business end topic

Business aim

A broad, longterm goal of a business.

Business objective

A specific target that helps a business achieve its aim.

R in SMART

Realistic.

Entrepreneur

Someone who starts a business, develops an idea and takes risks.

Unlimited liability

The owner is personally responsible for the business's debts.

Cooperative

A business owned and controlled by its members, with one member having one vote.

Ltd

A private limited company whose shares are privately held.

PLC

A public limited company whose shares can be offered to the general public.

Dividend

A payment of company profit to shareholders.

Revenue

Selling price × quantity sold.

Profit

Revenue − total costs.

Franchisor

The business that grants the right to use its brand and business model.

Franchisee

The person or business that buys the right to operate using the franchisor's brand.

Royalty

An ongoing fee paid by a franchisee to the franchisor.

MNC

A business registered in one country with operations in many countries.

Globalisation

The free movement of goods, services, people, capital, information and technology so businesses can sell worldwide.

Stakeholder

An individual or organisation with an interest in a business's activities and decisions.

Shareholder

A person who owns shares in a company.

Economies of scale

When average cost per unit falls as output increases.

Diseconomies of scale

When average cost per unit rises as output increases.

Average cost

Total cost divided by the number of units produced.

Purchasing economies of scale

Lower costs achieved by buying large quantities from suppliers.

Technical economies of scale

Lower average costs from using efficient technology and machinery at high output.

Managerial economies of scale

Lower average costs from employing specialist managers as the business grows.

Financial economies of scale

Large businesses may have easier access to finance or lower borrowing costs.

Marketing economies of scale

Marketing costs are spread over a larger number of products.

Internal economies of scale

Cost advantages gained from the growth of the business itself.

External economies of scale

Cost advantages caused by growth in the industry or area where the business operates.

Why do economies of scale reduce average cost?

Fixed costs are spread over a larger number of units as output increases.

What happens to average cost when output increases and economies of scale occur?

Average cost per unit decreases.

What happens when a business becomes too large?

Diseconomies of scale may occur and average cost per unit can increase.