1.
ACTIVITIES IN THE COMPANY
L1. ACTIVITIES IN THE COMPANY
• Procurement and production
• Commercial and marketing
• Human Resources
• Financing and investment
Procurement and production
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 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)
L2. MARKETING: What is market?
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
Market research
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.
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.

2.
Collecting market research
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.
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.
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.
Competition
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.

3.
L3. MARKETING MIX
The marketing mix is the combination of product, price, place and promotion for any business
venture.
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.
Using the marketing mix
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.
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%.
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

4.
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.
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.
Product life cycle
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.

5.
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:
 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.
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.
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:
 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.

6.
 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.
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.
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.

7.
 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.
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.
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.