Chapter 1

Question 1

The process of creating goods and/or services using the factors of production available to the business

Answer 1

Production

Question 2

A decision-making organization established to produce goods and/or provide services.

Answer 2

Business

Question 3

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.

Answer 3

Wants

Question 4

The function of an organization responsible for ensuring that the business has sufficient funds in order to conduct its daily operations.

Answer 4

Finance + accounts

Question 5

The basic necessities that an individual must have in order to survive, such as food, water, and shelter.

Answer 5

Needs

Question 6

The individuals who take risks in overseeing a business organization or business venture, usually in pursuit of profit.

Answer 6

Entrepreneurs

Question 7

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.

Answer 7

Quaternary sector

Question 8

The practice of producing a good or service that is worth more than the cost of the resources used in the production process.

Answer 8

Adding Value

Question 9

Refers to businesses involved in the cultivation or extraction of natural resources, such as farming, mining, quarrying, fishing, oil exploration, and forestry.

Answer 9

Primary Sector

Question 10

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.

Answer 10

Privately held company

Question 11

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.

Answer 11

limited liability

Question 12

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).

Answer 12

Stock market/stock exchange

Question 13

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.

Answer 13

Public Sector

Question 14

An organization which is owned by a single entrepreneur who has exclusive responsibility for the running of the business.

Answer 14

Sole Trader

Question 15

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.

Answer 15

Non-governmental organizations

Question 16

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.

Answer 16

Incorporation (incorporated)

Question 17

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.

Answer 17

Social Enterprises

Question 18

Refers to the declaration of an organization’s overall purpose. It forms the foundation for setting the objectives of a business.

Answer 18

Mission Statement

Question 19

These are moral guidelines or codes of practice which govern good organizational behaviour.

Answer 19

Ethics

Question 20

The relatively short-term and specific goals of a business. These targets are used to guide the daily functioning of the organization.

Answer 20

Tactical Objectives

Question 21

This is an organization’s decisions and actions that impact society in a positive way.

Answer 21

Corporate social responsibility (CSR)

Question 22

The longer-term goals of a business, such as profit maximization, growth, market standing, and increased market share.

Answer 22

Strategic Objectives

Question 23

Refer to organizational goals based on moral guidelines, determined by the business and/or society, which direct and determine decision-making.

Answer 23

Ethical Objectives

Question 24

The various plans of action that businesses use to achieve their targets. They are the long-term plans of the organization as a whole.

Answer 24

Strategies

Question 25

An organization’s long-term aspirations, i.e. where the business ultimately wants to be.

Answer 25

Vision Statement

Question 26

A succinct and motivating declaration of an organization’s purpose of existence, who they are, and what they do.

Answer 26

Mission Statement

Question 27

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.

Answer 27

Objectives

Question 28

Refers to the documented beliefs and philosophies of an organization, so that people know what is considered acceptable or not acceptable within the organization.

Answer 28

Ethical Code of Practice

Question 29

The short-term methods, often on a daily basis, are used to implement business strategy.

Answer 29

Tactics

Question 30

Peter Drucker’s framework for setting organisational objectives, should be specific, measurable, agreed upon (or achievable), realistic (or relevant), and time-bound.

Answer 30

SMART objectives

Question 31

Also known as organic growth, this takes place when an organization expands without the help of an external partner firm.

Answer 31

Internal Growth

Question 32

Also known as organic growth, this takes place when an organization expands without the help of an external partner firm.

Answer 32

Internal Growth

Question 33

A form of external growth whereby two (or more) firms agree to form a new organization, thereby losing their original identities.

Answer 33

Merger

Question 34

Larger businesses can afford to hire specialist functional managers, thus improving the organization’s efficiency and productivity.

Answer 34

Managerial economies of scale

Question 35

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.

Answer 35

Diseconomies of scale

Question 36

An external growth method that involves two or more organizations agreeing to create a new business entity, usually for a finite period of time.

Answer 36

Joint venture

Question 37

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).

Answer 37

Economies of scale

Question 38

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.

Answer 38

Synergy

Question 39

Cost savings by greater use of large-scale mechanical processes and specialist machinery, e.g., mass production techniques.

Answer 39

Technical economies of scale

Question 40

This external growth method occurs when one company buys another business that is closer to the consumer in the chain of production.

Answer 40

Forward vertical integration