How do you set prices?
Marketing
Is there a demand for
the product?
Who are the customers?
Who is the competition
& what are they doing?
Financial
implications
Demand – need to research what customers want, how much they
will pay and how often will they buy it.
Customers – target groups
Gender
Age
Occupation/Income group
Repeat sales
Hobby
Location
Competition - their products
their prices
their promotions
is the market saturated?
is there room for you?
Pricing Strategies:
•Market-led
same level as competition
•Penetration
low price to enter market, then increases as the
product becomes more established
•Destruction
price wars – knocking out competition through
having a price war
•Added Value
charge more for extras i.e. packaging
Health & Safety
Skills
Facilities
Training
Human
Resources
Recruitment
Legal issues
Retention
Wages
Legal aspects for human resources:
•Age limits
•Minimum wage
•Contract terms and conditions
•Discrimination – sex, age, race, religion
•Health and safety
•Payroll records
Physical Resource Planning
•Premises Planning
•Machinery and Equipment Planning
•Materials and stock
Premises Planning
Where?
•High street
•Work from home
•E-commerce
High Street – passing trade or need for
offices
•Buy or rent?
E-Commerce – online business; can replace a
shop, need storage space for goods; reliable
postal/courier service
•Insurance
Home – i.e. photographers, designers, etc
Laws:
•Planning permission
•Licences
•Environmental restrictions
Insurance:
•Fire
•Theft
•Business interruption
•liability
Machinery and Equipment Planning
•Machinery needed
•Equipment needed
•Fixtures and Fittings
•Buy or lease: machinery i.e. engraver
equipment i.e computer, photocopier
vehicles i.e. van, size
telephone i.e mobile/landline
Technology is constantly changing, do you lease or buy???
Think about suppliers and their payment terms
Managing materials and stock
Regular Suppliers:
discounts
money off for buying in bulk
money off for early payment
reliability
payment terms – 30/60 days; interest free
Regular Purchases:
quantities
quality
timing
Right supplier (reputation)
price
Managing Quality
•Quality chains – in the production process, staff looking at their own
work
•Quality Circles – meetings to monitor quality and discuss problems,
improvements are suggested.
•Quality Control – inspecting finished products
•ISO 9000 – International quality standard; has to achieve rigorous
procedures; can use BSi kite mark
Monitoring quality
•Statistical
Number of faults
Sales figures
Repeat customer orders
•Customer feedback
Questionnaires
letters of complaint
•Targets and achievements –
monitoring the business
performance
COSTS
Start up costs “one off costs which have to be met
before the business starts trading”
Running costs day to day costs incurred in the running of
the business”
Start up costs
•Premises
buying and getting a mortgage
renting (no major start up cost)
•Equipment
depends on the type and size of the business, i.e.
computers
telephone
furniture
vehicles
•Fixtures and fittings
carpets
shelving
Running Costs (A.K.A. Expenses)
•Production costs
raw materials
packaging
wages
•Marketing costs
market research
promotion/advertising
website design and operation
sales reps/direct mail
•Human Resources
staff wages
recruitment & training costs
health and safety requirements
•Administration
insurance
rent and rates
utilities and telephone
postage
stationery