Edexcel Business A Level Revision

Niche market - A smaller segment of a larger market where customers have specific needs and wants. Global market niches are subcultures in world society. These share common interests and can be identified as market segments on a global scale. Although a niche tagets a smaller market, on a global scale, this can be sizeable. This is particularly profitable when we recognise that these are likely to highly differentiated products rather than low costs. This means that the world's wealthiest consumers can be targeted, with the quality of the product being the most important factor. Other common features of a global niche market include; Requires high levels of customer service as demanding customers pay for quality not quantity Highly skilled employees with the expertise and, at times, the reputation required to create and sell the desired products Product innovation is essential in order to product the highly differentiated products that customers require A high level...

Global competitiveness - is the ability of a business, usually a MNC, to perform better than its rivals across markets in different countries. This can be achieved through performance on price and quality or customers' perception of these factors. Exchange rates -  is the price of one currency expressed in terms of another e.g. £1 = $1.65. This means that an American would need to pay $1.65 to buy each £... or, we would need to pay 65p to buy each $. The exchange rate decides how much currency has to be spent by a business in order to buy a specific amount of another currency. Exchange rate movements are fluctuations in value between currencies, which can result in losses to businesses that import and export goods and to investors. EXCHANGE RATE APPRECIATES... This means that; Exports are less attractive in terms of price competitiveness and businesses will find it harder to compete with competitiors as their products will be more expensive in terms of the local currenc...

Short-termism - where a business prioritises its short term reward rather than long term rewards such as investment in research and development, staff or technology. Long-termism -  where a business is focused on sustained growth through building long term relationships with suppliers and other external stakeholders, significant investment in research and development, perhaps at the expense of shareholder returns/dividends in the short term, and meeting customer needs despite short term needs. SHORT-TERMISM Management who can be described as "SHORT-TERMIST" tend to emphasise certain performance measures, such as: Share price Revenue growth Gross & operating profit Unit costs & productivity Return on capital employed As a possible consequence, other more longer-term measures of business performance might become less important, such as: Market share Quality Innovation Brand reputation Development of employee skills & experience Social responsi...

Variance analysis - Calculating and investigating the difference between actual results and the budget. Variance - arises when there is a difference between actual and budget figures. Management by exception - the process of focusing on activities that require attention and ignoring those that appear to be running smoothly Variances can be either: Positive/favourable (better than expected) Adverse/unfavourable ( worse than expected) A favourable variance might mean that: Expenditure was lower than expected in the budget Profits were higher than expected Income was higher than expected By contrast, an adverse variance might arise because: Expenditure was higher than expected in the budget Profits were lower than expected Income was lower than expected Looking at the sales revenue section, you can see that actual sales of standard product were £15k higher than budget – this is a positive (favourable) variance. Turning to the costs section, act...

Budgets - are forecasts or plans for the future finances of a business. It sets out targets to be met, the costs of achieving them and how that spending might be financed. Income budget - A target set for the amount of revenue to be achieved in a set period of time. Expenditure budget -  A limit placed on the amount to be spent in a given period of time Profit budget -  A target set for the surplus between income and expenditure in a given period of time Budgets can be: Income Expenditure Profit (Income - Expenditure) The purpose of setting budgets... Provides a quantifiable target, that can be communicated to interested parties, against which actual outcomes can be measured. For example, are sales targets being achieved? Are managers keeping expenditure under control? Is the business operating efficiently to achieve profit targets?  Helps with planning and forecasting to inform decision making. For example, what are this years' priorities? Where were b...

When a business makes a profit it usually results in a similar cash inflow – but not always, and not straightaway! It is important to understand the basic reasons why net profit and net cash flow might not always be the same. Profit and cash flow are two different calculations – as shown above. There are two main ways in which net cash flow differs from net profit during any accounting period: (1) Timing differences These arise because a business may not received cash straightaway from a customer and it may also delay payment for its costs. For example, a customer may buy goods for £50,000 but be allowed to pay for those goods in 60 days. (2) The way that fixed assets are accounted for Fixed assets are the assets that a busines...

Increasing profitability is often a major aim for growing businesses. There are several ways in which this can be achieved. Businesses are not limited to one of these options but must realise each option has knock on implications. 1) SELL THE SAME AMOUNT AT HIGHER PRICE This will hopefully increase your revenue... HOWEVER , Will you lose customers if prices are raised? What prices do competitors charge? because if you're too high then customers could just go to your competitors as some believe more in a bargain than brand loyalty, so how loyal are your customers? Will you have to spend more on maintaining brand image? Higher prices drives customers away, leaving a bad reputation on the brand so the business may have to maintain its brand image to keep a customer base. This option is only good if the product is price inelastic such as gasoline because the business has a necessity good that consumers don't mind if prices go up a little bit, meaning demand doesn't fall rap...

Break even - is the point at which a business is not making a profit or a loss i.e. it is just breaking even. Break even output - Is the number of items that a business must sell to reach this point. Contribution - The contribution is the difference between the sales revenue and the variable cost of each unit sold or made. SELLING PRICE - VARIABLE COSTS Margin of Safety - is how much actual/current output is above the break even level of output Profit - ( MAX OUTPUT - Break even) x contribution or TR - TC Loss - TC - TR At break even point total costs must be the same as total revenue TR = TC  Before reaching break-even, the business is performing at a loss . After reaching break even, each additional unit sold will contribute towards a profit . CONTRIBUTION When a sale comes in, the sales revenue will be the amount the item was sold at - selling price. This amount will then be used to cover its own variable costs that went in to making the pro...

Price Skimming - Charging a premium price when a product is first launched in order to maximise revenue per unit. The product can be sold in different market segments at different times. The top segment is skimmed off first with the highest price. Example : Apple IPhone or any other electrical device Early Adopters - People who are prepared to pay the highest price to have the latest product or service on the market Objective : Maximise profit per unit to achieve quick recovery of development costs. Works well for products that create excitement amongst " EARLY ADOPTERS ". Or for products that are new and face little or no competition. This is type of pricing strategy is typically used in the introduction stage of the product life cycle. DRAWBACKS 1) CANNOT LAST FOR LONG Price Skimming as a strategy cannot last for long as competitors will soon launch rival products that put pressure on the price. 2) DISTRIBUTION CAN BE A CHALLENGE Distribution (P...