Price Penetration

Pricing Methods - Price Penetration

Price penetration is where a business tries to increase market share by offering a low initial price. Loss leaders work in a similar way to price penetration.

Lower short-term profits

In the short term, price penetration can lead to lower average profits than would be earned with a higher price.
However, market share may be more important for the long-term profitability of a business.

Loss leaders

Loss leaders are products or services that are sold by a business at a price where the business makes a loss (average revenue < average cost).
Loss leaders can attract new customers or sell to existing customers, in the hope that they make extra (incidental) purchases.
- Dollar Shave Club offered to deliver a razor and new razor blades to your house for $1 every month. This was loss making, but it attracted customers who bought extra products.

1Business Activity & Influences on Business

1.1Business Objectives

1.1.1Business Aims

1.1.2Business Objectives

1.1.3Business Objectives Change Over Time

1.1.4End of Topic Test - Business Aims

1.1.5Diagnostic Misconceptions - Profit

1.2Types of Organisations

1.2.1Sole Traders & Partnerships

1.2.2Limited Companies

1.2.3Limited Liability

1.2.4Unlimited vs Limited Liability

1.2.5Not For Profit & Franchises

1.2.6Multinational Companies

1.2.7End of Topic Test - Business Ownership

1.2.8Application Questions - Business Ownership

1.2.9Diagnostic Misconceptions - Company vs Business

1.2.10Diagnostic Misconceptions - Owners vs Shareholders

1.3Classification of Businesses

1.3.1Sectors

1.4Decisions on Location

1.4.1Location

1.5Business & the International Economy

1.5.1Globalisation

1.5.2Exchange Rates

1.6Government Objectives & Policy

1.6.1Government Objectives

1.6.2The Government & Business Activity

1.6.3Interest Rates

1.6.4Interest Rates - Calculations

1.6.5Diagnostic Misconceptions - Recessions

1.7External Factors

1.7.1External Factors

1.8What Makes a Business Successful?

1.8.1Measuring Success

1.8.2Reasons for Failure

2People in Business

2.1Internal & External Communication

2.1.1Communication

2.2Recruitment & Selection Process

2.2.1Types of Employment

2.2.2Recruitment Stages

2.2.3Effective Recruitment

2.2.4Legal Controls Over Employment

2.2.5Diagnostic Misconceptions - Internal Recruitment

2.3Training

2.3.1Training

2.4Motivation & Rewards

2.4.1Motivation in the Workplace

2.4.2Financial & Non-Financial Methods

2.4.3End of Topic Test - The Workforce

2.4.4Application Questions - The Workforce

2.4.5Diagnostic Misconceptions - Money

2.5Organisation Structures

2.5.1Organisational Structures

2.5.2Centralised vs. Decentralised Structures

2.5.3Tall & Flat Organisations

2.5.4Functional Areas Within a Business

2.5.5End of Topic Test - Org Structure

3Business Finance

3.1Sources of Finance

3.1.1Internal & External Sources of Finance

3.1.2Factors Affecting Sources of Finance

3.2Cash Flow Forecasting

3.2.1Cash Flow

3.2.2Consequences of Cash Flow Problems

3.2.3Cash Flow - Calculations

3.2.4Solutions to Cash Flow Problems

3.2.5Diagnostic Misconceptions - Cash Flow

3.3Cost & Break-Even Analysis

3.3.1Costs, Revenue & Profit

3.3.2Profit, Average Unit Cost & Interest

3.3.3Costs - Calculations

3.3.4Revenue - Calculations

3.3.5Break-Even Analysis

3.3.6Profit & Losses - Calculations

3.3.7End of Topic Test - Finance

3.3.8Grade 9 - Finance

3.3.9Diagnostic Misconceptions - Fixed Costs

3.3.10Diagnostic Misconceptions - Break-even

3.4Financial Documents

3.4.1Financial Statements

3.4.2Income Statement

3.4.3Understanding Business Performance

3.5Account Analysis

3.5.1Business Calculations

3.5.2Gross Profit - Calculations

3.5.3Net Profit - Calculations

3.5.4Business Calculations 2

3.5.5Business Calculations 3

3.5.6Liquidity

4Marketing

4.1Market Research

4.1.1Market Research

4.1.2Forms of Market Research

4.2The Market

4.2.1Customer Needs

4.2.2Satisfying Customer Needs

4.2.3Market

4.2.4The Competitive Environment

4.2.5Market Segmentation

4.2.6Market Mapping - Price vs Quality

4.2.7End of Topic Test - Marketing

4.2.8Application Questions - Marketing

4.2.9Diagnostic Misconceptions - Competition

4.3The Marketing Mix

5Business Operations

5.1Economies & Diseconomies of Scale

5.1.1Economies of Scale

5.1.2Diagnostic Misconceptions - Economies of Scale

5.2Production

5.2.1Production Processes

5.2.2Flow and Batch Production

5.2.3Production Efficiency

5.2.4Technology & Production

5.2.5Diagnostic Misconceptions - JIT vs JIC

5.3Factors of Production

5.3.1Factors of Production

5.4Quality

5.4.1Importance of Quality

5.4.2Identifying Quality

5.4.3Total Quality Management

5.4.4End of Topic Test - Operational Decisions

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