Business Definitions
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- Created by: Richard98
- Created on: 16-09-16 20:18
What is - Factors of production
- The inputs that are used in the production of goods or services. They are land, labour, capital, and enterprise.
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What is - Value added
- What a business achieves by ensuring that the price of the finished good or service is in excess of the cost of the inputs.
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What is - Chain of production
- Stages that a product passes through until it reaches the final consumer.
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What is - Deindustrialisation
- The decline in the size of the secondary sector of the economy.
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What is - Private sector
- Businesses owned and run by private individuals - usually for profit.
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What is - Public sector
- Businesses and organisations owned and run by local or central government, whose objective is to provide a service rather than make a profit.
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What is - Companies House:
- All UK companies must be registered. They must also submit details about them selves such as the identity of the directors, the number of shares and the latest ‘Report and accounts’ Every year. This is where these details are on open access to
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What is - Franchise:
- A business with a well-known brand name (the franchiser) lets a person (the franchisee) or a group of people set up their own business using that brand.
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What is - Co-operative:
- A business that is owned and run by its members (employees and customers). Profits are shared between members rather than being distributed to shareholders.
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What is - Business size:
- The EU has a standardised way of measuring size based on the number of employees and turnover or balance sheet value.
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What is - Stakeholder:
- A person or party with an interest in the success of a business.
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What is - Private costs and benefits:
- Costs that a business pays (e.g. labour costs) and the benefits it gets from its activities.
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What is - Social costs and benefits:
- The overall or ‘true costs’ of a business’s activities, taking into account external costs and benefits, as well as private ones.
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What is - Strategic objectives:
- How a business plans to achieve its aims or goals; often a long-term approach.
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What is - Tactical objectives:
- The day to day (short-term) objectives needed to ensure the strategic objectives are achieved.
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What is - Business plan:
- A formal written document that explains in detail how a business is going to achieve its objectives.
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What is - Opportunity cost:
- The cost of the next best alternative foregone. The opportunity cost of planning is that the time spend on it could have been spent on some other activity.
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What is - Contingency planning:
- Planning for ‘what will happen if things go wrong?’ This means that an agreed course of action is in place and is ready to be used if necessary.
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What is - Firefighting:
- Where a manager spends time (and other resources) trying to fix unforeseen problems and ‘emergencies’. With appropriate contingency planning this sort of situation can be avoided.
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What is - Uncertainty:
- The inability to calculate the costs and benefits of a decision precisely.
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What is - Risk:
- The chance or possibility of an adverse occurrence.
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What is - Reward:
- The possible return that a particular activity may make.
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What is - Quantifiable risk:
- The likelihood of a predictable risk occurring. It is possible to put a value on this sort of risk.
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What is - Unquantifiable risk:
- The risk of an event that is unexpected. Sometimes referred to as ‘the unknown unknowns’. It is not possible to put a value on this sort of risk.
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What is - Line of best fit:
- A line drawn through the points on a graph so that the points are distributed as evenly a possible above and below the line.
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What is - A market:
- Any situation where buyers and sellers are in contact in order to establish a price.
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What is - Barries to entry:
- The factors that could prevent a business from entering and competing in a market.
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What is - Barries to exit:
- The factors that could prevent a business from leaving a market, even if it would like to.
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What is - Equilibrium:
- The situation in a market when demand is equal to supple.
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What is - Substitute:
- An alternative product that serves the same function.
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What is - Complement:
- A product that is used, and is therefore bought, in conjunction with another.
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What is - Subsidy:
- A payment from the government to encourage a business to increase supply.
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What is - Elastic:
- Where the change in demand that results from a price change is greater than the change in price that caused it.
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What is - Inelastic:
- Where the change in demand that results from a price change is less than the change is less than the change in price that caused it.
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What is - Free trade:
- Trade without tariffs or quotas being imposed when products are traded.
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What is - Singe market:
- A market in which there is a single (i.e. common) set a laws and regulations relating to the movement of products, people and money; all businesses in the single market have to abide by these.
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What is - Euro:
- The singe currency that came into being in most EU countries on 1 January 1999.
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What is - Eurozone:
- The collective name for countries that have adopted the euro as their single currency.
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What is - European Central Bank (ECB):
- The central bank that sets interest rates for the whole of the Eurozone.
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What is - Globalisation:
- The process of growth in world markets through a process of integration where it is possible to trade in a global market in the same way as one would in a domestic market.
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What is - Exchange rate:
- The value of the pound in terms of another currency.
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What is - Foreign exchange market:
- The market for currency, which is not in a single location but exists globally whenever buyers and sellers deal.
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What is - Hot money:
- Flow of money from country to country, which is chasing the highest rate of interest it can possibly get.
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What is - Fiscal policy:
- The use of government spending and taxation, through the government’s annual budget, to influence the level of demand in the economy.
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What is - The Competition and Markets Authority (CMA):
- The government organisation that makes markets work well for consumers.
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What is - Monopoly:
- In terms of UK and EU competition policy, this is any business that controls more than 25 per cent of the market share.
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What is - Macroeconomics:
- The study and analysis of the behaviour of the whole economy.
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What is - The economy:
- The collective behaviour of a number of different groups such as businesses, people as employees and consumers and the government.
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What is - Economic activity:
- The level of output in all sectors of the economy - primary, secondary and tertiary.
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What is - Gross Domestic Product:
- The total value of all the economy’s output (measured quarterly or yearly).
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What is - Business cycle:
- Rises and falls in economic activity; theses follow a pattern that can be identified as boom, recession, slump and recovery.
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What is - Inflation:
- Persistent general tendency of prices in the economy to rise.
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What is - ‘In real terms’:
- Earnings ( wages, revenue, or profit) adjusted for the effects of price rises. Price rises reduce the purchasing power of earnings.
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What is - Economic growth:
- An increase in the volume of goods and services (GDP) produced each year.
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What is - Balance of trade:
- Difference between the value of exports and imports. If exports exceed imports, there is a balance of trade surplus; if imports exceed exports, there is a glance of trade deficit.
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What is - Bank of England:
- The central bank in the UK; as banker to the government and other banks, it conducts monetary policy and is not involved in personal banking.
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What is - Monetary Policy:
- Manipulation of the level of demand in the economy using the rate of interest.
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What is - Monetary Policy Committee (MPC):
- The committee at the Bank of England that meets once a month to decide whether to change the rate of interest.
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What is - The Budget:
- An annual statement of how much the government intends to spend in the next year and how this spending will be financed.
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What is - Regional Policy:
- Government financial assistance to try to encourage businesses into regions of the country where economic activity is low.
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What is - The multiplier:
- The effect of changes in economic activity in one sector on other sectors; if one business experiences a rise or fall in demand for its products, this has a knock-on effect on businesses supplying.
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What is - Civil law:
- Law concerned with the rules that govern the relations between businesses and/or people, for example employment and consumer rights.
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What is - Criminal law:
- This law defines the actions that the state has decided are ‘wrong’ and the punishment that will result from these actions.
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What is - A contract:
- This is a legally binding agreement between two or more parties. Most business relationships are of a contractual nature and so contract law gives the basic framework of rights and obligations.
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What is - Employment tribunal:
- A special type of court that only deals with employment-related issues such as victimisation by an employer, unfair dismissal, and discrimination.
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What is - Obsolescence:
- Existing capital equipment is replaced by new developments in technology; for example, the replacement of the typewriter by the word processor.
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What is - Negative externality:
- A cost that arises out of production or consumption which is not paid for by the producer or consumer, e.g. pollution, congestion or litter.
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What is - Sustainability:
- The endurance of systems and processes. It refers particularly to preventing a negative impact from economic systems and production on the earth and its environment.
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What is - Conciliation:
TBC - The act of bringing parties together with an independent conciliator to find common ground and a solution the problem. It differs from arbitration, in that it has no legal standing. Arbitration is a legal process outside the courts where both p
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What is - Working capital:
- Short-term finance required for the day-to-day running of business.
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What is - Cashflow:
- A business needs sufficient inflows of cash to finance its day-to-day outgoings (e.g. wages and interest repayments); if cash receipts are insufficient, the business is said to have a cashflow problem.
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What is - Security:
- Something that acts as as assurance to a lender that it will receive its money if a business is unable to pay back money it has borrowed.
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What is - Stock market:
- A market where shares and debentures are ought and sold; only public companies have their shares traded on the stock market.
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What is - Venture Capital:
- Finance from individuals or firms who lend money to, or buy shares in, small and medium-sized businesses that require finance for starting-up or expansion.
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What is - Fixed costs:
- Costs do not vary with the level of of output (e.g. the factory, machines, business rates)
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What is - Overheads/indirect costs:
- Costs that can not be attributed to a particular unit of output.
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What is - Direct costs:
- Costs that are directly attributable to a unit output (the raw materials).
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What is - Variable costs:
- Costs that change in proportion to the level of goods or services a business produces.
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What is - Total Costs:
- Fixed costs + variable costs.
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What is - Unit cost:
- The cost of producing one unit = total costs / output.
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What is - Marginal cost:
- The cost of producing one extra unit.
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What is - Contribution:
- Revenue - variable costs.
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What is - Contribution per unit (CPU):
- Price - variable costs per unit.
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What is - Profit:
- Total contribution - fixed costs.
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What is - Break-even:
- The point where total revenue is equal to total costs (TR=TC). At that point all costs have been covered.
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What is - Margin of safety:
- The difference between the actual level of output and the break-even level.
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What is - Opportunity costs:
- Consideration of the next best alternative the money could have been used for.
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What is - Internal rate of return:
- The discount rate at which the NPV is equal to zero.
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What is - Overdraft facility:
- An agreement with a bank to be able to overdraw on an account up to a stated limit. This overdraft facility will usually have a agreed rate of interest (in relation to the Bank of England base rate) charged upon it.
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What is - Delegation:
- The passing on of responsibility, usually to someone at a lower level in the organisation.
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What is - Historic information:
- Information that already exists from past years. For example, any figures included in a balance sheet will be historic figures, recored at the point at which the account was dated.
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What is - Gross Profit:
- Revenue minus cost of sales.
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What is - Operating profit:
- Gross profit minus expenses.
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What is - Profit before tax:
- Operating profit minus finance costs.
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What is - Profit for the year:
- Profit and dividends minus tax.
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What is - Statement of financial position:
- A method of recording the value or wealth of business at a given moment in time.
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What is - Assets:
- What the business owns.
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What is - Liabilities:
- What the business owes.
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What is - Current liabilities:
- Less than one year.
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What is - Non-Currency liabilities:
- Money owed for more than one year.
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What is - Liquidity:
- The ability to convert assets into cash.
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What is - Depreciation:
- An allowance for the wear and tear on the fixed tangible assets.
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What is - Organisational structure:
- The way in which a business is organised.
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What is - Span of control:
- The number of employees (subordinates) for whom a manger is responsible.
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What is - Delayering:
- Reducing the number of levels in the hierarchy of an organisation.
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What is - Organismic structure:
- A flexible, flat organisational structure, with a wide span of control.
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What is - Mechanistic structure:
A bureaucratic, vertical structure, with a narrow span of control.
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Centralised structure
The decision making process is undertaken by the leader at the top of the hierarchy.
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Decentralised structure
The decision making process is delegated and undertaken on a regional or product basis
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Workforce planning
The process used to plan the number and quality of employees that will be required, both in the short and long term
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Outsourcing
The usage of external labour to undertake a specific job or contract
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ISO
An internationally accepted standard for quality. It ensures that businesses have effective employees so that they can deliver can effective product
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Appraisal
A formal assessment of an employee’s performance
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Development needs
The requirements that an employee has in order to perform his or her job more effectively and/or gain the skills and abilities necessary for promotion
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‘SMART’ target setting
A framework within which to set an employee’s targets for the coming year. Targets should be Specific, Measurable, Agreed, Realistic and Time-limited. SMART targets are much more likely to be successful than ones worded in an ambiguous way
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Labour turnover
A measure of the number of employees who have left the business (usually over the past year), relative to the number employed in that period. A high percentage is an indicator of poor morale and motivation
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Absenteeism
Employees are absent from work with minor medical ailments such as an upset stomach or a headache. Absenteeism can be a key indicator of low morale and motivation levels
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Productivity
A measure of output per employee in a particular period of time. Productivity is a key indicator of employee performance
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Centralisation
The amount of control exercised by senior executive over decision making. The business is highly centralised when middle managers and employees have little autonomy
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People needs
The needs of employees. A manager who concentrates on people needs will try to make employees contented and keep them in high spirits. This may be at the expense of getting the work done
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Task needs
The opposite of people needs. A manager who has an overriding desire to ‘get the job done’ will be orientated towards the task rather than employee needs
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Blake’s grid
A method of identifying the actions, priorities and therefore leadership style of a manager. This is undertaken through an analysis of task and people needs
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Line manager
Managers who have a direct input into and responsibility for policy on the business’s products
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Staff managers
Managers whose function is to provide advice and support to the line managers
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Motivation
A strong desire to act in a particular way and to achieve a certain result
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Morale
‘spirit’; if morale in an individual, group or team is high then there exists a spirit of confidence and purpose and vice versa
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Scientific management
The concept that a set of principles could be developed and applied by managers to motivate employees in most types of business. A central part of the theory is that employees are largely motivated by money
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Content theories
Deal with ‘what motivates employees?’ and are concerned with identifying a person’s individual needs and then using motivation to fulfil those needs
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Process theories
Deal with the process of motivation and are concerned with the issue of how motivation occurs
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Job enlargement
Redesigning and broadening the nature of a job so that employees can take on new and more challenging tasks if they want to. It does not simply mean ‘giving people more work’
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Job enrichment
Making sure that a job is interesting and enriching to an employee; for example, through a greater variety of tasks, more responsibility, greater involvement and so on
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Empowerment
Allowing employees to make decisions about when and how a task is performed
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Trade union
An organisation of employees that seeks to protect and improve the interests of its members. It does this by negotiating with employers on pay and conditions of work
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Trade Union Congress (TUC)
An organisation that brings Britain’s unions together to draw up common policies and lobby the government to implement policies that will benefit employees
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Union recognition
Employers who recognise a union agree to negotiate with it over members’ pay and conditions
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Work to rule
Employees do exactly what is tarted in their contract and no more; there is no ‘goodwill’ towards the employer
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Employee participation
Employees have the ability to participate in the decision making process at work
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Works council
A formal meeting of managers and employee representatives to discuss pay and working condition and to negotiate on issues such as change in working practices. There is a legal requirement for large multinational companies operating in EU to sign up
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Industrial action
The measures that a union can take to put pressure on management in a dispute in order to make them change their mind about a decision
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ACAS
The Advisory, Conciliation and Arbitration Service. It gives impartial advice and guidance on how to improve employer/employee relations
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Equality policy
A policy to ensure fair and consistent treatment of all employees so that they are not discriminated against, bullied or harassed on the grounds of sex, race sexual orientation, and so on. Managers should ensure that all employees are aware of this
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EU Regulations and Directives
Legislation emanating from the European Parliament. Regulations have to be adopted and applied in a certain way, whereas it is up to the individual member country to decide how to implement a directive
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Unfair dismissal
Where an employee is dismissed without a valid reason or that employer fails to follow the proper procedures
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Employment tribunal
A special sort of court dealing only with employment law; for example, and employees’s claim for unfair dismissal, discrimination or victimisation by their employer
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Termination of employment
An employees’s contract of employment is ended due to redundancy (the job no longer exists) or dismissal ( the job ends due to poor conduct, incapacity, etc.)
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Market share
The proportion or percentage of total sales within the market in question that is controlled by the businesses
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Globalisation
The integration of the countries of the world through trade, ideas and culture
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SWOT analysis
Involves looking at the strengths, weaknesses, opportunities and threats for a business
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Population
In sampling, the term population usually refers to the total group included in the sample; for example, all the pupils in a school to do a survey on school meals
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Niche marketing
Targeting a clear and identifiable segment of the market
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Mass marketing
Selling into a market containing many products that are similar
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Market (or customer) orientation
Gets the right product
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Production orientation
Gets the product right
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Publicity
Any form of free promotion for the business. It could be a picture of a sponsored boys’ football team in the local paper, or it may be negative publicity on a consumer affairs programme about a product fault
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Adding value
The difference between the actual price charged for a product or service and the actual cost of all the components and assembly of the product or service
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Product orientation
This means that a business concentrates its activities on improving the quality or efficiency of the product
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Morphological study
A method that generates a lot of ideas very quickly and therefore more cheaply
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Internal growth
Natural growth of a firm achieved by increased production and sales
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External growth
Growth achieved by takeover and merger
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Capacity
The maximum that a firm can produce in a given period with the available resources
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Capacity utilisation
The percentage of total capacity that is actually being achieved in a given period
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Economies of scale
A reduction in unit costs achieved as the scale of production increases
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Diseconomies of scale
An increase in unit costs as a result of an increased scale of production
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Infrastructure
The structures that support a society, such as transport links, telecommunications, education and health facilities, water supply, sewers and so on. If these are poor it will deter business location
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Supply chain management (SCM)
The strategic co-ordination of business functions within a firm and with other businesses in its supply chain. The aims of SCM are to co-ordinate supply with demand and lower costs
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Distribution management
The process of managing the movement of goods to the point of sale. It includes activities such as stock control, warehousing and transportation
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Quality control
This is a process in which a business reviews the quality of all the factors involved in the process of production
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Other cards in this set
Card 2
Front
- What a business achieves by ensuring that the price of the finished good or service is in excess of the cost of the inputs.
Back
What is - Value added
Card 3
Front
- Stages that a product passes through until it reaches the final consumer.
Back
Card 4
Front
- The decline in the size of the secondary sector of the economy.
Back
Card 5
Front
- Businesses owned and run by private individuals - usually for profit.
Back
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