Business Definition

Capacity:- The maximum number of units a firm can produce in a given amount of time with the available resources

Economies of Scale:- A reduction in the unit costs achieved by the increased production

Diseconomies od Scale:- An increase in unit costs due to an increase in production (often as the production has increased too much)

Labour Intensive:- Production that involves a high proportion of workers rather than machinery

Capital Intensive:- Production that involves a igher proportion of machinery than workers

Job Production:- Goods are produced one at a time to match specific needs of the customers

Batch Production:- Products are made in small batches before a different product is made in a small batch i.e. cakes, paint

Flow Production:- Very large production of a standardised product, normally on a continuous production line e.g cars

Cell Production:- Involves producing products in a self contained unit within a factory

Lean Production:- Techniques used within production to attempt to minimise waste

Quality:- Achieving minimum standard for a product or service wich meets customers needs

Quality Control:- Testing the quality of a product is to minimum standard AFTER the product has been made, often carried out by specialised employees

Quality Assurance:- Testing the quality of the product THROUGHOUT the production process, often by making quality the responsibility of all the workers

Stock Control Charts:- A diagram that tracks stock usage over time

Buffer Stock Level:- The lowest amount of stock held by a business at any time

Lead Time:- The amount of time between ordering stock and it being delivered

Just in Time:- Stocks are only delivered when they are needed for the production process and so no stocks are needed by the business

Kaizen:- The process of achieving continuous improvements by introducing small changes regularly

Kanban:- A card system used in JIT whereby a card follows each item through the production process and triggers when new stock is needed

Benchmarking:- A process of comparing a businesses products and production methods against those of businesses considered "best" in the industry

Waste Management:- An attempt to reduce anything that makes the production process inefficient

Labour Turnover:- The percentage or proportion of the workforce that leave the business within a given amount of time

Productivity:- The output divided by number of workers

Job Enrichment:- An attempt to give workers greater responsibility and recognition

Job Enlargement:- Giving an employee more work but of a similar nature to do

Job Rotation:- The changing of jobs or tasks from time to time

Piece Rates:- Payment linked to output produced by the worker

Autocratic Leadership:- Leader makes all the decisions and there is little involvement from the employees

Democratic Leadership:- Delegation of the decision making process allowing the workers to be involved

Laissez-faire Leadership:- Leader has little or no input in decision making, the workers can do what they like to a certain extent as long as they meet deadlines

Paternalistic Leadership:- Leader decides what is best for the workers but there may be some consultation

Organisation Chart:- Diagram showing the internal structure of a business

Span of Control:- The number of people who report directly to another worker in an organisation

Chain of Command:- The path down which orders are passed

Delayering:- Removing layers of management so there are fewer layers of hierarchy

Delegation:- Passing down of authority for work to another worker lower down in the hierarchy

Centralisation:- Type of business where decisions are made at the Head Office and then passed down the chain of command, branches have no control over decisions

Decentralisation:- Decision making is pushed down the hierarchy and away from the centre of the business or Head Office, for example branches have more control over decisions

Marketing:- A process that attempts to indentify customer demands, satisfy them, profitably

Unique Selling Point (USP):- A feature that differentiates the products of one business from its competitors

Customer Orientation:- Firm considers what the customers want before trying to produce it

Product Orientation:- Firm produces a product before trying to convince customers to buy it

Market Segment:- Part of a market that contains a group of buyers with similar characteristics and buying habits e.g. age, gender

Market Share:- The proportion of a markets total sales accounted for by an individual firm

Market Growth:- An increase in sales for the entire market

Marketing Mix:- Combination of factors which help a business to take into account customer needs when selling a product (4P's: Price, Place, Product, Promotion)

Product Life Cycle:- A marketing model that assesses the pattern of sales over time (development, introduction, growth, maturity, saturation and decline)

Extension Strategy:- Method used to lengthen the life cycle of a product and prevent it falling into decline

Product Portfolio:- Combination or range of products that a business sells

Boston Matrix:- Model which analyses a product portfolio according to the growth rate of the whole market and the relative market of a product.  It has four categories, stars, dogs, problem children and cash cows

Cost Plus Pricing:- Adding a markup to the total cost of a product to determine the price

Contribution Pricing:- Setting a price to cover at least the variable costs of a product

Price Discrimination:- Charging different prices for different customers for the same good or service

Psychological Pricing:- Setting a price to customers that suggests a product is cheaper than it actually is e.g. £4.99

Price Skimming:- Setting a high price for a new product

Penetration Pricing:- Setting a low price for a new product

Loss Leading:- Selling one or more products at a loss to encourage sales of other products in the portfolio at the same time

Predatory Pricing:- Setting low prices to force competitors out of the market

Distribution Channel:- The route taken to get goods from the supplier to the consumer

Wholesaler:- A link in the distribution chain that usually takes large quantities of goods from the prducer, stores them and sells in smaller quantities to retailers

Retailer:- A link in the distribution chain that usually deals directly with the customers

Above the Line Promotion:- Use of mass media to promote to a wide audience rather than a specific target market e.g. television, radio

Below the Line Promotion:- Promotion targeted more directly at customers

Advertising:- Communication that tries to inform potential customers about products or services and persuade them to purchase them

Elastic Demand:- Where a change in price causes a GREATER proportionate change in demand

Inelastic Demand:- Where a change in price causes a SMALLER proportionate change in demand

Revenue:- The amount of money received by selling goods or services (Selling price x Quantity sold)

Profit:-  Occurs when the revenues of a business are greater than its costs over a period of time (Revenue - Costs)

Budget:- An estimate or forecast of the income and expenditure of a business for a given period of time

Variance:- The difference between the predicted budget and the actual figure achieved

Cash Flow Forecast:- Predictions of cash movements in and out of a business

Inflows:- Money coming into the business

Outflows:- Money going out of the business

Debtors:- People who OWE the business money

Creditors:- People the business owes money to

Overdraft:- Borrowing money from a bank by drawing out more than is actually in a bank account, interest is then charged on the money drawn

Fixed Costs:- Costs which don't vary with output e.g. salaries or rent

Variable Costs:- Costs which vary depending on the amount produced e.g. raw materials

Total Costs:- All the costs of a business (Fixed Costs + Variable Costs)

Unit Costs:- Costs of producing one product (Total costs/output)

Marginal Costs:- Cost of producing one extra item

Contribution per unit:- Selling price per unit - variable costs per unit

Total Contribution:- Contribution per unit x sales

Break-even Point:- The level of output where total revenue=total costs ie. no profit or loss is made

Margin of Safety:- Difference between actual level of output and breakeven output

Investment Appraisal:- Methods of assessing whether an investment is a feasible option

Payback:- Assesses the amount of risk involved by calculating how long it takes to recover from the cost of the investment

Accounting Rate of Return:- Assesses the profitability of an investment

Gross Profit:- Sales Revenue - cost of sales

Operating Profit:- gross profit - fixed costs

Net profit:- operating profit - interest paid

Retained Profit:- Net profit - tax and dividends

Balance Sheet:- A method of recording the wealth of the business at a given moment

Assets:- What the business OWNS

Liabilities:- What the business OWES

Net Current Assets/ Working Capital:- Current assets - current liabilities

Capital Employed:- The value of the funds tied up in the business as shares and retained profit