Pearson Edexcel AS/A Level Business – Theme 1 Key Terms

Vocabulary flashcards covering the key terms and definitions for Theme 1 of the Pearson Edexcel AS/A Level Business course.

Brand

A unique design/sign/symbol/words/logo which makes it recognisable/distinguishes/differentiates it from its competitors.

Competition

The rivalry among sellers trying to achieve goals such as increasing profits, market share, and sales volume.

Direct competition

Businesses produce similar products that appeal to the same group of customers.

Dynamic market

A market that is subject to rapid/continuous change.

Indirect competition

Different businesses make or sell products that are not in direct competition but compete for the same customer experience e.g. Netflix and the local cinema.

Innovation

The creation, development and implementation of a new product, process or service.

Market share

$\%$ of the total market a business has in terms of volume or value.

Mass market

A large unsegmented market where mass appeal products are on sale.

Niche market

A specialised section of the market where customers have specific needs/wants; a subset of the market on which a specific product focuses.

Sales volume

The quantity of a good or service sold within a period of time, calculated as $\frac{\text{Sales revenue}}{\text{Selling price}}$.

Uncertainty

The inability to predict or a lack of knowledge about future events and outcomes, often caused by unexpected external factors outside the business’s control.

Market orientation

When a business’s products/services are based around the needs and wants of the customer.

Product orientation

When a business prioritises a product’s design quality or performance rather than meeting customer preferences to guide production and marketing decisions.

Primary market research

Obtaining data first hand by the business to match the specific needs of the business; also known as field research.

Secondary market research

Data collected by another business or organisation but used by the business in question; also known as desk research.

Qualitative research

Market research collected relating to the opinions and beliefs of consumers; data not presented numerically.

Quantitative research data

Numerical information gathered that can be presented and analysed using graphs, charts, or tables.

Added value

The increase in value that a business creates when producing a product/service; the difference between the selling price and the cost of inputs.

Competitive advantage

A feature of a business and/or its products that enable it to compete effectively with rival producers/products by having an edge over the competition.

Market mapping

The use of a 2-dimensional diagram that plots products or services in a market using two key variables to spot a gap in the market.

Complementary goods

Products consumed/used together, such as a printer and printer ink.

Demand

The quantity of goods/services that a consumer is willing to buy at a given price and at a given time.

Substitutes

Goods that can be bought as an alternative to others but perform the same function, e.g. petrol car and electric car.

Equilibrium price

The price where supply and demand are equal; also known as market clearing price.

Price elasticity of demand (PED)

Measures the responsiveness of quantity demanded to a change in price; always negative due to laws of demand.

Income elasticity of demand (YED)

Measures the responsiveness of changes in quantity demanded to changes in consumer income.

Inferior good

A product where an increase in income leads to a decrease in the quantity demanded.

Design Mix

The combination of factors needed in designing a product: Aesthetics, Function, and Economic Manufacture (Cost).

Ethical sourcing

When a business buys materials that are produced with fair working conditions/pay and minimum impact on the environment.

Emotional branding

The practice of building brands that appeal directly to a consumer's emotional state, needs, and aspirations.

USP (Unique Selling Point)

A feature that differentiates a product from its competitors and makes it stand out from the competition.

Price skimming

Setting a high price at the launch of a product to gain money back from R&D and take advantage of early adopters.

Penetration pricing

Setting a low price initially to build market share before switching to a more profitable and higher price.

Predatory pricing

Setting a low price to force rivals out of the market.

Boston matrix

A method used to analyse the product portfolio of a business containing Stars, Cash cows, Question marks, and Dogs.

Extension strategy

A plan aimed at preventing the decline stage of a product/service's sales in the medium-to-long term.

Staff as an asset

When employers recognise the input of employees as an important resource that contributes to the value of output.

Collective bargaining

Negotiation of wages/conditions of employment between employee representatives or trade unions and the employer.

Centralised structure

An organisational structure where business decisions are made at the top of the hierarchy by senior management.

Matrix organisational structure

Organises employees from different disciplines or divisions into projects or teams.

Span of control

The number of employees or subordinates that a manager is responsible for.

Taylor’s scientific management

Theory suggesting jobs should be broken into constituent parts for efficiency, believing workers are primarily motivated by money.

Mayo's human relations theory

Emphasises that motivation can improve when employees feel more involved and are treated as part of a group.

Maslow's hierarchy of needs

The order of people's needs, starting with basic human requirements.

Autocratic leadership

A style where decision-making is kept with managers who direct subordinates with little consultation.

Laissez-faire

A leadership style where employees are encouraged to make their own decisions within certain limits.

Entrepreneur

An individual who sets up and runs a business, combining land, labour, and capital, and taking on financial risk in the hope of profit.

Profit Satisficing

Making enough profit to satisfy the needs of the business owner rather than maximizing it.

Franchise

A business that buys the right to trade using the brand/logo/business model of an existing firm in return for a fee or royalty.

Opportunity cost

The next best alternative forgone when making a decision.