many headwinds that it is currently facing."

The four stages of the business life cycle

1. Boom- which occurs when levels of spending, production and employment are high within an economy.
2. Downswing- happens when characteristics of falling levels of demand and declining levels of output and employment occur in the market.
3. Slump- takes place when production is at its lowest, unemployment is high and there are many business failures
4. Recovery or upswing- occurs when unemployment rates begin to fall with production slowly increasing and businesses are less likely to fail.

How economic activity relates to GDP

Economic activity relates to GDP as economic activity of the population of a country or region  is related to the level of spending and production. Faster growth in the economy will cause GDP levels to rise as consumer confidence will rise making people more optimistic and therefore more likely to spend their money on goods,  however with fast growth there is a risk of high inflation to occur.
Slow or negative growth (a recession) will cause consumer confidence to decline making people pessimistic, resulting in consumer spending to fall, as people will become unwilling to spend there money because growing unemployment is associated with a recession climate, therefore jobs will become less secure, threatening consumers source of income therefore causing more saving to occur in order for people to have money to live on if their job is lost.

Business cycle and GDP

The business cycle is the different stages that markets go through representing how well the market is doing.
GDP means Gross Domestic Product and measures the value of a nations economic output over a period of time. The long-term trend in the UK is for GDP to grow at around 2.5% per year.

Uncontrollable variables

Are factors that businesses can do nothing about and cannot change e.g. competition, tax rates, laws and restrictions, state of the economy, demand, quantity of available materials, variable costs, government, rates of interest (loans), employees (strikes, resignations), war and terrorism.

These can affect a business as it can result in less profits being made, higher amount of competition, restrictions in what the business is allowed to do in order to expand and the efficiency of the workforce of the business.

How to improve cash flow

They can improve cash flow by:

• Dispose of surplus assets
• Debt factoring
• proceeds from new share capital 
• reduction in inventories 
• Have a reliable cash flow forecasting system
• Actively managed cash flow forecasting system
• Actively manage working capital
• Choose the right sources of fiance for the business needs

Cash flow

Is the movement of cash into and out of a business.

The difference between cash inflow and cash outflow is that cash inflow is movement of all money coming into a flow and cash outflow is the movement of all money going out of a business.

Importance for a business to calculate the cost of production

It is important for a business to calculate the cost of production because it enables them to manage their cash-flow and relies how much everything will cost.

Average cost

Is calculated by  Total production costs / Number of items manufactured 

Opportunity costs

Are the cost of the best alternatives that have been given up. The opportunity cost of a business buying a new delivery van may be the new computer system that they have had to forego. In context with Demand, the higher the price of a product, the more buyers there are that have to give up that product, so the less they're likely to buy.
Trade-off is the consequence involved in the choice you make from an opportunity cost as it is a gradual change of one variable in order to get more of another. Trade-off is a situation where having more of one thing leads to having less of another.

Total costs

Are calculated by Total fixed costs + Total variable costs

Indirect and direct costs

Indirect costs are expenses that go towards a wide range costs that a business uses to improve its output such such as advertising, computing, maintenance and security of premises.

Direct costs are an expense that go towards a specific cost center or cost object such as a department, process, or product such as labour of the workforce, material, fuel or power for the premises.

Fixed and variable costs

Fixed costs are payments that do not change amount with sales whereas variables costs are payments that can change regularly on the basis of the usage of what you are paying for such as the amount of electricity used in the month.

Semi-variable costs are payments which contain both fixed cost components and variable cost components an example of such cost is mobile phone contracts which have fixed monthly payments but if you go over your limit you have to pay the variable cost to how much gone over.

Running Costs

These are different to start-up costs as they are variable payments which involve paying monthly bills for example the electricity bill for the premises.

Start-up costs

Are mostly large one-off payments that are fixed, for things like premises and equipment.

Why not all businesses trial new their new products?

Reason for this can be because:

• It is seen as a waste of time for the firm
• It is too expensive to do
• Their may already be high demand for the product due to the brand name and so product trialing is not needed
• Afraid of competitors finding out about their product and do not want to reveal it on trial as the product may be copied.
• Multinationals use countries as test markets instead.

Benefits of trialing a product

The possible benefits of trialing a product are that:

• It allows opinions and feedback from the consumers through reinvent and innovating the product.
• It is cost efficient 
• It lets the company assess the safety and reliability of the product. 
• Links to supply and demand 
• Creates customer loyalty
• Gives control over the product 
• Pricing strategy awareness
• Can make the product more successful through encouraging more sales on release if the product is liked.
• Know what advertising to use and whom to target it at.
• It can save millions and prevent damage to the brand name.

Is product reliability the most important part of product quality?

It is one of four considerations of importance related to product, which are quality, function, reliability and safety   .

Product-testing certificates

These help a business to differentiate its products by categorizing its products as ones which have the lion market certificate means that the product is a children's toy which is safe, the CE certificate is the most common certificate on general products, which means conformity European, showing that the product has passed EU regulations to do with manufacturing and one the newest certificates that are becoming common is the Kite mark certificate which is linked to new technologies which can be found on video games.  

Benefits of product testing for customers

• Allows the customer to be safe.
• Helps to improve the final product for the customer making the product become it's full potential.
• The quality of the product to be at a good standard

The risks of launching a new product

A launching a new product is going to be risky even for an established business because it can damage the brand name of a business and cost a firm millions if they have invested a lot of money into this new product that has been a flop. Supply and demand may have been over or under estimated causing the business to lose money due to this, the price of the new product may be too expensive and cause many people to be excluded from buying as they may not be able to afford it or the new product costs more then what it offers in return.

Product trialing and product testing

Product trialing is when a consumer is given the opportunity to test a product or service, usually without charge or with return privileges and is usually performed in a confined area while taking in feedback.
Whereas product testing is the systematic gathering, related to the recording and analysis of data about issues related to the marketing of products and services.

Market Leader

Is the one business which has the most power in a market and has to some extent some degree of control over prices and marketing strategies, competitors may have to follow their lead.

Barriers of entry and exit

Barriers of entry are anything that prevents firms from entering a market, including star-up costs, branding, patents etc. Whereas barriers of exit are anything that prevents a firm form leaving a market, which may include contracts to suppliers and customers, unwanted stock, redundancy payments, etc.

Large businesses affecting suppliers

A large business will affect it's suppliers by having a good reputation of making payments in a short period of time, staying in the trade credit time period. Suppliers as a result of this would make these deliveries a high priority and provide a fast delivery. Economies of scale may occur as and large businesses will get a discounted price on their supplies or get more for their money which can cause the suppliers to lose out on some money, or dis-economies of scale may and the suppliers may increase the unit price of the large businesses supplies due to the businesses increased wealth and success, causing the opposite affect on the large business.   

Side effects of a business growing larger

• Economies of scale, unit price of products lowers 
• Dis-economies of scale, Unit price of products are raised
• Market will look attractive for new businesses to enter so to avoid more competition, growing businesses may introduce Limit pricing to sway off newcomers entering the market.
• Market share may increase
• Competitors may become fierce on the new growing business
• A high demand of new products may occur
• A Private limited company may be forced to become public limited if it wishes to continue growth
• Shares of the company will go up in value
• Dividend payouts will increases
• Objectives of the company may change
• Diversification may be required for the company to do in order to continue growing.
• Tax payout will increase as the company will be making more money
• A bigger workforce will be required to deal with the new high demand of service and orders.

The impacts of a monopoly on Stakeholders

The advantages on stakeholders is that he business has a very low % of failing as there are no others competitors in that market and so have no threat of of losing out on sales. This would result in employees having a secure job as cut backs will unlikely be needed as all sales go to the one business and would have a high paid wage due to profits being high, investors will get their money back quickly and make a profit from the business, suppliers will have the reassurance of getting their money for the supplies as the business will be gaining all sales, if shareholders have a lot of of shares in the business and if it's public  limited then the dividends will guaranteed to occur twice year as the company will be making profits all year round as it takes in all the sales, pressure groups can make sure that the one business is following fair trade and have low CO2 emissions as their is only one business in that market to focus and can see what they are doing.

The disadvantages on stakeholders are that suppliers will be unable to haggle a price with the business as their is no threat of supplier going to competitors as their are none and that the business can go somewhere else, customers will not have an impact on the prices as the one company in the market can charge what they wish as there is no other company for their customers to go to, the media can not cause the company any hassle through lowering sales through giving the business a bad image as their will be no other company for consumers to go to. 

Monopsony power

Is the ability to drive down the cost of inputs because you are the only buyer, or at least big enough business to behave like a Monopsony (occurs when there is only one buyer of a product or service).

Limit Pricing

Limit Pricing involves charging prices below the monopoly price in order to make entry appear unattractive

Contestability

Is a market structure that is usually found in oligopolistic markets where there is freedom of entry and exit which is easy enough for abnormal profits to be made, which attracts newcomers. 

Brand proliferation

Brand proliferation is when a company puts on the market a product and variants of a product under different names.

Game theory

Game theory is applied in situations in which decision makers must take into account the reasoning of other decision makers. It can be applied to businesses as it can determine potential partnerships between businesses, the optimum price at which to sell products or services or the best site for a manufacturing plant to get the best price. 

Competion

Oligopoly- Where several large firms dominate the industry and compete with each other
Monopoly- Where there is only one firm in the market and no competition
Cartel- Where businesses agree with one another in order to avoid having to compete through agreeing not to cut prices, or to share different parts of the market. This is illegal in most countries but still occurs.

Perfect competition

The benefits that there are in a perfectly competitive market for consumers are that prices can stay at a low level and if a business in that market raises there prices, competitors will most likely all keep their prices down and wait till the competitor who put their prices up, put them down again. As there is no market leader there is no one business who can influence the direction of the market. Market growth will most likely stay stable, keeping prices at a stable amount as there is no pressure of businesses finding it hard to keep up with the rest of it's competitors.

Competitive Markets

Perfect competition is when there is no market leader, product of sales are equal, products are very similar and market shares are near equal. Whereas imperfect competition is when the market obtains a vast volume of the market sales.

Product extension strategies

Product extension strategies are used by businesses to extend the life cycle of a product. These might include Increasing the use of the product, Encouraging the use of the product on more occasions, reducing the price, adapting the product or introducing promotional offers.

Take-overs and Mergers

The reason for merging is to be able to compete better. Two possible outcomes are greater efficiency and enhance power in the market e.g. PC World take-over of Curry's. A third possible outcome of this is that the risks will be reduced, because diversification means that falling sales for any one product will have less impact on the business as a whole.

Price Wars

• Occur in tense competitive markets where business have to compete vigorously for market share.
• Prices are driven down so products offering poor value for money will not sell
• Costs are kept to a minimum and efficiency increases
• Better quality products will be on offer and customer service will improve
• Innovation is stimulated as businesses strive for a competitive advantage
• Consumers get more choice, better service and lower prices
• Inefficient businesses will face falling sales revenue, make losses and exit the market.

The four P's of the marketing mix

Price- The ability to set a price that can be used as a valuable source of competitive advantage. A pricing strategy is used to market their product so if they want to produce higher profits they will  increase the price which may denote exclusivity and desirability in an attempt to produce more sales or to maximize on sales a product price may be lowered to attract consumers who see this as an important factor. 

Product- When quality or reliability are important to consumers which is usually involved with high tech products when assessing their features which add value to the product, enhancing its competitiveness in a dynamic market, through creating a differentiated product that is distinctive enough to attract a larger share of the market.

Promotion- Tactics that are used to bring a product or service to a consumer's attention and then persuade them to buy it. Techniques such as price reductions, special offers, advertising in all it's forms, sponsorship and direct selling can be used to promote a product or brand

Place- Getting the product or service to the consumer at the time and place by making the product easily accessible for the consumer to buy. 

Expansion of companies

As companies expand they become entitled to economies of scale which is when the purchase of large quantities of a product, the unit cost goes down. This gives a business the choice to either increase profits or reduce prices to gain a competitive advantage. However the expansion of companies can lead them to dis-economies of scale which causes the average unit cost of products increase and inefficiency begins to increase.

Distributed Profits

These are a tricky decision as profits are put straight back into the business to help to expand and do not get saved up for payments of variable costs and if the business does very poorly the next year the money put into the business will be lost and unable to come back to the owner.

Financial Considerations

• Wages/salaries-Costs (payments) - Start-up costs (fixed costs) -Running costs (variable costs)
• Payments to shareholders (dividends)
• Expansions cost -Money saved for reinvestment

             

Sales Revenue

If a business reduces the price of products it will lower the profit margin it makes, from the costs of the manufacturing the products, but may result in a higher amount sold. Stock may run out quickly due to a rise in demand.

If a business increases the price of it's products it will have a higher profit margin from the costs of manufacturing the products, but may result in less products being sold, as it may alienate certain market segments. The demand may drop and suppliers may rise prices as a result, but there may be an increase in quality.

Revenue

The income of a business raised by selling its goods or services.
Is measured by Price X Quantity 

Profits

Is the difference between the value of the total sales revenue of a business and the total costs involved in producing that output. Is calculated by Total Revenue - Total Costs. If total revenue is less than total costs, a loss will be made.

These are important to a business as it allows them to pay all their variable costs  and allows for the business to expand, showing a sign of success.

Dividends

Are paid twice a year to shareholders which is the share of the company's profit.

The importance of sharholders

Many businesses only pay careful attention to their shareholder instead of their stakeholders because shareholders contribute to the decisions of the company and receive a percentage of the company's profits, called dividend.

Shareholders

Shareholders have some form of ownership in public and private limited companies.

The impacts that Stakeholder have on a business

Customers and Competitors will affect a businesses pricing and the rates of products; the customers are important as they are the people that the businesses products or services, competitors are important to businesses as they need to know the amount of customers are going to them and their influence on the market share.

Employees will affect the business as a company has to pay out their salaries and make sure their happy so that the business can produce a high quality service and quantity of products that they produce.

Government will affect a business as they can either raise or lower the tax they charge on businesses which can affect the amount of profit the business makes and can also make sure the sure the business is following the governments policies and rights.

Investors such as banks and lending organisations can affect a business as they can pull out their funding and influence they have provided to the business causing cash-flow and profits to suffer. Or rates that businesses have to pay can go up causing them to make a loss or even become bankrupt.

Suppliers affect businesses as they can pull out if they are not receiving their required payments at certain periods, causing product deliveries to be delayed to the business who will then not be seen as a priority delivery.

Pressure groups effect businesses as they can influence the way products are made, what raw materials are used and make businesses use the fair trade system.

Stakeholders

Stakeholders are people that have an interest in the possible success or failure of a business.
Internal stakeholders are people that are inside a business and have a direct effect on the business, these will consist of the employees, investors, suppliers, shareholders, banks and lending organisations. Whereas external stakeholders are people that are outside the business and have an indirect effect on the business, these will consist of customers, competitors, government, pressure groups (WWF/Green peace) and the media.