Definitions Flashcards
Needs
Goods or services we need to survive
Opportunity Cost
is the next best alternative given up by choosing another item
Purpose of Business Activity
Business satisfies peoples (consumers) wants
Scarcity
is the lack of sufficient products to fulfil the total wants of a population
Specialisation
occurs when people and businesses concentrate on what they are best at
Value Added
Selling price - cost of bought-in materials
Wants
Good or service people want but aren’t essential for survival
Primary Sector
Using natural resources to make raw materials for business
Secondary Sector
Manufacturing goods from raw materials
Tertiary Sector
A business that provides services to consumers and other businesses
Private sector
Part of the economy owned and controlled by private individuals
Economic Problem
there exist unlimited wants but limited resources to producee the goods and services to satisfy those wants this creates scarcity
Business Plan
A document setting out a businesses objectives and how it will achieve them
Entrepreneur
Someone who invests capital, takes a risk and starts up and operates a new business venture
External Growth
Business expansion, taking over or merging with another business
Grant
Capital given by a government to a business to assist with start-up costs, innovation or business growth
Internal Growth
Business expansion without taking over or merging with another business (organic growth)
Franchise
Buying the license to use another companies logo and sell their products
Incorporated Business
Business is a separate legal entity - separation between owners and the company
Joint Venture
Two companies share capital and expertise on a project they share risks and profits
Limited Liability
Owners responsibility for company debts restricted to what they have invested in the business
Partnership
Two or more people join to set up a business. Shared decision making, capital invested and risk
Private Limited Company
Incorporated business with shares sold to friends and family
Public Corporation
Government-owned organisation set up to provide service to the public
Public Limited Company
Incorporated business with shares sold to the general public, limited liability
Public Sector
Part of the economy owned and controlled by the government
Sole Trader
A business owned by one person who is responsible for all decisions, capital invested and risk
Unincorporated Business
No separation between the company and the owners in law
Business Objectives
Aims or targets a business sets out to achieve
External Stakeholders
Individual or group outside the business impacted by the business activity (customers, suppliers, government, local community)
Internal Stakeholders
Individual or group inside the business impacted by the business activity (owners/shareholders, managers, employees)
Social Enterprise
A private enterprise which uses profits to pursue environmental or social objectives
Unlimited Liability
Owners personal assets may be taken to pay for debts of the company
Bonus
An extra reward given to employees for reaching a certain target;
Commission
Salespeople are given a % of the selling price if they make a sale;
Herzberg’s Hygiene Factors
Basic employee needs which must be fulfilled before employees can be motivated;
Job enrichment
Employees are given additional responsibility in their day to day tasks
Job rotation
Employees switch simple tasks for a short time;
Labour turnover
The number of employees leaving a business in a year and is calculated as a share of the total workforce;
Maslow’s hierarchy of needs
Ranks human needs in order from survival needs to self-actualisation;
Motivation
Motivation is the reason why employees work hard and effectively for a business;
Opportunities for promotion
Rewarding employees with positions of higher status or responsibility in the business;
Profit Sharing
Employees get rewarded with a % of the firm’s profits annually;
Salary
Fixed payment usually paid monthly;
Taylor’s Motivational Theory
Viewed workers as machines
Team working
Groups of employees are given responsibility for a specific project
Wages
Payment for work usually paid weekly;
Autocratic Leadership
The leader makes all decisions
Chain of command
The path through which authority is passed down through an organisation;
Delegation
Passing responsibility to subordinates to complete tasks;
Democratic leadership
Leader consults with employees before making a decision
Lassez-Faire Leadership
A “hand’s off” approach to leadership where most decisions and responsibility are delegated to employees;
Span of control
No of subordinates who report to each manager/supervisor;
Functions of management
Planning
Discrimination
Treating an employee differently because of age
Dismissal
End of employment due to underperformance or breaking company regulations;
External recruitment
Hiring an employee for a post not currently employed by the business;
Healthy and safety
Responsibility to ensure the workplace is safe and no accidents occur;
Induction training
Training to familiarise new employees with the workplace
Internal recruitment
Hiring an employee for a post currently employed by the business in another post;
Job Advertisement
Tells potential applicants about the job
Job description
Duties and responsibilities of a position;
Legal minimum wage
Government sets the minimum pay rate for workers within a country;
Off the job training
Training off-site at a college or specialist training location;
On the job training
Training at the workplace under the direction of an experienced employee;
Recruitment and Selection
Finding and choosing the correct candidate for the vacant job post;
Short-listing
Choosing the most suitable candidates to invite to interview;
Trade Union
An organisation of employees who aim to improve the pay and conditions of their members;
Training
Improving the knowledge and skills of employees so they perform their jobs more effectively;
Unfair dismissal
Ending a work contract without proper or legal justification;
Interview
Employers ask potential employees questions to decide if they are suitable for the job;
Redundancy
Losing employment as the position no longer exists
Communication (effective)
The message is passed to intended recipients and understood with feedback to confirm understanding;
Communication barriers
Anything that prevents receiving and understanding messages
Brand
A name image or logo which distinguishes a product or service from competitors
Brand image
The general impression that a brand presents to consumers
Building customer relationships
Building strong relationships to ensure customer loyalty
Customer loyalty
Consumers who make repeated purchases of a specific product or brand
Market
Where businesses sell
Market orientated
Products or services developed in response to market research data
Market segmentation
Splitting a market into smaller parts based on consumer characteristics
Market Share
Revenue of a business as a % of the total market revenue
Marketing
The process a business undertakes to promote the buying or selling of a product or service
Mass marketing
Selling the same product to a whole market
Niche marketing
Developing product for a small market segment
Product oriented
A business decides what to produce
Target Market
All potential consumers who have an interest in buying a product and the money to do so
Cost plus pricing
Adding a fixed price to the cost of making or buying a product
Focus groups
A small group of potential consumers discuss a product or service led by a market researcher
Market research
Collecting and analysing data about customers
Primary research
First-hand data collected specifically for a business needs
Sampling
Taking a representative sample from the target market to complete market research
Secondary research
Collection of data from second hand resources
Advertising
Influencing the buying behaviour of consumers with a persuasive selling message about products
Competitive pricing
Setting a price close to competitors’ products in the same market
Distribution channels
The path a product takes from producer to consumer
E-commerce
Selling products and services over the internet
Extension strategies
Strategies to lengthen the maturity stage of a product
Marketing Mix
Four marketing decisions required for the successful marketing of a product or service (4p’s or 4c’s)
Packaging
The wrapping material around a consumer item that serves to contain
Penetration pricing
Setting a low price to attract consumers to buy a new product
Personal Selling
Salesperson aims to convince the customer in buy a product
Price elasticity of demand
How much demand is affected by a change in price
Price skimming
Setting a high price for a new unique product which has no direct competitor in the market
Product development
The creation of products with new or different characteristics that offer new or additional benefits to the customer
Product life cycle
Pattern of sales from introduction to withdrawl from the market
Promotional pricing
Reducing the price of a product or services in short-term to attract more customers & increase the sales volume
Sales Promotion
Incentives used to encourage short-term increases in sales or repeat purchases
Social media marketing
Using social media websites and social networks to market a company’s products and services
Sponsorship
A business pays to have its name linked to an event or sporting team
Licensing
An agreement in which one company gives another company permission to manufacture its product for a payment
Marketing Strategy
Plan to achieve marketing targets with set resources
Batch production
Producing goods in batches where all products must pass through one stage of production before moving onto the next
Efficiency
Making the best possible use of resources. Maximising outputs from inputs
Flow production
Constantly producing large quantities of identical goods
Inventory
Stock of work in progress
Job production
Producing a unique product
Just in time (inventory management)
Inventory management method where supplies arrive exactly when needed in the production process
Kaizen
Constantly introducing small changes in a business in order to improve quality and/or efficiency
Labour productivity
How efficiently workers produce output
Lean Production
Production of goods and services with maximum efficiency and minimum waste
Operations management
The process of production of goods and services
Production
The process of converting inputs like (raw materials and components) into finished products
Productivity
Measure of efficiency calculated by dividing outputs by inputs
Average costs
It is the total cost of production divided by total output (sometimes known as unit cost)
Break even
Achieving quality production by designing every process to get the product ‘right first time’ and preventing mistakes
Diseconomies of scale
They are the factors that lead to an increase in average costs as a business grows beyond a certain size
Economies of scale
They are the factors that lead to a reduction in average costs as a business increases in size
Fixed costs
Cost which do not vary in the short run with the number of items sold or produced. They have to be paid wheter the business is paying any sales or not. They are also known as overhead costs.
Margin of safety
Difference between the current level of output and break-even point
Total Costs
They are fixed and variable costs combined
Variable costs
They are costs which vary directly with the number of items sold or produced
Quality assurance
Achieving quality production by designing every process to get the product ‘right first time’ and preventing mistakes
Quality control
Checking quality through inspection at the end of the production process
Debt Finance
Borrowing money from a bank which must be repaid with interest
Equity Finance
Selling shares in the business to raise finance rather than borrowing
Internal Sources of Finance
Finance sourced from inside the business
Loan
Bank lends a fixed amount for an agreed time period
Long term finance
Finance required for periods usually longer than one year
Micro Finance
Lending small amounts of finance small business people to those who can’t access finance from another source
Overdraft
Banks allow businesses to take additional money out of their account up to a certain limit
Owners savings
Using owners’ own savings to finance the business
Sale of assets
Selling equipment /machinery/inventory to raise finance for a business
Short-term Finance
Finance required for short periods usually less than one year
Start Up Capital
Money required to set up a business and keep the business operating until the business breaks even
Trade Credit
When the business delays paying its suppliers,which leave the business in a better cash position
Cash flow
Cash flow in and out of the business over a period of time
Cash flow forecast
Estimate of future cash inflows and outflows usually calculated month by month to ensure there is enough cash to pay short-term debts
Cash Inflow
Cash going into a business
Cash outflow
Cash going out of the business
Crowd Funding
Raising finance by raising small amounts of money from many people
Net cash flow
Cash inflows - cash outflows
Trade receivables
Sales made by a business
Working Capital
Capital available to a business day to day to pay short-term debts (Current Assets – current liabilities)
Profit
Sales revenue minus total costs of making a product/service
Retained Profit
Reinvesting profits back into the business
Account Payable
Unpaid bills or payment owed by a business which must be paid (current liability)
Assets
Items of value owned by the business like buildings
Capital Employed
Money invested in a business (buildings
Current Assets
Items of value that the business won’t keep for longer than a year
Liabilities
Debts owed by the business
Non current assets
Items of value the business will keep longer than one year
Non-current liabilities
Debts which will last longer than one year
Business cycle
The business cycle tracks the size of the economy as it increases and decreases and goes through four phases – growth
Economy
Everything which is produced and consumed within a country
Globalisation
Increased interconnectedness and worldwide movement of goods
Government Spending
Government investment on infrastructure or spending on welfare payments
Gross Domestic Product
Gross Domestic Product measures the size of the economy. Calculated by adding up the value of all the goods and services produced in one country in on year
Inflation
Prices and salaries rise so the value of money – what you can buy - decreases
Quotas
A limit on imports
Recession
Economy is decreasing in size
Business ethics
“Doing the right thing”. Basing business decisions on what is morally right
External benefits
The positive impact of business activity which doesn’t benefit the business but positively affects the rest of society
External costs
The costs of business activity which aren’t paid by the business but by society
Multinational corporations (MNC)
Businesses that sell goods/services or have production in more than one country
Pressure Groups
Group that tries to influence business or consumer activity in the interest of a particular cause
Repatriating profits
Taking profits earned in a foreign market and transferring to the home country of the business
Sustainable development
Achieving development (growth) without negatively impacting the environment
Currency appreciation
Value of a currency rises
Currency depreciation
Value of a currency falls
Exchange rate
The price of one currency for another
Interest Rates
The cost of borrowing money. Lower interest rates means higher spending and greater economic activity
Tariffs
A tax on imports
