What marketing actually is

Marketing is identifying, anticipating and satisfying customer requirements profitably. It starts with market research, not with the product.

Market research: primary vs secondary

Primary (field) research collects new, first-hand data: surveys, questionnaires, interviews, focus groups, observation, test marketing. It is specific and current but expensive and slow.

Secondary (desk) research uses existing data: government stats (e.g. 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 It is cheap and quick but may be out of date or not specific to the firm's exact question.

Qualitative vs quantitative

Qualitative data explores opinions, motivations and feelings (focus groups, in-depth interviews) - rich detail but small samples and hard to generalise.

Quantitative data is numerical (surveys, sales figures) - easy to analyse statistically and good for spotting trends, but can miss the 'why'.

Sampling methods - know these exactly

• Random sampling: every member of the population has an equal chance of selection.
• Stratified sampling: population split into relevant strata (e.g. age groups), then randomly sampled in proportion.
• Quota sampling: interviewers fill fixed quotas for different groups; non-random, so cheaper and faster but biased.
• Cluster sampling: population divided into geographic clusters, whole clusters sampled.

Common mistake: confusing stratified (proportional, random within groups) with quota (non-random, judgement-based).

The market and segmentation

Market segmentation splits a market into groups with similar needs: demographic (age, gender, income), geographic, psychographic (lifestyle, values) and behavioural (usage rate, brand loyalty). Firms then target one or more segments and position their product relative to competitors using a positioning map (two axes, e.g. price vs quality).

The marketing mix (7Ps for A-Level Business)

Product, Price, Promotion, Place, People, Process, Physical evidence. The extended 3Ps (people, process, physical evidence) matter especially for services.

Market size, share and growth

• Market size = total value or volume of sales in a market.
• Market share (%) = (firm's sales / total market sales) x 100.
• Market growth = % change in market size over time.

These numbers drive strategic decisions like whether to invest, harvest or exit.

Common exam mistakes

• Writing 'market research' when the question asks specifically about primary or secondary methods - always name the method.
• Forgetting to link data back to a business decision (evaluation marks need 'so what').
• Mixing up sampling methods, especially quota vs stratified.
• Treating correlation in sales data as guaranteed causation.

Why finance matters

Every business needs finance to start up, run day-to-day and grow. OCR splits this into internal sources (owner's savings, retained profit, sale of assets) and external sources (loans, share issues, venture capital, crowdfunding, trade credit, overdrafts, leasing, grants, business angels).

Choosing a source of finance

Key factors: amount needed, purpose (short-term cash flow vs long-term investment), cost (interest rates, dividends given up), control (share issues dilute ownership), risk and the size/status of the business (a sole trader cannot issue shares; only a plc can sell shares on the stock exchange).

Cash flow vs profit

Cash flow is the movement of money in and out of the bank account; profit is revenue minus costs over a trading period. A business can be profitable but still run out of cash (overtrading, late payer, too much stock) — this is the single most tested distinction on this topic. Cash-flow forecasts show opening balance, cash inflows, cash outflows, net cash flow and closing balance for each month.

The three key financial statements

• Income statement (profit and loss account): shows revenue, cost of sales, gross profit, expenses and net profit for a trading period.
• Statement of financial position (balance sheet): a snapshot at one point in time of assets (non-current and current), liabilities (non-current and current) and equity. It must always balance: Assets = Liabilities + Equity.
• Statement of cash flows: shows cash from operating, investing and financing activities.

Key ratios (learn the exact formulas)

• Gross profit margin = (Gross profit ÷ Revenue) x 100
• Net profit margin = (Net profit ÷ Revenue) x 100
• Current ratio = Current assets ÷ Current liabilities (ideal is roughly 1.5-2:1)
• Acid test (quick) ratio = (Current assets - Inventory) ÷ Current liabilities
• Return on Capital Employed (ROCE) = (Operating profit ÷ Capital employed) x 100
• Gearing = (Non-current liabilities ÷ Capital employed) x 100 — above 50% is considered highly geared

Break-even analysis

Break-even output = Fixed costs ÷ (Selling price - Variable cost per unit). Contribution per unit = Selling price - Variable cost per unit. Margin of safety = Actual output - Break-even output. A higher margin of safety means lower risk of making a loss.

Common mistakes

Students mix up profit and cash, forget ratios need comparing over time or against competitors to mean anything, and forget that break-even is a model based on assumptions (all output is sold, costs are perfectly linear) — always evaluate its limitations in exam answers.

What operations management covers

Operations management is about how a business produces goods or services efficiently while meeting customer needs on quality, cost and time. Key decisions cover production methods, capacity, quality, stock control (inventory) and location.

Methods of production

• Job production: one-off, unique items (a wedding cake, a bridge). High cost, high quality, flexible, but slow.
• Batch production: groups of identical items move through stages together (bakery bread runs). Flexible between batches but downtime when switching.
• Flow (mass) production: continuous production of standardised items (car assembly lines). Low unit cost via economies of scale, but high set-up cost and inflexible.

A common mistake is picking flow production for a customised or low-volume product - always match the method to the volume and variety needed.

Capacity utilisation

Capacity utilisation = (actual output / maximum possible output) x 100. Running below 100% wastes fixed costs per unit; running at 100% risks no slack for machine breakdowns or rush orders. Businesses can rationalise (cut capacity) to raise utilisation, or subcontract to meet demand above capacity.

Quality management

• Quality control: inspecting output at the end of the process to catch defects.
• Quality assurance: building quality checks into every stage of production to prevent defects happening.
• Total Quality Management (TQM): a whole-culture approach where every employee is responsible for quality, championed by Deming and Juran.

Quality assurance and TQM are generally cheaper long-term than quality control because they reduce waste and rework - examiners like this comparison in evaluation.

Stock (inventory) control

• Buffer stock: minimum stock level kept to avoid running out.
• Lead time: the time between ordering stock and it arriving.
• Just-in-time (JIT): stock arrives exactly when needed, cutting storage costs but increasing risk of stock-outs if suppliers fail (Toyota pioneered this).
• Just-in-case (JIC): holding buffer stock for security, raising storage costs but reducing stock-out risk.

Stock control diagrams (with reorder level, lead time and buffer stock lines) are commonly tested - know how to read and draw one.

Location and lean production

Location decisions weigh cost of land/labour against proximity to market, suppliers and infrastructure. Lean production techniques (JIT, Kaizen - continuous improvement, cell production) all aim to cut waste (muda) and improve efficiency.

Common mistakes

• Confusing quality control with quality assurance.
• Forgetting capacity utilisation is a percentage, not a raw output number.
• Assuming JIT always suits all firms - it's high risk if supply chains are unreliable.

Human resource objectives and workforce planning

Human resources (HR) plans the people side of a business: getting the right number of staff, with the right skills, in the right place, at the right cost.

Workforce planning starts with a Human Resource Plan, forecasting future demand for labour against current supply. Businesses compare current staffing to future needs using a labour audit.

HR objectives usually link to wider corporate objectives, e.g. matching workforce skills to a growth strategy or controlling the wage bill as a percentage of revenue.

Organisational design

Organisational structures show the formal chain of command. Key terms: span of control (number of subordinates reporting to one manager), chain of command (levels of hierarchy from top to bottom), and delayering (removing layers of management to flatten the structure, widening spans of control and cutting costs).

Structures can be tall (many layers, narrow spans, slower communication) or flat (few layers, wide spans, faster communication but managers more stretched).

Centralised structures keep decision-making at head office; decentralised structures push decisions down to local or divisional level, improving responsiveness but risking inconsistency.

Recruitment, selection and training

Internal recruitment (promoting existing staff) is cheaper and faster and boosts morale, but limits new ideas. External recruitment brings fresh skills but costs more and takes longer.

Selection methods include application forms, CVs, interviews, aptitude tests and assessment centres — each has a trade-off between cost and reliability.

Induction training gets new starters up to speed; on-the-job training (learning while working, cheap but disruptive) contrasts with off-the-job training (external courses, costly but high quality, no lost output cover needed on-site... actually output IS lost while staff are away).

Motivation in theory and practice

Taylor: scientific management — workers are motivated purely by money and clear, measurable targets (piece-rate pay).

Maslow: hierarchy of needs — physiological, safety, social, esteem, self-actualisation; managers must satisfy lower needs before higher ones motivate.

Herzberg: two-factor theory — hygiene factors (pay, conditions) prevent dissatisfaction but do not motivate; motivators (recognition, responsibility, achievement) actually drive performance.

Financial methods: piece rate, performance-related pay (PRP), profit share, share ownership, fringe benefits.

Non-financial methods: job enrichment (more responsibility/variety), job enlargement (more tasks, same level), job rotation, empowerment, teamworking.

Employment law essentials (UK, 2026)

National Living Wage (from age 21) is a statutory minimum — check the current HMRC rate each tax year as it rises annually.

Employees get a written statement of employment particulars from day one, and statutory redundancy pay after 2 years' continuous service.

The Equality Act 2010 makes discrimination on protected characteristics (age, sex, race, disability, etc.) unlawful in recruitment, pay and dismissal.

Common exam mistakes

• Confusing job enrichment (Herzberg, vertical, more responsibility) with job enlargement (horizontal, more tasks).
• Forgetting to link HR theory to context — always apply Maslow/Herzberg/Taylor to the specific business scenario given.
• Treating delayering as always positive — it can overload remaining managers and demotivate survivors.

What strategy actually means

Strategy is the long-term plan a business follows to reach its corporate objectives. It sits above tactics (short-term, day-to-day decisions) and is usually set by senior managers or the board, looking 3-5+ years ahead.

Levels of decision-making

• Corporate level: whole-business decisions, e.g. which markets to enter, made by the board or CEO.
• Functional (or business) level: decisions within one department, e.g. marketing or HR, made by department heads.
• Both levels must align, otherwise the business sends mixed signals to staff and customers.

Influences on strategic decisions

• The business's mission, corporate objectives and core competencies (what it is uniquely good at).
• The competitive environment, using Porter's Five Forces: threat of new entrants, buyer power, supplier power, threat of substitutes, and competitive rivalry.
• Resources available: finance, people, technology.
• Ethical and stakeholder pressures, including environmental and social responsibility.

Key analytical tools (learn these by name)

• SWOT analysis: Strengths, Weaknesses (internal), Opportunities, Threats (external).
• PESTLE analysis: Political, Economic, Social, Technological, Legal, Environmental factors.
• Ansoff's Matrix: four strategies from two axes (existing/new products x existing/new markets) — market penetration, product development, market development, diversification. Diversification carries the highest risk because the business has no experience of either the product or the market.
• Porter's Generic Strategies: cost leadership, differentiation, and focus. A business that tries to do both cost leadership and differentiation without a clear choice risks being 'stuck in the middle' with no real competitive edge.
• Boston Consulting Group (BCG) Matrix: classifies products by market growth and market share into Stars, Cash Cows, Question Marks (Problem Children) and Dogs — used to manage a product portfolio.

Decision-making models

• Scientific (quantitative) decision-making: uses data, forecasts and models like decision trees to reduce risk, but can be slow and data may be unreliable.
• Intuitive (hunch-based) decision-making: fast and flexible, useful under uncertainty, but riskier and harder to justify to stakeholders.
• Decision trees: a diagram showing choices, chance events (with probabilities that must sum to 1.0) and financial outcomes; calculate the expected value of each branch to compare options.

Common exam mistakes

• Confusing corporate objectives (broad, e.g. 'grow market share') with corporate strategy (the actual plan to achieve it) — examiners reward this distinction.
• Using a model (SWOT, Ansoff, etc.) as a list without applying it to the specific case study context — always link back to the numbers and scenario given.
• Forgetting that strategy must be evaluated against constraints: finance available, stakeholder conflict, and the external environment, not analysed in isolation.

What the external environment covers

The external environment is everything outside a business that it cannot fully control but must respond to. OCR groups this using STEEPLE: Social, Technological, Economic, Environmental, Political, Legal, Ethical factors. Businesses that scan and adapt to these gain competitive advantage; those that ignore them risk decline.

Economic factors

• The economic (business) cycle has four stages: boom, recession, slump, recovery.
• A recession is officially two or more consecutive quarters of negative GDP growth.
• Key indicators: GDP growth, inflation (measured by CPI), interest rates (set by the Bank of England's MPC), exchange rates, and unemployment.
• Rising interest rates increase borrowing costs and reduce consumer spending; a weaker pound makes exports cheaper and imports dearer.
• Common mistake: students confuse inflation (general price rises) with a price rise for one product.

Political and legal factors

• Government policy, taxation (e.g. Corporation Tax, VAT at the standard rate of 20%), trade agreements and regulation all shape business decisions.
• UK employment law sets minimum standards, e.g. the National Living Wage for workers aged 21 and over.
• The Equality Act 2010 protects against discrimination; the Consumer Rights Act 2015 gives buyers rights to goods that are of satisfactory quality.
• Post-Brexit, UK businesses trading with the EU face customs checks and tariffs where no agreement exists.

Social and technological factors

• Demographic change (an ageing UK population) affects demand patterns and the labour market.
• Changing tastes and lifestyle trends (e.g. health-consciousness) shift demand.
• Technology can create competitive advantage but also disrupts existing business models (e.g. e-commerce vs. physical retail) and requires investment.

Environmental and ethical factors

• Businesses face pressure to reduce carbon emissions; the UK has a legal target of net zero greenhouse gas emissions by 2050.
• Ethical decisions (fair trade, sustainable sourcing) can build reputation but may raise costs, creating a profit-versus-ethics trade-off.
• Common mistake: treating STEEPLE as a list to describe rather than analysing the actual impact on a specific business's costs, revenue or decisions.

Exam tip

Always link STEEPLE factors to the specific business in the case study — state the factor, explain the mechanism, then show the effect on profit, competitiveness or strategy.