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B&A 59: PRINCIPLES OF BUSINESS
Centre Number :
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Learning Outcome / Section 1: Understand business markets
Assessment Criteria (AC)
Assessor feedback on AC
[comments not necessary in every box]
Explain the characteristics of different business markets
Business markets buy goods and services for further processing or for use in their own production process, and differ from consumer markets in terms of:
Market structure and demand
The nature of the buying unit
The types of decisions
The decision-making process
You are required to explain the characteristics of two or more different business markets
The market is made up of different buying needs. There is R&D research and development, Manufacturing, Distributor, Retail and Consumer.
Demand for R & D could be one or two items whereas manufacturing will take the product and mass produce thousands. The product will be purchased by specialist distributors to be sold into the retail and consumer market. In the retail market the product will need to be packaged and sold in packs or cases of single items.
R&D take an idea and make a prototype. This can be expensive as the market price and demand is low demand but high price. No end user price or packaging is looked at.
Manufacturing take the prototype and machine make these. Cost is reduced as sourcing raw materials and bulk buying will be cheaper. Consumers do not usually purchase at the factory, because of the quantities made. End user packaging may be added to the product.
Distributors purchase pallets or containers of the product, and find a retail market. This will incur costs for advertising.
The retailer will purchase cases of a completed product here the price will set for the consumer, and here the customer will not realise how much time has gone into the product.
At each stage costs are considered, transport, production, advertising, packaging and exchange rates.
Pass or Referral
Explain the nature of interactions between businesses within a market
The interactions between businesses within a business market will depend upon a variety of factors, including:
The buying process, and who participates in the buying process
Influences upon buyers
How businesses make their buying decisions
You are required to explain the nature of two or more interactions between businesses within a business market
The customer will always want the best product for the best price.
The quantity of the product will always change from low demand to high demand and reduce back to low demand.
Advertising a new product will always capture the end user eye, but the customer will need or want the product to change upgrade or improve their life.
The factory may want a new machine to make toothpaste, to improve the product, increase production, reduce labour. The customer will want cheap toothpaste of a high standard.
Politics currently like Brexit, immigration across Europe from Syria etc., war zones like Afghanistan, as well as earth quakes and weather can affect price and demand.
Explain how an organisation’s goals may be shaped by the market in which it operates
Businesses do not operate alone and in isolation; they are affected by changes that happen inside the organisation itself (internal factors) and changes that happen outside the organisation (external factors).
Internal factors include:
Products and processes
External factors may be:
You are required to explain how two external factors may shape an organisation’s goals in the market in which it operates. (Goals are outcomes that define what an organisation is trying to achieve)
The recent Brexit has cause many companies to look at price. Worldwide changes affect the price, this may be due to exchange rates.
Describe the legal obligations of a business
The most common business structures in the UK private sector include:
Private Limited Company (Ltd.)
Public Limited Company (PLC)
You are required to describe the legal obligations of two different types of business
Section comments (optional):
Verification comments (optional):
Learning Outcome / Section 2: Understand business innovation and growth
Define business innovation
You are required to provide a correct definition of ‘business innovation’
This is where the business will introduce new ideas, products, services and workflows.
Explain the uses of models of business innovation
There are a variety of models of business innovation, and perhaps the two most straightforward models are ‘Technology-Push’ and ‘Market-Pull’
You are required to explain how two models of business innovation are used
Identify sources of support and guidance for business innovation
You are required to identify two or more sources of support and guidance for business innovation
Explain the process of product or service development
Product or service development is the process by which an existing product or service is improved or modified, or a new product or service is developed, to keep up with trends in the marketplace and customer preferences and buying behaviours.
New Product Development (NPD) is described as going through eight stages:
Concept Development and Testing
Marketing Strategy and Development
You are required to use the eight stages of NPD to explain the process of product or service development
Explain the benefits, risks and implications associated with innovation
Innovation is inherently risky as it is a complex process with many stages, usually requiring investment of time and money before the perceived benefits of the innovation are realised.
The benefits associated with innovation include:
New business opportunities
AC 2.5 cont’d
The risks associated with innovation include:
The product is not accepted by the market
Initial high investment and long payback period
implications associated with innovation include:
it may be necessary to move resources away from existing products or services
New skills may be required to implement the innovation
You are required to explain two benefits, two risks and two implications associated with innovation. (You may wish to use examples to illustrate your answer.)
Learning Outcome / Section 3 Understand financial management
Explain the importance of financial viability for an organisation
Financial viability is the ability of an organisation to generate or attract sufficient income to meet its operating expenses and financial obligations and still have sufficient funds for future growth
An organisation that is not financially viable may be operating at a loss, or may have difficulty paying its debts, and may not survive an unexpected event that reduced its income.
You are required to explain the importance of financial viability for an organisation
Explain the consequences of poor financial management
Poor financial management is the main cause of business failure, and occurs when financial information about the business is not collected and analysed regularly in order to monitor income and expenditure, maintain control over creditors and debtors, and enable business decisions to be based on sound financial information.
You are required to explain the consequences of poor financial management (You may find it useful to illustrate your answer with examples.)
Explain different financial terminology
‘Financial terminology’ is the language used by, for example, accountants and financial institutions, and a good understanding of financial terms is necessary in business.
Some of the most important financial terms are to be found in the following:
Profit and Loss Account
You are required to explain the meaning of:
Two different financial terms found in the Profit and Loss Account
Two different financial terms found in the Balance Sheet
Two different financial terms found in the Cashflow Statement
Answer: Finacial terms on
Profit and loss account .
Sales income - this is something that has been sold and generated cash / income Purchase /out going - this is something we have brought/ purchased / at a cost to us.
Balance Sheet -
Assets - Something held by the business that is of value and is used during the day to day running of trading. - cash, equipment, stock
Debtors - the total value to the business that is owed by others for sales and services not paid for at the time of purchase.
Cash income v outgoings - a preditive estimate of money coming in v outgoings listed with a balance set out monthly to see peaks and troughs and will be able to see roughly where cash will be at a premium.
Cash at bank - amount of cash in the bank that can be used for day to day business.
Learning Outcome / Section 4: Understand business budgeting
Explain the uses of a budget
A budget is a plan of action (not a statement of fact) expressed in financial terms that is drawn up before the period to which it relates
Budgets are drawn up for a specified period, usually one year, and examples include:
Research and Development budget
Departmental costs budget
Advantages of budgets are that they facilitate:
Coordination and teamwork
You are required to explain the three uses of a budget. (You may wish to use an example of a budget you are familiar with to illustrate your answer.)
Explain how to manage a budget
Budget management is primarily concerned with monitoring and comparing actual expenditure to date against planned expenditure for the same period in order to identify, analyse and explain any positive or negative variances
An action plan may need to be developed to address significant variances, depending upon the organisation’s policies and procedures for budget management.
You are required to explain how to manage a budget (You may wish to use an example that you are familiar with to illustrate your answer.)
Learning Outcome / Section 5: Understand sales and marketing
Explain the principles of marketing
‘Marketing’ involves a range of processes across the organisation that combine to satisfy customer needs.
A key principle of marketing is that an organisation’s marketing tools work together in a ‘marketing mix’ to affect the market place
The marketing mix comprises Product, Price, Promotion and Place, and is known as the ‘4Ps’
You are required to provide a clear and correct explanation of the principles of marketing (You may wish to use the marketing mix to illustrate your answer.)
Explain a sales process
A sales process is an approach to selling a product or service, and there are a number of models that set out this process as a series of ‘steps’
One such model is the ‘7-step model’:
Planning the sale
Identifying and questioning
You are required to provide a clear and correct explanation of a sales process (You may wish to use the 7-step model to illustrate your answer.)
Explain the features and uses of market research
Market research may be quantitative or qualitative, and market research is a key element in ensuring that an organisation has a clear marketing focus in everything that it does in order to meet the needs and expectations of customers.
Features of market research include:
Comprehensive in scope, i.e. addresses all aspects of the marketing mix
Uses statistics and statistical analysis
Is a continuous process
Used as a decision-making tool
You are required to explain two or more features of market research and two or more uses of market research.
Answer: This is to collect data to find the customers needs, and will continue after decisions may have been made, this will then help future updates and upgrades and well as new innovations.
It can be used as a tool for monitoring the currant market and also develope future products by using secondry data.
Explain the value of a brand to an organisation
‘Brand’ may be defined as ‘a name, term, sign, symbol, design or a combination of these, which is used to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors’. (Kotler, et al (1996) ‘Principles of Marketing’)
Kotler et al note that benefits of brands for an organisation include:
Easier processing of orders and tracking down problems
Attracting a loyal and profitable set of customers
Easier segmentation of markets
You are required to explain how two or more features of a ‘brand’ work to add value to an organisation
Answer: Brand will add value to a business which will give consistancy, this a a means that the product will be of a standard that will stay the same or improve, with updates and upgrades eg Iphone.
In conversation sometimes it is easier to relate to a product by brand this is giving the product a peronsality of its own and then everyone becomes aware of this. Apple is a brand which has gone from strength to strength. Branding will give the public, a look and reputation.
Explain the relationship between sales and marketing
Marketing is a range of processes across the organisation that combine to satisfy customer needs (AC 5.1), whilst the sales process is an approach to selling a product or a service (AC 5.2)
Both are necessary to the success of a business, and selling is a key component of the Marketing Mix.
Quality Assurance Use
Outcome (delete as applicable):
PASS / REFERRAL
Signature of Assessor:
Outcome (delete as applicable):
PASS / REFERRAL
Signature of QA:
Date of QA check:tisfy customer needs.