What is marketing?

Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably. It is not just advertising - it covers the whole process from market research through to the marketing mix.

Market research: primary vs secondary

Primary (field) research collects new, first-hand data - surveys, questionnaires, focus groups, observation, consumer panels, test marketing. It is specific and up to date but expensive and slow.

Secondary (desk) research uses existing data - government publications (ONS), trade journals, competitor reports, internal sales data. It is cheap and quick but may be out of date or not specific to the firm's need.

Qualitative vs quantitative data

Quantitative data is numerical (sales figures, survey scores) and easy to analyse statistically but lacks depth.

Qualitative data explores opinions and motivations (focus groups, interviews) giving rich insight but is harder to analyse and more subjective.

Sampling methods

• Random sampling: every person has an equal chance of selection - unbiased but can be costly.
• Stratified sampling: population split into groups (strata) and sampled proportionally - representative.
• Quota sampling: interviewer fills fixed quotas from set groups - quick and cheap but not random, so open to bias.

Sample size and method affect the validity and reliability of results - a common exam mistake is confusing 'reliable' (consistent results) with 'valid' (measures what it claims to).

Market segmentation

Dividing a market into groups with similar needs, allowing more targeted marketing. Common bases: demographic (age, gender, income), geographic (region, urban/rural), psychographic (lifestyle, attitudes) and behavioural (usage rate, brand loyalty). Niche marketing targets one small segment; mass marketing targets the whole market.

The extended marketing mix (7Ps)

Product, Price, Promotion, Place (the original 4Ps) plus People, Process and Physical environment (added for services). Students must be able to apply all 7Ps, not just the first four, especially for service-sector case studies.

Common exam mistakes

• Describing research methods without linking them to the business context or decision being made.
• Confusing correlation shown in data with causation.
• Forgetting that market research reduces risk but never eliminates it - always evaluate limitations (cost, sample bias, rapidly changing markets).
• Failing to distinguish niche (high margin, low volume) from mass marketing (low margin, high volume) strategies in evaluation.

Why finance matters

Businesses need finance for start-up costs, working capital, and expansion. The right source depends on the amount needed, how long it is needed for, and the cost of that finance (interest, dilution of control).

Sources of finance

• Internal: retained profit, sale of assets, reducing working capital. Cheap and no interest, but limited by how profitable the firm already is.
• External short-term: overdraft (flexible but high interest, repayable on demand), trade credit (usually 30 to 90 days).
• External long-term: share capital (permanent, no repayment, but dilutes ownership and dividends), loans and debentures (fixed interest, must be repaid, can require collateral), venture capital and crowdfunding for start-ups.

Costs, revenues and profit

• Fixed costs do not change with output (rent, salaries). Variable costs change directly with output (materials, piece-rate labour).
• Total cost equals fixed cost plus variable cost. Total revenue equals price times quantity sold.
• Contribution per unit equals selling price minus variable cost per unit. Contribution pays off fixed costs first, then becomes profit.
• Break-even output equals fixed costs divided by contribution per unit. Margin of safety equals actual output minus break-even output.

Common mistake

Students often confuse contribution with profit. Contribution is price minus variable cost only; it ignores fixed costs. Profit is only made once total contribution exceeds total fixed costs.

Budgets and variances

A budget is a financial plan for income and expenditure over a set period. A favourable variance means actual results were better than budgeted (higher profit or lower cost); an adverse variance means worse than budgeted.

Financial statements

• The income statement (profit and loss account) shows revenue, costs and profit over a trading period, ending in profit for the year.
• The statement of financial position (balance sheet) is a snapshot at one point in time, showing assets, liabilities and equity, where assets always equal liabilities plus equity.
• The cash flow statement tracks cash in and out; a profitable business can still fail if it runs out of cash (this is called overtrading).

Ratio analysis

• Gross profit margin equals gross profit divided by revenue, times 100.
• Net profit margin equals net profit divided by revenue, times 100.
• Current ratio (a liquidity measure) equals current assets divided by current liabilities; a healthy range is usually seen as 1.5 to 2.
• ROCE (return on capital employed) equals operating profit divided by capital employed, times 100, and measures how efficiently capital is used.

Common mistake

Don't just calculate a ratio; always compare it to a previous year, a competitor, or an industry benchmark, and explain what it means for the business.

What is operations management?

Operations is the function that turns inputs (labour, materials, capital) into outputs (goods and services). Good operations management balances cost, quality, speed and flexibility to give a business a competitive edge.

Production methods

• Job production: one-off, bespoke items (e.g. wedding cakes). High quality and flexibility but slow and expensive per unit.
• Batch production: groups of identical items made together (e.g. bakery bread runs). More efficient than job but needs changeover time between batches.
• Flow production: continuous production line (e.g. car assembly). Low unit cost through economies of scale but needs high, stable demand and heavy upfront investment.

Capacity utilisation

Capacity utilisation = (actual output ÷ maximum possible output) x 100. Running below 100% wastes fixed costs; running at 100% for too long risks quality problems and worker burnout. Businesses manage under-utilisation by rationalising (closing sites) or subcontracting.

Stock (inventory) control

• Buffer stock: the minimum stock level held to avoid running out.
• Lead time: the time between ordering and receiving stock.
• Re-order level: the stock level that triggers a new order.
• Just-in-Time (JIT): stock arrives exactly when needed, cutting storage costs but relying on very reliable suppliers — a supply-chain shock (e.g. bad weather, strikes) can halt production fast.
• Just-in-Case (JIC): buffer stock is held to guard against uncertainty, raising storage costs but improving resilience.

Quality management

• Quality control: inspecting output at the end of the process, often by a separate QC team.
• Quality assurance: building quality checks into every stage of the process, with all staff responsible.
• Total Quality Management (TQM): a culture where continuous improvement (kaizen) and zero-defect targets are everyone's job, not just inspectors'.

Poor quality raises costs through wastage, returns, and reputational damage.

Location and scale of production

Decisions on where to locate depend on cost of premises, transport links, labour supply and proximity to market or suppliers. Economies of scale (e.g. purchasing, technical, managerial) lower unit costs as output grows; diseconomies of scale (e.g. poor communication) raise them if a business grows too fast or too large.

Common mistakes

• Confusing quality control (inspecting at the end) with quality assurance (built in throughout) — examiners reward the distinction.
• Forgetting capacity utilisation is a percentage, not a raw output figure.
• Assuming JIT is always better than JIC — always weigh reliability of supply chain against cost savings, and apply to the specific case study.
• Not linking operations decisions back to competitiveness (cost, quality, speed, flexibility, dependability).

What HR does

Human resources (HR) plans workforce needs, recruits, trains, motivates and manages the exit of staff so the business has the right people, in the right numbers, with the right skills, at the right time.

Workforce planning

HR forecasts future demand and supply of labour. Key numbers:

• Labour turnover = (number of staff leaving in a year / average number employed) x 100. High turnover raises recruitment and training costs.
• Labour retention = the ability to keep staff; measured as the opposite of turnover.
• Absenteeism rate = (days lost / total days worked) x 100.

Organisational structure is shown on an organisation chart. Key terms: chain of command (line of authority), span of control (number of subordinates one manager directly oversees), delayering (removing a layer of management to flatten the structure), centralised (decisions at the top) vs decentralised (decisions pushed down).

Recruitment and selection

Internal recruitment (existing staff) is cheaper and faster; external recruitment (outside candidates) brings fresh ideas but costs more and takes longer. Selection methods include application forms, CVs, interviews, tests and assessment centres. Under the Equality Act 2010 employers must not discriminate on protected characteristics (age, sex, race, disability, religion, etc) at any stage.

Training and development

• Induction training: settles new starters in.
• On-the-job training: learning while working (cheap, but disrupts productivity and quality can suffer).
• Off-the-job training: away from the workstation, eg courses (higher quality but costlier and staff are away from work).

Motivation in theory

• Taylor (Scientific Management): workers are motivated mainly by money; work should be broken into simple, timed tasks.
• Maslow's hierarchy of needs: physiological, safety, social, esteem, self-actualisation — must satisfy lower needs before higher ones motivate.
• Herzberg: hygiene factors (pay, conditions) prevent dissatisfaction but do not motivate; motivators (recognition, responsibility, achievement) genuinely drive performance.

Financial methods: piece rate, commission, performance-related pay, profit share, share ownership.

Non-financial methods: job enrichment, job enlargement, job rotation, empowerment, teamworking.

Employment law and pay basics

• National Living Wage (from April 2025): £12.21 per hour for workers aged 21 and over.
• Statutory minimum paid holiday: 5.6 weeks (28 days) per year for full-time workers.
• Written statement of employment particulars must be given from day one of employment.

Common mistakes

Do not say 'delayering always cuts costs' — it can overload remaining managers and hurt morale. Do not confuse labour turnover with labour productivity (output per worker) — they measure different things. Do not assume money always motivates — Herzberg says pay is a hygiene factor, not a true motivator.

What business strategy actually means

Strategy is the long-term direction a business chooses to achieve its objectives. It sits above tactics (short-term, day-to-day decisions) and below the mission/corporate objectives that set the overall aim.

Corporate objectives and SMART targets

Good objectives are SMART: Specific, Measurable, Achievable, Realistic, Time-bound. Objectives cascade down: mission (why the business exists) sets corporate objectives (e.g. 'grow revenue 20% in 3 years'), which shape functional objectives in marketing, finance, HR and operations.

Decision-making models

• Scientific decision-making uses data and models (e.g. investment appraisal, decision trees) to reduce risk before committing.
• Intuitive decision-making relies on judgement, experience and gut feel, useful when data is scarce or speed matters.
• Most real firms blend both, and the balance shifts with the size of the decision and time pressure.

Analytical tools you must know

• SWOT analysis: internal Strengths/Weaknesses, external Opportunities/Threats. Used to match resources to the environment.
• PESTLE: Political, Economic, Social, Technological, Legal, Environmental factors shaping external decisions.
• Porter's Five Forces: assesses industry attractiveness via threat of new entrants, buyer power, supplier power, threat of substitutes, and competitive rivalry.
• Ansoff's Matrix: four growth strategies plotted on existing/new products against existing/new markets - market penetration (existing/existing, lowest risk), product development (new product/existing market), market development (existing product/new market), and diversification (new/new, highest risk).

Influences on strategic choice

Stakeholder power (Mendelow's matrix maps stakeholders by power and interest), corporate culture, ethical stance, and the resources available (finance, skills, technology) all constrain which strategy is realistic, not just which is theoretically best.

Implementation and change

Even a good strategy fails without implementation. Kotter's 8-step model and Lewin's force field analysis (driving forces vs restraining forces) are the key change-management frameworks AQA expects you to apply, not just define.

Common mistakes

• Confusing strategy (long-term, whole-business) with tactics (short-term, functional).
• Listing SWOT/PESTLE points without analysing impact or making a judged recommendation.
• Forgetting Ansoff's risk ordering: penetration is lowest risk, diversification is highest.
• Ignoring stakeholder conflict when evaluating a strategic decision - always weigh whose interests are served.

What is the external environment?

The external environment covers all the factors outside a business that it cannot fully control but must respond to. A-Level Business groups these using STEEPLE: Social, Technological, Economic, Environmental, Political, Legal, Ethical. Success depends on how well a business adapts to change in each area.

Economic factors

• Interest rates: set by the Bank of England's Monetary Policy Committee; higher rates raise borrowing costs and reduce consumer spending on credit.
• Exchange rates: a weaker pound makes exports cheaper abroad but imports more expensive, hitting firms reliant on imported materials.
• Inflation: measured by the Consumer Prices Index (CPI); the Bank of England's target is 2%. High inflation raises costs and erodes real incomes.
• The economic cycle has four stages: boom, recession, slump, recovery. A recession is officially two consecutive quarters of falling GDP.
• Unemployment affects both labour supply and consumer demand levels.

Political and legal factors

• Government policy (tax, trade, subsidies) shapes costs and opportunities; fiscal policy uses tax and spending, monetary policy uses interest rates and money supply.
• The National Living Wage (for workers 21 and over) is reviewed and usually raised each April by the Low Pay Commission — a key legal cost pressure.
• Employment law, consumer protection law (Consumer Rights Act 2015) and health and safety law create compliance duties.
• Political stability and trade agreements affect the ease of importing/exporting.

Social and technological factors

• Demographic change (an ageing UK population) shifts demand patterns and the size of the working-age labour pool.
• Changing tastes and lifestyle trends (e.g. health-consciousness, online shopping habits) force product and marketing changes.
• Technology can cut costs (automation), open new channels (e-commerce), or destroy old business models entirely.

Environmental and ethical factors

• Environmental regulation and carbon targets (UK net zero by 2050) increase compliance costs but can create new markets.
• Ethical sourcing and CSR (Corporate Social Responsibility) affect brand reputation and stakeholder trust.

Common mistakes

• Confusing the economic cycle stages, or saying 'recession' when GDP is merely slowing, not falling.
• Forgetting that external factors can be opportunities as well as threats — always analyse both directions.
• Mixing up fiscal policy (government tax/spending) with monetary policy (Bank of England interest rates) — they are set by different bodies.
• Stating STEEPLE factors without applying them to the specific business in the exam question — always link back to context for higher marks.