Course: Fundamentals of business (463)
Semester: Springs 2019
Assignment No: 1
AIOU Solved Assignments 1 & 2 Code 463 Autumn 2019
Q: 1 what is a Business? Explain the various types of business for economy and society?
A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit entities or non-profit organizations that operate to fulfill a charitable mission or further a social cause.
The term business also refers to the organized efforts and activities of individuals to produce and sell goods and services for profit. Businesses range in scale from a sole proprietorship to an international corporation. Several lines of theory are engaged with understanding business administration including organizational behavior, organization theory, and strategic management.
One of the first questions prospective business owners ask is, “What type of business should I form?” The legal aspects of starting a business are often the most intimidating to new entrepreneurs, and it causes people to give up before they ever get started. Although there are several different types of businesses, choosing one doesn’t need to be difficult. We’ve created a list of the 7 most common types of businesses, and give you all of the information and real-world examples you need to decide which kind of business is right for your startup.
A sole proprietorship is one of the most popular business structures, namely because it’s one of the simplest and only requires a single person to create. In a nutshell, a sole proprietorship is a business that’s owned and operated by just one person. The nice thing about a sole proprietorship is that you don’t have to fill out any forms or go through any legal procedures to declare this type of business.
.An important thing to note is that there isn’t a legal or financial distinction between the business and the business owner, which means that you as the business owner are accountable for all of the profits, liabilities and legal issues that your business may encounter.
Two heads are better than one, right? If that’s the philosophy behind your business structure, then a partnership might be the best choice for you. A partnership might be appropriate if your business is owned by two or more people. Keep in mind that with this type of business, business responsibilities, including financial and legal, fall upon each business owner. Depending on how the ownership is divided (either equally or not), there are different types of partnerships for you to explore from a legal standpoint.
A limited partnership, or LP, is an off-shoot version of a general partnership, and while it may not be as common, it’s a great bet for businesses who are looking to raise capital from investors who aren’t interested in working the day to day aspects of your operations. With a limited partnership, there are two sets of partners: The General Partner and the Limited Partner. The general partner is usually involved in the everyday business decisions, and has personal liability for the business. On the other hand, there’s also a limited partner (typically an investor), who is not liable for debts and don’t partake in regular business management of the company. Just like a general partnership, if you enter a limited partnership agreement, you’ll need to register your business with the state, establish a business name, and inform the IRS of your new business. Again, this option is the most common for those looking for investment dollars, so keep that in mind when exploring your partnership options.
A corporation is a fully independent business that’s made up of multiple shareholders who are provided with stock in a business. Most common is what’s known as a “C Corporation,” which allows your business to deduct taxes much like an individual – the only problem with this is that your profits will be taxed twice, both at the corporate level and at the personal level. Don’t let this fact deter you, however – this is extremely common, and if you currently work for a company with multiple employees, that’s likely the business structure they’re using. Most likely, if you’re starting off as a smaller business, particularly one that only operates online, declaring yourself as a corporation wouldn’t be appropriate. However, if you’re already an established business with several employees, listing your company as a corporation might be the correct move. You’ll need to file very specific documents with the state, followed by obtaining the appropriate business licenses and permits.
Limited Liability Company (LLC)
Next on our list of business types is a Limited Liability Company, better known as an LLC. An LLC is a newer type of business that is a blend between a partnership and a corporation. Instead of shareholders, LLC owners are referred to as members. No matter how many members a particular LLC has, there must be a managing member who takes care of the daily business operations. The main difference between an LLC and a corporation is that LLCs aren’t taxed as a separate business entity. Instead, all profits and losses are moved from the business to the LLC members, who report profits and losses on a personal federal tax return.
The nice thing about pursuing an LLC is that members aren’t personally liable for business decisions or actions of the company in question, and there’s far less paperwork involved in creating an LLC as compared to a corporation. LLCs are another of the most common types of online businesses, since they allow small groups of people to easily form a company together.
A nonprofit organization is pretty self-explanatory, in that it’s a business organization that’s intended to promote educational or charitable purposes. The “non-profit” aspect comes into play in that any money earned by the company must be kept by the organization to pay for its expense, programs, etc. Keep in mind that there are several types of nonprofits available, many of which can receive “tax exempt” status.
This process requires filing paperwork, including an application, with the government for them to recognize you as a nonprofit organization. Depending on the parameters of your new business, they’ll be able to tell you which category you best fall under.
The last on our list is what’s known a cooperative, or a business that’s fully owned and operated for the benefit of the members of the organization that use its services. In other words, whatever is earned by the cooperative is then shared among the members themselves, and aren’t required to be paid out to any external stakeholders, etc.
Unlike other types of businesses, which have shareholders, cooperatives sell shares to cooperative “members,” who then have a say in the operations and direction of the cooperative itself. The main difference in the process of becoming a cooperative, as opposed to the other types of businesses listed, is that your organization must create bylaws, have a membership application and have a board of directors with a charter member meeting.
AIOU Solved Assignments 1 Code 463 Autumn 2019
aiou solved assignments code 463
Q: 2 what is company? How it is registered? Explain the various types of companies? Can a sole proprietor register his/her business as a company? Explain.
What is a Company
A company is a legal entity formed by a group of individuals to engage in and operate a business enterprise. A company may be organized in various ways for tax and financial liability purposes depending on the corporate law of its jurisdiction. The line of business the company is in will generally determine which business structure it chooses, for example a partnership, a proprietorship, or a corporation. As such, a company may be regarded as a business type.
A Step by Step Guide for Registering a Company in Pakistan
Company registration remains the most favored form of business organization in Pakistan. Incorporation of a company helps boost business for medium as well as large-scale business enterprises. All company registrations and regulations are controlled by the Companies Ordinance Act of 1984.
The function of administration of all companies is governed by the Securities and Exchange Commission of Pakistan and the Registrar of Companies appointed by the Securities and Exchange Commission of Pakistan (for the particular province) where such company is to be registered.
Under the provisions of the Companies Ordinance, 1984 a company is a corporate body with separate legal entity and a perpetual succession. A company may be formed by persons associating for any lawful purpose by subscribing their names to the Memorandum and Articles of Association and complying with other requirements for registration of a company under the provisions of the Ordinance.
According to the Companies Ordinance, 1984 there can be three different types of companies:
A company limited by shares
A company limited by guarantee
An unlimited liability company
The following steps needs to be followed to create and register a company in Pakistan.
1. SEEK APPROVAL ON NAME OF THE COMPANY
The first step towards incorporation of a company is to seek the “availability of name” for the proposed company from the concerned registrar of companies. Although, it sounds simple enough, but there are certain prohibitions and restrictions, the applicants have to look into while choosing a name for a company. This is the SECP official guideline for choosing a name.
2. PAY FEE’S ASSOCIATED WITH INCORPORATION AND REGISTRATION OF THE COMPANY
Post receiving the name availability certificate from SECP, the applicants have to file an application for incorporation. There are two ways to go about it:
A. ONLINE INCORPORATION
For an online submission, the applicants are required to create an account (username and password) under user registration system of eservices and generate PIN for signing the application. A video tutorial prepared by SECP for user registration at eservices is available here.
Once you submit the process as per the guidelines suggested in the video, you can now pay the fees associated with company registration process by credit card, debit card or online funds transfer (the online transfer facility is available for Muslim Commercial Bank (MCB) and United Bank Limited (UBL) account holders only.) Alternatively, the print out of the fee challah can be submitted in the designated branch of MCB or UBL.
B. OFFLINE INCORPORATION
The fees associated with the process can be paid by generating manual challah from this Chillan link and submitting it along with a company registration application at the designated branches of MCB or UBL in Pakistan.
Post payment of the fee, SECP then requires the applicant to submit the following documents:
Declaration of compliance
Identification of office’s location
Copies of CNIC/NICOP of the subscribers/ directors/ chief executive officer/ nominee (for single member
Company)/authorized representative or copies of Passport in case of a foreigner
NOC/Letter of Intent/ License (if any) of the relevant regulatory authority in case of a specialized business
In case the subscriber is a foreign company, the profile of the company, detail of its directors, their
Nationality and country of origin, certified copy of its charter, statute or memorandum and articles etc.
Copies of the Memorandum and Articles of Association with each member’s signature, where:
Memorandum of Association explains the business sector of your company e.g. Institution, Travel agency, Trading or manufacturing, Supply or chain of stores. To put simply, MOA tells about the relationship of your company with the outside world.
Articles of Association lets know about the day-to-day proceedings within the company i.e. what role CEO and directors would play, business concerned meetings and the appointments of employees, in short- how the company will run.
At the completion of the process, the subscriber registering the company shall receive a Certificate of Incorporation issued electronically or in physical form.
Once the certificate of incorporation is received, a private company /single member company can start its function.
3. OBTAIN A DIGITAL SIGNATURE AND CREATE A COMPANY SEAL
The signature is granted by National Institutional Facilitation Technologies (NIFT) and can be obtained by using the electronic services of the SECP. After the certificate of incorporation is issued, the company representatives may be required to present a company seal, depending on the where the business will be head quartered or started.
4. REGISTER FOR INCOME, SALES AND PROFESSIONAL TAXES
To register for Income tax, the company will have to to apply for a National Tax Number (NTN) at the tax facilitation of the Regional Tax Office (RTO) of the Federal Board of Revenue (FBR). The requirements for this application include:
Memorandum and Articles of association
Bank account number
Copies of National Identity Cards (NICs) of companies’ Directors
An attestation of business address
Sales tax, like the income tax can be registered for, by applying for a Sales Tax Number (STN) at the tax facilitation center of RTO of FBR. For the professional tax, provided it applies, the company will have to register with Excise and Taxation (ET) Department of the District.
5. REGISTER WITH ESSI AND EOBI
Depending on the location of the business, the company will need to register with
Punjab Employees Social Security Institutions (PESSI)
Sindh Employees Social Security Institution (SESSI)
Likewise (BESSI) or (KPKESSI) for Baluchistan and Khyber Pakhtunkhwa respectively.
Under the Employees Old Age Benefits Institution (EOBI), insured employees are entitled to a pension, upon retirement, invalidity in the case of disability, old-age grant and survivor’s pension. Every industry or a commercial establishment with five or more employees has to be registered with the Federal Employees Old age Benefits Institution (EOBI).
6. REGISTER WITH THE LABOR DEPARTMENT OF THE DISTRICT
To safeguard the labor standard of the workers, all company’s are required to registration with the District Chief Inspector of the labor department in each district. For registration, employer must submit the application form A accompanied with the relevant bank form.
Once these requirements are met and vetted by SECP, the company is then ready to become an independent operating body in Pakistan and will be treated as such.
After weighing the pros and cons, you might be drawn to the simplicity of sole proprietorships and decide that this business form is the right choice for you. Here are a few ways to take advantage of everything that a sole proprietorship has to offer and minimize the disadvantages.
1. Open a business bank account.
aiou solved assignments code 463
Sole proprietors can establish some separation between themselves and the business by opening a business bank account. The key to remember: Only use this account for business deposits and withdrawals. Maintaining a separate business bank account will enable you to easily identify streams of business income and losses for tax returns and bookkeeping.There are plenty of business bank accounts that require low minimum balances and allow you to make dozens of deposits and withdrawals for free each month.
2. Get a business credit card.
A business credit card is another great tool for separating business expenses. Again, the key here is to use the card only for business expenses, nothing personal. Business credit cards are a great alternative to loans because specific cards offer different credit limits, rewards points on purchases, and introductory 0% interest rates. And you can choose the one that’s most advantageous to your business as a sole prop. While the introductory rate is in effect, you can basically borrow money interest-free.
See the Best Business Credit Cards
3. Apply for an Employer Identification Number (EIN).
An employer identification number (EIN) is a unique, nine-digit number for your business. Similar to a social security number for individuals, this number “follows” your business around on tax returns, credit reports, and loan applications.
Does a sole proprietor need an EIN?
As a sole proprietor, you aren’t legally required to have an EIN, unless you have employees. Instead of an EIN, you can use your personal social security number on business paperwork. That said, getting an EIN can help you build business credit. Having credit in your business’s name, as opposed to relying on your personal credit alone, can strengthen your business loan applications.
4. Purchase business insurance.
Sole proprietors face more legal risks compared to corporations and LLCs, but buying business insurance can significantly lower your risk. There are several types of business insurance that you can purchase. General liability insurancecovers the cost of damage to your business’s premises, equipment, or products. Product insurance covers damage ensuing from defective products. And home-based business insurance is available for sole proprietors who work out of their homes.
5. Draft clear contracts with your clients.
Contractual disputes between businesses or between employees and employers are common. Lawsuits can be very debilitating for any company but especially for sole proprietors because your personal assets are completely on the line. One of the best ways to guard yourself is by drafting clear contracts whenever you do do business with a supplier, vendor, or other third party.
Same goes when you hire employees or independent contractors. You can hire an attorney to create these contracts or write up simple contracts yourself.
Consider Starting as a Sole Proprietorship and Switching Later
One thing to keep in mind when deciding your business’s structure is that your initial choice of entity isn’t set in stone. Many freelancers and other business owners start out as sole proprietors and then later “graduate” to an LLC or corporation when they reach one of these milestones:
- Going from a side gig to a full-time professional business
- Hiring employees or multiple contractors (You can have employees as a sole proprietorship, but if you are adding employees to your business, it might be better to restructure as an LLC)
- Significantly increasing revenue
- Working with major clients who prefer a registered business
Feeling a strong commitment to your business, as opposed to the business being a side gig or an experiment, is a good signal that you might benefit from registering your business. Mazdak Mohammadi, owner of web design studio BlueberryCloud, says:
“I decided to upgrade from being a sole proprietor to being a corporation when my desire became to run my business for the rest of my life. I wanted to protect myself in the process, and transferring personal liability to my corporation was my main priority. After deciding to be a lifelong business owner, becoming a corporation was a must.”
Switching to a different business structure is relatively straightforward and involves filing a few forms with the state. When you do so, you’ll need to check to see if the name you’d like to incorporate your business with is a available. If so, you’ll need to file your articles of incorporation with the state office where you operate your business.
AIOU Solved Assignments 2 Code 463 Autumn 2019
aiou solved assignments code 463
Q: 3 what is equity financing? Explain the various tools for obtaining the equity financing? Explain.
Definition of ‘Equity Finance’
Definition: Equity finance is a method of raising fresh capital by selling shares of the company to public, institutional investors, or financial institutions. The people who buy shares are referred to as shareholders of the company because they have received ownership interest in the company.
Six sources of equity finance
There are various sources of equity finance, including:
1. Business angels
Business angels (BAs) are wealthy individuals who invest in high growth businesses in return for a share in the business. Some BAs invest on their own or as part of a network. BAs are often experienced entrepreneurs and in addition to money, they bring their own skills, knowledge and contacts to the company. See business angels.
2. Venture capital
Venture capital is also known as private equity finance. Venture capitalists (VCs) look to invest larger sums of money than BAs in return for equity.
Venture capital is most often used for high-growth businesses destined for sale or flotation on the stock market. See venture capital.
Crowdfunding is where a number of people each invest, lend or contribute small amounts of money to your business or idea. This money is combined to help you reach your funding goal. Each individual that backs your idea will usually receive rewards or financial gain in return. See crowdfunding.
aiou solved assignments code 463
4. Enterprise Investment Scheme (EIS)
Some limited companies can raise funds under the EIS. The scheme applies to small companies carrying on a qualifying trade.
There are potential tax advantages for individuals who invest in such companies, such as:
- the buyer of the shares gets income tax relief at 30 per cent on the cost of the shares
- Capital Gains Tax (CGT) on the sale of other assets can be deferred if the gain is reinvested into EIS shares
Certain conditions must be met for a company to be a qualifying company and for an investor to be eligible for tax relief – see HM Revenue & Customs (HMRC) EIS guidance.
5. Alternative Platform Finance Scheme
If your small business is struggling to access bank finance, there is now a new government scheme in which the UK’s biggest banks will pass on details of any businesses they have rejected to three alternative finance providers. These are:
6. The stock market
Joining a public market or stock market is another route through which equity finance can be raised. A stock market listing can help companies access capital for growth and raise finance for further development
AIOU Solved Assignments Code 463 Autumn 2019
aiou solved assignments code 463
Q: 4 Every business required vibrant planning? What are the essentials of planning? Explains the various types of plans made for the business.
Elements of a Healthy and Vibrant Business
The idea of business culture is a hot topic these days, but the actual concept of culture can be tough to pinpoint or define. However, like so many things that are hard to describe, you know it when you see it.
Many small businesses don’t give the idea of culture much thought, particularly early on, but every business has a culture. It may be strong or weak, positive or negative, or just plain hard to spot, but it’s like a form of internal brand in a way. It’s the collective impression, habits, language, style, communication and practices of the organization.
A healthy and vibrant culture is what attracts and keeps people that are committed to what a business stands for and it’s what ultimately attracts and keeps customers and fosters a strong external community.
My belief is that a healthy culture is a shared culture, one created through shared stories, beliefs, purpose, plans, language, outcomes and ownership. These aren’t little things; these aren’t things that you get right during an annual retreat. These are things molded over time with trust and passion and caring. These are things that evolve because you work very hard at finding them, holding them and making them important.
The following seven elements make up the foundation of a healthy business culture.
1. Archived stories
The first step is to begin to develop, archive, curate and tell stories that illustrate what your business stands for. Stories that share why you do what you do, who you it for, why you’re passionate about it, and where the business is headed.
Throughout time, great leaders have used stories to inspire commitment and attract community. The central elements of a strong culture are the stories that employees tell themselves and each other. The ‘why you would want to work here’ story, the orientation story, the ‘here’s how we deal with challenges’ story, the ‘here’s where we are headed’ story.
These illustrations are like oral traditions that allow culture to sustain, thrive and grow, and it’s the job of the leader of the business to make story-building an intentional act.
2. Active beliefs
People want to work for more than a paycheck. Sure, they want to be paid fairly and in some cases the element of salary will be an important aspect of their decision to come to work for an organization, but perhaps more importantly, people want to work on something they believe in and they want to do that work with people who share their passion and beliefs.
This isn’t the same thing as saying that everyone in your organization has to maintain the same beliefs. However, by creating a set of core beliefs that everyone in the organization lives by and supports, you create a set of filters for how decisions are made, how people treat each other, how they treat customers, what’s expected, how to manage and even how to write a sales letter.
3. Demonstrated purpose
In order to bring purpose into the organization you must determine a way to bring it to life and reinforce in every decision the organization makes.
This may take the form of an employee development program, foundation support, benefit package or community program. The key is to bring purpose to life by example. Your actions, or how you treat your staff, will speak far louder about purpose than any page in an employee manual. In order to create a shared purpose the staff must be your first customer.
4. Clear objectives
The strongest, most productive cultures come to life when people know what to do and how to do it—in places where they are trusted to do good work and use their creativity to solve problems.
5. Mentored leadership
While stories are an important way to attract and inspire people to join you on your journey, they can only take you as far as the leaders you develop.After payroll is made and your business is generating sufficient cash flow, I believe that the leader’s primary role should shift to developing leaders internally. In fact, as the owner of a business you’ll never succeed in reaching beyond where you are today until you are no longer the person that brings in the most work.
6. Measured accountability
You must create reporting mechanisms that truly measure the most important components of your business. This will include key financial elements, but must strive to go far into measuring success around shared beliefs and culture.
aiou solved assignments code 463
7. Real ownership
The ultimate measure of commitment is achieved when people that work for your organization come to understand that they play a crucial role in creating the kind of company they want to work for—that the company is actually their most important product.
The most crucial part of your business plan
The executive summary the most important part of your business plan, and perhaps the only one that will get read so make it perfect!The executive summary has only one objective : get the investor to read the rest of your business plan.
Ok but how?
Get in the reader’s shoes
His inbox is probably full of business plans and he needs to get to the bottom of it.
He is therefore very likely to scan through each business plan in less than 2 minutes, and to select only the most promising projects.
How to make your executive summary stand out?
First on the form. Make the text easy to read by using short paragraphs rather than long blocks of text. And keep it short: 1 (ideal) or 2 (maximum) pages.
Then on the content itself: go straight to the point. Introduce in a couple of paragraphs : the idea, the team, the market, the potential in terms of profitability, and the funding requirements. Don’t try to cover everything in too much details: keep it high level and the investor will read the rest of the plan to get the details if he is interested.
The introduction of the executive summary
The investor (or the banker) will start by checking that the project matches its investment criteria:
- the idea and the funding requirements match his investment stage: seed, series A, growth, or LBO
- the sector is not over allocated in its portfolio: investors have diversification criteria imposed by their investors, banks by the their credit committee
- the market is big enough: especially important for equity investors
- the team has the right skill-set
The introduction of your executive summary must touch briefly on all of the points above before covering them in more details in the body of the executive summary.
Try to introduce the company in a couple of sentences (legal structure, location, shareholders and management team), its activity, and the main milestones to date.
The aim is to build interest from the reader of your plan by showing that you have the right team to carry this project and some traction around the product. If you have some skill gaps within the team you need to address this concern by showing how you are going to fill the gap (recruitment, external advisor).
The reader now knows:
- in what he will be investing
- along which shareholders
- and who will lead the project
The next step is to give a brief overview of the market:
- Customers: who are they? How many are they? What is the estimated value of the market?
- Need: why will customers buy your products?
- Competition: who are your competitors? What sets you apart?
- Strategy: what is your market positioning? How are you going to access the market?
If you are writing your business plan for a bank, try to reassure by showing that there is a real need for your product and that you are going to generate revenues quickly. If your business plan is for an equity investor, you also need to emphasize on the market size and demonstrate that there is the potential to establish a large business.
Here you need to present your key historical and forecasted financials, along with the main assumptions underlying your forecast.
Which figure should I mention? This really depends on both your sector and stage. As a minimum, try to show:
- That you are profitable: your EBITDA is positive
- That you generate cash: your operating cash flow is positiveThat you are growing: your revenues, EBITDA, and operating cash flow are growing regularly
Depending on your sector you might also want to include a few Key Performance Indicators (KPIs). For example the number of active users for a software company.
Finish the executive summary by stating the funding requirements and the use of proceeds. If needed, detail the offer (% of equity on offer, ideal length of the loan, etc.).
If you are trying to raise equity and already received binding offers from a few investors, mention it here as this will reinforce the attractiveness of your project.
aiou solved assignments code 463
Types of Business Plans
usiness plans guide owners, management and investors as businesses start up and grow through stages of success. A business owner or prospective business owner writes a business plan to clarify each aspect of his business, describing the objectives that will anticipate and prepare for growth. Savvy business owners write a business plan to guide management and to promote investment capital.
Start-Up Business Plans
New businesses should detail the steps to start the new enterprise with a start-up business plan. This document typically includes sections describing the company, the product or service your business will supply, market evaluations and your projected management team. Potential investors will also require a financial analysis with spreadsheets describing financial areas including, but not limited to, income, profit and cash flow projections.
Internal Business Plans
Internal business plans target a specific audience within the business, for example, the marketing team who need to evaluate a proposed project. This document will describe the company’s current state, including operational costs and profitability, then calculate if and how the business will repay any capital needed for the project. Internal plans provide information about project marketing, hiring and tech costs. They also typically include a market analysis illustrating target demographics, market size and the market’s positive effect on the company income.
Strategic Business Plans
A strategic business plan provides a high-level view of a company’s goals and how it will achieve them, laying out a foundational plan for the entire company. While the structure of a strategic plan differs from company to company, most include five elements: business vision, mission statement, definition of critical success factors, strategies for achieving objectives and an implementation schedule. A strategic business plan brings all levels of the business into the big picture, inspiring employees to work together to create a successful culmination to the company’s goals.
Feasibility Business Plans
A feasibility business plan answers two primary questions about a proposed business venture: who, if anyone, will purchase the service or product a company wants to sell, and if the venture can turn a profit. Feasibility business plans include, but are not limited to, sections describing the need for the product or service, target demographics and required capital. A feasibility plan ends with recommendations for going forward.
Operations Business Plans
Operations plans are internal plans that consist of elements related to company operations. An operations plan, specifies implementation markers and deadlines for the coming year. The operations plan outlines employees’ responsibilities.
Growth Business Plans
Growth plans or expansion plans are in-depth descriptions of proposed growth and are written for internal or external purposes. If company growth requires investment, a growth plan may include complete descriptions of the company, its management and officers. The plan must provide all company details to satisfy potential investors. If a growth plan needs no capital, the authors may forego obvious company descriptions, but will include financial sales and expense projections.
AIOU Solved Assignments 1 & 2 Autumn 2019 Code 463
aiou solved assignments code 463
Q: 5 why do a business need advertising? Explain the various tools for advertising .In your opinion, business in Pakistan fulfill their promises made in the advertising?
Reasons to Advertise Your Business
Advertising allows for companies to target their customers and form a lasting connection with them. It instills a sense of familiarity and trust within the consumer, ensuring that they remain loyal to your business. Advertisements use images, words, and ideals that target your desired demographic and encourages them to stay devoted to your business.
Advertising increases company traffic– Many consumers are more likely to visit a business after viewing an advertisement. More consumers mean more sales and more business for you. *A survey of more than 3,000 companies found that advertisers who maintained or expanded advertising over a five-year period saw their sales increase an average of 100 percent, and companies that cut advertising grew at a less than half the rate of those who advertised steadily.
Advertising gives your company a positive image– Advertising tells your consumers and your competitors that you are open and ready for business. Dynamic and positive advertising can entice consumers to your business regardless of the economy and competition.
Advertising attracts new customers– The market is constantly changing and new consumers are moving in and out of your area. New consumers mean a new target audience that your advertisements will reach. Advertising shows consumers that are new to the market that your business is the top of the line and the one that they want to visit.
Advertising promotes repeat business– With all of the choices consumers are able to make, many once loyal consumers have strayed from previous businesses in search of other options. Advertising reminds your consumers why they choose your business in the first place and why they should continue to choose you in the future.
Advertising helps your business compete– There are only so many consumers in the market that are willing to buy your product at any given time. Advertising helps businesses stay ahead of the game while competing with other businesses. Advertising is how you convince the consumer that you are the one they should choose.
Advertising is one of the most important aspects of marketing because consumers can’t buy products unless they know what they are and where to get them. Businesses can employ a variety of different advertising tools to inform consumers about the benefits of their products and services, increase brand awareness and drive sales.
Print and Outdoor Advertising
Print and outdoor advertisements relay information to consumers through physical means. Print advertisements are ads placed in publications, such as newspapers, newsletters and magazines. Examples of outdoor advertising include billboards, signs and posters. Direct mail is another physical advertising tool that involves mailing printed materials such as leaflets and catalogs directly to consumers. Print and outdoor advertising can direct consumers to other advertising channels, including company websites and social media platforms.
TV and Radio
Television and radio are two traditional advertising tools that do not require the delivery of information in a physical form. TV and radio ads can potentially reach millions of consumers simultaneously. The effectiveness of TV and radio ads depends on the popularity of the show during which the ads are broadcast. The time of day and popularity of programming govern how expensive it is to buy TV and radio ads.
As ad filmmakers are formulating the most effective ways of enticing consumers to buy their products, they have found children are good targets. Younger minds are easy to manipulateand are seen as long-term potential buyers. The idea is to worm a brand’s way into a child’s life as early as possible. But while they may sell products, another question emerges: what values are being promoted for the future generation?
Spoiling our children
Children tend to misinterpret messages conveyed through advertisements. Glossy images in magazines, on billboards or on flashy advertisements on television only create the urge for impulse buying. Children view a certain lifestyle and lose the ability to live life without relying on materialistic joy. A child may prefer only a specific brand of jeans as compared to other clothing available in stores. The desire to live the TV lifestyle may lead to requests that parents are unable to fulfill.
If they don’t have an endless array of new products some children may become convinced that they are inferior to others.
Ads make false promises
In addition to inculcating materialistic values, commercials deceive and manipulate children on a massive scale. The false promises of popularity, success, and attractiveness that marketers routinely make for their products are such common lies that adults have become inured to their dishonesty.
Both girls and boys are highly objectified in the modern advertisement business. Boys are projected as “tough and strong” while girls are “sexy and pretty”. Thus, stereotypical roles are portrayed before them as the epitome of perfection, discouraging originality and creativity.
Given the unprecedented volume of commercials to which children are exposed today, along with their increasing sophistication, we need to consider the cumulative impact of ads.
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