Business Studies Unit 2 - Key Terms

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Key Terms - GCSE Business Studies
Unit 2: Growing as a business

Advertising: Communication to consumers, using television and other media, to encourage them to buy a product.
Appraisal: Assessing how effectively an employee is working.
Assets: Items of value owned by a business.
Autocratic management: Managers who believe in taking all decisions and just passing instructions to workers.
Balance sheet: This lists the value of a company’s assets and liabilities.
Centralisation: Senior managers take all important decisions.
Competitive pricing: Setting a price for a product based on prices charged by competitors.
Cost of sales: The cost to the business of the goods sold.
Cost-plus pricing: Setting a price by adding a profit mark-up to the total cost of producing a product.
Decentralisation: Decision-making power is spread to managers in branches and divisions of the business.
Democratic management: Managers who involve workers and less senior managers in decision-making.
Direct marketing: Using direct means to contact consumers to increase sales (e.g. e-mail, telemarketing and direct mail).
Diseconomies of scale: The reasons why production costs of each item rises as a firm expands.
Diversification: Joining two businesses in different industries (e.g. an insurance company merges with a publishing business).
Diversify: Spreading risk by selling in different markets.
Dividend: Payment made to shareholders from company profits - usually made annually.
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.
Divorce between ownership and control: When directors control a public limited company and thousands of shareholders own it, but the two groups may have different objectives.
Economies of scale: The reasons why average costs of each item fall as a firm expands.
Ethical objective: A business aim to ‘do the right thing’ according to the values and beliefs of the 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). They will reduce social costs.
Extension strategies: Steps taken to extend the life cycle of the product.
External recruitment: Appointing an employee of another business to fill a vacancy.
Flow production: Large-scale production where each stage of production is carried out one after the other, continuously, on a production line.
Franchisee: The firm that buys the franchise rights from the existing business.
Franchisor: The existing firm that sells the franchise rights to another business.
Globalisation: Increasing trend for goods to be traded internationally and for companies to locate abroad.
Gross profit: The difference between sales revenue and cost of making the products sold. Gross profit = sales revenue - cost of sales.
Gross profit margin: The percentage of sales revenue that is gross profit. Gross profit margin % = (gross profit / sales revenue) x 100.
Horizontal integration: Joining two businesses in the same industry and stage of production (e.g. two hairdressing businesses).
Induction training: Initial training to familiarise new recruits with


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