Privatisation and Public sector Private sector

When a company has gone from being a public company to a company that is privately owned and their objective is to make a profit.
Move from the public sector to the private sector.

Public sector-
- services are available to everyone
- owned and run by the government and profits go to the government
COP
Control- government
Ownership- government
Profits- government

Private sector-
- objective to make a profit
COP
Control- private individuals- the owners/ board of directors
Ownership- private individuals
Profits- owners

Arguments for privatisation:
- more motivation to suceed and improve by the objective of making a profit
- make own decisions not affected by government- governments don't think long term
- make more efficient- have the risk of failure- will cut down on things they don't need

Arguments against privatisation:
- profit is bad- too much emphasis on making a profit
- equality- not all can afford it
- monopolies cause high prices
- more focused on customers and workers

Stakeholders

A stakeholder is any person or group of people with an interest in the success of a business.

Main stakeholders include:
COWSL
Customers
Owners
Workers
Suppliers
Local communities

Other stakeholders:
Government
Shareholders

Stakeholders conflict:
- conflicts will arise when the interests of one stakeholder group are opposite to that of another stakeholder group
e.g. workers seeking higher wages might conflict with the desire of the owners to cut costs and boost profit

Price elasticity of demand

PED is how sensitive the market is to changes in price of a product.
Businesses calculate this to predict what will happen to sales if they change the price.

PED= %change in quantity demanded
           -------------------------------------
           % change in price

%change= change
                  ---------- x 100
                  original

If your answer is between 0 and 1 the product is price inelastic- customers are NOT affected by price e.g. petrol

If your answer is greater than 1 the product is price elastic- customers ARE affected by price e.g. bread

Ignore any minus signs in the final answer.

Pricing Strategies

Competitive pricing- when companies monitor their competitors prices to make sure their prices are the same or at a lower rate

Premium pricing- keeping the price of a product or service high to encourage favourable perceptions of the product, based solely on price

Skimming pricing- charging a high price for a product for a limited period when it is new to the market while it remains unique to the market

Loss leader- products sold at or below cost price. They will lose money but will make profit indirectly.

Penetration pricing- the opposite of skimming. Charging a low price for a product to attract customers and gain market share

Psychological pricing- companies base the price on customers expectations about what to pay. e.g. £9.99

Mark up/cost plus pricing- adding direct and indirect costs of production together and then adding a fixed percentage called a mark up

Discrimination pricing- charging different prices for different customers e.g. train tickets- on and off peak

Promotional pricing- reducing pricing to unsustainably low levels to increase interest in the product.

Supply and Demand diagrams

Supply and demand diagrams help a business work out the best price to charge to benefit the customer and the business.
Supply looks at working out price from a business point of view.
Demand looks at price from a customers point of view.

Supply goes up- it's sky high
Demand goes down- it's down low.

Factors causing a shift in demand:
PASIFIC
Population
Advertising
Substitute products
Income
Fashion/ trends
Interest rates
Complementary products



Factors causing a shift in supply:
PINTSWC
Productivity
Indirect taxes
Number of competitors
Technology
Subsidies
Weather
Cost of production