4.2 A2 Business key terms

Question 1

economies of scale

Answer 1

the cost advantages that a business can exploit by increasing the scale of production, which leads to a lower cost per unit of output
increasing size or speed - lowers the costs - increases efficiency

Question 2

labour productivity

Answer 2

the amount of output (volume of goods and services) produced by each employee, in a given time

Question 3

push factors

Answer 3

adverse (prevent success or development) factors in the existing market that encourage an organisation to seek international opportunities

Question 4

pull factors

Answer 4

factors that entice firms into new markets, they are the opportunities that businesses can take advantage of when selling into overseas markets

Question 5

offshoring

Answer 5

the relocation of business activities from the home country to a different international location

Question 6

outsourcing

Answer 6

the delegation (transference) of one or more business processes to an external provider, who then owns, manages and administers the selected processes to an agreed standard

Question 7

saturation

Answer 7

he point when most of the consumers who would buy a product already have it, or there is limited remaining opportunity for growth in sales

Question 8

product life cycle

Answer 8

the stages that many products go through;

1) development 2) introduction 3) growth 4) maturity 5) decline

Question 9

risk

Answer 9

the probability of a negative event occurring that has a negative impact as a result - different from the event that was hoped for

Question 10

disposable income

Answer 10

personal income that remains after an individual has paid their taxes and other governmental charges (national insurance and deductions)

Question 11

exchange rate

Answer 11

the price of one currency in terms of another

Question 12

infrastructure

Answer 12

the basic systems, facilities, services and capital equipment required for a country’s economy to function
this would include:
- roads
- communication systems
- power services - electricity
- transport and telecommunication networks

Question 13

reshoring

Answer 13

it involves a business returning production or operations to the host country that had previously been moved to a different international location

Question 14

franchising

Answer 14

when a franchisor grants a licence (franchise) to another business (franchisee) to allow it trade using the brand/business format

Question 15

intellectual property

Answer 15

a product that is a creation of the mind, such as an invention, literary work or artwork - that the law protects from unauthorised use by others
types include:
patent, trademarks and copyrights

Question 16

licensing

Answer 16

a contract a firm has with another firm which allows it to use its intellectual property

Question 17

barriers to entry

Answer 17

factors that make it difficult for a company to enter an industry or type of business and compete effectively - these can include:
brand recognition, restrictive government policies, lack of capital investment and so on

Question 18

cost competitiveness

Answer 18

where an international firm is able to acquire ever-increasing economies of scale, which can then allow it to operate under very low costs
it can then be able to create the cheapest products and services in the market

Question 19

cost leadership

Answer 19

pursuing a strategy to become the lowest cost producer in the industry, which acts as a competitive advantage
developed by Michael Porter

Question 20

differentiation

Answer 20

when a firm selects certain attributes of its products or services and tries to match them with specific customers, and instead of aiming for lower costs, they command said customers a higher price for creating a catering and differentiated product

Question 21

economic risk

Answer 21

risk that future cash flows will change due to unexpected exchange rate changes

Question 22

global competitiveness

Answer 22

the extent to which a business is able to succeed against both domestic rivals and foreign competitors in international markets

Question 23

skills shortages

Answer 23

when potential employees do not have the skills demanded by employers