Key terms for business Flashcards
Consumer goods:
the physical and tangible goods sold to the general public, they include durable consumer goods, such as cars and washing machines, and non-durable consumer goods, such as food, drinks and sweets than can be used only once.
Consumer services:
the non-tangible products sold to the general public – they include hotel accommodation, insurance services and train journeys.
Capital goods:
the physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles
Creating value:
increasing the difference between the cost of purchasing bough-in materials and the price the finished goods are sold for
Added value:
the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for
Opportunity cost:
the benefit of the next most desired option which is given up
Entrepreneur:
someone who takes the financial risk of starting and managing a new venture
Social enterprise:
a business with mainly social objectives than reinvests most of its profits into benefiting society rather than maximizing returns to owners.
Triple bottom line:
the three objectives of social enterprises: economic, social, and environmental.
Primary sector business activity:
firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms.
Secondary sector business activity:
firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes-making, and construction.
Tertiary sector business activity:
firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism, and telecommunications
Public sector:
comprises organizations accountable to and controlled by central or local government
Private sector:
comprises businesses owned and controlled by individuals or groups of individuals
Mixed economy:
economic resources are owned and controlled by both private and public sectors
Free-market economy:
economic resources are owned largely by the private sector with very little state intervention.
Command economy:
economic resources are owned, planned, and controlled by the state
Sole trader:
a business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits.
Partnership:
a business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
Limited liability:
the only liability – or potential loss – a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder
Private limited company:
a small to medium sized business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the general public
Share
a certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights
Shareholder:
a person or institution owning shares in a limited company
Public limited company:
a limited company, often a large business, with the legal right to sell shares to the general public – share prices are quoted on the national stock exchange
Memorandum of association:
this states the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorization and the declared aims of the business.
Articles of Association:
this document covers the internal workings and control of the business – for example, the names of directors and the procedures to be followed at meetings will be detailed.
Cooperative:
a jointly owned business that produces or distributes goods or services operated by members for their mutual benefit – as in consumers’ cooperatives or farmers cooperatives.
Franchise:
a business that uses the name logo and trading systems of an existing successful business.
Joint venture:
two or more businesses agree to work closely together on a particular project and create a separate business division to do so
Holding company:
a business organization that owns and controls a number of separate businesses, but does not unite them into one unified company
Public corporation:
a business enterprise owned and controlled by the state – also known as nationalized industry
Revenue:
total value of sales made by a business in a given time period
Capital employed:
the total value of all long-term finance invested in the business
Market capitalization:
the total value of a company’s issued shares
Market share:
sales of the business as a proportion of total market sales
Internal growth:
Internal growth: expansion of a business by means of opening new branches, ships, or factories (also known as organic growth)
Market share equation
(Total sales of business/Total sales of industry) x 100
Market capitalization equation.
Current share price x total number of shares issued.
SMART objectives:
Aims that are specific, measurable, achievable, realistic and time specific
corporate aim:
These are very long term goals that a business hopes to achieve
mission statement
A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups
corporate social responsibility
This concept applies to those businesses that consider the interests of society bu taking responsibility for the impact of their decisions and activities on the customers, employees, communities and the environment
Management by objectives:
a method of coordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager and employee
ethical code (code of conduct)
a document detailing a company’s rules and guidelines on staff behaviour that must be followed by all employees
stakeholders
People or groups of people who can be affected by - and therefore have an interest in - any action by an organisation
stakeholder concept:
The view that businesses and their managers hav responsibilities to a wide range of groups, not just shareholders
corporate social responsibility:
The concept that accepts that businesses should consider the interests of society in their activities and decisions, beyond the legal obligations that they have
Manager
responsible for setting objective, organising rescuers and motivating staff so that the organisation’s aims are met
leadership
The art of motivating a group of people towards achieving a common objective
autocratic leadership
A style of leadership that keeps all decision making at the centre of the organisation
democratic leadership
A leadership style that promotes the active participation of workers in taking decisions
paternalistic leadership
A leadership style based on the approach that the manager is in a better position than the workers to know what is best for an organisation
Laissez-faire leadership:
a leadership style that leaves
much of the business decision-making to the workforce – a
‘hands-of ’ approach and the reverse of the autocratic style.
Informal leader:
a person who has no formal authority but
has the respect of colleagues and some power over them.
Emotional intelligence (EI):
the ability of managers to
understand their own emotions, and those of the people
they work with, to achieve better business performance.
Motivation:
the internal and external factors that
stimulate people to take actions that lead to achieving
a goal
Self-actualisation:
a sense of self-fulfilment reached by
feeling enriched and developed by what one has learned
and achieved.
Motivating factors (motivators):
aspects of a worker’s
job that can lead to positive job satisfaction, such as
achievement, recognition, meaningful and interesting work
and advancement at work
Hygiene factors:
aspects of a worker’s job that have the
potential to cause dissatisfaction, such as pay, working
conditions, status and over-supervision by managers.
Job enrichment:
aims to use the full capabilities of
workers by giving them the opportunity to do more
challenging and fulfilling work.
Time based wage rate:
payment to a worker made for
each period of time worked, e.g. one hour.
Piece rate:
a payment to a worker for each unit produced.
Commission:
a payment to a sales person for each sale made.
Salary:
annual income that is usually paid on a
monthly basis.
Bonus:
a payment made in addition to the contracted
wage or salary.
Profit sharing:
a bonus for staf based on the profits of
the business – usually paid as a proportion of basic salary
Performance-related pay:
a bonus scheme to reward
staf for above-average work performance.
Fringe benefits:
benefits given, separate from pay, by an
employer to some or all employees.
Job rotation:
increasing the flexibility of employees
and the variety of work they do by switching from one
job to another.
Job enlargement:
attempting to increase the scope of a
job by broadening or deepening the tasks undertaken.
Job redesign:
involves the restructuring of a job – usually
with employees’ involvement and agreement – to make
work more interesting, satisfying and challenging.
Quality circles:
voluntary groups of workers who meet
regularly to discuss work-related problems and issues.
Worker participation:
workers are actively encouraged
to become involved in decision-making within the
organisation.
Team-working:
production is organised so that groups of
workers undertake complete units of work.
Human resource management (HRM):
the strategic approach to the effective management of an organisation’s workers so that they help the business gain a competitive advantage.
Recruitment:
the process of identifying the need for a new
employee, defining the job to be filled and the type of person
needed to fill it and attracting suitable candidates for the job.
Selection:
involves the series of steps by which the
candidates are interviewed, tested and screened for
choosing the most suitable person for vacant post.
Job description:
a detailed list of the key points about the
job to be filled – stating all its key tasks and responsibilities
Person specification:
a detailed list of the qualities, skills
and qualifications that a successful applicant will need
to have.
Labour turnover:
measures the rate at which employees
are leaving an organisation. It is measured by:
number of employees leaving in 1 year / average number of people employed × 100
Employment contract:
a legal document that sets out
the terms and conditions governing a worker’s job.
Training:
work-related education to increase workforce
skills and efficiency.
Induction training:
introductory training programme
to familiarise new recruits with the systems used in the
business and the layout of the business site.
On-the-job training:
instruction at the place of work on
how a job should be carried out.
Of -the-job training:
all training undertaken away from
the business, e.g. work-related college courses.
Employee appraisal:
the process of assessing the
effectiveness of an employee judged against pre-set
objectives.
Dismissal:
being dismissed or sacked from a job due to
incompetence or breach of discipline.
Unfair dismissal:
ending a worker’s employment contract
for a reason that the law regards as being unfair.
Redundancy:
when a job is no longer required, the
employee doing this job becomes unnecessary through
no fault of their own
Work–life balance:
a situation in which employees are
able to give the right amount of time and ef ort to work and
to their personal life outside work, for example to family or
other interests.
Equality policy:
practices and processes aimed at
achieving a fair organisation where everyone is treated
in the same way and has the opportunity to fulfil their
potential.
Diversity policy:
practices and processes aimed at
creating a mixed workforce and placing positive value on
diversity in the workplace.
Marketing
The management task that links the business to the customer by identifying and meeting the needs of customers profitably - it does this by getting the right product at the right price to the right place at the right time
Marketing objectives:
The goals set for the marketing departments to help the business achieve its overall objectives
marketing strategy
Long term plan established for achieving marketing objectives
Market orientation:
an outward-looking approach basing
product decisions on consumer demand, as established by
market research.
Asset-led marketing:
an approach to marketing that
bases strategy on the firm’s existing strengths and assets
instead of purely on what the customer wants.
Product orientation:
an inward-looking approach
that focuses on making products that can be made –
or have been made for a long time – and then trying
to sell them.
Societal marketing:
this approach considers not only the
demands of consumers but also the ef ects on all members
of the public (society) involved in some way when firms
meet these demands
Demand:
the quantity of a product that consumers are
willing and able to buy at a given price in a time period.
Supply:
the quantity of a product that firms are prepared
to supply at a given price in a time period.
Equilibrium price
the market price that equates supply and demand for a product
Market size
The total level of sales of all producers within a market
Market growth
the percentage change in the total size of a market (volume or value) over a period of time
Market share
the percentage of sales in the total market
sold by one business. This is calculated by the following
formula:
firm’s sales in time period/ total market sales in time period x 100
Direct competitor:
businesses that provide the same or
very similar goods or services.
USP
− unique selling point (or proposition): the special
feature of a product that differentiation it from competitors’ products.
Product diferentiation:
making a product distinctive
so that it stands out from competitors’ products in
consumers’ perception.
Niche marketing:
identifying and exploiting a small
segment of a larger market by developing products to suit it.
Mass marketing:
selling the same products to the whole
market with no attempt to target groups within it.
