BUSS3 Definitions Flashcards
Business unit strategy
How a business attempts to compete successfully in a particular market.
Aims/Goals
General statements of what a business intends to achieve. Precise details of those intentions are set out in objectives.
Corporate objectives
Objectives that relate to the business as a whole. Usually set by top management.
Corporate strategy
Concerned with the overall purpose and scope of the business activities. Used to achieve corporate objectives.
Cost leadership
A business strategy concerned with aiming to be the lowest-cost producer in an industry. Usually requires exploitation of economies of scale.
Functional objectives
Set for each major business department and designed to ensure that the corporate objectives are met.
Mission statement
A written description of the overall objectives and purposes of the business.
Shareholder value
Where shareholders earn a return from their investment which is greater than their required rate of return.
SMART objectives
Objectives that are more likely to be achieved because they are specific, measurable, achievable, realistic, and timed.
Social responsibility
The way in which a business meets its responsibilities to society as a key external stakeholder.
SWOT analysis
Assessment of the internal strengths and weaknesses, and the external opportunities and threats that the business needs to consider.
Targets
Similar to objectives. Targets are often set at an individual or team level.
Acid test ratio
Compares current assets, excluding stock, to current liabilities. Shows how much of what a business owes in the short term is covered by assets.
Asset turnover
A ratio that compares the sales revenue a business makes to the value of its total assets.
Assets
Amounts owned by, or owed to a business.
Average rate of return
A measure of the total accounting return from an investment project.
Balance sheet
The financial statement that provides a snapshot of the assets and liabilities of a business at a particular date.
Capital expenditure
Expenditure on assets which are intended to be kept in the business rather than sold or turned into products.
Cash flow targets
Specific objectives set by a business for cash flow generated by a business.
Corporation tax
The tax levied on the profits of companies. The percentage varies depending on the size of the profits earned. Typically 20-30%.
Cost minimisation
A strategy of achieving the most cost-effective way of delivering goods and services to the required level of quality.
Creditor/Payable days
A ratio that estimates the average period (in days) taken to settle amounts owed by a business to suppliers.
Current ratio
Compares current assets, including stock, to current liabilities.
Debentures
A long-term source of finance that has fixed interest rates and payback days.
Receivable days
Compares the average amount owed to a business by its debtors to the value of the total sales that it gives buyers credit for.
Depreciation
An accounting estimate of the fall in value of a fixed asset over time.
Discount factor
The multiplication factor that converts a projected cost or benefit in a future year into its present value.
Dividend
Amounts paid to shareholders out of the profits earned by a company.
Dividend yield
A measure of shareholder return. Calculated by comparing the dividend per share by the share price.
Fixed assets
Assets such as property, equipment and vehicles that are intended to be retained and used in a business for more than one year.
Gearing
The gearing ratio measures the proportion of assets in a business that are financed by borrowing.
Going concern
A business that is viable and able to continue in business for the foreseeable future.
Goodwill
An intangible asset that can be included in a balance sheet, it is the difference between the net assets of a business acquired and the price paid for the business.
Income statement
A financial statement that summarises the trading results of a business over a specific period. Usually one year.
Investment appraisal
Analytical techniques to help management evaluate the returns from potential investments, and to help choose between competing investments.
Liabilities
Amounts owed by a business to others.
Liquidity
The ability of a business to finance required payments to creditors.
Net present value
The present value of a series of future net cash flows that will result from an investment, minus the amount of the original investment.
Operating profit
The profit earned by a business from its entire trading operations. Stated before financing and tax.
Overtrading
Where a business suffers financial difficulties from expanding too quickly. Usually suffering set-up losses and increased working capital.
Payback period
The time it takes for a project to repay its initial investment.
Profit centres
A separately identifiable part of a business for which it is possible to identify revenues and costs and calculate a relevant profit.
Profit quality
The sustainability of profit from one period to the next. Higher quality profit is profit that is likely to be repeated rather than affected by one-off items.
Profitability
The amount of profit earned in a period or rate of profit earned compared with revenue.
Provisions
Amounts set aside to cover future costs or liabilities.
Ratio analysis
Interpretation of financial performance by calculating and interpreting ratios.
Retained earnings
Profits earned by a business that are kept in the business rather than distributed as dividends.
Revenue expenditure
Spending on day-to-day operation of the business. For example paying for materials.
Rights issue
The issue of new shares to existing shareholders in order to raise new finance. The new shares are usually offered at a significant discount to the existing share price to encourage take-up.
ROCE
A measure of the percentage return that a business earns from the capital employed in the business. Often referred to as the “primary ratio”.
Share capital
The amount invested into a company by shareholders.
Shareholder returns
The rewards earned by shareholders. Dividends paid to them and any increase in the value of their shares.
Stock turnover
A liquidity ratio that looks at how often a business rotates its stock during a year.
Trade creditors
Amounts that a business owes to its suppliers.
Trade debtors
Amounts that awe owed to a business from its customers.
Working capital
The net amount invested by a business to finance day-to-day trading: usually calculated as current assets less current liabilities.
Ansoff’s matrix
A strategic model for helping a business analyse the relationship between general strategic direction and suitable marketing strategies.
Average
A term for various measures of central tendency, including the mean, mode and median.
Competitive advantage
Skills, competences, resources and other advantages that enable a business to out-perform its competition.
Correlation
A measure of how close the relationship is between an independent variable and a dependent variable.
Customer relationship management (CRM)
The process of building a long-term, profitable relationship between a business and its customers.
Diversification
Part of Ansoff’s Matrix. The relatively risky strategy of trying to enter new markets with new products.
Extrapolation
The use of trends established by historical data to make predictions about future values.
Growth rate
The percentage growth over a particular period. Market growth rates are typically quoted in terms of percentage growth per year.
Market analysis
The process of analysing the size, structure and growth of a market in order to support marketing decisions.
Market development
A growth strategy where the business seeks to sell its existing products into new markets. From Ansoff’s matrix.
Market penetration
A relatively low-risk growth strategy where a business focuses on selling existing products into existing markets.
Market share
The proportion of a market revenue or sales volume that is captured by a business or Brand.
Marketing budget
Specific amounts that are allocated to activities in the marketing plan.
Marketing plan
The actions that management intend to take via the marketing mix in order to achieve marketing objectives.
Moving average
A calculation that takes a data series and smoothes the fluctuations in data to show a trend average.
Product development
A growth strategy where a business aims to introduce new products into existing markets.
Product positioning
The way in which the marketing function tries to create an image or identity in the minds of the target market.
Repositioning
Changing the marketing mix for a product to appeal to a different market segment.
Sales forecasting
Techniques for estimating the likely demand for a product in future periods.
Target market
The market segment or segments which a business is attempting to enter with the chosen marketing mix.
Test marketing
Launching a new product or service in a limited part of the target market in order to gauge the viability of the product and assess the most appropriate marketing mix.
Trend
A general direction in which something tends to move.
Capital intensity
The extent to which production or operations depend on investment in and use of capital.
Critical path analysis
Project management tool that uses network analysis to help manage complex and time sensitive operations.
Diseconomies of scale
Factors which result in higher unit costs as production output reaches too high a level.
Economies of scale
Cost advantages that a business can exploit as a result of expanding its scale of production. Economies of scale reduce the average unit cost of production.
Efficiency
A measure of the ability of a business to achieve the required level of production whilst minimising the use of resources being available to it.
Industrial inertia
Where a business decides to stay in its existing location despite potentially better locations being available to it.
Innovation
Putting a new idea or approach into action. The commercial exploitation of ideas.
Just-in-time
Method of lean production where production resources arrive at the moment they are required rather than being held in stock.
Kaizen
A cultural approach to lean production and quality assurance. Involves encouraging employees to constantly seek and implement small incremental changes to production in order to improve quality and efficiency.
Labour intensity
The extent to which production or operations depend on investment in and use of labour.
Labour productivity
The level of output per unit of labour.
Lead time
The period of time between an order being placed and being received.
Lean production
An approach to management that focuses on cutting out waste whilst still ensuring quality.
Marketing economies
Where marketing costs per unit sold can be lowered by spreading marketing costs over larger output.
Minimum efficient scale
The minimum output a business needs to achieve in order for it to be able to minimise unit costs.
Multinational
A business which owns operations in more than one country.
Network analysis
Breaking a project down into separate activities and their requirements.
Offshoring
Where a business has work done for it overseas.
Outsourcing
Where a business has work done for it by someone else.
Productivity
Measures of how effective a business is in turning resources into output.
Purchasing economies
Cost savings that arise from buying in bulk or from a more powerful relationship with a supplier due to increased output.
Quota
A restriction on the volume or quantity of a good that can enter or be sold in a market.
Scale
The size or output of a business, best measured relative to that of direct competitors.
Unit costs
The key measure of productive efficiency, calculated as total costs divided by total output (over a specific period).
Arbitration
An alternative to a court of law in determining legal and employment disputes. Involves a specialist outsider being asked to make a decision on a dispute.
Centralisation
An organisational structure where authority rests with senior management at the centre of the business.
Communication
The process by which a message or information is exchanged from a sender to a receiver.
Conciliation
A way of mediating industrial disputes to gain agreement without going to arbitration.
Core workers
Employees who are part of the core workforce of a business. Central to the business activities.
Decentralisation
An organisational structure where authority is delegated further down the hierarchy, away from the centre.
Delayering
The process of removing one or more layers from the organisational structure.
Downsizing
The reduction in the scale and resources of a business, usually involving job losses and/or the sale or closure of business units.
Flexible working
The range of employment options designed to help employees balance work and home live.
Gap analysis
Analysis of the difference between the workforce needs of a business and its current capabilities.
Hard HRM
An approach to HRM based on treating employees as resources in the same way as any other business resource.
HRM
Strategies for managing people in order to achieve business objectives.
Labour shortage
Where a business finds it does not have sufficient employees in number, or with the right skills and experience, for its needs.
Peripheral workers
Employees who are on the fringe of the core workforce. They are not essential workers, and their activities can often be outsourced or provided using flexible contracting.
Soft HRM
An approach to HRM based on treating employees as the most important resource in a business.
Staff turnover
The proportion of staff that leave their employment with a business over a period, usually measured over a year.
Team working
Individuals work in groups rather than focusing on their own specialised jobs.
Trade union
Organisations of employees who seek to negotiate their employment terms through collective bargaining.
Workforce planning
How a business determines how many and what kind of employees are required.
Works council
A formal meeting of employer and employees to consider issues affecting the business and workplace.
