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Information may be out of date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