Unit 2: Growing as a Business Flashcards
Merger
An agreement between business owners to combine two businesses owners and operate as a larger one
Takeover
Purchasing another business from it’s owner
Horizontal integration
Joining two businesses in the same industry and stage of production (e.g two hairdressing business)
Vertical backward integration
Joining two businesses in the same industry but a different stage or production, towards the supplier (e.g a computer manufacturers takeover of a ‘chip’ maker)
Diversification
Joining two businesses in different industries (e.g an insurance company merges with a publishing business)
Vertical forward integration
Joining two businesses in the same industry but a different stage of production, towards the customer (e.g a farmer’s takeover a butcher’s shop)
Limited company
A business recognised as a legal unit that offers investors (shareholders) limited liability
Private limited company (ltd)
A company that cannot sell shares to the general public. It is not listed on the Stock Exchange
Public limited company (PLC)
A company able to sell shares to the general public by being listed on the Stock Exchange
Limited liability
Investors (shareholders) in a limited company can only lose their investment in the business if it fails; they cannot be forced to sell assets to pay off firm’s debts
Shareholders
Part owners of a limited company - they own shares in it
Dividend
Payment made to shareholders from company profits - usually made annually
Divorce between ownership and control
When directors control public limited company and thousands of shareholders own it, but the two groups may have different objectives
Ethical objective
A business aim to ‘do the right thing’ according to the values and beliefs of managers, even if this is not the most profitable way (e.g. pay workers in low-wage countries above average rates)
Environmental objective
A business aim to protect the environment during its operations (e.g. to recycle waste water). This will reduce social costs
Social costs
The costs of business activity, including both financial and costs paid by the firm and the costs on society (e.g. factory pollution)
Social benefits
The benefits of a business activity, not just to the firm but to society (e.g. new jobs created by business expansion)
Globalisation
Increasing trend for goods to be traded internationally and or companies to locate abroad
Offshoring
Making products or parts of products in other countries. Services can be offshored too, as with telephone call centres moving to India
Multinational
A business with operations in more than one country
Product portfolio
The range of products sold by a business
Target Market
The group of consumers aimed at by the business
Diversify
Spreading risk by selling in different markets
Product Life Cycle
The lifespan of a product, recorded in sales from launch to being taken off the market
Extension Strategies
Steps taken to extend the life cycle or the product
Competitive Pricing
Setting a price for a product based on prices charged by competitors
Price Skimming
Setting a price at a high level to create a high-quality and exclusive image
Cost Plus Pricing
Setting a price by adding a profit mark up
Loss Leader Pricing
Setting a price below cost hoping to gain other profitable sales
Promotion
All the ways a business communicates to consumers with the aim of selling products
Advertising
Communication to consumers using a television and other media encouraging them to buy a product
Sales Promotion
Activities to attract consumer to a product to increase sales
Sponsorship
A business pays for an activity or an event to gain publicity
Wholesaler
Middleman or distributor that buys in a bulk
Telesales
Selling through a telephone contact alone
Mail Order
Direct marketing through mail shots
Retained profit
Profit kept in the business after tax and dividends have been paid.
Sale and Leaseback
Selling an asset, such as a building, to a leasing company and paying an annual leasing charge so that the asset can still be used.
Profit and Loss Account
This shows whether the business made a profit or loss over the last period. It is also known as the income statement.
Sales Revenue
The value of goods sold.
Cost of Sales
The cost to the business of the goods sold.
Gross Profit
The difference between sales revenue and cost of making the products sold.
Overheads
Expenses of the business that are not directly part of the production process.
Net profit
The difference between sales revenue and the total costs of the business.
Gross Profit Margin
The percentage of sales revenue that is gross profit.
Net Profit Margin
The percentage of sales revenue that is net profit.
Balance Sheet
This lists the value of a company’s assets and liabilities.
Assets
Item of value owned by a business.
Liabilities
Debts owned by a business.
Liquidity
How easy it is for a business to pay it’s short-term debts.
Organisational structure
The internal links between managers and workers showing lines of authority
Layers of management
The number of different levels of management and responsibility in a structure
Span of control
The number of junior employees each manager is directly responsible for
Centralisation
Senior managers take all important decisions
Decentralisation
Decision-making power is spread to managers in branches and divisions of the business
Recruitment
Attracting people to apply for job vacancy
Job analysis
Identifying the tasks and skills needed to perform a job well
Person specification
A profile of the type of person likely to make a good applicant
Internal recruitment
Appointing an existing employee of the business to fill a vacancy
External recruitment
Appointing an employee of another business to fill a vacancy
Induction training
Initial training to familiarise new recruits with the systems of a new business
On-the-job-training
Takes place when an employees receive training as they are working at the place of work
Off-the-job-training
Takes place away from the job at another place (e.g. the business’s training centre or college)
Appraisal
Assessing how effectively an employee is working
Motivated
The will to work due to the enjoyment of the work itself
Retaining staff
Keeping existing staff in business, which cuts down the cost of recruitment, selection and training
Autocratic management
Managers who believe in taking all decisions and just passing instructions to workers
Democratic management
Managers who involve the workers and less senior managers in decision-making
Flow Production
Large-scale production where each stage of production is carried out one after the other, continuously, on a production line
Specialisation
Work is divided into separate tasks or jobs that allow workers to become skilled at one of them
Division of Labour
Breaking a job down into small, repetitive tasks that can be done quickly by workers or machines specialised in this one task
Lean production
A production approach that aims to use fewer resources by using them more efficiently
Kaizen
Continuous improvement
Just-in-time manufacturing (JIT)
Ordering supplies so that they arrive just when they are needed and making goods only when ordered by customers
Lean design
Producing new designs as quickly as possible
Economies of Scale
The reasons why production costs of each item fall as a firm expands
Diseconomies of Scale
The reasons why production costs of each item rises as a firm expands
Quality Product
Goods or service that meets customers’ expectations and is there ‘fit for purpose’
Outsourcing
Using the businesses to make all or part of a product or provide an aspect of the customer care
Quality Standards
The expectations of customers expressed in terms of the minimum acceptable production or service standards
Quality Assurance
Setting and trying to meet quality standards throughout the business
Total Quality Management (TQM)
An approach to quality that aims to involve all employees in the quality improvement process
