Chapter 1 Flashcards
The process of creating goods and/or services using the factors of production available to the business
Production
A decision-making organization established to produce goods and/or provide services.
Business
These are the desires of individual customers, i.e., the goods and services that they would like to have (rather than things they need to survive), such as a new smartphone, a family holiday in an overseas location, fresh flowers, or jewellery.
Wants
The function of an organization responsible for ensuring that the business has sufficient funds in order to conduct its daily operations.
Finance + accounts
The basic necessities that an individual must have in order to survive, such as food, water, and shelter.
Needs
The individuals who take risks in overseeing a business organization or business venture, usually in pursuit of profit.
Entrepreneurs
A sub-category of the tertiary sector, where businesses are involved in intellectual and knowledge-based activities that generate and share information, such as research organizations.
Quaternary sector
The practice of producing a good or service that is worth more than the cost of the resources used in the production process.
Adding Value
Refers to businesses involved in the cultivation or extraction of natural resources, such as farming, mining, quarrying, fishing, oil exploration, and forestry.
Primary Sector
A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public on a Stock Exchange.
Privately held company
This legal status of a business enables its shareholders (business owners) not to be liable for more than the original amount of money invested in the business.
limited liability
A marketplace for trading stocks and shares of publicly held companies (or public limited companies). Examples include the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE).
Stock market/stock exchange
Refers to the part of the economy controlled by the government. Examples include state healthcare and education services, emergency services, social housing, and national defence.
Public Sector
An organization which is owned by a single entrepreneur who has exclusive responsibility for the running of the business.
Sole Trader
The private sector not-for-profit social enterprises that operate for the benefit of others rather than primarily aiming to earn a profit, such as Oxfam and Friends of the Earth.
Non-governmental organizations
This means that there is a legal difference between the owners of a company (the shareholders) and the business entity itself. This ensures that the owners are protected by limited liability.
Incorporation (incorporated)
Refer to revenue-generating businesses with social objectives at the core of their operations. They can be for-profit or non-profit business entities, but all profits or surpluses must be reinvested for that social purpose rather than being distributed to shareholders and owners.
Social Enterprises
Refers to the declaration of an organization’s overall purpose. It forms the foundation for setting the objectives of a business.
Mission Statement
These are moral guidelines or codes of practice which govern good organizational behaviour.
Ethics
The relatively short-term and specific goals of a business. These targets are used to guide the daily functioning of the organization.
Tactical Objectives
This is an organization’s decisions and actions that impact society in a positive way.
Corporate social responsibility (CSR)
The longer-term goals of a business, such as profit maximization, growth, market standing, and increased market share.
Strategic Objectives
Refer to organizational goals based on moral guidelines, determined by the business and/or society, which direct and determine decision-making.
Ethical Objectives
The various plans of action that businesses use to achieve their targets. They are the long-term plans of the organization as a whole.
Strategies
An organization’s long-term aspirations, i.e. where the business ultimately wants to be.
Vision Statement
A succinct and motivating declaration of an organization’s purpose of existence, who they are, and what they do.
Mission Statement
Refers to what an organization strives to achieve. They are the goals of an organization, such as growth, profit, protecting shareholder value, and ethical objectives.
Objectives
Refers to the documented beliefs and philosophies of an organization, so that people know what is considered acceptable or not acceptable within the organization.
Ethical Code of Practice
The short-term methods, often on a daily basis, are used to implement business strategy.
Tactics
Peter Drucker’s framework for setting organisational objectives, should be specific, measurable, agreed upon (or achievable), realistic (or relevant), and time-bound.
SMART objectives
Also known as organic growth, this takes place when an organization expands without the help of an external partner firm.
Internal Growth
Also known as organic growth, this takes place when an organization expands without the help of an external partner firm.
Internal Growth
A form of external growth whereby two (or more) firms agree to form a new organization, thereby losing their original identities.
Merger
Larger businesses can afford to hire specialist functional managers, thus improving the organization’s efficiency and productivity.
Managerial economies of scale
Growth that is excessive results in inefficiencies and higher average costs of production, perhaps due to problems such as miscommunication, misunderstandings, and poor management of resources.
Diseconomies of scale
An external growth method that involves two or more organizations agreeing to create a new business entity, usually for a finite period of time.
Joint venture
These are cost-saving benefits enjoyed by a business as it increases the size of its operations, i.e. lower average costs (the cost per unit).
Economies of scale
Often referred to as “1 + 1 = 3”, this is a key benefit of growth which occurs when the whole is greater than the sum of the individual parts. A larger company, with synergy, through a merger, acquisition, or takeover creates greater levels of output and improved efficiency.
Synergy
Cost savings by greater use of large-scale mechanical processes and specialist machinery, e.g., mass production techniques.
Technical economies of scale
This external growth method occurs when one company buys another business that is closer to the consumer in the chain of production.
Forward vertical integration
