The most common methods of market segmentation are:
Life style
A married person with kids who has the same wage as a single person will buy different products. This means that the advertising for some products will be aimed at the single person. while some will be aimed at the married person.
Age
People of different age buy different products. This means that a old person will buy different products to a young person.
Gender
Certain products are only brought by males, and some is only brought by females, so the advertising targets that group. Sometimes the a products are brought by both groups, but the advertising is just aimed at one.
Region
People in different areas of the country will buy different products. A person in a wet part of the country will buy clothes for wet weather, while in a dry part people wont. This also applies to when a product is exported.
Income
These are created depending on a person's income. The highest in the groups are the managers while the lowest are the unemployed. A product that is to aimed art the highest income group will have a high price, while a product aimed the lowest will have a low price. This also means that the advertising campaign will be different for each group.
Use of product
Domestic home users or business can use a product. This will influence the way that the product is sold and advertised. If selling to a business then the company may go direct to the business and sell face to face. While if selling to the domestic, market they may just sell over the phone. A product that is aimed at a business user may not be advertised on television, unlike a domestic. Instead brochures may be used. This means that the same product could have to different advertising campaigns.
Social grades
What are social grades?
This is a other method of segmenting the market by class. The groups are created on what the head of each home does for a living. The social grades are:
Social group
Job description
A
Senior management
B
Lower management
C1
Supervisor role, administration
C2
skilled manual
D
Unskilled manual
E
Causal labours
Questionnaire
Aim
The aim of this questionnaire is to find out what social group is not catered for in the local area.
Questions
Are you in full time employment?
Yes 75%
No 25%
What types of work do you?
Senior management 20%
Lower management 12%
Supervisor role, administration 30%
Skilled manual 7%
Unskilled manual 23%
Causal labours 8%
Which best describes your yearly income?
Below £5000 4%
£5001-£15000 21%
£15001-£25000 30%
£25001-£35000 10%
£35001-£45000 20%
£45001+ 15%
Do you shop in the local area?
Yes 17%
No 83%
Why?
Good choice 15%
Lack of choice 67%
Poor parking 15%
Other 3%
Where do you buy your electrical goods from?
Dixons 20%
Currys 34
Johnlewis 6%
Catalogue shop 30%
Internet shop 10%0
Results
The results are shown in pie chart from, as they are the best way to show percentages:
Conclusion
From my research I have found that the social grade of the local area is C, and the average pay is between £"15000-"25000. The majority of these people do not shoe locally, and the main reason is that the local shops do not cater for their needs. This shows me that there would be place for me to sell my goods, aimed at social group C. This is because of the people surveyed the majority fit into this group, so it makes sense to primarily aim for them, and then unskilled workers. Also the shop that most of people say they shop at is out side of the local area, but they would shop locally if they had the choice.
My market- The market that I aiming at is the senior administrative workers in group C, that earn around £15000-£25000. This is will determine where I place my shop, and pricing. I will aim at this group, as they are the group that feel there is no choice for them. I will aim for this market, as the other major shops in the area over look it.
As I know now what group that I will primary aim my products at, I must now find a area that is made up mainly of that group. The place where you put your shop is how you get your product to your customers, when looking for a place for my business these facts must be considered:
* Competition
* Parking
* It must be in a area where the income is around £15000+ (for my shop)
From my research I have found that the Maltings shopping centre would meet my criteria as it has a large proportion of shops aimed at group C workers and were I to open, I would then provide the only electronics shop in the area.
Planning restrictions
Planning restrictions are used to restrict where a business can build or start up. If the government says no then it would be against the law for the company to build there.
What do they do?
They help to protect areas that are of beautiful nature from being destroyed. They also stop factories from opening near homes. The planning restrictions also help to bring business into areas where there is high unemployment. The government will do this by offering incentives of building in a certain area.
What planning restrictions apply to me- from research into local planning restrictions have found that I must get permission for the following:
Any ballads placed by me near my shop
Shutters
Extra building at the rear of shop
Any structural work
I do not need to worry about the replacement of doors and windows as my business is in a non listed building.
Social effects of my place
What are social costs?
These are costs that the rest of the local area must pay because of where your business, or factory. There can also be social benefits; this basically means what the local area gains from you placing your business there.
My social costs- The social costs as a result of where I place my business are:
May be increase in traffic
Increase in litter
My result in local competition closing down
The social benefits that come from me placing my business area:
People shop locally
Creates one or two extra jobs
Helps the local economy
Evaluation
The place that I have chosen has more advantages then disadvantages. This is because my shop will be near a main road that will allow people to see any promotions, and they will be drawn to the area by the large range of shops already there. Also there is a bus stop opposite, which makes it easy to get to my shop. Another major advantage is that there is bank near by that has a cash point meaning it easy to withdraw cash. There are some disadvantages primarily that there is no dedicated car park, and that there are parking restrictions. The main parking restrictions are that there is no parking on certain points between 8 PM and 6 PM Monday - Friday. The planning restrictions in the local area are not very strict so this will help if I want to make changes to my business. There are very few social costs, but there are also few benefits. The major benefit of me placing shop in my chosen place is that this would bring people into the local area to shop. This would help other local shops.
Channels of distribution
A channel of distribution is the way that company gets its product to its customers. If the product costs a lot and few are sold then the manufacture will sell direct to the consumer. If the product is cheap and large amounts are sold, it is easier to sell the product to a whole sales in thousands, and they then sell it on. This type of distribution needs to be efficient and cheap to run.
There are four different channel of disruption:
Channel 1 of distribution
This is the simplest method of distribution, as it involves the manufacture selling direct to its customer. This is usually impractical if you don't live near the manufacture, but that is why they ship them out. Examples of goods that are sold direct are:
Computers
Furniture
Spare parts
Books
Software
The reasons for this is that if the product is quite expensive then to lower the price they can cut out the middle man.
Channel 2 of distribution
This is a very common method of selling, as the manufacture sells the product to a re-seller and they then sell it to the public. This is very widely used by supermarkets, or clothes.
Channel 3 of distribution
This form uses a wholesaler who buys the products in bulk from the manufacture, then sells to the re-seller. This is to break up the bulk as a small shop can not buy in very large amounts, so it buys in small amounts from a wholesaler.
Channel 4 of distribution
This is when the product is sold through agents some times in different countries. The manufacture will export the product to the country, the agent will know how best to sell in the local conditions.
My distribution method- I will use channel 3 of distribution, buying from a wholesaler, primarily ads they break up the bulk, so it means I have a wide range of items, buy having selective numbers in stock. This means that if I see that one product is selling very well then I can buy more form the wholesaler, and if a product is not selling then I can stock less.
What is the role of the wholesaler?
The wholesaler is very useful to the local shopkeeper and the large manufacture. The services that are provided by the wholesaler to the small shop are:
They break up the bulk so they make it easier for the small shop to buy goods. They fill in gap between the manufacture and shop, as a small shop would not be able buy large quantities of goods, so instead they can buy them in small amounts form the wholesaler.
They have lots of choice of products as if they were to buy from a manufacture they might to be tied to their line of products. Also as they would have to buy in bulk they would not have space for as wide a range of goods. This may upset some customers, as there is no choice.
The wholesaler can deliver the goods in large amounts, as the local shopkeeper may not have the vehicle to transport large quantities of goods. Also if the goods must be transported in special conditions (Frozen), then it is more likely that the wholesaler will have the special vehicle, unlike a small shop. This also saves the shop owner time.
A wholesaler will normally give the shopkeeper credit, so this free up cash, which can be used for other things. If cash is paid then the wholesaler may give a discount.
A wholesaler may be able it give more information on a product, or new products. This is because they sell the product them self.
What does the wholesaler do for the manufacture?
The wholesaler buys the product in very large quantities so it saves the manufacture time. This is because they are only dealing with only a few retailers, instead of lots. This cuts down on paper work, and transport.
They save storage space for the manufacture, as the large quantities of goods are stored by the wholesaler not the manufacture, saving them space.
The wholesaler may normally carry out the promotion, saving the manufacture money on advertising.
How will the wholesaler help me- The wholesaler will be very important in my business, as it will help to breaks up the bulk. The wholesaler being able to deliver will save me time and money, as will not have to invest in special equipment. The wholesaler also may give me credit that will help free up cash for my business.
How will I price
This must be right, as people will have to buy large numbers for you to make a profit. The price that you charge can depend on what you are trying to do. If you want to attract a lot of customers then a low price is better, but if know that your product is better than others then you may charge higher price. There are three types of price:
* Low price- To attract lots of customers, you will have a price lower then your competition.
* Average price- Your price will be same as the other companies, so you will try to get customers other ways.
* Higher price- If you know that your product is better then your rivals, and your customers know that then you can charge a higher price
My price: My price will be as low is possible, so that I can attract the largest number of customers. I will also have goods that are of a high price, that are specialist and only I sell them. Even though am I aiming at social group C, they may be looking for cheap television or videos which I should be able to sell to them as well as the more expensive models.
How to price?
This is very important, as you must decide how to price your products. There are six main ways of pricing your products:
Cost plus pricing- This is where the company will figure out how much a job costs, and then add on a certain percentage, this is sometimes called a mark up. An example is a garage, a repair may cost £100, but when they add on their mark of 40% it comes to £140
Hour based pricing- This is where the work that is done is charged for by the hour.
Penetration price- This is when a company will bring out a new product and sell it very cheap, so that it gets in to market very quickly. When they have established the product in the market they will raise the price.
Skimming- When you first realise a product in to the market at a higher price then lower the price later. This is because sometimes customers will like the prestige of having your product first, before anyone else. This is called skimming as you skim your customers first selling to the richest.
Destroyer- This is where you price your goods or service at very low price so that you put the other companies with that service or goods out of business.
Crucial price point- This means the pricing difference between £9.99 - £10.00. A customer will feel that the £9.99 is a lot cheaper then the £10.00, even though it is only a penny. This also applies to £1.89 - £1.90, this works on a number of prices.
My pricing structure: I plan to use the crucial pricing point, and to sell my goods at a penetrating price on a permanent basis. This is because using the "crucial pricing point" makes my goods seem cheaper, so I will sell more. The reason that I will use penetration pricing is that this should attract customers, destroyer pricing is impractical, as I would find it hard to compete with the large companies like Dixon’s, or Curry’s. To get my promotional price I would add on a certain amount to the price, around 15%.
Evaluation
The method of pricing that I have chosen does have some disadvantages. The main disadvantage is that I will have to sell a lot of my product in order for me to break even and then to make a profit. Also if I am going to try and have a price that is lower or the same as my competition then I will have to do research in to other prices. To do this it will require spending time, into researching the local prices.
The product
This is important, as it must have the right features to sell, good looking, hard wearing. In a small business it is easy for the business to design the product for the customer. The small business can also order special parts for the design. Customer service for a small company is normally better as they can stay open longer, and there after sales support is better. It will be easier for a customer to take a piece of equipment to a local shop, and then send it back to a large company. During the products life it will have many changes to improve it, this is the products life cycle. During a products life cycle the profit and sales of the product are linked, so if sales fall so does profit.
There are many ways of putting the life back into a product:
Changing, or improving the product- This could mean that the company introduces new features, designs, or models.
Altering distribution patterns- sell your products in a more attractive way, e.g. redesign your shops or introduce catalogue or Internet shopping.
Change prices- This can make the product more popular if the price is lowered.
Promotional campaigns- You can revamp a product by adverts, that say but on get one free, or free trails.
Products, brands, and packaging
If your product does not have the benefits that a customer wants the there is no point in spending money on adverts.
Product benefits
These are the benefits that your customer wants when buying your product. This means things like on a hot day you buy a cold drink this benefits you as you cool down. Examples of benefits are:
* Connivance
* Accessibility
* After sales support
* Reliability
* Comfort and easy use
* Accountability, so if the product goes wrong then you there is after sales support
* Good staff
* Good designed and looking packing
* Peace of mind, as you know that the company is trust worthy
The more benefits that you can provide the higher the price you could be sell your product for; competition is about creating benefits.
My Benefits- To see what benefits a customer would want from my product I will carry out a survey to see what benefits are important to a person. I will only as people in my target group with a wage of £15000.
Aim
The aim of the questionnaire is to see what benefits a customer would want from local electrical shop.
Questions
When buying from a shop, what is important to you? (You may tick more the one)
Shop has a good reputation 15
Good after sales service 20
Home delivery 20
Home installation 16
Convenience 20
Extended guarantee 45
Other 20
Never undersold guarantee 30
Would pay extra for these service?
Yes 70
No 30
Are the benefits available more important then Price?
Yes 85
No 15
Which of these would pay extra for? (you can tick more then one)
Home delivery 35
Home instillation 25
Extended guarantee 75
Other 19
Conclusion
My conclusion is that it is that it is very important to have benefits that help to sell your product. Also that people are willing to pay extra for some these extra services. I also found that people were influenced by what benefits that they can get from other stores.
Other research
I also used the Internet to research into the benefits that are offered by the major retail outlets and found that:
Most shops charge for:
* Extended warranty
* Home delivery and instillation
Most shops for free offer:
* Never undersold guarantee
* Good after sales service
* Convenience
* Customer credit
Also I spoke to a owner of a similar shop who said that I should offer as many benefits for free as possible, as I will most likely sell more thus covering the cost.
My benefits- The benefits that my customer will get as a result of my survey are:
Benefits that they will receive for free;
* A shop that has a good reputation
* Good after sales service
* Convenience
* Extended guarantee
* Never undersold guarantee
* Customer credit
Benefits that my customers will have to pay a small fee for are:
* Home delivery
* Home instillation
* Customer credit (The money is made on the interest)
Evaluation
The benefits that I am offering are ones that are already offered by the local competition. This is because not one store offers all of them and my survey showed which ones where the most important. The reason that I will not be offering interest free credit is that this would loose me a lot of money. Instead I will let the credit be taken of by a third party, but hopefully the opportunity of credit would bring in extra sales.
A company can make more then in product this is called the product mix.
Each and every product must have good strong brand that makes it recognisable to people. A very strong brand is Coke a Cola brand, as the colours, shape of cans, and lettering tell the buyer what the product is. The characteristics of the brand come from the products physical features of the product. This means the taste and the shape of the product. These are created by the manufacture through adverts and packaging. People talk the products consistency, the quality, and its design, and adverting campaign.
Is Image Important?
The image of the product is the way that the public see you product. Your product could have a negative or positive image, this depends on how the product is advertised and presented.
My Image- The image of my product will be taken care of by the manufacture, but I will make sure that my store is a sort of brand. This is would help people to remember my shop. I plan to create my image by a good advertising campaign, and by offering a good service.
How packaging affects the product?
Packaging is the way that the product is presented to the public; the packaging can give benefits:
* Attractive
* Strong for transport
* Can be dismantled for storage
* Or is easy to use
There can be problems with packaging; it can cause the following problems:
* Increase the production cost
* Make the product bigger and heavier so it costs more to transport
* The more packaging that you have, the more waste you will produce
This means that firms have to think very hard about there packaging, as they must considered the advantages and disadvantages of there packaging. To help decide what type of packaging I will used I carried out research into existing packaging. I found that current packaging was bulky.
My packaging: My packaging will be what the goods are supplied in by the manufacture. This is because they will have spent lots of time and effort on designing the best packaging. For accessories I will supply bags that carry my logo and shop names along with other information. This would be: opening times, services available, and special offers.
What is the aim of adverting?
The aims of advertising are:
* Inform people about the product
* Create a image
* Increase sales
* Compete with other shops
* Introduce in products into the market
What is the aim of my advertising- The aims of my advertising will be:
* Increase sales
* Compete with other shops
* Create a image
I do not want my advertising to try and introduce new products into the market, as this is normally done by the manufacture on a national scale. The manufacture will also inform people about the product.
Informative advertising
Currently in the biggest spender on this form of advertising, is the government this advertising is used to pass on information to the public. The passing on of this information is very important in any advert.
Persuasive advertising
The washing power industry spends as much as the government on advertising, there adverts try to persuade the viewer that there products are much better then the compensation. There goal is to attract people to buy there products.
There are different types of pervasive advertising:
* Adverts that show a famous person using the product
* Adverts that compare one product with a other
* Adverts that use sex to sell the product
Public relations
Public relations is the department that that try's to promote and show the good side of the company to the public.
Advertising agencies
Advertise is a very expensive business, to make sure that the money is well spent they will hire a company to do it right. For a advertising campaign to be successful it must:
* Reach the right audience
* Be attractive and appealing
* Make the money that the audience cost back in sales.
Control over advertising
In a advert you can not put just put anything in it, there are certain rules they are:
There is a code of practice in side the advertising industry that you must obey. The trade description act, which means you must describe as truthfully to the best of you knowledge.
My method of advertising: I plan to use informative advertising, as I want to inform people of the benefits of buying from my shop.
What media's are there for advertising?
There are many different types of advertising, each has advantages, and disadvantages these are:
Televisions
This is a very powerful media to use to get your message across this a very useful media. Millions will see the advert that is produced. The time at which your advert is shown effects who see it. If your product is for children then you would show your advert during children's programmes, not adult. You must also take into account the number of people watching, as this will affect the cost. To produce an advert you must take all these things into consideration:
How many adverts can you afford, as there would be no point in only being able to run your advert once
When will it be shown
Is the advert correct in itself
Advantages
* Reaches the largest number of people
* The adverts can make the product look much nicer, than in print
Disadvantages
* Very expensive
Radio
This method of advertising is very similar as television adverting, but it is cheaper and sound is used instead of visual images. In a radio advert a theme tune is used.
Disadvantages
* People may switch station when the advert comes on
* If there is poor reception then the listener may miss the advert
* There are no radio stations that take adverts that span the whole country
Advantages
* Cheaper then television
* Large audiences can be reached
* This type of advertising is very good for local shops
* The advert can be repeated many times
Newspapers/Magazines
Newspapers are normally produced and bought every day, so people will see your advert daily. Magazines on the other hand are normally produced weekly, or monthly. Newspapers can be aimed at different people, some are aimed at business owners, while others are aimed at very one. A newspaper can be local national, the difference is that a national paper is available all other the country while a local is aimed at the local area. It is easy to see what social groups read a national paper, while this is harder with a local. As magazines are normally aimed at specific groups, the adverts also do the same. This basically means that if your shop sells computer parts, then you advertise in a computer magazine.
Advantages
* A advert in print is normally kept for longer, so it may be seen many times by different people
* Colour printing is now available at a much lower cost
* Coupons can be in the advert so that the person can cut them out
* Easy to reach a target group with magazines
Disadvantages
* Reader most of the time will skip the advert
* You may have to design different adverts for different newspapers, or magazines
* In some newspapers/magazines the advert may be surrounded by others, thus causing the advert to loose its affect
* Magazine adverts cost more then newspapers
* Newspaper adverts are not normally in colour
Posters billboards
These adverts are normally in a permanent place, and every one sees them. This means that these are good method of advertising if trying to target a large number of people.
Advantages
* A poster will be visible for a long time
* The posters are normally big, colourful so they grab people attention
* They can placed on buses, trains, and in stations
* Very good to advertise in the local area
* Quite cheap
Disadvantages
* Posters may be ignored by drivers, or pedestrians
* Message must be brief, or it will not work
* Adverts may be damage by vandals
* No detailed information can be placed on the advert
This type of adverting can be very affective. The film that is being watched will effect the advert, so in a kids film you will advertise kids toys.
Evaluation of advertising
It would be impractical of me to use television as a form of advertising, as I will only have one shop in a local area, and television is not good to advertise in the local area. Also the cost involved in creating the advert, and putting it on television is enormous. This would mean for me to run the advert more then once I would have to cut things for my business like customer benefits, and opening hours. Radio would be a better option but as I only have one shop, it is not a good method to use at this time. This is because the advert will be heard by the whole of London, buy I am only at the moment targeting at the Harrow area. Local papers are a very good method in my case, but this will depend on the results of questionnaire that I carry out. A magazine is not suitable as they are normally national. A other very good method would be adverting on local transport, as they will be seen by people in the local area. This will also depend on the results of my questionnaire.
Questionnaire
Aim
The aim if this questionnaire is to find out:
Which media most people see/have access to
Which adverts do they read them
When they are seen/read
Questions
Which of these media's do have the most access to?
Television 35%
Radio 15%
Print 6%
Poster bill boards on transport 25%
Road side posters 3%
Cinemas 1%
leaflets 15%
Do you often read the leaflets that you receive?
Yes 44%
No 56%
When do you listen to the radio
8.01 am -12 PM 22%
12.01 PM - 4 PM 8%
4.01 PM - 8 PM 34%
8.01 PM - 12 PM 10%
12.01 am - 4 am 1%
4.01 am - 8 am 25%
What grabs you attention in a advert?
Slogans 22%
Bright colours 18%
Brand names 35%
The shape of the paper the advert comes on 25%
Results
The results are shown in pie char form as they best represent percentages.
Conclusions from results
My conclusion is that the best method for me to use is poster billboards on public transport. Even though more people have access to a television, this media is not suitable for my business. I will also use leaflets as this would mean that I could put in coupons for the reader. Also that I should use bright colours in my advert, as my leaflets should have a distinctive shape.
My method of adverting and cost- I will advertise on the local transport system £98 per month, for a small advert on the back of a bus. The leaflets that I will produce will cost £25 for a 1000 delivery, and printing costs vary.
My advert- My two adverts will look like:
The first advert is the one that would be placed on buses. The advert is brief, and shows some information about opening times. The advert is brief as there may not be time to read it. The advert has the logo of brands so that people know what brands I sell.
The second advert is in a round shape as I hope that this will catch a person’s attention. It has the same colours, and style of the other advert so that people will remember them.
Promotions
A promotions is not run for a very long time, they are used to help the adverting, and to get existing and new customers to buy the product. This is only ever used for a short time. An example of a promotion is buy on get one free for a certain time.
The advantages of having promotions are:
* Can help to boost sales when they are low
* Gets new customers to try old products
* Gets people to use new products
* Engorges
There are many ways of promoting a product some are:
Money off
This is where you offer money off your product so to attract customers. Coupons could be used, these can be in leaflets, or come in a previous product that you buy. Another way is where there is a discount in the whole shop and no coupons are needed. The idea of these is to get the customer to buy your product.
After sales service
This is very important were very expensive products like televisions, kitchen appliances or computers are involved. A person who buys a expensive product will be influenced by a warranty, this is because a customer wants to know that if the product goes wrong in a few months they can get it fixed. After sales support can make person by from a specific shop just for the extra warranty.
My method of promotion- The method of promotion that I going to use is after sales service, price reductions, and in-store demo's. This is because televisions, videos, and hi-fi can be very expensive, and from previous research I found that this is very important. The in-store demo's would be used as the customer would want to see what the products permanence is like. Using price reductions of small amounts, like £ 10 off your next purchase would help to bring people back. The use of free samples, gifts, competitions are not very suitable for my shop. This is because it would be impractical to give out free samples, competitions will take a lot of time to set up and run, and gifts are not of any use as you normally only buy one of the product, normally.
My conclusions are:
* I now know what methods of advertising, promotion, and packaging I will use
* I know what benefits I will offer my customers
I will now look into the laws that I will have to comply with in opening and running a successful electronics shop.
What laws must I comply with?-
1968 Trade description act- This stops a business from not supplying the right information about a product on purpose
1974 Consumer credit act- This means that when people take up a credit agreement they get a copy of it. This is so that they can see how much they have borrowed, over how long, and how much interest they will pay.
1979 Sales of goods act- This is a very important law as it makes it does not allow:
The selling of faulty, dangerous products
The selling of products that are fit to use for the required task. This means selling a wood glue to a person who wants to glue plastic
The selling if products that do not do what they are clamed to be able top do
1987 Consumer protect act- This stops people from using misleading pricing claims, e.g. saying a product is at a reduced price when it is at the same. It also makes the supplier responsible if faulty goods are sold then the supplier can be sued for the cost of the damage caused.
These are the laws that I must comply with when selling goods but there are also other laws. These laws ate here to protect the employees from unfair treatment at work. Employees are protected from:
Discrimination
Poor working conditions
Wage protection
Discrimination
The laws prevent there from being unfair discrimination at work. They cannot discriminate on the basis of:
Disability
Age
Religion
Race
Gender
Working conditions
There laws that stop the miss treatment of the workers. The makes it the law for a worker to have:
Breaks when working very long shifts
Provide safe, and clean working conditions
Provide a workplace that is of a reasonable temperature
Provide cleaning facilities and toilets
Protection from dangerous machines
Wage protection
This gives the worker the right to be paid for the work that they do. This also gives the employee the chance to a contract of employment. This contract sates:
Job
Wage rate to be paid
When they will be paid
any deductions that will be made
That the minimum wage is paid
Which of these apply to me, and how will I comply with them- I must comply with all of the laws that I researched into. The consumer protection act guarding against the selling of faulty goods would be wholesaler’s responsibility. This is because I would be buying form them. To protect the employee I will make sure that my shop has a good working environment, as I would be working there.
What does insurance do?
Insurance helps to reduce the risk for a business. To do this you take out a contract that protects you against a certain risk. To have this cover you must pay certain amount every month, or yearly. As results of getting insurance you are given a insurance certificate. If your business suffers damage, or is closed then you receive a cash pay out.
What can you cover?
Insurance cover can be taken out against any thing. A person who plays football will insure them self agist a injury that could stop them from playing football. To have this they would have to pay a high premium (this is amount that is paid on a regular date in return for insurance), because there is a high risk.
What cannot be covered?
There are some events that can be covered, they are:
A consequence of your actions, this means if you insure your car you can not then steel to get the insurance
Wide spread risk, this is widespread risk which will cause lots of loss like in a war
Risk can not be assessed this means where do not know the risk of a business failing
There is much insurance that a business can have but there are only two kinds of insurance that a business must have by law they are:
Employer’s liability- If a business has any employees then it must take out employers liability insurance this covers the employees death, injury, or illness caused by a accident at work because of employer.
Motor vehicle- If you own a motor vehicle then you must have third party insurance, which covers the death and injury of other people in a crash.
Money
This covers against of money being lost, this includes more then theft and covers all cash, cheques, and valuable documents that are in the business.
Which insurance's will I get?- The insurance's that I will have to take out are: motor vehicle and employees liability. The insurance's that I can choose to take out, and that I will are: Permanent health, as I am a sole trader
Theft, as there is a high chance of theft
Public liability, as I will customers in my shop
Fire and other risks, as I will expensive stock on the site
Loss of profits, as I my shop closes then I will need to find a income.
The reason that I took out those insurance’s is that those are the ones that apply the most to my business.
For my shop I will have to run I will have to hire staff, there are different types of staff I could hire:
Temporary workers- This is where I would hire staff just to complete a certain task.
Part time workers- This is where I would hire staff who just work a certain amount of hours are counted as part time.
Short term contract- This is where I would hire staff only for a short amount of time, like 6 months then I after the 6 months I can dismiss them, or renew the contract.
Which will I use- I will use part time staff, as they will be very flexible, also as I will be working in the shop I will only need staff for some of the time. The laws that I have to comply with when hiring are the:
1975 Sex discrimination act
1976 Race relations act
1944 Disabled persons employment act
When deciding on what rate I am going to pay my staff I will have to think about the minimum wage. The minimum wage is £3.60 a hour, which is the lowest I can pay. If I pay a higher rate then my staff my feel more valued. Commission could also be used to add on to the basic, this is would reward the staff when they make a sale.
The method of payment that I will use is based on the type of the job. If the person that I hire is qualified to carry out televisions repairs, accountants, or any thing else of use then they will be paid more. I will pay £4- £4.50, and I will not offer commission. This is because people do not like sales men who work on commissions. I will pay my self with what is left from the profits. This means that if I am doing very well then I will have a higher pay, and vice verses.
A bank loan is a very common source of eternal finance for a business. The loans is repaid over a certain period of time and interest is paid. The time period can be anything from one year to twenty or more. Interest must be paid on a loan, this is paid back to the person who lent the money.
I assume that I will need a large loan to start out my business but I hope to be able to pay it off with my profits over time.