The document discusses the key activities that take place within a company, including procurement and production, commercial and marketing activities, human resources, and financing and investment. It provides details on each of these functions. Specifically, it outlines the various types of utility that are created through production and distribution of goods to satisfy customer needs. It also discusses the key elements of marketing including market research, identifying market segments, the marketing mix of product, price, place and promotion, and how companies use different strategies for each element.

1. ACTIVITIES IN THE COMPANY

2. L1.ACTIVITIES
INTHE
COMPANY
Procurement and
production
Commercial and
marketing
Human
Resources
Financing and
investment
Activities

3.  Read page 128. “Unique system of Toyota”

4. Procurement
andproduction
 The production consists of increasing the utility of goods
to satisfy in the best way possible our needs. In this way,
there is an increase in utility that becomes an added
value.
 The utility of the goods can be divided into the following
five types of utility:
Usefulness of place (The
distribution allows the
product to be available to
consumers in a place
close to them.)
Utility of form
(transformation of raw
materials into final
products for consumers)
Usefulness of information
(Communication allows
consumers to have
knowledge about the
product and its qualities.)
Usefulness of property
(With the sale and
payment of the product,
this becomes the property
of the consumer)
Types of
utility

5. L2.
MARKETING:
Whatismarket?
 Businesses sell to customers in markets. A market is
any place where buyers and sellers meet to trade
products - it could be a high street shop or a website.
Any business in a marketplace is likely to be in
competition with other firms offering similar products.
Successful products are the ones which meet customer
needs better than rival offerings.
 Markets are dynamic. This means that they are always
changing. A business must be aware of market trends
and evolving customer requirements caused by new
fashions or changing economic conditions

7. Marketresearch
 There is far more to marketing than selling or
advertising. Put simply, marketing is about identifying
and satisfying customer needs.
 The first step is to gather information about customers
needs, competitors and market trends. An
entrepreneur can use the results of market research to
produce competitive products.

8.  The first step for a new business or product is to
attract trial purchases.
 A new magazine may run special offers to get
customers to try the first issue, hoping that repeat
sales are generated. The magazine will soon close if
customers fail to buy future issues. The aim of a special
offer scheme is to convert trial purchases into repeat
sales.
 Market research involves gathering data about
customers, competitors and market trends.

9. Collecting
marketresearch
 Primary research (field research) involves gathering new data
that has not been collected before. For example, surveys using
questionnaires or interviews with groups of people in a focus
group.
 Secondary research (desk research) involves gathering existing
data that has already been produced. For example, researching
the internet, newspapers and company reports.

10.  Factual information is called quantitative data.
Information collected about opinions and views is
called qualitative data.
 Accurate market research helps to reduce the risk of
launching new or improved products.
 Some businesses opt out of field research and rely
instead on the know-how and instincts of the
entrepreneur to ‘guess’ customer requirements. They
do this because market research costs time and money.
Existing business can make use of direct customer
contact to help them identify changing fashion and
market trends.

11. Market
Segments
 Most markets contain different groups of customers who share similar
characteristics and buying habits. These collections of similar buyers
make up distinct market segments.
 Targeted marketing
 Breaking down a market into submarkets can lead to a business
opportunity.
 For example, a magazine publisher can target a specialist journal at one
group of customers of similar age, gender, class or income.
 Another tool used to help identify a business opportunity is a market map. A
market map is a diagram that identifies all the products in the market using
two key features.
The diagram on the right side shows how four
local cafés are competing in terms of price and
quality.
The black circle identifies a gap in the market.
There is a business opportunity for a new café
offering standard quality products at standard
prices.

12. Competition

13.  A competitive market has many businesses trying to
win the same customers. A monopoly exists when one
firm has 25% or more of the market, so reducing the
competition.
 Competition in the market place can be good for
customers. Governments encourage competition
because it can help improve these factors:
 Price: If there are several retailers, each retailer will
lower the price in an attempt to win customers. It is
illegal for retailers to agree between themselves to fix a
price. They must compete for business.
 Product range: In order to attract and satisfy customers,
companies need to produce products that are superior to
their competitors.
 Customer service: Retailers that provide customers with
a helpful and friendly service will win their loyalty.

14. L3.MARKETING
MIX
 The marketing mix is the combination of product,
price, place and promotion for any business venture.

15.  No one element of the marketing mix is more
important than another – each element ideally
supports the others. Firms modify each element in the
marketing mix to establish an overall brand image and
unique selling point (the distinctive factors that make
a product or brand stand out from rivals.) that makes
their products stand out from the competition.

16. Usingthe
marketingmix
 An exclusive brand of jewellery uses the best materials
but comes at a high price. Such designer brands can only
be bought at exclusive stores and are promoted using
personal selling sales assistants. By contrast, cheap and
cheerful jewellery for the mass market is best sold in
supermarkets and can be promoted using television
adverts.
 Market research findings are important in developing the
overall marketing mix for a given product. By identifying
specific customer needs a business can adjust the features,
appearance, price and distribution method for a target
market segment.
 New technologies and changing fashion means goods and
services have a limited product life cycle. Ideally, the
marketing mix is adjusted to take account of each stage.
For example, the life of a product can be extended by
changing packaging to freshen a tired brand and so boost
sales.

17.  There is no single right
marketing mix that
works for all businesses
at all times. The
combination of product,
price promotion and
place chosen by a
business will depend on
its size, competition, the
nature of the product
and its objectives.
 The overall marketing
mix is the business’
marketing strategy. It is
judged a success if it
meets the marketing
department’s objectives,
eg increase annual sales
by 5%.

18. Consumer
protection
 The law gives customers protection against unfair selling practices. You do not need to know specific Acts but you do need
to understand how fair trading regulations protect consumers.
 The consumer has basic legal rights if the product is:
 given a misleading description
 of an unsatisfactory quality
 not fit for its intended purpose

19. L4.PRODUCT
 A product is goods or a service that is sold to customers
or other businesses. Customers buy a product to meet a
need. This means the firm must concentrate on making
products that best meet customer requirements.
 A business needs to choose the function, appearance
and cost most likely to make a product appeal to the
target market and stand out from the competition. This
is called product differentiation.

21.  How product differentiation is created:
 Establishing a strong brand image (personality) for goods or
a service.
 Making clear the unique selling point (USP) of goods or a
service, for example, by using the tag line 'quality items for
less than a pound' for a chain of discount shops.
 Offering a better location, features, functions, design,
appearance or selling price than rival products.
 Firms face a dilemma if they choose to launch a premium
brand. Improving the quality or appearance of a product
adds to the cost of making it. In turn, this means that the
business must charge higher prices if they are to make a
profit.
 An alternative marketing strategy is to produce a budget
brand. If a mobile phone has limited functions and a
standard design then it can be manufactured cheaply. The
low production costs allow for discount pricing.

22. Productlifecycle
 The product life cycle diagram shows that four stages exist
in the ‘working life’ of most products.
 These are:
 launch
 growth
 maturity
 decline
 In the launch and growth stages, sales rise. In the
maturity stage, revenues flatten out.
 Getting a product known beyond the launch stage usually
requires costly promotion activity.
 At some point, sales begin to decline and the business has
to decide whether to withdraw the item or use an
extension strategy to bolster sales. Extension strategies
include updating packaging, adding extra features or
lowering price.

24. L5.PRICE
 Pricing strategies
 Remember there is a big difference between costs and
price. Costs are the expenses of a firm. Price is the
amount customers are charged for items.
 Firms think very carefully about the price to charge for
their products. There are a number of factors to take into
account when reaching a pricing decision:

25.  Customers. Price affects sales. Lowering the price of a
product increases customer demand. However, too low a price
may lead customers to think you are selling a low quality
‘budget product’.
 Competitors. A business takes into account the price charged
by rival organisations, particularly in competitive markets.
Competitive pricing occurs when a firm decides its own price
based on that charged by rivals. Setting a price above that
charged by the market leader can only work if your product
has better features and appearance.
 Costs. A business can make a profit only if the price charged
eventually covers the costs of making an item. One way to
try to ensure a profit is to use cost plus pricing. For example,
adding a 50% mark up to a sandwich that costs £2 to make
means setting the price at £3. The drawback of cost plus
pricing is that it may not be competitive.
 There are times when businesses are willing to set price
below unit cost. They use this loss leader strategy to gain
sales and market share.

26.  Pricing new products
 A business can choose between two pricing tactics when launching a new
product:
 Penetration pricing means setting a relatively low price to boost sales. It is often
used when a new product is launched, or if the firm’s main objective is growth.
 Price skimming means setting a relatively high price to boost profits. It is often
used by well-known businesses launching new, high quality, premium products.

27. L6.PLACE
 What is place?
 Place is the point where
products are made
available to customers.
A business has to
decide on the most cost-
effective way to make
their products easily
available to customers.
 This involves selecting
the best channel of
distribution. Potential
methods include using:

28.  Retailers. Persuading shops to stock products means
customers can buy items locally. However, using a middle
man means lower profit margins for the producer.
 Producers can opt to distribute using a wholesaler who
buys in bulk and resells smaller quantities to retailers or
consumers. This again means lower profit margins for
the manufacturer.
 Telesales and mail order. Direct communication allows a
business to get products to customers without using a
high street retailer. This is an example of direct selling.
 Internet selling or e-commerce. Online selling is an
increasingly popular method of distribution and allows
small firms a low cost method of marketing their
products overseas. A business website can be both a
method of distribution and promotion.
 Developing new or improved channels of distribution
can increase sales and allow a firm to grow.

29.  Customer awareness
 Promotion refers to the methods used by a business to
make customers aware of its product. Advertising is just
one of the means a business can use to create publicity.
Businesses create an overall promotional mix by putting
together a combination of the following strategies:
 Advertising, where a business pays for messages about
itself in mass media such as television or newspapers.
Advertising is non-personal and is also called above-the-line
promotion.
 Sales promotions, which encourage customers to buy now
rather than later. For example, point of sale displays, 2-for-
1 offers, free gifts, samples, coupons or competitions.
 Personal selling using face-to-face communication, eg
employing a sales person or agent to make direct contact
with customers.
 Direct marketing takes place when firms make contact with
individual consumers using tactics such as ‘junk’ mail shots
and weekly ‘special offer’ emails.

30.  There is no one right promotional mix for all firms. The combination of promotional elements
selected takes into account the size of the market and available resources. Large businesses have
the resources to use national advertising. Small firms with limited resources and a local market
may instead opt for leaflet drops to promote their activities.