Business Studies Glossary PDF

# Business Studies Glossary ## Key Economic Concepts | Term | Definition | |---|---| | A need | A good or service essential for living. | | A want | A good or service that people would like to have, but is not essential for living. People's wants are unlimited. | | Economic problem | There exist u...

# Business Studies Glossary ## Key Economic Concepts | Term | Definition | |---|---| | A need | A good or service essential for living. | | A want | A good or service that people would like to have, but is not essential for living. People's wants are unlimited. | | Economic problem | There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity. | | Factors of production | The resources needed to produce goods or services. There are four factors of production (land, labour, capital and enterprise) and they are in limited supply. | | Scarcity | The lack of sufficient products to fulfil the total wants of the population. | | Opportunity cost | The next best alternative given up by choosing another item. | | Specialisation | Occurs when people and businesses concentrate on what they are best at. | | Division of labour | When the production process is split up into different tasks and each employee performs one of these tasks. Division of labour is a form of specialisation. | | Businesses | Businesses combine factors of production to make products (goods and services) that satisfy people's wants. | | Added value | The difference between the selling price of a product and the cost of bought-in materials and components. | | Primary sector | The primary sector of industry extracts and uses the natural resources of the earth to produce raw materials used by other businesses. | | Secondary sector | The secondary sector of industry manufactures goods using the raw materials provided by the primary sector. | | Tertiary sector | The tertiary sector of industry provides services to consumers and the other sectors of industry. | | De-industrialisation | Occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country. | | Mixed economy | A mixed economy has both a private sector and a public (state) sector. | | Capital | The money invested into a business by the owners. | ## Types of Business | Term | Definition | |---|---| | Entrepreneur | A person who organises, operates and takes the risk for a new business venture. | | Business plan | A document containing the business objectives and important details about the operations, finance and owners of the new business. | | Capital employed | The total value of capital used in the business. | | Internal growth | Occurs when a business expands its existing operations. | | External growth | When a business takes over or merges with another business. It is often called integration as one business is integrated with another. | | Takeover | When one business buys out the owners of another business, which then becomes part of the 'predator' business (the business which has taken it over). Also known as an acquisition. | | Merger | When the owners of two businesses agree to join their businesses together to make one business. | | Horizontal integration | When one business merges with or takes over another one in the same industry at the same stage of production. | | Vertical integration | When one business merges with or takes over another one in the same industry but at a different stage of production. Vertical integration can be forward or backward. | | Conglomerate integration | When one business merges with or takes over a business in a different industry. This is also known as diversification. | ## Business Structures | Term | Definition | |---|---| | Sole trader | A business owned by one person. | | Limited liability | Limited liability means that the liability of shareholders in a company is limited to the amount they invested. | | Unlimited liability | Unlimited liability means that the owners of a business can be held responsible for the debts of the business they own. Their liability is not limited to the investment they made in the business. | | Partnership | A form of business in which two or more people agree to jointly own a business. | | Partnership agreement | The written, legal agreement between business partners. It is not essential for partners to have such an agreement, but it is always recommended. | | Unincorporated business | A business that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses. | | Incorporated business | A business that has separate legal status from its owners. | | Shareholders | The owners of a limited company. | | Private limited company | A business owned by shareholders but it cannot sell shares to the public. | | Public limited company | A business owned by shareholders but it can sell shares to the public and its shares are tradable on the stock exchange. | | Annual General Meeting (AGM) | A legal requirement for all companies. Shareholders may attend and vote on who they want on the Board of Directors for the coming year. | | Dividends | Payments made to shareholders from the profits (after tax) of a company. They are the return to shareholders for investing in the company. | | Franchise | A business based on the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buys the licence to operate this business from the franchisor. | | Joint venture | When two or more businesses start a new project together, sharing capital, risks and profits. | | Public corporation | A business in the public sector that is owned and controlled by the state (government). | ## Business Objectives | Term | Definition | |---|---| | Business objectives | The aims or targets that a business works towards. | | Profit | Total income (revenue) of a business less total costs. | | Market share | The percentage of total market sales held by one brand or business. <br> Market share % = $\frac{Company \ sales}{Total \ market \ sales} \times$ 100 | | Social enterprise | A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business. | | Stakeholder | Any person or group with a direct interest in the performance and activities of a business. | ## Employee Motivation | Term | Definition | |---|---| | Motivation | The reason why employees want to work hard and work effectively for the business. | | Wage | A payment for work, usually paid weekly. | | Wage rate | The amount paid to an employee for one hour of work. | | Piece rate | An amount paid for each unit of output. | | Salary | Payment for work, usually paid monthly. | | Bonus | An additional amount of payment above basic pay as a reward for good work. | | Commission | Payment relating to the number of sales made. | | Profit sharing | A system whereby a proportion of the company's profit is paid out to employees. | | Job satisfaction | The enjoyment derived from feeling that you have done a good job. | | Job rotation | Involves employees swapping around and doing each specific task for only a limited time and then changing around again. | | Job enrichment | Involves looking at jobs and adding tasks that require more skill and/or responsibility. | | Teamwork | Involves using groups of employees and allocating specific tasks and responsibilities to them. | | Training | The process of improving an employee's skills. | | Promotion | The advancement of an employee in an organisation, for example, to a higher job/managerial level. | ## Organisational Structure | Term | Definition | |---|---| | Organisational structure | The levels of management and divisions of responsibilities within an organisation. | | Organisation chart | A diagram that outlines the internal management structure. | | Hierarchy | The levels of management in any organisation, from the highest to the lowest. A 'level of hierarchy' refers to managers/supervisors/other employees who are given a similar level of responsibility in an organisation. | | Chain of command | The structure in an organisation that allows instructions to be passed down from senior management to lower levels of management. | | Span of control | The number of subordinates working directly under a manager. | | Directors | Senior managers who lead a particular department or division of a business. | | Line managers | Managers who have direct responsibility over people below them in the hierarchy of an organisation. | | Supervisors | Junior managers who have direct control over the employees below them in the organisational structure. | | Staff managers | Specialists who provide support, information and assistance to line managers. | | Delegation | Giving subordinates the authority to perform particular tasks. | | Leadership styles | The different approaches to dealing with people and making decisions when in a position of authority - autocratic, democratic or laissez-faire. | | Autocratic leadership | The manager is in charge of the business, takes all decisions and expects orders to be followed. | | Democratic leadership | All employees are involved in the decision-making process. | | Laissez-faire leadership | Makes the broad objectives of the business known to employees, who are then left to make their own decisions and organise their own work. | | Trade union | A group of employees who have joined together to ensure their interests are protected. | ## Recruitment and Training | Term | Definition | |---|---| | Recruitment | The process from identifying that the business needs to employ someone up to the point at which applications have arrived at the business. | | Employee selection | The process of evaluating candidates for a specific job and selecting an individual for employment based on the needs of the organisation. | | Job analysis | Identifies and records the responsibilities and tasks relating to a job. | | Job description | Outlines the responsibilities and duties to be carried out by someone employed to do a specific job. | | Job specification | A document outlining the requirements, qualifications, expertise, physical characteristics, etc., for a specified job. | | Internal recruitment | The vacancy is filled by someone who is an existing employee of the business. | | External recruitment | The vacancy is filled by someone who is not an existing employee and will be new to the business. | | Part-time employment | Jobs often considered to be between 1 and 30-35 hours a week. | | Full-time employment | Jobs where employees will usually work 35 hours or more a week. | | Induction training | An introduction given to a new employee, explaining the business’s activities, customs and procedures, and introducing them to their fellow employees. | | On-the-job training | Training at the place of work by watching a more experienced employee doing the job. | | Off-the-job training | Training away from the workplace, usually by specialised trainers. | | Workforce planning | Establishing the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required. | | Dismissal | When employment is ended against the will of the employee, usually for not working in accordance with the employment contract. | ## Communication | Term | Definition | |---|---| | Communication | The transferring of a message from the sender to the receiver, who understands the message. | | Message | The information or instructions being passed by the sender to the receiver. | | Internal communication | Communication between members of the same organisation. | | External communication | Communication between the organisation and other organisations or individuals. | | Transmitter/sender | The person starting off the process by sending the message. | | Medium of communication | The method used to send a message, for example, a letter is a method of written communication and a meeting is a method of verbal communication. | | Receiver | The person who receives the message. | | Feedback | The reply from the receiver that shows whether the message has arrived, been understood and, if necessary, acted upon. | | One-way communication | A message that does not call for or require a response. | | Two-way communication | When the receiver gives a response to the message and there is a discussion about it. | | Formal communication | When messages are sent through established channels using professional language. | | Informal communication | When information is sent and received casually using everyday language. | | Communication barriers | Factors that stop effective communication of messages. | ## Marketing | Term | Definition | |---|---| | Marketing | Identifying customer wants and satisfying them profitably. | | Customer | A person, business or other organisation that buys goods or services from a business. | | Customer loyalty | When existing customers continually buy products from the same business. | | Customer relationships | Communicating with customers to encourage them to become loyal to the business and its products. | | Market share | The percentage of total market sales held by one brand or business. | | Consumer | Someone who buys goods or services for personal use - not to re-sell. | | Mass market | Where there is a very large number of sales of a product. | | Niche market | A small, usually specialised, segment of a much larger market. | | Market segment | An identifiable sub-group of a whole market in which consumers have similar characteristics or preferences. | ## Market Research | Term | Definition | |---|---| | Market research | The process of gathering, analysing and interpreting information about a market. | | Product orientated (business) | A business whose main focus of activity is on the product itself. | | Market orientated (business) | A business that carries out market research to find out consumer wants before a product is developed and produced. | | Marketing budget | A financial plan for the marketing of a product or product range for some specified period of time. It specifies how much money is available to market the product or range, so that the marketing department knows how much it may spend. | | Primary research | The collection and collation of original data via direct contact with potential or existing customers. (Also known as field research.) | | Secondary research | Information that has already been collected and is available for use by others. (Also known as desk research.) | | Questionnaire | A set of questions to be answered as a means of collecting data for market research. | | Online survey | A survey that requires the target sample to answer a series of questions over the internet. | | Interview | Asking individuals a series of questions, often face-to-face or over the phone. | | Focus group | A group of people who are representative of the target market. | | Sample | A group of people who are selected to respond to a market research exercise, such as a questionnaire. | | Random sample | When people are selected at random as a source of information for market research. | | Quota sample | When people are selected on the basis of certain characteristics (such as age, gender or income) as a source of information for market research. | ## Marketing Mix | Term | Definition | |---|---| | Marketing mix | A term used to describe all the activities that go into marketing a product or service. These activities are often summarised as the four Ps - product, price, place and promotion. | | Unique selling point (USP) | The special feature of a product that differentiates it from the products of competitors. | | Brand name | The unique name of a product that distinguishes it from other brands. | | Brand loyalty | When consumers keep buying the same brand again and again instead of choosing a competitor’s brand. | | Brand image | An image or identity given to a product that gives it a personality of its own and distinguishes it from its competitors’ brands. | | Packaging | The physical container or wrapping for a product. It is also used for promotion and selling appeal. | | Product life cycle | The stages a product will pass through from its introduction, through its growth until it is mature, and then finally its decline. | | Extension strategy | A way of keeping a product at the maturity stage of the life cycle and extending the cycle. | ## Pricing | Term | Definition | |---|---| | Cost-plus pricing | The cost of manufacturing the product plus a profit mark-up. | | Competitive pricing | When the product is priced in line with or just below competitors’ prices to try to capture more of the market. | | Penetration pricing | When the price is set lower than the competitors’ prices in order to be able to enter a new market.| | Price skimming | A high price is set for a new product on the market. | | Promotional pricing | When a product is sold at a very low price for a short period of time. | | Dynamic pricing | When businesses change product prices, usually when selling online, depending on the level of demand. | | Price elastic demand | When consumers are very sensitive to changes in price. | | Price inelastic demand | When consumers are not very sensitive to changes in price. |