Marketing and People

Primary research involves collecting new data that did not exist before. The business gathers this data itself (or pays a research agency to do it) specifically for its own purposes. Because this data is collected first hand, it is directly relevant to the business question being asked.

Methods of primary research include:

Surveys and questionnaires: Structured sets of questions given to a sample of people. Can be done online, by phone, by post, or face to face. Good for collecting data from large numbers of people quickly and cheaply.

Interviews: One to one conversations between a researcher and a respondent. Can be structured (fixed questions) or unstructured (free flowing). Good for getting detailed, in depth responses but time consuming and expensive.

Focus groups: A small group of people (usually 6 to 10) brought together to discuss their opinions about a product, brand, or idea. A moderator guides the discussion. Good for understanding attitudes and feelings in depth.

Observations: Watching how customers behave in a real environment, such as tracking which aisles they visit in a supermarket. Good for understanding actual behaviour rather than what people say they do.

Test marketing: Launching a product in a small area before a full national launch. Allows the business to see real customer reactions and make adjustments before committing to a full scale rollout.

Secondary research involves using data that has already been collected by someone else for a different purpose. The researcher finds and analyses existing information rather than collecting new data. It is called desk research because it can often be done from a desk using the internet, libraries, or databases.

Sources of secondary data include:

Internal sources: The business's own sales data, customer records, financial accounts, loyalty card data, and website analytics. This data is free and specific to the business.

External sources: Government statistics (census data, economic reports), industry reports (from organisations like Mintel or IBISWorld), newspaper and magazine articles, competitor websites, academic research, and trade association data.

The data collected from market research can be divided into two types: quantitative and qualitative. Most businesses use a combination of both to get a complete picture.

It is usually impossible or impractical to survey every person in a market. Instead, businesses select a sample, which is a smaller group of people chosen to represent the whole target population. The way the sample is chosen affects how reliable the results are.

Random Sampling:

• How it works: Every member of the target population has an equal chance of being selected, which can be done using computer generated random numbers or drawing from a hat
• Pros: Minimises bias and produces statistically reliable results that can be confidently generalised to the entire population
• Cons: Can be impractical and expensive if the population is very large, requiring access to a complete list of all population members; may accidentally miss important subgroups if the sample is too small

Quota Sampling:

• How it works: The researcher identifies key characteristics of the population (age, gender, income), sets quotas for each characteristic, and then selects people to fill these quotas
• Pros: Ensures the sample structure mirrors the population structure, which is faster and cheaper than random sampling, and does not require a complete list of the population
• Cons: Relies heavily on the researcher's judgement in selecting individuals, which can introduce bias; the choice of which characteristics to use affects how representative the sample is

Stratified Sampling:

• How it works: The population is divided into subgroups (strata) based on shared characteristics, then random samples are taken from each subgroup in proportion to their size in the population
• Pros: Combines the statistical reliability of random sampling with the representativeness of quota sampling; ensures all important subgroups are included in appropriate numbers
• Cons: More complex to implement than other methods; requires knowing the population structure in advance and having access to identify which stratum each person belongs to

Sample Size Considerations:

• Larger samples: Generally produce more reliable results and allow findings to be confidently generalised to the entire population, but increase costs and time required to collect and analyse data
• Smaller samples: Are cheaper and quicker but produce results that are less reliable and may not represent the entire population; findings may be due to chance rather than real patterns
• Balance needed: Businesses must balance the need for accuracy and reliability against budget constraints and time pressures

Three important measures that businesses use to understand their market are market size, market share, and market growth. These can be measured by volume (number of units sold) or by value (total revenue generated).

Businesses generally take one of two approaches when developing their products: product orientation or market orientation. The approach a business takes has a major impact on its marketing strategy and chances of success.

Product oriented businesses believe that if they create a superior product, customers will come. This can work brilliantly when the product is truly innovative. Think of Dyson developing the first bagless vacuum cleaner or Apple creating the first iPhone. These businesses did not ask customers what they wanted because customers did not know such products could exist.

Market oriented businesses start by researching what customers want and then design products to meet those needs. Most supermarkets and fast food chains are market oriented. They constantly monitor customer preferences and adjust their offerings accordingly. This approach reduces risk because the business already knows there is demand.

In reality, most successful businesses combine both approaches. They use market research to understand customer needs but also invest in innovation to create products that customers did not know they needed.

A market map (also called a perceptual map or positioning map) is a visual tool that plots brands or products on a grid based on two key variables that matter to customers. Common axes include price (low to high), quality (low to high), age appeal (young to old), or image (functional to luxury).

Uses of market mapping:

Market maps help businesses identify gaps in the market where no current product exists, understand how their brand is perceived compared to competitors, decide where to position a new product, and track how positioning changes over time.

Limitations: Market maps are a simplification because they only use two dimensions when in reality customer perceptions are based on many factors. They can also be subjective, as different people may place brands in different positions. They are best used as a starting point for discussion rather than a definitive answer.

A competitive advantage is a factor that allows a business to outperform its competitors. It is the reason customers choose one business over another. Without a competitive advantage, a business will struggle to survive in the long term because there is nothing to stop customers switching to competitors.

Competitive advantage can come from several sources:

Cost advantage: Being able to produce at a lower cost than competitors, which allows the business to either charge lower prices or earn higher profit margins. Walmart and Primark compete primarily on cost.

Differentiation advantage: Offering something that competitors cannot easily replicate, whether through design, technology, brand, or customer experience. Apple and Tesla compete on differentiation.

Focus advantage: Serving a specific niche better than anyone else. A specialist organic bakery may outperform a large supermarket in that niche because it can offer greater expertise and authenticity.

For a competitive advantage to be sustainable, it needs to be difficult for competitors to copy. A temporary price cut is easy to match, but a strong brand reputation or patented technology is much harder to replicate.

The law of demand states that, all other things being equal, as the price of a product increases, the quantity demanded decreases, and vice versa. This inverse relationship between price and quantity demanded is one of the most fundamental concepts in economics and business.

This relationship is shown on a demand curve, which slopes downward from left to right. The vertical axis shows price and the horizontal axis shows quantity demanded.

When price rises, quantity demanded falls for two reasons: the substitution effect (consumers switch to cheaper alternatives) and the income effect (the product takes up a larger share of their budget, so they can afford less of it).

A movement along the demand curve happens when the price of the product itself changes. A shift of the demand curve happens when a factor other than price changes, causing more or less to be demanded at every price level.

Several factors can cause the demand curve to shift (meaning more or less is demanded at every price):

Consumer income: When income rises, demand for most goods increases (these are called normal goods). However, for some goods like value brands, demand actually falls when income rises because people switch to more expensive alternatives (these are called inferior goods).

Price of substitutes: A substitute is a product that can be used instead of another. If the price of Coca Cola rises, demand for Pepsi is likely to increase as consumers switch.

Price of complements: A complement is a product that is used alongside another. If the price of printers falls, demand for ink cartridges is likely to increase.

Consumer tastes and preferences: Fashion trends, health concerns, advertising, and social media can all shift demand. Growing awareness of sustainability has increased demand for electric vehicles.

Demographics: Changes in population size, age distribution, or household structure affect demand. An ageing population increases demand for healthcare products.

Marketing and advertising: Effective advertising campaigns can shift demand to the right by increasing consumer awareness and desire for a product.

Seasonality: Demand for ice cream peaks in summer, while demand for central heating rises in winter.

The law of supply states that, all other things being equal, as the price of a product increases, the quantity supplied increases, and vice versa. This positive relationship exists because higher prices make production more profitable, encouraging businesses to produce and sell more.

This relationship is shown on a supply curve, which slopes upward from left to right. The vertical axis shows price and the horizontal axis shows quantity supplied.

A movement along the supply curve happens when the price of the product itself changes. If the price of coffee beans rises, coffee farmers will supply more because it is now more profitable to grow coffee. A shift of the supply curve happens when a factor other than price changes, causing more or less to be supplied at every price level.

Several factors can cause the supply curve to shift (meaning more or less is supplied at every price):

Costs of production: If raw material prices, wages, or energy costs rise, it becomes more expensive to produce each unit. This reduces profitability and causes supply to decrease (shift left). Conversely, falling costs increase supply (shift right).

Technology: Improvements in technology allow businesses to produce more efficiently, reducing the cost per unit and increasing supply. For example, automation in manufacturing has dramatically increased the supply of many consumer goods.

Government policy: Taxes on production (such as environmental levies) increase costs and reduce supply. Subsidies reduce costs and increase supply. Regulations can also affect how much businesses are able or willing to produce.

Number of firms in the market: If new firms enter the market, total supply increases. If firms exit the market due to losses or other factors, total supply decreases.

Weather and natural factors: Particularly relevant for agricultural products. A good harvest increases the supply of crops, while drought or flooding reduces it.

Productivity: If workers become more productive (producing more output per hour), the business can supply more at the same cost, shifting the supply curve to the right.

Equilibrium is the point where the demand curve and the supply curve intersect. At this point, the quantity that consumers want to buy exactly equals the quantity that producers want to sell. The price at equilibrium is called the market clearing price because there is no surplus and no shortage.

If the price is above equilibrium, there is a surplus (excess supply). Producers are offering more than consumers want to buy, so unsold stock builds up. To clear this surplus, businesses will lower their prices, which encourages more demand and discourages some supply until equilibrium is restored.

If the price is below equilibrium, there is a shortage (excess demand). Consumers want to buy more than producers are offering. This competition among buyers pushes prices up, which encourages more supply and reduces demand until equilibrium is restored.

When demand or supply shifts, the equilibrium point changes. Use the interactive diagram above to see how an increase in demand raises both the equilibrium price and quantity, while an increase in supply lowers the equilibrium price but raises the equilibrium quantity.

Price elasticity of demand measures how responsive demand is to a change in price. In simple terms, it tells you: if the price goes up by 10%, will demand barely change or will it fall dramatically?

Interpreting PED values:

If |PED| > 1: Demand is elastic. Demand is very sensitive to price changes. A small price increase causes a larger percentage drop in demand. Businesses should avoid raising prices because total revenue will fall.

If |PED| < 1: Demand is inelastic. Demand is not very sensitive to price changes. A price increase causes a smaller percentage drop in demand. Businesses can raise prices and total revenue will increase.

If |PED| = 1: Demand is unitary elastic. The percentage change in demand is exactly equal to the percentage change in price. Total revenue stays the same regardless of price changes.

What makes demand more elastic? Many close substitutes available, the product is a luxury not a necessity, the product takes up a large share of income, and there is plenty of time for consumers to find alternatives.

What makes demand more inelastic? Few or no substitutes, the product is a necessity (like petrol or medicine), the product is a small share of income, brand loyalty is strong, and consumers are habitual buyers.

How Firms Use PED in Business Decisions:

Pricing Decisions: If demand is price inelastic (|PED| < 1), a business can raise prices and total revenue will increase because the fall in quantity demanded is proportionally smaller than the price increase. This works well for essential products, addictive goods, or products with strong brand loyalty. If demand is price elastic (|PED| > 1), the business should avoid raising prices because customers will switch to competitors or stop buying. Instead, it may benefit from lowering prices to attract more customers, since the increase in quantity demanded will more than compensate for the lower price.

Revenue Forecasting: Businesses use PED to predict the impact of price changes on total revenue. If a supermarket knows that demand for its own brand bread has a PED of -0.3 (inelastic), it can confidently raise the price by 5% knowing that demand will only fall by about 1.5%, resulting in higher revenue overall.

Marketing Strategy: Businesses try to make demand for their products more inelastic by building brand loyalty, creating unique selling points, and reducing the availability of substitutes. If a business can make its product appear unique and irreplaceable, customers become less price sensitive, giving the business greater pricing power.

Tax Impact Analysis: When the government increases taxes on products (such as VAT or excise duty), businesses use PED to decide whether to absorb the cost or pass it on to consumers. If demand is inelastic, the business can pass the full tax increase on to customers without losing many sales. If demand is elastic, the business may need to absorb some of the tax to avoid a large drop in sales.

Income elasticity of demand measures how responsive demand is to a change in consumer income. This is important because it tells businesses what happens to their sales when the economy is growing (incomes rising) or in recession (incomes falling).

Interpreting YED values:

Positive YED (YED > 0): The product is a normal good. Demand rises when income rises. Most goods fall into this category.

Positive and YED > 1: The product is a luxury good. Demand rises more than proportionally when income rises. Examples include designer clothing, fine dining, and premium holidays.

Positive and 0 < YED < 1: The product is a necessity. Demand rises, but less than proportionally to income. Examples include bread, toothpaste, and electricity.

Negative YED (YED < 0): The product is an inferior good. Demand actually falls when income rises because consumers switch to better alternatives. Examples include supermarket value ranges and public transport (when people can afford cars instead).

How Firms Use YED in Business Decisions:

Preparing for Economic Changes: During an economic boom (rising incomes), businesses selling luxury goods (high positive YED) can expect rapidly increasing demand and should increase production capacity, invest in marketing, and potentially raise prices. Businesses selling inferior goods (negative YED) should expect falling demand and may need to diversify their product range.

Product Portfolio Management: A smart business will sell a mix of products with different YED values. This provides protection against economic cycles. For example, a food company might sell both premium organic products (luxury, high YED) and value range products (necessity or inferior, low or negative YED). When the economy is strong, premium products drive profits. During a recession, value products keep revenue flowing.

Market Targeting: YED helps businesses decide which markets to target. In rapidly growing economies where average incomes are rising quickly (such as parts of Asia), there is strong demand for luxury goods. Businesses can use YED data to identify which countries or regions represent the best growth opportunities for their products.

Long Term Strategic Planning: Businesses selling products with negative YED (inferior goods) know that as an economy grows and incomes rise over time, demand for their products will fall. This means they need a long term strategy to either move upmarket, innovate, or diversify. Budget airlines, for example, have added premium services to capture customers whose rising incomes make them want more comfort.

When designing a product, businesses must balance three key elements known as the design mix: function, aesthetics, and cost. Getting this balance right is essential because it determines how well the product meets customer needs and whether it can be produced profitably.

Changes in the Design Mix to Reflect Social Trends: Modern consumers increasingly expect businesses to consider social and environmental factors in product design. This has shifted the design mix in several important ways.

Environmental Sustainability: Businesses now design products to minimise environmental impact. This includes using recyclable or biodegradable materials, reducing packaging, designing products that last longer to reduce waste, and making products easier to repair rather than replace. Companies like IKEA now design furniture for disassembly so components can be recycled.

Ethical Sourcing: Consumers increasingly want products made from ethically sourced materials. This means avoiding materials linked to exploitation, deforestation, or animal cruelty. Fair trade certification and supply chain transparency have become important design considerations.

Reducing Waste: The growing focus on the circular economy means products are being designed with their end of life in mind. This includes designing products that can be refurbished, remanufactured, or recycled rather than sent to landfill. Companies like Patagonia encourage customers to repair clothing rather than buy new items.

Every product goes through a series of stages from when it is first launched to when it is eventually withdrawn from the market. This journey is called the product life cycle. Understanding which stage a product is in helps businesses decide how to market it, price it, and whether to invest in developing it further.

The Boston Matrix (also called the BCG Matrix) is a tool that helps businesses analyse their product portfolio. It classifies products into four categories based on two factors: market share (high or low) and market growth (high or low).

Stars (High market share, High market growth): Products that are market leaders in a fast growing market. They generate high revenue but also require heavy investment to maintain their position. The goal is to maintain market share so they become Cash Cows when the market matures.

Cash Cows (High market share, Low market growth): Products that dominate a mature market. They generate strong, steady profits with little investment needed. The cash generated is often used to fund Stars and Question Marks.

Question Marks (Low market share, High market growth): Products in a growing market that have not yet achieved a strong position. They need significant investment to grow their market share. The business must decide: invest to make them Stars, or cut losses?

Dogs (Low market share, Low market growth): Products with a weak position in a stagnant market. They may still be profitable but typically generate low returns. The usual strategy is to harvest remaining profits or divest (sell off or discontinue).

Price is the only element of the marketing mix that directly generates revenue. All other elements represent costs. The pricing strategy a business chooses depends on its objectives, the competition, the product's position in its life cycle, and how price elastic demand is.

Cost Plus Pricing: The business calculates the total cost of making the product and adds a percentage markup for profit.

Price Skimming: Setting a high initial price when launching a new product, then gradually lowering it over time to appeal to different customer segments.

Penetration Pricing: Setting a low initial price to attract customers quickly and gain market share. Prices may be gradually increased once a customer base is established.

Competitive Pricing: Setting prices at a similar level to competitors to avoid price wars and remain attractive to customers.

Psychological Pricing: Setting prices that have a psychological impact on consumers, such as pricing at £9.99 instead of £10.00 to create the perception of a lower price.

Dynamic Pricing: Prices change in real time based on demand, time of day, season, or customer profile. Airlines and hotels use this extensively.

Predatory Pricing: Setting prices extremely low, often below cost, with the deliberate intention of driving competitors out of the market. Once competitors have left, the business raises prices to recoup losses.

The degree of competition in a market has a major influence on the pricing strategies available to a business. Market structure determines how much pricing power a firm has.

Monopoly: A market dominated by one firm (technically 25%+ market share in UK law). The monopolist has significant pricing power because customers have few or no alternatives. They can use price skimming or premium pricing to maximise profits. However, monopolists are regulated by the Competition and Markets Authority (CMA) and cannot exploit consumers excessively. Examples include some utility companies and pharmaceutical firms with patent protection.

Oligopoly: A market dominated by a few large firms (such as UK supermarkets, mobile phone networks, or banks). Firms in an oligopoly are interdependent, meaning each firm's pricing decisions affect the others. This often leads to competitive pricing where firms match each other's prices to avoid a price war. Non price competition (branding, loyalty schemes, product quality) becomes more important. Price wars can occur but tend to be destructive for all firms involved.

Competitive Markets: Markets with many sellers offering similar products (such as local restaurants, hairdressers, or independent retailers). Individual firms have very little pricing power because customers can easily switch to competitors. Prices tend to be low and driven by market forces of supply and demand. Firms must focus on cost efficiency to survive. Differentiation through quality, service, or location can allow slightly higher prices.

Place refers to how the product gets from the manufacturer to the customer. The distribution channel is the route a product takes. Choosing the right channel affects price, brand image, and how easily customers can access the product.

Direct Distribution (Zero Level): The manufacturer sells directly to the consumer through online stores, factory shops, farmers' markets, or company owned outlets.

One Level Channel: The manufacturer sells to a retailer, who then sells to the consumer. Common for branded goods sold in supermarkets and department stores.

Two Level Channel: The manufacturer sells to a wholesaler, who sells to a retailer, who sells to the consumer. Useful when reaching many small independent retailers.

Multi Channel Distribution: Using multiple distribution channels simultaneously, such as the business's own website, physical stores, and third party retailers.

Promotion is how a business communicates with its target market to inform, persuade, and remind customers about its products. The promotional mix is the combination of promotional methods a business uses.

Advertising: Paid messages communicated through media such as TV, radio, newspapers, billboards, online platforms, and social media.

Sales Promotion: Short term incentives to encourage purchases, such as discounts, buy one get one free, free samples, competitions, and loyalty schemes.

Personal Selling: Direct face to face or phone interaction between a salesperson and a potential customer.

Public Relations (PR): Managing the public image of the business through press releases, sponsorships, events, and media coverage.

Digital Marketing: Using online platforms including social media marketing, email marketing, SEO, pay per click advertising, content marketing, and influencer partnerships.

Viral Marketing: Creating content that consumers want to share with each other, spreading the message rapidly through social networks without paid promotion.

Promotional methods can be classified as either above the line or below the line depending on how they reach the target audience. Understanding this distinction helps businesses allocate their promotional budget effectively.

Above the Line (ATL) Promotion: ATL promotion uses mass media channels to communicate with a broad audience. The business pays for advertising space and the message is broadcast widely, reaching both potential customers and people who may have no interest in the product. ATL is particularly effective for building brand awareness and reaching large numbers of consumers quickly.

Common ATL methods include: television advertising, radio advertising, national newspaper and magazine adverts, cinema advertising, billboard and poster campaigns, and online banner or display advertising on major websites.

Below the Line (BTL) Promotion: BTL promotion targets specific groups or individuals rather than broadcasting to a mass audience. It tends to be more focused, measurable, and cost effective than ATL, making it particularly suitable for smaller businesses or niche products. BTL methods allow businesses to build direct relationships with customers.

Common BTL methods include: direct mail and email marketing, sales promotions (discounts, coupons, BOGOF), personal selling, sponsorship, public relations (PR), trade fairs and exhibitions, loyalty programmes, social media engagement, and point of sale displays.

Through the Line (TTL) Promotion: Most modern businesses use a combination of both ATL and BTL methods, known as through the line promotion. This integrated approach uses mass media to build broad awareness while simultaneously using targeted methods to convert interest into sales. For example, a car manufacturer might run a national TV campaign (ATL) to build excitement about a new model, while also sending personalised emails to existing customers with exclusive test drive invitations (BTL). TTL ensures the promotional message is consistent and reaches customers at every stage of the buying process.

An organizational structure shows how a company is organized, who reports to whom, and how authority and responsibility are distributed. The right structure depends on the size, type, and strategy of the business.

Chain of Command: The line of authority from the top to the bottom of the organization. It shows who each person reports to and ensures clear decision making lines. A clear chain prevents confusion about who has authority to make decisions.

Span of Control: The number of employees that one manager directly supervises. A narrow span means each manager supervises only a few people, allowing closer supervision. A wide span means managers supervise many people, which can reduce costs but may mean less individual attention.

Tall Organisational Structure: Many levels of management from bottom to top, creating a pyramid shape with narrow spans of control.

Flat Organisational Structure: Few levels of management with wide spans of control; most employees report directly to senior managers.

Centralisation: Decision making power is held at the top by senior management; lower level staff implement decisions but have little input.

Decentralisation: Decision making power is spread throughout the organization to middle and junior managers; local managers make decisions for their departments or regions.

Matrix Structure: Employees report to two managers instead of one; typically a functional manager (e.g., marketing) and a project manager.

Key Factors Influencing Organisational Design:

Business Size: Small businesses typically operate with flat structures and informal communication. As a business grows, it needs more formal structures with defined roles, departments, and reporting lines. Very large businesses often need multiple layers of management to coordinate activities across different locations and functions.

Business Strategy: A business pursuing innovation and creativity may favour a flat, decentralised structure that encourages employee initiative. A business prioritising efficiency and consistency (such as a fast food chain) may prefer a tall, centralised structure with tight controls.

External Environment: Businesses operating in fast changing, competitive markets benefit from flatter structures that allow quick decision making and adaptation. Businesses in stable, predictable markets can afford taller, more bureaucratic structures.

Technology: Modern technology has enabled flatter structures because digital communication, project management software, and data analytics allow managers to supervise more employees effectively, increasing span of control.

How Organisational Design Changes as Businesses Grow:

When a business is small, the founder typically makes all decisions and communicates directly with every employee. As the business grows, this becomes impossible. New management layers are added, creating taller structures. Departments are created for specialist functions like marketing, finance, and HR. Communication becomes more formal, with written policies and procedures replacing informal conversations. Decision making may shift from centralised (founder control) to decentralised (departmental managers). Some growing businesses adopt matrix structures to manage increasingly complex projects across multiple departments. These changes are necessary but can create challenges including slower communication, higher costs, and reduced employee motivation if staff feel more distant from decision makers.

Motivation is the drive that makes employees work hard and perform well. Understanding different motivation theories helps managers create environments where employees are more engaged and productive.

Frederick Taylor's Scientific Management: Taylor believed workers are motivated only by money. He studied jobs scientifically to find the most efficient way to do them, then paid workers based on how much they produced (piece rate). This approach increased productivity but treated workers like machines and ignored their emotional and social needs. Many workers found repetitive work boring and demotivating despite higher pay.

Elton Mayo's Human Relations Theory: Mayo's research showed that workers are motivated by social relationships and feeling valued, not just money. He found that when workers felt their manager cared about them and when they worked in friendly groups, productivity increased even without extra pay. This theory highlighted the importance of communication, teamwork, and making work interesting.

Abraham Maslow's Hierarchy of Needs: Maslow suggested people have different levels of needs that must be satisfied in a certain order. Only when lower level needs are met can people focus on higher level needs.

Physiological Needs (Bottom): Food, water, shelter, and basic health. In the workplace, this means fair wages to afford housing, safe working conditions, and reasonable breaks.

Safety Needs: Job security, safe working conditions, and protection from harm. Employees need to know their job is secure and the workplace is physically safe.

Social Needs: Belonging, friendship, and teamwork. Employees need to feel part of a team and valued by colleagues. Team building activities and social events help meet this need.

Esteem Needs: Recognition, respect, and achievement. Employees need to feel their work is valued and recognized. This can come through praise, promotions, or public recognition of good work.

Self Actualisation (Top): Personal development and realizing full potential. Employees want to feel they are growing, learning, and achieving meaningful work. Offering training, challenging projects, and career development fulfills this need.

Frederick Herzberg's Two Factor Theory: Herzberg identified two separate factors affecting motivation.

Hygiene Factors: These prevent dissatisfaction when present, but do not create satisfaction. They include pay, working conditions, company policies, job security, and supervision. If these are poor, employees will be unhappy. But improving them only prevents dissatisfaction, it does not create strong motivation.

Motivators: These create satisfaction and motivation when present. They include achievement, recognition, the work itself, responsibility, and advancement. Herzberg found that the most motivated employees were those who had responsibility, achieved goals, and felt their work was important and recognized.

Businesses use money as a motivator through various methods, each with different effects on employee behavior and company costs.

Wages and Salaries: Regular payment for work; wages are usually hourly pay and salaries are usually annual amounts.

Piecework: Employees are paid per item produced; for example, a factory worker might be paid per unit assembled.

Commission: Employees are paid a percentage of the sales they make; common in sales roles.

Bonus: Lump sum payment in addition to base salary, usually given for meeting targets or at the end of the year.

Profit Sharing: Employees receive a share of company profits, usually distributed annually.

Performance Related Pay: Pay increases or bonuses based on individual or team performance ratings; usually linked to objectives or competencies.

Many methods of motivation do not involve money but instead address Maslow's higher level needs and Herzberg's motivators.

Delegation: Giving employees authority and responsibility to complete tasks that were previously handled by their manager.

Empowerment: Giving employees the power to make their own decisions about how they complete their work without needing constant manager approval.

Enrichment: Adding more variety, responsibility, and challenge to employees' jobs to make work more interesting and fulfilling.

Teamwork: Organising employees into groups to work together on shared tasks and goals.

Flexible Working: Allowing employees to choose when, where, or how they work, including options like remote working, flexitime, and compressed hours.

Job Rotation: Moving employees between different roles or tasks on a regular basis to provide variety and broaden their skills.

Training and Development: Providing structured learning opportunities to improve employees' skills, knowledge, and future career prospects.

Leadership style refers to the way a manager leads, communicates with, and motivates their team. Different styles work in different situations.

Autocratic Leadership: Manager makes all decisions without consulting employees and expects immediate obedience; communication flows only downward from manager to staff.

Paternalistic Leadership: Manager is protective and caring, making decisions in what they believe is the best interest of employees, but not consulting them; communication is mostly one way.

Democratic Leadership: Manager consults employees, listens to their ideas, and involves them in decision making; manager ultimately makes final decisions; communication is two way.

Laissez Faire Leadership: Manager provides little direction or guidance and gives employees freedom to make decisions and organize their own work.

Factors Influencing the Choice of Leadership Style:

The Nature of the Task: Routine, repetitive tasks with clear procedures (such as factory production) may suit autocratic leadership where instructions are clear. Creative, complex tasks (such as product development) benefit from democratic or laissez faire styles that encourage input and innovation.

Employee Skills and Experience: Inexperienced or untrained workers often need more direction and guidance, making autocratic or paternalistic styles more appropriate. Highly skilled, experienced professionals often resent being told what to do and perform best with democratic or laissez faire leadership.

Time Pressure: In a crisis or emergency situation, there is no time for consultation. Autocratic leadership is necessary to make fast decisions. In normal operations with no urgency, democratic leadership produces better decisions through wider input.

Organisational Culture: A business with a tradition of employee involvement will struggle if a new manager tries to impose an autocratic style. Similarly, a business used to top down control may find a sudden shift to laissez faire creates confusion and poor performance.

Business Size: Small businesses with few employees often suit a more personal, paternalistic or democratic style. Large organisations with many employees may need more formal autocratic elements to maintain consistency and control across departments.

Risk Level: High risk decisions with serious consequences (such as safety critical industries like aviation or medicine) may require autocratic leadership to ensure strict compliance with procedures. Lower risk environments can afford more employee freedom.

Leadership vs Management: Leadership means influencing and inspiring employees to achieve goals, while management means organizing and controlling resources to achieve goals. A good leader motivates people to want to achieve goals, while a manager ensures the systems and resources are in place. The best leaders are also good managers and vice versa.

Getting the right employees in the first place through good recruitment, and then developing them through training, is essential for managing people effectively.

Internal Recruitment: Hiring employees from within the company for promotion or lateral moves to different departments.

External Recruitment: Hiring people from outside the company through job advertising and formal selection processes (interviews, tests, references).

Induction Training: Training given to all new employees when they join, covering company history, values, policies, health and safety procedures, and introducing them to their team and role.

On the Job Training: Learning while doing the actual work, usually with guidance from an experienced employee or supervisor.

Off the Job Training: Learning away from normal work, at a training center, university, college, or in an online course.

The relationship between employers and employees is crucial for business success. How a business communicates with and negotiates with its workforce affects motivation, productivity, and industrial harmony. There are two main approaches to managing this relationship.

Trade Union Recognition: A trade union is an organisation that represents workers and negotiates on their behalf. When an employer formally recognises a trade union, they agree to negotiate with it on matters such as pay, working hours, and working conditions. Recognition gives the union legal rights to represent workers. In the UK, if more than 50% of workers in a bargaining unit vote in favour, the employer must legally recognise the union.

The Role of Trade Unions: Trade unions negotiate better pay and conditions for members, provide legal advice and representation in workplace disputes, campaign for improved health and safety standards, represent individual members in grievance and disciplinary procedures, and provide training and professional development opportunities. Well known UK unions include Unite, Unison, and the GMB.

Dismissal and Redundancy: Dismissal occurs when an employer terminates an employee's contract, usually due to misconduct, poor performance, or capability issues. Redundancy occurs when the job itself no longer exists, perhaps because of restructuring, automation, or declining demand. Employees have legal rights in both situations, including notice periods and the right to appeal. Redundancy payments are required by law for employees with two or more years of service.

Entrepreneurs are not just business owners. They have specific roles and characteristics that set them apart.

Creating and Setting Up New Businesses: Entrepreneurs see a gap in the market that customers need filled. They use their own money and often borrow from banks or investors to start a business. They handle all the initial setup including finding premises, hiring staff, obtaining licenses, and establishing supplier relationships. This is risky because many new businesses fail, particularly in the first few years.

Innovation: Entrepreneurs introduce new products, services, or ways of doing business. Innovation can be completely new ideas (like Uber creating ride sharing) or improvements to existing ideas (like Amazon improving online shopping). Innovation is what drives competitive advantage and creates value.

Intrapreneurship: Sometimes people within existing businesses show entrepreneurial characteristics by developing new ideas, launching new products, or entering new markets. This is called intrapreneurship. Companies like Google encourage intrapreneurship by giving employees time to work on their own projects.

Barriers to Entrepreneurship: Several factors prevent people from becoming entrepreneurs even if they have good ideas. These barriers can be grouped into four categories.

Financial Barriers: The most common barrier. Many aspiring entrepreneurs struggle to raise enough capital to start their business. Banks may refuse loans to unproven businesses, personal savings may be insufficient, and the risk of losing personal assets (especially with unlimited liability) deters many people. Even with a strong business idea, lack of collateral or credit history can make funding impossible.

Knowledge Barriers: Running a business requires understanding finance, marketing, operations, HR, and legal requirements. Many potential entrepreneurs lack formal business training and may not understand how to write a business plan, manage cash flow, or comply with regulations. This knowledge gap can be overcome through mentoring, business courses, and government support programmes.

Personal Barriers: Fear of failure is a powerful deterrent. The possibility of losing money, damaging reputation, and facing financial hardship stops many people from taking the leap. Family responsibilities, such as dependents who rely on a steady income, make the unpredictable income of a startup too risky. Lack of confidence and self belief also prevents people from pursuing their ideas.

Environmental Barriers: Difficult economic conditions (recession, high interest rates) make it harder to start a business. Excessive government regulation, complex tax systems, and bureaucratic processes create hurdles. In some regions, lack of infrastructure, poor internet connectivity, or absence of business support networks make entrepreneurship much more difficult. Cultural attitudes in some societies may also discourage risk taking.

Risk vs Uncertainty: Entrepreneurs face two different things. Risk is when the probability of different outcomes is known, like a 50 percent chance of success. Uncertainty is when the probability of outcomes is unknown, like launching a completely new product where we do not know if customers will buy it. Uncertainty is harder to manage than risk because you cannot predict or insure against unknown outcomes.

People become entrepreneurs for different reasons. Understanding motives helps explain why some people accept the risks of starting a business.

Financial Motives: Money is important but not the only motive. Entrepreneurs want to make profit (returns on their investment) and generate personal income to support themselves and their families. Some entrepreneurs are also motivated by wealth creation, wanting to become wealthy. However, the financial rewards of entrepreneurship are uncertain and often take years to materialize. Studies show that many entrepreneurs earn less initially than they would in a salaried job.

Non Financial Motives: Many entrepreneurs are driven by motives beyond money. Independence is a major one, wanting to be your own boss and make your own decisions without having to answer to someone else. Satisfaction comes from creating something, solving a problem, or serving customers. Some entrepreneurs pursue social enterprise, creating businesses specifically designed to address social or environmental problems while still making a profit or surplus. Examples include fair trade businesses or charities that operate trading arms.

Achievement and Legacy: Some entrepreneurs are motivated by wanting to achieve something significant, prove their ability, or leave a legacy. They want to build something that lasts and that they can be proud of. This motivation often drives people to work much harder than they would in a job where they do not own the outcome.

Successful entrepreneurs share certain characteristics and develop specific skills, though there is no single entrepreneur personality.

Risk Taking: Entrepreneurs are willing to take calculated risks. They invest their own money and time knowing there is a chance of failure. They do not take reckless risks but rather carefully assess opportunities and decide if the potential reward justifies the risk. This separates entrepreneurs from most employees who prefer security and predictable income.

Creativity and Innovation: Entrepreneurs see possibilities where others see nothing. They think about how things could be done differently or better. Creativity allows them to find unique solutions to customer problems and develop ideas that competitors have not thought of. However, creativity without business sense often fails.

Initiative: Entrepreneurs do not wait for permission or perfect conditions to start. They see an opportunity and take action. They make things happen rather than waiting for things to happen to them. This self starting quality is essential because starting a business requires countless decisions and actions with no boss telling you what to do.

Determination and Resilience: Building a business is incredibly hard. Most entrepreneurs face numerous setbacks, failures, and periods of doubt. The difference between entrepreneurs who succeed and those who fail is often their determination to keep going despite obstacles. Resilience, the ability to recover from failure and learn from mistakes, is essential.

Business Knowledge and Skills: Successful entrepreneurs develop knowledge in finance, marketing, operations, and human resources. They understand how to read financial statements, market their business, operate efficiently, and build teams. Most entrepreneurs had to learn these skills through study or experience rather than having them innately.

Networking and Relationship Skills: Entrepreneurs build networks of suppliers, customers, investors, mentors, and peers. Good relationships open doors, provide information, and create opportunities. Many entrepreneurs credit their success to their network as much as their ideas.

All businesses set objectives, which are the targets or goals they want to achieve. Different businesses prioritize different objectives depending on their situation and ownership.

Survival: For a new or struggling business, survival is the primary objective. The business needs to generate enough revenue to cover costs and keep operating. Once survival is secured, the business can pursue other objectives.

Profit Maximisation: Some businesses aim to make as much profit as possible. This is common for owner run businesses where the owner keeps the profits. It is also a goal for many large companies, particularly those with shareholders who expect returns on their investment. However, single minded focus on profit can harm reputation and employee morale.

Sales Maximisation: Some businesses prioritize growing sales revenue rather than profit. This can make sense when a business wants to grow market share, achieve economies of scale, or grow the business to sell it later. However, maximizing sales sometimes means accepting lower profit margins.

Market Share: Growing market share, meaning the percentage of total market that the business controls, is another common objective. Market share is important because it indicates competitive position and often leads to profitability as businesses with large market share often have cost advantages.

Cost Efficiency: Some businesses focus on controlling costs and operating efficiently. Airlines and budget supermarkets often prioritize cost efficiency to offer low prices. This requires careful management of operations and can drive down quality if taken too far.

Employee Welfare: Some businesses prioritize fair treatment, good working conditions, and career development for employees. Companies like Costco operate on the principle that treating employees well leads to better customer service and business performance. This might mean paying higher wages or offering more benefits than competitors.

Customer Satisfaction: Some businesses make customer satisfaction their primary objective, believing that satisfied customers spend more and recommend the business to others. Companies like Zappos have built success on exceptional customer service. However, this can cost money and might reduce short term profits.

Social Objectives: Social enterprises and some larger companies pursue objectives beyond profit, such as environmental sustainability, community development, or social justice. These objectives can add purpose and motivation but might mean accepting lower profit.

Every business decision involves choices, and choosing one thing means giving up something else.

Resource Trade Offs: A business has limited money, time, and people. If it invests heavily in research and development to create innovative products, it has less money for marketing. If it offers high wages to attract good employees, it has less profit to distribute to owners or reinvest in growth. Understanding opportunity cost helps managers make better decisions by considering what they are giving up.

Strategic Trade Offs: Different business strategies involve different trade offs. A strategy of low prices and high volume (like Primark or Ryanair) requires low costs and efficiency but often means less quality or less comfortable customer experience. A luxury strategy of high prices and high quality (like premium brands) means higher profit per unit but smaller market and slower growth. The trade off is between volume and margin.

Time Trade Offs: Entrepreneurs and business leaders must choose what to focus on. Time spent managing accounts means less time developing new products. Time spent in meetings with investors means less time with customers. Understanding opportunity cost of time helps leaders prioritize what matters most.

Understanding and Measuring Opportunity Cost: Opportunity cost is often not measured directly in accounts because it is something that did not happen. However, good decision makers think about it. If a business could have earned 10 percent interest on money in the bank but instead invests it in a project that returns only 8 percent, the opportunity cost of that investment is 2 percent per year.