Business Glossary

Above the line promotion

Advertising through media (e.g. newspapers, television, radio, cinema, posters)

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Absenteeism

The proportion of employees not at work on a given day. Absentee rate = staff absent x 100 total number of staff

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Accountability

The extent to which a named individual is answerable for the success or failure of a particular policy, project or piece of work; the obligation of an individual to report formally about the work he or she has done to discharge their responsability

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Added Value (Value Added)

Sales revenue minus the cost of bought-in materials. Adding Value = Selling Price – Cost of Raw Materials For example, to make a football shirt the cotton may cost £1, but it will be sold for £60, so the added value is £59! Not the same as profit.

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Adding Value

The process of increasing the worth of resources by modifying. Example: TV – a fully manufactured TV is worth more to people than components, and the distribution and retailing add value as the product is available in a convenient location.

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Adverse Variance

When costs are higher than expected or revenue is lower than expected. (Also called an unfavourable variance.)

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Advertising

The process of communicating with customers or potential customers though specific media, e.g. TV/newspapers

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AIDA (the aims of promotion):

Attention – get their attention and improve awareness –Interest – drip feed information, repetitive, different forms of promotion, leave people wanting to find out more –Desire – now have customers interest, so give them reasons to buy - Action - buy

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Authoritarian

Authoritarian (Autocratic/Dictatorial) Management/Leadership Style. Features: •Leader makes all decisions •Tells workers what to do •Lots of control/leader has power •Do not listen to workers’ opinions •Use of rewards and penalties

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Bank overdraft

When a bank allows an individual or organisation to overspend on its current account in the bank up to an agreed (overdraft) limit and for a stated time period. •Short term •External

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Bank loan

A fixed sum of money provided to a business by a bank for a specific, agreed purpose. •Long term •Externa

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Below the line promotion

All other types of promotion that are not advertising (e.g. PR, merchandising, sponsorship, direct marketing, personal selling and competitions)

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Blake Mouton Managerial Grid

Identifies five different leadership styles based on Concern for People AND Concern for Production. The 5 styles are: Impoverished Management, Country Club Management, Task management, Middle of the Road Management, Team Leader Management

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Boston Matrix

A tool of product portfolio analysis that classifies products according to market share and market growth.

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Brand

A name, sign, logo, symbol, design or slogan linked to a particular product or service in order to differentiate it from its competitors

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Break-even

The level of output at which total sales revenue is equal to total costs of production. The business makes no profit and no loss. Break even = fixed costs/contribution per unit

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Budget

A financial plan for the future concerning the revenues and costs of a business, it shows the policy the business is pursuing and the anticipated outcomes of that policy.

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Budgeting

The process involved in setting a budget.

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Buffer inventory level

Used in an inventory control chart, it is the minimum level of inventory targeted by a business. (It should be enough to cover sudden increases in demand or unexpected problems in getting inventories from suppliers.)

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Business Objectives

Goals that must be achieved in order to realise the mission/aims of an organisation, department or individual team. They are medium to long-term. They can be corporate or functional objectives.

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Capacity

The maximum total level of output or production that a business can produce in a given time period. If a company is operating at this level it is said to be producing at ‘full capacity’.

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Capacity Shortage

When a firm’s capacity is not large enough to deal with the level of demand for its products, leaving some customers disappointed. This could lead to negative publicity and unhappy customers not buying again.

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Capacity Utilisation

The percentage of a firm’s total possible production level that is being reached, over a specific time period.

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Capital expenditure

Spending on non-current assets that will be used again and again, e.g. machines

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Capital-intensive production

Methods of production that use a high level of capital equipment (machines) in comparison to other inputs such as labour, e.g. a fully automated car factory or a nuclear power station.

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Cash Flow

The amount of money flowing into and out of the business over a period of time.

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Cash Flow Forecast

The process of estimating the expected cash inflows and cash outflows over a period of time.

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Causal Link

A logical link between 2 sets of information or types of behaviour, for example, when the weather is sunny people will buy more ice creams. Used in correlation.

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Centralisation

This structure has a greater degree of central control as authority is not delegated. Decision making is kept at the top of the organisation.

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Chain of command

The lines of authority within a business showing the communication channels downwards and upwards in the organisation.

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Collective Bargaining

The process whereby workers’ representatives meet employers to discuss and negotiate employment related issues. Also called Negotiation.

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Commission

A financial reward where a sum of money is paid to an employee upon completion of a task, usually selling a certain amount of goods or services; commission may be paid as a percentage of sales made or as a flat rate based on sales volume.

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Confidence Interval

The plus or minus figure used to show the accuracy of statistical results arising from sampling, e.g. a sample says that 36% of people will buy a product with a confidence interval of =+or-4 means 32-40% of the population will buy the product

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Confidence Level

The degree to which statistics are a reliable predictor of actual events, e.g. a 95% confidence level means that the prediction will be correct 19 times out of 20.

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Consumer Marketing

Products bought by final consumers for personal consumption, e.g. crisps. There are 3 types of products in this category: Convenience Products Shopping Products Speciality Products

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Contribution

Contribution per unit=selling price/unit–VC/unit. Contribution looks at whether a product helps the business to make a profit. It shows us if the sales revenue is bigger than the VC and so if it is contributing towards paying FC and making profit

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Convenience Products

Products purchased frequently with minimum thought and effort by customers

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Corporate Objectives

Goals of the whole organisation (not just a department). They are set in order to co-ordinate the activities of different departments and to give the business a sense of direction. They are based on the mission/corporate aims.

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Correlation

A statistical technique used to establish the strength of the relationship between two variables. Correlation helps with sales forecasting as it shows the degree to which price/advertising/competitors actions/consumers incomes influence sales

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Debt factoring

When a factoring company (usually a bank) buys the right to collect the money from the credit sales of a business. •Short term •Internal

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Debts

Money owed by an individual or organisation to another individual or organisation, e.g. bank loan

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Decentralisation

This structure has a greater degree of delegated authority to regions/subordinates. Power is delegated from head office to management in local branches.

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Decision Tree

A tree-like model of the various options available in a decision, including the probability of different consequences and the financial outcomes of each option

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Decision Tree Analysis

Is a model that uses numerical data to assist businesses when making decisions.

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Democratic

Democratic Management/Leadership Style. Features: •Workers are consulted and included in the decision making process •Work is delegated •Teamwork encouraged

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Demographics

The characteristics of human populations and population groups; it includes analyses of migration trends, birth and death rates, age, ethnicity, gender, levels of education, marital status and size of family.

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Dependability

Measures whether a business is ‘on time’ in providing for its customers needs

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Dependent Variable

Used in Correlation, it is the variable that is being influenced (by the independent variable), e.g. sales. Plotted on the vertical y axis.

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Digital Marketing

The anticipating and satisfying of consumer wants through the use of different forms of technology. Digital marketing includes social media marketing, search engine marketing, digital displays and marketing through other forms of digital media

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Direct Selling

Communicating directly with the customer. e.g. Direct mail, Telephone, Door-to-door drops, Personal selling

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Discretionary Income

Is the disposable income less all the regular bills that must be paid including rent, mortgage, loans, utilities, transport and food. (So it is the money available to spend on luxuries.)

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Diseconomies of Scale

The disadvantages an organisation experiences due to an increase in size, causing a decrease in efficiency and/or an increase in unit costs. (also called internal diseconomies of scale)

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Economies of Scale

The advantages an organisation gains due to an increase in size, causing an increase in efficiency, improved labour productivity, and lower costs per unit. (also called internal economies of scale)

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Disposable Income

Income left for spending after taxes have been deducted from gross income

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Distribution Channels

The routes through which a product passes in moving from the producer (manufacturer) to the consumer, from production to final consumption. For example, corner shop: producer to wholesaler to retailer to consumer.

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Diversification

Is when a business moves into the production/sale of a different type of good/service. For example, Richard Branson started Virgin as a music business, and now has trains and planes!

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Dividend

A payment made by a company to its shareholders out of profits earned, this is distributed profit. (It is not compulsory to pay a dividend, profits can be reinvested instead.)

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Efficiency

Output (production) is maximised from a given level of inputs. To increase efficiency either produce the same output with less inputs OR produce more output with the same inputs.

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Elastic Demand (Price)

The change in demand is more than the change in price, so a price change will result in a significant change in demand. It IS responsive to a change in price. –Answer will be more than 1 (e.g. -1.4)

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Elasticity

Measures the responsiveness of demand to a change in a relevant variable – such as price or income

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Employee costs as a percentage of turnover

The percentage of sales turnover needed to cover employee or labour costs. Employee costs as a % of turnover = Employee costs/Sales turnover x 100

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Employee Involvement

Refers to the extent to which employees are involved in decision making Also called employee representation and industrial democracy.

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Empowerment

A type of non-financial reward. Giving employees the means by which they can exercise power over their working lives.

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Engagement

Feeling positive and committed to work, caring about doing a good job, thinking hard about the job and how to do it better, and actively taking opportunities to discuss work related improvements with others at work.

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Environmental Objectives (in Operations)

The aims set by a business that indicate its commitment to helping those aspects of the environment where it has an impact

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Ethics

The moral judgement about the rights and wrongs associated with business behaviour, the way they operate, and how they interact with their stakeholders.

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Extension Strategy

Methods used to prolong the life cycle of a product by preventing or delaying it from reaching the decline stage of the product life cycle.

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External Environment

Factors from outside the business that affect its operations, a business cannot control/change these factors, but has to react to them.

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External recruitment

Filling a job vacancy by advertising outside the firm.

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Externalities

Costs and benefits that occur as a result of a firm’s activities which effect people outside the business, for example, pollution and congestion caused by a factory cause costs which are paid by the local community not the business.

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Extrapolation

Using previous patterns/trends of numerical data in order to predict values in the future. Calculate the average over previous years and then add this average on for the next year(s) to predict future trends.

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Factors of Production

The resources (inputs) used by businesses, they consist of:Land: natural resources, Labour: workers (efficiency measured by labour productivity), Capital: goods used to produce other goods, Enterprise: organising production and ideas of entrepreneurs

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Favourable Variance

When costs are lower than expected or revenue is higher than expected.

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Financial Accounting

The provision of financial information to show external users the financial position of the business (the accounts); it concentrates on historical data.

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Financial Objectives

The specific, focused aims or goals of the finance and accounting function or department within an organisation.

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First mover advantage

Being the first to enter a new market, e.g. iPad was the first tablet

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Functional Objectives

Goals of each functional area of a business (marketing, finance, operations, human resources). The objectives set by each department should help the organisation to achieve its corporate objectives, and ultimately its mission

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Gross Profit

Revenue minus Cost of Sales (the cost of making the product, e.g. raw materials and wages of direct labour) It shows how efficiently a business is converting raw materials into finished goods, or how well it is adding value to its raw materials

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Gross profit margin

Gross profit/Sales revenue x 100 Measures gross profit as a percentage of sales revenue. It measures how efficiently the business is transforming raw materials into products.

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Hard HRM Strategy

This strategy treats employees as a resource. Workers are to be monitored and used in an efficient manner in order to achieve the strategic objectives of the organisation, just like any other resource.

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HR Objectives

A specific goal or target relating to the management and performance of human resources in a business. e.g. Employee engagement and involvement,Talent development, Training, Diversity, Alignment of HR objectives with corporate, number/skill/location

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Human Resource Flow

The flow of employees through an organisation, including the inflow – when they are recruited; the internal flow – what happens to them within the organisation; the outflow – when they eventually leave the organisation.

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Human Resource Management (HRM)

The management of people in order to assist the organisation in achieving its objectives. Includes conducting job analysis, recruiting the right people, induction and training, managing wages, providing motivation, communicating, resolving disputes.

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Human Resource Plan

The process that links the human resource needs of an organisations to its strategic plan to ensure that staffing is sufficient, qualified and competent enough to achieve the organisation’s objectives.

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Human Resources (HR)

The organisation’s employees; it describes the department or function within an organisation that is focused on activities related to employees.

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Income Budget

Shows the agreed, planned income of a business (or division/department of a business) over a period of time. (Also called a revenue budget or sales budget.)

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Income Elasticity of Demand

The degree to which the quantity demanded of a good or service is affected by a change in consumer income. (Shortened to YED) YED = % change in quantity demanded/% change in income. Firms cannot control income so it is mainly used to forecast demand

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Incorporated businesses

The business has a separate legal identity from the individual owners. This includes private limited companies and public limited companies.

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Induction training

For new workers to familiarise them with the workplace and the job they are doing, so they quickly reach the same level as experienced workers. Includes tour of the workplace, health and safety, meet colleagues, job description, terms of employment

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Industrial Action

Types of this include: Strike Work-to-rule Go-slow Overtime ban

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Industrial dispute

A disagreement between managers and the trade union representing the employees, which is serious enough to cause industrial action

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Industrial Marketing

Bought for further processing or for use in conducting a business. Bought by other businesses, not consumers, e.g. components. It could be: manufacturers selling to retailers suppliers of components selling to manufacturers

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Inelastic Demand (Price)

The change in demand is less than the change in price, so a price change will have little impact on the amount demanded. It is unresponsive to a change in price. –Answer will be less than 1 (e.g. -0.5) –Examples – essentials

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Inferior Goods (Income Elasticity)

Have negative income elasticity, as demand falls when income rises. This is because people can now afford better alternatives. –Answer of YED is a negative figure, e.g. -0.5 –Example: Tesco value (unbranded) products or cheap cuts of meat

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Informative Promotion

Intends to increase consumer awareness of the product and its features, e.g. toothpaste.

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Integrated Marketing Mix

The marketing mix is co-ordinated so that each element supports, and is consistent with, other parts of the mix. The 7P's all work together, which is called 'blending the mix'.

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Interest Rates

The cost of borrowing money and the return for lending money

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Internal recruitment

Filling a job vacancy by selecting a person already employed in the firm e.g. promotion.

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Internal sources of finance

Ways of raising finance from within (inside) the business, e.g. retained profit

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Intuition

The ability to understand something without the need for conscious reasoning; similar to ‘hunch’; a gut feeling held by a manager that is based not on scientific decision making but on the personal views of the manager.

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Inventories

Items that firms need to produce for, or supply to, customers. 3 types of inventory; raw materials, work-in-progress and finished goods

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Inventory Control

Management of levels of raw materials, work-in-progress and finished goods in order to reduce storage costs whilst still meeting the customer’s demands.

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Inventory Control Chart

A diagram that is used to register levels of stock/inventory over a period of time

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Inventory Rotation

Using old inventory before new inventory to make sure that inventory wastage is kept to a minimum

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Inventory Wastage

A measure of the loss of inventory within a business

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Job Description

A document listing details about the job itself, including the job title, duties, line manager and subordinates (if any).

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Job Design

The process of deciding on the content of a job - its duties and responsibilities, the methods to be used in carrying out the job, in terms of techniques, systems and procedures, and the relationships between the job holder, superiors and colleagues.

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Job enlargement

A type of non-financial reward which increases the scope of a job using job rotation or job enrichment

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Job enrichment

A type of non-financial reward where a job is expanded vertically by giving the worker more responsibility.

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Job Rotation

A type of non-financial reward where a job is expanded horizontally by giving the worker more tasks, but at the same level of responsibility

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Job Security

Job Security is an assurance that an individual will keep his or her job without the risk of becoming unemployed

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Just In Time (JIT)

A Japanese philosophy that organises operations so that stock (inventory) arrives just at the time when they are needed for production or sale. The ultimate aim is to eliminate the need for stock

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Kaizen

A policy of implementing small, incremental changes in order to achieve better quality and/or greater efficiency. ‘Continuous improvement’ is achieved by listening to employees ideas to improve quality

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Labour costs per unit

A measure of the average labour costs involved in producing one unit of output in a given time period. Labour costs per unit = Total labour costs/Total units of output

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Labour Productivity

A measure of the output per worker in a given time period. (It is how much each worker produces.) Labour productivity (in units) = Output per period/Number of employees per period

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Labour turnover

The proportion (%) of employees leaving an organisation in a given time period, usually a year. Labour turnover = Number of employees leaving over a given time period/Average number of employees over a given period x 100

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Labour-intensive production

Methods of production that use high levels of labour in comparison to capital equipment (machines), e.g. call centres, restaurants

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Laissez-Faire

Laissez Faire Management/Leadership Style. Features: •Employees get on with their work with little or no interference •They work based on broad guidelines set by a leader •Delegation occurs •Leader has minimal input

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Lead time

The time taken from a customer request to be fulfilled. When used in the context of inventory control charts, the lead time is how long the supplier takes to deliver an item once an order has been placed.

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Leadership

Deciding on the direction for a business/department/functional area, setting objectives that reflect this, and inspiring and motivating staff to achieve these objectives. Leaders are: •Innovative •Risk seeking (comfortable with taking risks)

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Lean Production

Production based on a range of time-saving and waste-saving measures inspired by Japanese manufacturing companies. It encompasses: •Just in Time (JIT) •Quality circles •Total Quality Management (TQM) •Kaizen (Continuous Improvement)•Cell Production

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Levels of hierarchy

The number of different supervisory and management levels between the shop floor and the CEO in an organisation

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Limited Liability

A situation in which the liability of the owners of a business is limited to the amount they have invested in their shares. (If the business cannot pay its debts the owners can only lose what money they invested in the business.)

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Liquidity

The ability to convert an asset into cash. (Cash is the most liquid asset, so businesses need to manage their cash to remain liquid and survive!)

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Loan capital

Money received by an organisation in return for the organisation’s agreement to pay interest during the period of the loan and to repay the loan within an agreed time.

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Local Community

People who live near the business, in the same town or same area, and are therefore affected by its operations

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Localisation

When a firm locates close to competitors, e.g. electrical retailers locate near each other so it is easy for consumers to compare, as they are unlikely to go to a different location just to view a different product to compare.

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Long term finance

Finance that is normally intended to be repaid after 3 years (if repayment is necessary). It is normally associated with capital expenditure

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Long term funding

Money provided to a business which does not require repayment within a year. Long term funding includes loans and equity (which does not need to be repaid)

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Loss Leader

Setting low prices for certain products in order to encourage customers to buy other fully priced products, e.g. Asda 2p sausage, or a technology firm that has the main product as a loss leader and the accessories create the profit.

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Luxury Products (Income Elasticity)

Are income elastic, a rise in income leads to a greater rise in quantity demanded. As income grows, as larger proportion of income is spent on luxuries. –Answer when calculating YED will be greater than +1 –Example: holidays, branded designer clothes

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Management

Getting things done by planning, organising and co-ordinating people and resources. Managers: •Work for the leader to get things done •Risk averse, avoid conflict and want to run a ‘happy ship’

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Management Accounting

The creation of financial information for use by internal users in the business, in order to predict, plan, review and control the financial performance of the business.

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Margin of safety

The difference between the actual output and the break-even level of output. Margin of safety = actual output – break-even output

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Market Capitalisation

The value of outstanding shares in a plc. (Outstanding shares are the total of all ordinary shares issued and fully paid up.) Market Capitalisation is calculated by multiplying the total outstanding shares by the current market price of a share

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Market Growth

A marketing objective which measures the percentage change in sales (volume or value) of a generic product/service in a market over a period of time: (Market size in current year – Market size in previous year)/Market size in previous year x 100

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Market Mapping

A technique that analyses markets by looking at the features that distinguish products or firms. It is usually based on 2 factors, e.g. price and quality

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Market Positioning

Where your product or brand stands in relation to the products or brands of other businesses

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Market Research

The systematic and objective collection, analysis and evaluation of information that is intended to assist the marketing process

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Market Segmentation

Dividing a market into groups (market segments) that reflect different customer needs and wants, each segment responds differently to different products or marketing approaches. Market Segmentation Types: Demographic, Geographic, Income, Behavioral

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Market Share

A marketing objective which measures the percentage or proportion of the total sales of a product or service, by a firm or brand, compared to the whole market: Sales of one product/brand/company / Total sales in market x 100 = Market Share (%)

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Market Size

A marketing objective which measures the volume of sales of a product (number of products) or the value of sales of a product (total revenue) in a market. Calculated by adding up total sales

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Market Targeting

Deciding on the consumers/market segment(s) you intend to sell your product/brand to

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Marketing

The process of identifying, anticipating (predicting) and satisfying customer needs profitably

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Marketing Mix

The combination of elements used by a business to enable it to meet the needs and expectations of customers. Referred to as the 4P's or 7P's

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Marketing Objectives

The goals of the marketing department in an organisation, which help to achieve the overall business objectives of the firm as a whole

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Mass Customisation

Offering individually tailored goods or services to customers on a large scale.

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Mass Marketing .

Aiming a product at all (or most) of the market. Also called Undifferentiated Marketing

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Maximum inventory level

Used in an inventory control chart, the highest amount of inventory a company is able to store.

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Merchandising

Point of Sale (PoS) and Point of Purchase (PoP) by providing retailers with displays, persuading retailers to provide more shelf space (variation of different cereals products), having advisors who visit retailers to advise on how to display products

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Mission

An organisation’s aims or long-term intentions, its ultimate purpose (which is also referred to as its 'corporate aims'

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Mission Statement

A qualitative statement of an organisation’s aims that uses language intended to motivate employees and convince customers, suppliers and those outside the firm of its sincerity and commitment

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Motivation

The desire and energy to be continually interested and committed to a job, role or subject, or to make an effort to attain a particular goal.

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Multi-channel distribution

When firms use more than one type of distribution channel, e.g. Mars.

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Mutual Societies

Mutuals (and co-operatives) are owned by members such as employees, customers or others with an interest in the business, and they give members a say in how the organisation is run. They are often run for the benefit of its members e.g. John Lewis

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Necessities (Income Elasticity)

Are income inelastic, a rise in demand is smaller than the rise in income. As income grows, proportionally less is spent on necessities. –Answer when calculating YED it will be greater than 0 but less than +1 –Example: Milk

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Net Cash Flow

The sum of cash inflows to an organisation minus the sum of cash outflows over a period of time. Calculated by cash inflows minus cash outflows.

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Net Gain

The value to be gained from making a particular decision. Calculated by adding together the expected value of each outcome and deducting the costs associated with the decision.

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Niche Marketing

Targeting a product or a service at a small segment of a larger market, where customers have specific needs and wants. Also called Concentrated Marketing.

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Non-Profit Organisations

Businesses that do not have an aim of maximising profit, instead they reinvest any surplus to further their social/environmental/community/cultural objectives, e.g. charities.

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Off-the-job training

Educating workers outside their immediate workplace, e.g. at college or in a conference room at a factory.

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Offshoring

Used to describe outsourcing/subcontracting when the activity being transferred takes place in a different country.

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On-the-job training

The employee learns a job by seeing how it is done by an experienced employee at the workplace, watching them and then having a go themselves

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Operating Profit

Gross profit minus administrative expenses. It is the profit made from trading and ignores one-offs, it is the profit before tax

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Operating profit margin

Operating profit/Sales Revenue x 100. Measures operating profit as a percentage of sales revenue. It measures how efficiently the business is making profit from the resources that it is using for its trading activities.

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Operational Objectives

Specific, focused targets of the operations management department within an organisation. Examples: –Costs –Quality –Speed of Response –Flexibility –Dependability –Environmental Objectives - Added Value

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Operations Management

The management of processes, activities and decisions relating to the way goods and services are produced and delivered, so the business provides the right goods/services to the customer.

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Opportunity Cost

The next best alternative forgone, or, the benefits that could have been gained by taking a different decision. (The next best thing you could have chosen but did not choose.) e.g. the opportunity cost of opening a new store could be advertising.

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Ordinary Share Capital

Money given to a company by shareholders in return for a share certificate that gives them part ownership of the company. Example – a shareholder with 1% of ordinary shares receives 1% of any profit (dividend) given to ordinary shareholders.

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Organisational Culture

A system of shared assumptions, values, and beliefs, which governs how people behave in businesses. E.g. how they dress, act, and perform their jobs.

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Organisational Design

The process of shaping an organisation’s structure so that it meets the organisation’s purpose and helps to deliver its objectives.

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Organisational Hierarchy

The vertical division of authority and accountability in an organisation

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Outsourcing

The transfer of activities, which were previously conducted in-house, to a third party outside the business. For example, another company making components for you or a company outsourcing its catering.

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Paternalistic

Paternalistic Management/Leadership Style. Features: •Workers are consulted, but ultimately the leader decides what is best for employees •No/little delegation •Leaders try to act in best interest of staff

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Penetration Pricing

A strategy in which low prices are set to break into a market or to achieve a sudden increase in market share, e.g. chocolate bar/credit card companies with introductory offers.

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People (in the Marketing Mix)

Refers to the staff or representatives of a company who will directly or indirectly come into contact with customers, therefore influencing the quality of service provided to the customer. One of the 7P's.

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Performance Related Pay (PRP)

A financial reward system rewarding staff based on an assessment of their individual performance (an appraisal) and usually measured against pre-agreed objectives; usually takes the form of a bonus or increase in salary for above-average performance

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Person Specification

A document stating the characteristics of the ideal candidate for a job including skills, aptitude, knowledge, experience, qualifications, and personal qualities (e.g. team player)

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Personal Selling

Salespeople visiting homes so two way communication, normally to sell high value durable items such as household goods.

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Persuasive promotion

Encourages customers to buy the products by emphasising its desirability, e.g. car/perfume ads

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Physical Environment (Physical Evidence) (In the Marketing Mix)

Refers to the tangible features of the service that can enhance customers’ experience. Examples of physical environment: –The business’s reception area –Company brochures –Letterheads -Company website - signage - staff appearance - layout of shop

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Piece Rate

A financial reward where payment is based on the number of items each worker produces

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Predator (or destroyer) pricing

Setting very low prices to drive other firms out of the market, e.g. low cost airlines

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Pressure Groups

Organisations formed by people with a common interest or shared goal, who can join together to further their interests or achieve their goals by putting pressure on the general public, governments or businesses. For example Friends of the Earth

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Price Elasticity of Demand

The degree to which the quantity demanded of a good or service is affected by a change in price. PED=% change in quantity demanded/% change in price. A fall in price usually leads to a rise in demand. Negative because it is either +P=-D of -P=+D

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Price Leadership and Price Taking

A large company (the price leader) sets a price that smaller firms (price takers) tend to follow, e.g. petrol. Small firms usually follow the price set by the price leader as to avoid a price war, and a higher price would lead to less customers

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Price Skimming

A strategy in which a high price is set to yield a high profit margin, e.g. iPad/fashion.

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Primary Market Research

Data collected first-hand for a specific research purpose of the initial user. Examples include: •Experiments (Test marketing) •Observation •Focus groups •Personal (face-to-face) surveys •Postal surveys •Telephone surveys •Internet surveys

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Private Limited Company

A business with limited liability that raises capital by selling shares to (invited) friends and family, but cannot sell shares to the general public.Usually small-medium sized businesses

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Private Sector Organisation

Businesses which are owned, run and financed by private individuals, who mostly aim to make a profit

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Probability

The chance of an outcome happening/The percentage chance or possibility that an event will occur. •Ranges between 1 (100%) and 0 •If all the outcomes of an event are considered, the total probability must add up to 1

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Process (in the Marketing Mix)

The procedures / flow of activities by which a service is delivered to the customer. –Ensuring customer enquiries are dealt with promptly -Training and empowering staff so they can answer questions directly -reduce queuing -communicating effectively

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Product Portfolio

The range of products or brands provided by a business.

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Product Portfolio Analysis

Assesses the position of each product or brand in a firm’s portfolio to help determine the right marketing strategy for each. A firm can decide what new products should be added to the portfolio. Having a range of products means that risk is spread.

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Product Proliferation

Diverse range of goods and services (common during economic growth)

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Profit

The difference between the income of a business and its total costs. Formula for profit is Profit = Total Revenue - Total Costs. To increase profit a business needs to increase revenue or reduce costs.

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Profit Budget

Shows the agreed, planned profit of a business (or division/department of a business) over a period of time.

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Profit for the year

Operating profit minus tax and one-off items. It is the profit available to the owners/shareholders.

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Profit for the year margin

Profit for the year/Sales revenue x 100 Measures the profit that is available for shareholders, as a percentage of sales revenue. It measures how much the shareholders may benefit directly from the financial performance of the business.

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Profitability

Viewing a business's profit in comparison to the size of the business. For example, calculating profit as a percentage of its revenue. It is the ability of a business to generate profit or the efficiency of a business in generating profit

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Promotion

The process of communicating with customers or potential customers, and other stakeholders such as shareholders/suppliers.

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Promotional Mix

The specific mix of promotional methods that a business uses to pursue its marketing objectives (e.g. TV, sponsorship and merchandising). The elements must be integrated in a cohesive, consistent and logical manner.

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Psychological Pricing

Gives the impression of value, e.g. £4.99 instead of £5

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Public Limited Company

A business with limited liability that sells shares to the public (on the stock exchange)

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Public Relations

Activities that create goodwill toward an individual, business, cause or product and gain favourable publicity in the media, e.g. a newspaper article about a new laptop or test driving a car on a tv programme.

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Public sector organisations

Businesses are owned and operated by the government (state-owned), they aim to provide essential services

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Punctuality

Calculates the degree to which a business delivers its products (or provides its services) on time. Punctuality (%) = Deliveries on time/Total deliveries x 100

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Qualitative Research

Collection of information about the market based on subjective factors, such as opinions and reasons

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Quality

Those features of a product or service that allow it to satisfy (or delight) customers. Ways to measure quality: –Customer Satisfaction Ratings –Customer Complaints –Level of Product Returns –Scrap Rate - Punctuality

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Quality Assurance

A system that aims to achieve or improve quality by organising every process to get the product ‘right first time’ and prevent mistakes ever happening

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Quality Control

A system that uses inspection as a way of finding any faults in the good or service being provided.

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Quality System

The approach used by an organisation to achieve quality. Most quality systems can be classified as either quality control or quality assurance

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Quantitative Research

Collection of information about the market based on numbers.

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Rationalisation

A process by which a firm improves its efficiency by cutting the scale of its operations.

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Re-order level

Used in an inventory control chart, it is the inventory level at which an order is placed for new inventory.

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Re-order quantity

Used in an inventory control chart, it is the actual number of products purchased from the supplier in a particular order

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Recruitment

Identifying the need for new employees, attracting the ‘best’ candidates for the job, and then selecting (choosing) the most suitable candidate in order to meet the staffing requirements of an organisation

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Recruitment Process

Job becomes vacant, Job descriptions, Person (job) specification, Deciding on internal or external recruitment, Advertising media, Application forms and CV’s, Shortlisting, Interviews and other methods of assessment, Appointment

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Redeployment

The process of moving existing employees to a different job, or different location, within the same organisation.

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Redundancy

When an employer dismisses an employee because their job no longer exists. (This might be because the business is changing what it does, doing things in a different way (e.g. automation), changing location or closing down.)

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Retailers

Shops that holds stock of products to sell to consumers

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Retained profit

Profit that is re-invested back into the business rather than distributed to shareholders (as dividends). •Long term •Internal

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Retention Rate

The proportion of employees with a specified length of service (normally 1 or more years) as a proportion of the total workforce. Retention rate = Number of employees with one or more years’ service/Overall workforce numbers x 100

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Return on investment

A measure of the efficiency of an investment in financial terms, used to compare the financial returns of alternative investments

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Revenue expenditure

Spending on day-to-day running costs, e.g. stock.

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Salary Scheme

A financial reward with a basic rate payment system where employees are paid an annual salary.

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Sales Growth

A marketing objectives which measures the percentage change in sales (volume or value) for a specific business/product over a period of time. Calculated by: (Sales in that year – sales in previous year)/Sales in previous year x 100 = Sales Growth (%)

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Sales Value

A marketing objective which measures the financial worth of items sold, calculated by sales volume multiplied by average price

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Sales Volume

A marketing objective which measures the number of items sold or produced

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Sampling

Sampling-gathering data from a group of respondents, which should be representative of the population (e.g. target market) as a whole. Methods–random (equal chance of being chosen), quota (reflects the type of consumer they want to to target eg. age

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Scientific decision making

Involves making decisions based on evidence (data and research) and adopting a systematic approach, rather than intuition, hunch or ‘gut reaction’. It is a logical and research-based approach to decision making.

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Shopping Products

Products consumers want to be readily accessible, but which involve thought and planning before purchase

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Soft HRM Strategy

This strategy views employees as valuable assets, a major source of competitive advantage and of vital importance in achieving strategic objectives

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Span/Span of Control

The number of subordinates a manager is responsible for and required to supervise directly

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Spare Capacity

When a firm’s output is below the maximum possible output. It represents a waste of resources and means that the organisation is spending unnecessarily on fixed assets. Also called Excess Capacity and Under-utilisation of capacity.

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Speciality Products

Products whose purchase is planned by consumers, who will seek out these products for purchase

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Speed of Response

The time taken for a customer requirement to be fulfilled. It measures the time taken to reply to an email, answer the telephone or answer the customer’s question/solve the problem.

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Subcontracting

When another business takes an assigned task or part of a task from another business under a contract. For example, a house building firm will subcontract electrical work. Can be specialists in that field.

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Supply chain

A network of: •sellers of raw materials, •manufacturers that transform those materials into finished products, and, •wholesalers and retailers who get those products to customers

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Supply chain management

The organisation of the supply chain network to create value for the customer and profit for the businesses involved in supplying the products.

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Tannenbaum and Schmidt Continuum

Tannenbaum and Schmidt’s continuum of leadership shows the relationship between the level of freedom in decision making that a manager chooses to give a team of workers AND the level of authority retained by the manager

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Time based management

An approach that seeks to reduce the level of unproductive time within an organisation. This leads to quicker response times and reductions in waste, leading to greater efficiency

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Total contribution

The difference between total revenue and total variable costs. Contribution per unit x units of output OR Sales revenue – total VC

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Total Quality Management (TQM)

A culture of quality that involves all employees. Quality chains are used where workers treat the receivers of their work (the next worker) as customers. It is an ‘attitude’ which every worker has to adopt.

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Trade Union

A group of employees who join together to maintain and improve their conditions of employment (pay and working conditions)

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Unincorporated businesses

There is no distinction in law between the individual owner(s) and the business itself. The identity of the business and the owner is the same. This includes sole traders and partnerships

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Unlimited Liability

A situation in which the owners of a business are liable for all the debts that the business may incur. (If the debts of the business exceed the assets of the business, the owners would have to use their personal possessions to repay the debts.

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Variance Analysis

The process by which the outcomes of budgets are examined and then compared with the budgeted figures. The reasons for the differences (variances) are then found.

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Venture capital

Finance that is provided to small/medium sized firms that seek growth but which may be considered risky by typical share buyers or lenders such as banks, e.g. Dragons' Den! •Long term •External

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Wholesalers

"Break bulk” by buying in large quantities from producers and break into smaller quantities to sell to retailers

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Working capital cycle

Shows how cash “flows” around a business. It is calculated by: length of time goods are held as inventories + time taken for receivables to pay us – period of credit received from suppliers = working capital cycle.

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Works Council

A committee of management and workforce representatives that meet to discuss company-wide issues such as training, investment and working practices

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