AP Business Unit 1 Cheatsheet: Businesses, Competition, and New Ideas

Business: Organization producing and distributing goods and/or services of any size (local to global, face-to-face or virtual).

Customer vs. Consumer:

• Customer: Buys the product
• Consumer: Uses the product (may not be the buyer)

Problem-Solution Fit: Business identifies a customer problem, need, or want and develops a product to address it. Businesses must choose which problems and customers to serve.

Value Creation: Providing a product that responds to customer problems, needs, or wants.

Value Capture: Charging customers a price higher than production cost to earn profit.

Market: Physical or virtual space where sellers (businesses) and buyers (customers) interact. Can be local, regional, or global.

Market Price: Established when sellers seek higher prices and buyers seek lower prices; competitive interaction tends to settle on a prevailing price.

Competitive Advantage: Ability to outperform rivals, leading to increased market share and profits.

Differentiated Products: Products with distinguishing features that set them apart from rivals.

Barriers to Entry: Obstacles making it difficult for new firms to compete—patents, regulations, limited supplier access, high startup costs, low prices from scale.

Monopoly: Market with only one business producing a unique good/service; no competition.

Market Entry: Business enters when PESTEL factors align with business model and target customers.

Viability Changes: Shifts in PESTEL factors affect customer needs, production feasibility, and operating costs.

Highly Competitive Markets (commodities): Seek advantage through efficiency and lowest possible price.

Differentiated Product Markets: Seek advantage by demonstrating superiority through:

• Higher quality
• Unique features
• Better customer service
• Lower prices
• More effective marketing

Monopoly Position: Protect by maintaining barriers to entry (IP rights, regulations, resource control, scale advantages).