Unit 1 key terms Flashcards
Adding value
The process of producing a particular good or service that is worth more than the cost of the resources used to produce it
Business
A decision-making organization established to produce goods and/or provide services
Consumers
Individuals who use a product
Customers
Individuals who buy a product
Entrepreneurs
Individuals who take risks in overseeing a business organization or business venture, usually in pursuit of knowledge
Entrepreneurship
The knowledge, skill and experiences of individuals who have the ability to manage the overall production process
Factors of production
The collective terms for the resources used in the production process i.e Land, Labour, Capital and Entrepreneurship
Finance and accounts
Function of an organization responsible for ensuring that the business has sufficient funds in order to conduct its daily operations
Goods
Tangible (physical) products
Human Resources (HR)
The business function that handles all aspects of a firm’s operations related to staff within an organization
Marketing
Business function identifying the needs and wants of customers so that the organization can provide the goods and services to meet these requirements and desires in a profitable way
Needs
The basic necessities that an individual needs in order to survive
Operations/ Operation management
The business function that refers to the process of making goods and providing services from the available resources of a business to meet the needs and wants of its customers
Primary sector
Business activity involved in the extraction of natural resources
Production
The process of creating goods and/or services using the factors of production available to the business
Quaternary sector
Business activity involved in the creation or sharing of knowledge and information
Secondary sector
Business activity involved in the manufacturing or construction of finished products
Services
Intangible products
Tertiary Sector
Business activity involved in providing services to customers
Value added
The value between the cost of factor inputs in the production and the price that the final output is sold for
Wants
The desires of individual customers
Companies (corporations)
Refers to any business organization that’s owned by its shareholders, who have limited liability. They comprise of private and publicly held companies
Cooperatives
These are for-profit social enterprises owned and run by their members, Their primary goal is to create value for their member owners
Deed of partnership
A legally binding contract that all joint owners of a partnership sign. stating the purpose of a business, the formal rights of the partners and how many profits should be split
Incorporation (incorporated)
This means that there is legal difference between the owners (shareholders) and the business entity itself. Ensures that the owners are protected by limited liability.
Initial public offering (IPO)
Occurs when an organization sells all or part of its business to shareholders on a public stock exchange for the first time. This changes the legal status of the business to publicly held company
Limited liability
The legal status of a business enables its shareholders not to liable for more than the original money they invested into the business
Limited partnership
This is a special type of partnership where one or more partners contributes capital and enjoys a share of the profits but does not participate in the running of the business. However, at least one partner must have unlimited liability.
Non-governmental organizations (NGOs)
A type of non-profit organization (NPO) which operates in the private sector of the economy for the benefit of others in society rather than its shareholders
Partnerships
A business alliance consisting between 2 and 20 individual owners who are jointly responsible for the business
Private sector
The section of the economy that is made up of businesses that are owned by individuals or groups of individuals rather than the government
Privately held company
The is a business owned by shareholders with limited liability but the shares cannot be traded on the public stock exchange
Publicly held company
This is a business owned by shareholders. The shares can be bought and sold on the general stock exchange without prior approval of existing owners.
Public sector
Businesses in this section of the economy are run and owned by the government in order to provide essential services for society as a whole
Sleeping partner (silent partner)
An investor in a partnership who does not get involved in the daily running and management of the organization
Social enterprises
These organizations are revenue generating businesses with social objectives at the core of their operations in order to benefit the general public rather than the private shareholders
Sole trader
An organization which is owned by a single entrepreneur who has exclusively responsibility for the running of the business
Stock exchange
This is any marketplace where the general public and other companies can buy and/or sell shares
Unlimited liability
This means that the owners of a business is personally liable for any business debts, even if it requires the debts to be settled by selling off personal assets
Corporate social responsibility (CSR)
This is an organization’s decision and actions that impact society in a positive way
Ethical code of practice
The formal documented philosophies and values of a business so that stakeholders know what is considered acceptable or not acceptable within the organization
Ethical objectives
Organizational gals based on moral guidelines that determine decision making
Ethics
These are moral guidelines or codes of practice which govern good organizational behaviour
Mission statement
A declaration of an organization’s purpose of existence, who they are and what they do
Objectives
Clearly defined targets of a business in order to achieve its aims.
SMART objectives
Framework for setting organizational objectives which are specific, measurable, achievable, relevant and time-bound
Strategic objective
The long term goals of a business which could include profit maximization, growth and increased market share
Strategies
Various long term plans of action and approaches used by a business to achieve its goals
Tactic
Short term methods, often on a daily basis, used to implement business strategy
Tactical objectives
The relatively short term and specific goals of a business. They are used to guide the daily functioning of the organization
Vision statement
An inspiring declaration of what an organization ultimately strives to be or to achieve in the distant future
Arbitration
Methods of stakeholder conflict resolution with all stakeholder groups in conflict agreeing to accept the decision or judgement of the independent arbitrator
Competitors
The firm’s rivals, which operate in the same industry and contest for the same customers
Conciliation
Method of stakeholder conflict resolution which aims to align the incompatible interests of different stakeholder groups by helping different parties to better understand each others interests
Conflict
Refers to mutually exclusive and incompatible interests of different stakeholder groups. If this is not manged, it often leads to protracted disagreements, disputes and arguments in the workplace
Customers
The firm’s clients, individuals and other businesses who purchase the organizations goods and/or services.
Directors (executives)
Group of senior managers who run a company on behalf of the owners of the company
Employees
These are the workers within and organization.
External stakeholders
Stakeholder groups that are not directly involved in the running of an organization but have direct interest in its operations
Financiers
Financial institutions and individual investors who provide a source of finance for businesses.
Government
The ruling authority within a state or nation.
Internal stakeholders
These stakeholders are part of the organization such as employees, managers, directors and shareholders
Local community
The general public and local businesses that have a direct interest in the activities of the organization and the firm’s ability to create jobs and to operate in a socially responsible way
Managers
The people hired to be responsible for overseeing certain functions, operations or departments within an organization
Pressure groups
Individuals who comes together or organizations that are set up for a common concern.
Shareholders
The people or organizations that have shares in a company, their interests are financial
Stakeholder conflict
Refers to differences in the varying needs, perspectives and priorities of the numerous stakeholder groups of an organization
Stakeholder mapping
A business management model used to determine the relative interest of stakeholders and their level of influence on an organization
Stakeholders
The individuals, organizations or groups with a vested interested in the actions and outcomes of a specific organization. They are directly affected by the performance of the business
Suppliers
Organizations that provide the goods and support services for other businesses.
Acquisition
A method of external growth that involves one company buying a majority stake in another with the agreement and approval of the target company’s board of directors
Backwards vertical integration
A method of external growth that involves a company buying another company that is further away from the consumer in the chain of production
Conglomerate
The form of external growth that occurs when two or more businesses in unrelated industries integrate through a merger, acquisition or takeover
Demerger
Occurs when a company sells off a part of its business, thereby separating into two or more separate entities.
Diseconomies of scale
Excessive growth that results in inefficiencies and higher average costs of production
Economies of scale
Lowering of average costs by increasing size of its operations and its efficiency
External EOS
Category of EOS that occurs when a firms avg cost of production falls as the industry grows (al firms in the industry benefit)
External growth
Takes place when an organization requires the support of a partner organization for its growth
Financial EOS
Banks and other lenders charge lower interest to larger businesses for overdrafts, loans, and mortgages as they represent lower risk
Forward vertical integration
External growth that occurs when a company buys another business that is closer to the consumer in the chain of production
Franchise
Growth strategy that involves the right to trade using another company’s products, brand name and corporate logo
Franchising
Growth method that involves two parties in which the franchisor gives the licensing rights to a franchisee to ell goods and services using the franchisor’s brands and products
Horizontal integration
External growth strategy where a merger, acquisition or takeover takes place between two or more companies operating within the same industry (reducing competition)
Internal DOS
Higher unit costs of production that occur due to internal problems of mismanagement as a business organization grows
Internal EOS
Category of EOS that occurs for and within a particular organization as it grows in size
Internal growth
Takes place when an organization expands without the help of an external partner firm
Joint venture
An external growth method that involves two or more organizations agreeing to create a new business entity usually for a finite period of time
Lateral integration
External growth method involving two or more firms in a merger, improves organizations efficiency and productivity
Marketing EOS
Larger businesses can spread their fixed costs of marketing by promoting and advertising a greater range of brands and products
Managerial EOS
Larger business can afford to hire specialist functional managers, improving the organizations efficiency and productivity
Merger
External growth that involves two or more companies agreeing to form a single, larger company thereby benefiting from operating on a larger scale
Optimal output level
The level of output where the avg cost of production is at its lowest value, so profit is maximized
Purchasing EOS
Larger firms can gain huge cost savings by buying vast quantities of stock
Risk bearing EOS
Large businesses can bear greater risks due to a greater product portfolio.
Specialization EOS
Larger firms can afford to hire and train specialist workers which boosts output, efficiency, productivity etc.
Strategic alliances
Formed when two or more organizations join to benefit from external growth without having to set up a new separate legal entity
Synergy
Key benefit of growth when the whole is greater than the sum of the individual parts. Creates greater levels of outputs and efficiency
(Hostile) Takeover
Occurs when a company buys a controlling interest in another firm without the prior agreement or approval of the target company’s board of directors
Target company
The business that is the focus of being bought out by the purchasing company in an acquisition or takeover
Technical EOS
Cost savings by greater use of large-scale mechanical processes and specialist machinery
Vertical integration
When an acquisition or takeover occurs between two companies operating in different industries
Foreign direct investment (FDI)
Refers to cross-border investment in which a foreign company establishes an ongoing and significant stake in its operations in another economy
Host country
A nation that allows an MNC to set up in its country
Globalization
Refers to the process of greater integration and interdependence of businesses and economies throughout the world
Gross domestic product (GDP)
A measure of the monetary value of a country’s annual output or its national income.
Multinational company (MNC)
A business that operates in two or more countries or is legally registered in more than one country
Protection policies
These are measures imposed by a country to reduce the competitiveness of imports.
