Principles of Business Report: Business Markets and Innovation

This report provides a comprehensive overview of key business principles, encompassing various aspects crucial for organizational success. The report begins by exploring different business markets, including Business-to-Business, Consumer, and Service markets, and examines the nature of interactions between businesses, emphasizing the importance of long-term relationships and brand loyalty. It then delves into shaping organizational goals through environmental scanning and the legal obligations businesses face, such as those outlined in company law. The report further discusses business innovation, defining it as the introduction of new ideas, workflows, and products, and presents a cycle of business innovation model. Sources of guidance for business innovation, including tax credits and patent boxes, are also explored. The report continues with an analysis of financial viability, emphasizing the importance of sufficient funds, profitability, and effective financial management. It highlights the consequences of poor financial management, such as liquidation and potential director penalties. The report also explains the uses of budgets and how to manage them effectively, alongside an examination of marketing principles, sales processes, market research, and the value of branding. Finally, the report concludes by summarizing the relationship between sales and marketing.

PRINCIPLES OF
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Characteristics of different business markets .......................................................................1
1.2 Nature of interactions between businesses within market ...................................................1
1.3 How to shape an organization's goals...................................................................................2
1.4 Describe legal obligations of a business ..............................................................................2
TASK 2............................................................................................................................................2
2.1 Define business innovation ..................................................................................................2
2.2 Model of business innovation ..............................................................................................3
2.3 Sources of guidance for business innovation .......................................................................3
2.4 Process of product development...........................................................................................3
2.5 Benefits and risks are associated with innovation ................................................................4
TASK 3............................................................................................................................................4
3.1 Importance of financial viability ..........................................................................................4
3.2 Consequences of poor financial management ......................................................................5
3.3 Financial terminology ..........................................................................................................5
TASK 4............................................................................................................................................5
4.1 Explain the uses of budget ...................................................................................................5
4.2 How to manage a budget ......................................................................................................6
TASK 5............................................................................................................................................6
5.1 Principles of marketing ........................................................................................................6
5.2 Explain a sales process .........................................................................................................6
5.3 Features and uses of market research ...................................................................................6
5.4 Value of a brand to an organisation .....................................................................................7
5.5 Relationship between sales and marketing ..........................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Principle of business success is identifying the needs of the society and then directly or
indirectly filling those needs. In other words - either you with services, skills or product filling a
need, or your broker, or somebody else who is producing the product and service to fill the need
(Kukulin, Krasnopolsky and Horácek, 2013). If a business organization follows all principles and
ethics and then it would easily achieve its goals and objectives.
TASK 1
1.1 Characteristics of different business markets
All businesses market their products and services, albeit there will be differences in the
way each business approaches their markets.
 Business-to-Business - The business-to-business market is one in which businesses sell
to other businesses, rather than to consumers. For example, an accountant specialising in
business accounts will be operating in a B2B market. They might also operate in a
consumer market if they have a department that deals with individuals private tax affairs.
 Consumer Market A consumer market is one in which products and services are sold by
businesses to consumers. This type of business market has the most transactions because
of the massive numbers of consumers. Examples include supermarkets and cafés.
 Service Market - A service market is one in which a business sells its services directly to
individual consumers. Examples include IT maintenance and hairdressers. A consumer
may purchase a product in conjunction with the service.
1.2 Nature of interactions between businesses within market
B2B interaction is usually protracted because of a tendency to have many more people
involved in the purchasing decisions than is the case in business to consumer markets.
Consequently, there can be a greater emphasis on developing a long-term relationship based on
mutual trust. This tends to result in high levels of brand loyalty and repeat sales (Krajewski,
Ritzman and Malhotra, 2013).
Account managers and sales representatives tend to look after the relationship
management between business customers and will seek to keep customers informed of
improvements to product or service range and offerings. After sales service will account for a lot
of interaction as maintaining the satisfaction of the business client is fundamental to repeat and
additional sales.
1

1.3 How to shape an organization's goals
To be effective, businesses need to have goals. They set out what they want to achieve
and in what markets. However, it is often not until the plan to achieve the goals is put into action
that discoveries can be made that require changes to the plan or changing of the goals. That is
where successful and responsive businesses get significant advantage: they are constantly
examining the market and looking ahead to change their offerings and associated goals based on
what the market wants or needs, or because the rules of the game have changed. For example,
changes in legislation or economic circumstances, etc. The more agile a business is in responding
to the market and realigning its goals, the better its chances of capitalising on market demands.
The process of constantly looking outwards to detect changes in market conditions and
requirements is known as Environmental Scanning.
1.4 Describe legal obligations of a business
Company Law In the UK, company law is the legal domain that sets out what the main
obligations of a company, as a separate legal entity, are. The Companies Act (2006) sets out key
obligations in combination with numerous other Acts, Codes and Directives. There are a few
main areas or fields that serve to compartmentalise aspects of UK Company Law:
Corporate Governance covers the obligations and accountability of company directors,
shareholders, employees and creditors (Belohlavek, 2012).
Corporate Finance relates to funding of businesses through equity finance (issuing
shares) or debt finance through loans. If a company is unable to repay debts when, an
administrator is appointed in accordance with UK Insolvency Law to attempt to salvage the
company.
TASK 2
2.1 Define business innovation
Business innovation is an organization's process for introducing new ideas, workflows,
methodologies, services or products. Like IT innovation, which calls for using technology in new
ways to create a more efficient and agile organization, business innovation should enable the
achievement of goals across the entire organization, with sights set on accomplishing core
business aims and initiatives. Innovation often begins with idea generation, wherein ideas are
narrowed down during brainstorming sessions, after which leaders consider the business
viability, feasibility and desirability of each idea.
2

2.2 Model of business innovation
The Cycle of Business Innovation model sets out the key elements of successful business
innovation. The organisation needs to have the necessary resources and capabilities for the
market it serves and to generate innovative ideas. By highlighting profitability and return on
investment the model accords with the basic requirement that a business needs to be profitable to
survive. Market readiness is a vital element of the approach (Jarvis, 2011). However, that
readiness may need to be created. Some products the market is ready and eager for, while, for
others, some products the market may not know the product is needed. This is the dichotomy
between market pull (the market needs the product) and market push the product needs to be
pushed. A good example of market push was the introduction of 3G phones, the overwhelming
view at the time was that they were an unnecessary advancement.
2.3 Sources of guidance for business innovation
There are two types of sources which guides and supports business innovation, such as-
 Tax credits - Tax credits include enhanced relief from Corporation Tax on qualifying
expenditure, and in some cases payable credit. This is the single biggest government
scheme supporting business investment in and innovation. Claims totalled £1.2 billion in
the financial year 2011 to 2012.
 Patent Box – The Patent Box enables companies to apply for a lower rate of Corporation
Tax on profits earned after 1 April 2013 on patented inventions and certain other
innovations. This relief is being phased in from 1 April 2013. The lower rate of
Corporation Tax will be 10%.
2.4 Process of product development
Below describe different stages of product and service development, such as-
 Ideas Generation: an on-going systematic exploration for new product opportunities.
Product Evaluation: leading to decisions as to what products merit pursuing/further
research.
 Initial Feasibility Testing: potential buyers are introduced to the product idea and initial
buying intentions determined (Bryman and Bell, 2015).
 Business Analysis: an examination of what profitability the new product offers and its
production feasibility, conventionally done via a feasibility study.
3

 Product Development: where possible a prototype would be produced and designs refined
to meet any specific requirements identified in market research.
 Marketing Testing: incorporating observation of buyer behaviours and all other aspects of
the marketing mix. Phased introduction in a selected area reflecting the overall target
market and segmentation.
 Decision on Continuation: options include: continue with the product, change the
product, change the marketing approach or discontinue the product.
 Introduction to the Market: that, is, the introduction stage of the product life cycle
2.5 Benefits and risks are associated with innovation
Innovation certainly carries risk. Other than for some incremental innovations there can
be considerable need for allocation of time, money and resources before positive returns can be
realised. Moreover, there is no guarantee that there will be a return at all. The risks can be
managed which ultimately requires managers to apply judgement as to, for example, what
innovations to proceed with, which will be profitable, which will give you competitive advantage
most quickly, etc. There is risk incumbent in not meeting standards of efficiency and
effectiveness, including quality standards and in misreading potential market demand for the
products and services. The cost of investing in innovations that flop can be enormous. Similarly,
the costs of research and development may not provide return for years, if ever.
TASK 3
3.1 Importance of financial viability
To be financially viable, a business needs to have sufficient funds to pay its current
liabilities (bills) and to carry on trading. Any business that does not have access to sufficient
funds is trading is insolvent and trading illegally. If a business makes a loss then it needs to be
able to absorb that loss to enable it to carry on. For continued viability a business needs to be
profitable and needs to ensure that it has firm control over both debtors and creditors (Pohl,
2010). Financial management of a business involves much more than keeping an accurate set of
books and balancing your business accounts. The businesses' finances need to be carefully
managed and to be prepared for all eventualities. Often companies that fail are profitable but
poor financial management has led them into failure.
4

3.2 Consequences of poor financial management
Companies that cannot pay their debts are likely to go into liquidation. An administrator
is appointed to attempt to salvage the business or find a buyer for the business. If that cannot be
done its assets are sold (liquidated) and all monies raised are distributed to people that are owed
money. When an administrator is appointed, directors cannot act for the company and lose
control of anything owned by the company. Directors are obliged to give the administrators any
requested information about the company and hand over company assets and records. They will
need to explain why the company failed (Spitzer, 2013). Directors may be banned from being a
director for between 2 and 15 years and/or prosecuted if the administrator considers there are
grounds to believe a director was negligent in any way
3.3 Financial terminology
Financial Management Reports The principal statements of account or reports are the
profit and loss statement, the balance sheet and the cash flow statement. Reports that are
prepared by businesses fall into 2 categories 1 financial accounting and management accounting.
The Profit & Loss Statement - The P&L Statement is a summary of transactions over a period. It
shows income generated, costs incurred and either a profit or a loss for the period. It records
relevant transactions to determine various levels of Profit or Loss from the organisation's
activities over the period.
The Balance Sheet The Balance Sheet is a snapshot of an organisation's financial position
at a given point. It shows all the assets, liabilities and accumulated reserves giving the company's
net worth.
TASK 4
4.1 Explain the uses of budget
A budget is a plan for income and expenses, which allows a business to operate within its
means. An internally focused plan, a budget is usually drawn up for each financial year based on
estimated sales and costs. The actual performance of the business can be monitored and
measured against this proposed plan. Different budgets can be created depending on what
particular aspect of the business requires focus. The most common budget operated at line
manager level would be a budget for a particular purpose.
5

4.2 How to manage a budget
The BCC format enables managers to monitor actual project activity spend against the
agreed and planned budget. When a variance arises, a manager can decide whether or not formal
corrective action is required. In the example above, the first activity purchase materials was more
expensive than envisaged. Noting that, the manager could justifiably change his or her plan for
one or more of the activities that are to follow (Gibson, 2011). For example, it might be cheaper
to use paving slabs instead of concreting the ground. The key point here is that informed
decisions can be made at key times during to control actual spend.
TASK 5
5.1 Principles of marketing
Marketing is a social process by which individuals and groups obtain what they need and
want through creating and exchanging products and values with others. Anticipating market
requirements is extremely important, as it is possible to accrue business advantage from what
marketers refer to as first mover advantage). That is, getting a product or service available in the
market before the competition does (4+ Basic Principles of Marketing, 2018). It requires
businesses to be looking into the environment to spot upcoming opportunities and shifts in
demand for products and services.
5.2 Explain a sales process
Selling is a process involving the interaction between a potential buyer and a person hired
by a company to sell its products to potential buyers. Sales is a recognized business profession,
and ranges from a shoe salesman to an investment banker who manages company stock with
billions of dollars at stake. Three stages are involve in sales process, such as-
 Information gathering
 Matching
 Closing the sale
5.3 Features and uses of market research
This term can be easily confused, i.e. marketing research is research into a specific
market, whereas 'marketing research is wider. Marketing research includes 'market mix plus all
elements of the marketing mix; for example, areas such as research into new products, or
distribution channels. The main reason for marketing research is to judge the likelihood of
products being successful in the marketplace.
6

5.4 Value of a brand to an organisation
Effective branding can promote recognition for your business. If your brand is consistent
and easy to recognise, it can help people feel more at east purchasing from you. People adhere to
familiarity and if you’re remembered as a quality provider, then you will encourage repeat
business as they are more likely to choose your product or service again. A strong brand can
create referrals or viral traffic because people love to tell others about the brands they like.
People eat, listen and wear brands, and they’re constantly telling others about the ones they love.
In fact, 84% of consumers have said that they ‘always or sometimes’ take action based on
personal recommendations.
5.5 Relationship between sales and marketing
Sales is not marketing but it is a part of marketing. However, the overall aim of
marketing is to lead people to buy products and services and to make the business profitable.
Fundamentally, people cannot buy a company's products or services unless they know of the
company and the products/services available from them. Making people aware of the products
and services offered is part of the role of marketers.
CONCLUSION
From the above mentioned report, it is analysed that business organisations have to
follow all standards and principles so as to manage all working activities in an effective manner.
In addition, the role of business innovation is to generate qualitative and innovative products so
as to attain and retain customers for long term period.
7

REFERENCES
Books and Journal
Belohlavek, R., 2012. Fuzzy relational systems: foundations and principles (Vol. 20). Springer
Science & Business Media.
Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA.
Gibson, R., 2011. Rethinking the future: rethinking business, principles, competition, control &
complexity, leadership, markets and the world. Nicholas Brealey Publishing.
Jarvis, J., 2011. What would Google do?: Reverse-engineering the fastest growing company in
the history of the world. Harper Business.
Krajewski, L. J., Ritzman, L. P. and Malhotra, M. K., 2013. Operations management: processes
and supply chains (Vol. 1). New York, NY: Pearson.
Kukulin, V I., Krasnopolsky, V. M. and Horácek, J., 2013. Theory of resonances: Principles and
Applications (Vol. 3). Springer Science & Business Media.
Pohl, K., 2010. Requirements engineering: fundamentals, principles, and techniques. Springer
Publishing Company, Incorporated.
Spitzer, F., 2013. Principles of random walk (Vol. 34). Springer Science & Business Media.
Online
4+ Basic Principles of Marketing, 2018. [Online]. Available through:
<http://tinobusiness.com/4-basic-principles-of-marketing/>.
8