My competitors are Cosmetica, Boots and Superdrug. Boots and Superdrug are not as specialised as my business, but they are larger shops with lots of financial backing and it may be difficult to beat their prices, especially during times when there is a recession. However, Cosmetica is my main competitor as it sells more specialised products, and may sell the same ones as I am. However, I can overcome this by trying to keep my prices either equal or lower than Cosmetica. This however, will not always be possible, as Cosmetica is an established business.
Social and Competitive issues are the most important to my business because I have to think about what the people want. Also, I need to study the competition closely so I can keep my prices around the same as theirs and also, see what products they are stocking and decide whether I can stock different ranges to them.
TASK 4
SWOT Analysis
In this task I will be discussing what SWOT analysis is and why companies use this method in business. SWOT analysis can be used to decide the future of a company and discuss future strategies.
SWOT analysis involves looking at strengths, weaknesses, opportunities and threats, internally and externally as part of a business. Internal SWOTs can be changed easily, but external SWOTs cannot be changed, as that is the job of other businesses. Looking at strengths could involve looking at things like internal structure and management care. You can also look at these things as weaknesses. Opportunities could be things such as chances to enter a new market or begin producing a new product. Threats might include things like taxes and changes in customer tastes. In SWOT analysis you are discussing the future aims and plans for a company.
Management expertise
Knowing about what your staffs wants and how effectively management can be used to gain greater output from staff. It’s all about prioritising and delegating business activities to achieve maximum efficiency for your department to keep costs low and maximise profit – organizing the workflow to maintain budgets. I intend to achieve this in my business by communicating with my staff and working with them to make sure that they work to the best of their capabilities.
Training in the workforce
Training in the workforce can be done on the job or off the job. The TECS (Training and Enterprise Councils) make sure that people receive proper training for the job that they are supposed to be doing. Hopefully I wont have to be training my staff in sales, but I will have to train hem in use of the till etc.
Low Overheads
Basically, this means that a company will be making a bigger profit because its outgoing costs are not as big as other companies, which might be larger in size. A company does not have so much social responsibility and the costs of premises, hiring staff and training may be lower. However, it is difficult to achieve low overheads at the outset of starting the business.
Reputation
Having a reputation is very important in a business, but only if the reputation that you have is a good one. Companies who do not have a good reputation will fail because no one will want to buy products from them, but also no one will want to supply them with any products or materials, if you have a reputation for not paying bills or debts. Building up a good reputation can take a long time, but if you are willing to try hard, word of mouth and good promotion can help. Being a new business you have no reputation, so making a good first impression is very important and will take time, so business may be slow at first.
Sole trader vs. Ltd
Being a sole trader, you are on your own out there. By being a LTD, you have limited liability, and therefore the affect on investing in that business is not as great. By investing in a business that you are going to run yourself, you are taking on all the risks of the company and whilst you may have lower expenditure, you may not be able to match prices that the bigger companies who are making a lot of profit can make.
Factors outside market affecting supply and demand
In business you do not always have control over how much raw materials or products will cost, because of other factors outside your market. I am going to be selling cosmetics, but if the cost of packaging goes up, I am going to be affected because the producers of the products will also put their prices up. With demand, I may not be able to supply what the customer wants because the demand for products by other business may be high and if they are paying greater amounts for products, then the suppliers will supply more to them than to me.
Population growth
If the population increases, then the demand for products will be greater and this is an opportunity for a business to expand its range of stock and appeal to an ever-increasing market. This is a good thing for business. At present, the population is increasing and more specifically, the population of females, who will be my main customer base, is increasing. There are a large number of young females in Seaford who are coming of the age when they want to wear make up, and this is very good for business.
New product ideas
By having new product ideas and possibly being able to put these products together without the help of other companies, then I will be able to appeal to a wider range of client and lower expenditure even further if the company slowly becomes self-sufficient.
Real consumer spending is set to rise
Due to this fact, a business may be able to get away with slightly higher prices, as consumers are likely to be spending a greater amount on products. Also, interest rates will affect this side of the economy too.
Competition
Competition will always be the greatest threat to a business. If somewhere else can produce the same products as you at lower prices and provide a higher standard of customer service, then it can be very hard to survive in business. The only way to become a successful in business is to provide different things than other business and also to sell them at a reasonable price. I will be mainly competing with Cosmetica.
Interest rates rising
At present, interest rates are rising and therefore businesses need to add these costs to their services or products, i.e. banks, building societies and housing estates to house prices.
UK is set to become increasingly dependant
As the UK becomes more and more dependant on other countries around the world, then prices of certain products may go down. Generally, Middle Eastern countries can produce products for lower prices, but this means depending on others outside the UK. If the UK was to try and stay independent, then really, although the cost of buying products may be higher, the economic results of this are great.
TASK 5
Marketing Objectives
In this task, I am going to explain what marketing objectives are and how they can be achieved. I will explain about the marketing mix and how marketing is going to affect my business.
Marketing is where you have to get people to notice your business and make sure that people are aware that you exist. The market of a business is the potential customer that you hope will be buying your products. Marketing is the most varied job within a business, and as customer’s demand more and more from businesses, and then marketing becomes more and more important within the business.
The marketing mix is made up of the four P’s. They are the various marketing activities within a firm. They are:
This includes things like product ranges packaging and extension strategies.
This includes how things are priced and what affects their prices, how to keep costs low and profits high and what are the factors that affect the price of something is.
How can the business increase sales, generate awareness of your business and persuade customers to buy products from your business? Also, what types of promotion are going to help your business the most, e.g. sales promotion, advertising, direct mail etc?
Place is all about having the right product at the right time, with different channels of distribution and transport.
Marketing objectives state exactly what an organisation hopes to achieve through its marketing activities. Different types of objectives include:
- Analysing the market
- Satisfying customer requirements
- Managing the effects of the competition
- Managing the effects of change
- Co-ordinating marketing
- Maximising income and generating profit
- Generating community benefit
- Helping customers to see products in the best way possible
My marketing objectives are going to be to analyse the market, by doing market research, so that I can find out what the customers really want to buy and therefore I will be able to make a profit by supplying what is on demand and meeting the customers needs. I am also going to try and manage the effects of the competition, by promoting my product ranges well. This will help me to keep my place in the market.
TASK 6
Market Research
In this task, I am going to be looking at market research and seeing how I can use it in my business. I will be discussing the advantages and disadvantages of the different types of research and creating a questionnaire for my business to distribute.
“Market Research is the process of collecting, collating, interpreting and analysing information about the market” (ref: Nuffield BP business and economics for GCSE) Market research can provide a business with information which can enable it to produce an effective marketing campaign.
The different methods of research are primary (field) and Secondary (desk). In the table are the advantages and disadvantages of both methods, as well as the differences between the two methods.
Examples of Primary research include:
These are when companies send questionnaires out to people on mailing lists, which they hope you to return by offering you special offers.
When companies phone you up at home and ask you questions about certain products of services, sometimes trying to sell you things or make you sign-up for something.
People are employed by companies to stand on the streets or in busy areas to ask people on the street questions. They may offer you vouchers in return for your time.
- Observation / Focus group
People who are collected together to analyse certain products and give their opinions. They can be paid for this, or it can be voluntary.
Secondary research is mainly looking up statistics that have been collected by local government or other companies. Local statistics are often available from libraries, or local government offices.
In a business it is always a good idea to draw up a marketing plan, as this will help you to analyse the market effectively. Here is the Marketing research plan for my business.
Research Plan
Questionnaire
The aim of this to discover what the people of Seaford want to see in shops around their area. Please check the box that most applies to you.
- How old are you?
0-10 11-20 21-30 31-40 41-50 over 50
- Are you male or female?
Male Female
- Do you shop in Seaford town centre?
Never Occasionally Often Everyday
- What do you shop in Seaford for? (Please check all that apply)
Food Clothes Toiletries Electrical appliances
- What is your average income?
£0 - £5,000 £5,001 - £10,000 £10,001 - £15,000
£15,001 - £20,000 £20,001 - £30,000 £30,001 +
- What method of promotion do you think is most effective?
Advertising Postal leaflets Exhibitions
Personal Sales
- Would you prefer if shops were all in one place in the town centre, or scattered around Seaford in various areas?
All in the town centre Scattered in various areas
- Do you usually buy products from big chains (like Boots) or small shops (like Cosmetica)?
Big chains Small Shops
- How much money do you usually spend on your personal appearance a week?
£0 - £5 £6 - £10 £11 - £20 £20 +
Thank you for your time.
Evaluation of Questionnaire
I feel that I have asked effective questions that most of the public will be able to answer. I will be able to gain the required information for my business from it, but given more time, I would like to do a more detailed questionnaire that would be able to evaluate the public better, by asking them more specific questions. I have asked about methods of advertising which I feel is important, as then I will know how to advertise my products the most effectively, and also I have asked whether people prefer to go to small shops because I am a small store and would like to think that people would support me as a new business. It could be improved by being more detailed.
TASK 7
Product
In this task I am going to be discussing the product ranges that I am going to be offering to the public. My competition may be selling the same products as me, so I am going to try and effectively analyse how I can sell more of these products than my competition.
In my business I am going to be selling cosmetic products. The types of things I am going to be selling are:
- Make-up (e.g. Mascara, Lipstick etc)
- Facial cleansers
- Make-up applicators (e.g. blusher brushes, eye-lash curlers etc)
- Hair Dyes
I am also going to be selling brand names such as: Maybelline, Rimmel, No 17, L’Oreal etc. Brand named products, are products that have already been established, not by a shop, but by a company. They are well known and do not necessarily have to be sold in particular shops, but can be sold to any business who the manufacturer supply them to. Obviously brand-name cosmetics are going to have to be priced according to the companies recommend retail price, but I will also be selling lesser known names, and I will be able to sell these at a cheaper price, depending on the price I buy them at.
I am going to try and keep my prices competitive, but this will be difficult in the first few months of trading until I get well established. However, I plan to buy lots of end of line/range products, one off batches, or slightly damaged products, which are still viable.
“Product differentiation – making one product different from another, for instance through the quality of a product, its design or advertising.” (Ref: GCSE Business Studies second edition)
I will try and make my products different from the competition by using different suppliers and selling different ranges of products. I hope to offer good quality, friendly service that will make customers come back to the shop again and again.
TASK 8
Price
In this task I am going to be looking at pricing strategies and which one I am going to be selecting for my business, deciding on what strategy I am going to be using in my business and mentioning prices that are being charged by my competitors.
When considering what pricing strategy I am going to be using, the factors I am going to have to take into consideration are:
- The competitions prices, e.g. In Boots, L’Oreal lipstick costs £6 on average.
- Whether raising the price of products will increase sales, e.g. by increasing product prices, this will make the product seem better quality to the customer and therefore they will but it over the competitions.
- Whether the price I charge will cover all my costs (overheads), i.e. I need to work out how much my overheads are and then price my products so that the sales will cover the overheads.
There are four main pricing strategies. They are:
- Cost-plus prices
This is fixing a price to a product by adding a certain percentage onto the cost of the product. For example, if a lipstick costs the producers £2 to make, then I will add 50% to that product. The price will become £3 and I will have made £1 profit.
- Penetration pricing
This is selling products at very low prices to encourage people to buy it. This can also be referred to as ‘Loss Leaders’. Once you have got people interested in the product, hopefully they will then continue to buy it and you can put your prices up. This strategy ‘pulls’ customers into shops.
- Skimming Pricing
This is where products are deliberately sold at high prices to give the customer the illusion that it is also a high quality product. However, this is not always true. Producers are deliberately making smaller quantities of the product to gain high profit margins.
- Competition-based Pricing
This is where you set your prices, depending on what the competition are charging. You set your prices similar to theirs.
There are also 2 other types of pricing strategy.
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Price Discrimination – the same product being sold at different prices to different segments of the market, e.g. Mobile Phone companies have ‘peak’ (expensive) and ‘off-peak’ (cheap) times, and they charge more or less depending on when you use your phone.
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Non-Price Competition – competing with the competition using other strategies apart from price (i.e. packaging, “sex sells” and sales promotion).
For my business I am going to be using Cost-plus pricing. I have chosen this one because I feel that it is realistically possible for my business. I hope to achieve an approximate profit margin of £100 for the first 3 months. I also hope to use Non-Price Competition as well, as I feel that in my business I am going to be able to achieve this from the beginning. I can package my products differently, and I hope to offer excellent customer service by employing friendly staff.
TASK 9
Place
In this task I am going to be discussing where I am going to locate and my business and why I am going to do this. An explanation of the main channels of distribution and the methods of transport will also be included. I will also include a map of where my business is going to be in relation to my competition.
The main channels of distribution are:
Directly to the Consumer
Products sold directly to the consumer. For example, mail order catalogues and door-to-door sales (Avon and Betterware).
Directly to Retailers
Products taken from the manufacturers to the firms, selling them to the customers. Supermarkets store their products and then distribute them to individual stores.
Through Wholesalers
Used by smaller shops, as they do not often order enough stock to get products directly from the manufacturer. The wholesalers will sell smaller quantities to the retailer and then they will sell them onto the consumer.
Omitting Retailers
Wholesalers receive goods from the manufacturer and they sell them directly to the customer. These types of business are often located in densely populated areas.
I am going to use “through wholesalers” method of distribution because I feel that this will be the easiest for my business and will make me the most money. I am going to get my products delivered to me by “road” (lorry, most probably) as this is probably the only way that the products I am going to be selling are delivered to businesses in towns.
I am going to locate my business in the centre of Seaford, down the main street as I feel I am going to attract most business here and also I am going to get ‘passers by’ trade as well as people who will come into the shop looking for specific things. My competition is located close to my business, and I feel that this is an effective way to compete with them. If they were located far away, then perhaps consumers would be less likely to look around for the best price/product/promotional offers.
TASK 10
Promotion
In this task I am going to be looking at the different types of promotion and discussing the advantages and disadvantages of these.
Advertising is only one type of promotion however. There are many more and these include:
-
Sales Promotion – can boost sales effectively. Money off vouchers, free gifts and competitions can encourage customers to buy certain products. It only works in the short term though, so other promotion strategies will have to be used.
-
Personal selling – when people sell products “door to door”. The advantages of this are that people get to see the product working, but many people feel pressured by this method of promotion and feel that it is a waste of their time
-
Public relations – companies try to get good news about the products or services into the press, especially when trying to launch a new product. The companies have no control over what is written and public relations can backfire when the press gives a product bad media coverage.
-
Direct mail – leaflets sent through the door. Can get people noticed in a product, but many people resent being sent “junk mail” as it is a waste of paper and they just end up throwing it away without looking at it.
-
Branding – this is more of a long-term outcome of promotion, but it is a good way of advertising, as people can know your product without even seeing it. If you hear “just do it” you associate it with ‘Nike’ immediately. Branding doesn’t really have any disadvantages except for the fact that the initial promotion is extremely expensive.
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Sponsorship – where firms provide financial support to companies in exchange for advertising.
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Demonstrations – a show of how a product works. It is used for products that need to be seen working. (Demos done in Churchill Square, Supermarkets etc)
To launch my business I am going to be using Sales Promotion and Advertising through posters and local press. I feel that these are affordable for my business and also this is probably the best way of getting across to my target market. (The Cost of promotion is shown on the next page in a budget plan.)
I feel that the choices I have made are justified. They are achievable within the promotional budget that I have been given (£5000). My advert will be distributed throughout the community and therefore will be an effective, relatively cheap way of getting consumers to come and visit my business.
TASK 11
Marketing Constraints
In this task I am going to be discussing the constraints of my business, due to government and other factors. There are internal and external constraints affecting my business.
Marketing Constraints are pressures on business that prevent it from doing things in a certain way, i.e. selling products which are incorrectly labelled, pricing products far above the RRP etc. These are there to protect those customers’ rights, as well as to prevent business from breaking the law.
There are two types of constraints on business. These are Internal and External.
Internal constraints are within the firms’ control and consist of:
- A budget – in our marketing campaign we have been given £5000 to spend. Therefore I cannot spend more than this.
- Staff expertise – Staff cannot be expected to know everything about setting up a business, so experience will have to be gained whilst actually working in the shop. This means that initial progress will be slow.
- Time – we have a set date on which to open, and everything has to be completed by this date, preferably before. Marketing research about where the shop should be located cannot go on forever, as I have to decide on a location sometime. The promotional aspects should be ready and the shop floor must be presentable and ready for use.
- New business – because I am a company starting up and am going to be learning from the very beginning, the business may not run as smoothly as it will, say, a year down the line
External constraints are outside of the business' control and consist of:
- Ethics – this has recently become a huge issue for retailers. In the 1990’s companies were criticised for buying products from factories in the third world employing children. Companies did this as the materials and cost of labour was extremely cheap, however it violates human rights. Other businesses have been shown to use advertising in a derogatory manor towards certain groups of people. (NSPCC ads to TV are one such example.) This will affect my business in such a way, that I am going to have to be very careful about the products that I choose to stock. Anti-vivisection groups may start hassling my business to stop buying certain products that they believe have been tested on animals, and I feel that this could bring on bad press against me, and therefore this affects what product choices I make. Many people still believe however, that ethical issues do not concern business.
- Legislation – these are laws that restrict what you can do i.e. how/when/where you can advertise, prevents them from misleading customers by ensuring that they pass consumer protection laws, such as the Trade Descriptions Act of 1968 and the Consumer Credit Act, 1974. This means that all the products that I am going to sell are going to have to be checked to make sure that they’re labelled correctly and therefore you cannot be sued for deceit.
- Codes of Practice – encouraged by the government, these are rules which businesses agree to keep. However they have no legal status. Often enforced by the advertising standards committee. I am going to have to stick to these, by constantly checking if I am complying with them. They are my authority within business.
- Pressure groups – check on the activities of businesses. The consumers association for example defends consumers’ rights, by investigating particular products. It also pressure industry and government to ensure consumers interest. Organisations such as Greenpeace are well known for campaigning for the ethical behaviour of businesses and governments to be increased and monitored. This is closely linked to ethical constraints and many of the main points that are going to affect my business are going to be the same.
TASK 12
Conclusion
I am going to be discussing the key issues of my marketing campaign and what decisions I have made regarding them.
My main marketing objectives for my business are going to be to analyse the market by doing market research and therefore being able to supply what the customers want. I will be publishing a questionnaire to discover public demand. I have drawn up a research plan, which shows the other sources I am going to be looking into.
In terms of pricing strategy, I have chosen to use cost-plus pricing, with non-price competition. I feel that a combination of the two will not only be effective but will also give me the opportunity to show that my business really can be a success without having to provide rock bottom prices.
My business will be located in Seaford, as I know the area well, and due to this, I will be able to use my knowledge of the area to promote my business and its products effectively. Through sales promotion and advertising, I feel that those who are likely to become customers will see my businesses adverts.
In terms of product range, I have decided to select ranges that are not tested on animals, that can be sold cheaper than the recommended retail price (RRP) and most products will be branded.
For promotion, I felt that sales promotion and advertising through the local press would be the best ideas. These are simple, effective ways of promotion and are used by many other companies in their own promotions.
TASK 13
Evaluation
The best way to evaluate my work is through a table of advantages and disadvantages.
TASK 14
Bibliography
- GCSE Business Studies second edition. Alain Anderson
- Project for University degree in Business. SWOT analysis. Simon Pearce.
- Section C of GCSE Business Studies Workbook. Topic 33 – Analysing the market.
- Section 3.1.3. Key marketing objectives
- Topic 2 of ‘Purposes and types of business organisation’. Objectives of Business
- Business Studies teacher – Mrs Austen
- Unit 2. Methods or marketing research. HarperCollinsPublishers Limited 2000.
- Unit 3. Sales and Marketing. The product.
- Product worksheet for folders.
- Price worksheet for folders.
- Business Studies. Dave Hall, Rob Jones and Carlo Raffo.
- Business and Economics for GCSE. Nuffield – BP.
- Promotion – Advertising Media. GCSE revision Guide
- Techniques of promotion. HarperCollinsPublishers Limited 2000
- AIDA. HarperCollinsPublishers 2000
- Resource sheet 3 – Marketing costs
- Advertising costs. Nestle at work resource pack.
- Channels of Distribution. Worksheet for folders.
- Marketing Campaign Promotional Budget Plan for ABC Florists.
- Ex-Business Studies student – Louise Cotton
