definitions

Added Value

The difference between the selling price of a product and the cost of the raw materials used to make it.

Entrepreneur

An individual who takes the financial risk to start and manage a new business venture, organizing resources to produce goods or services for profit.

Intrapreneur

An employee within an existing business who is encouraged to think creatively and develop new ideas or products that improve the company.

Opportunity Cost

The next best alternative that is given up when a decision is made.

Specialisation

When individuals, firms, or regions focus on producing one part of a product or a limited range of goods to increase efficiency.

Corporate Social Responsibility (CSR)

A business policy that shows commitment to act ethically and consider the effects of decisions on society and the environment.

Stakeholder

Any individual or group that has an interest in or is affected by the activities and decisions of a business.

SMART Objectives

Objectives that are Specific, Measurable, Achievable, Realistic, and Time-specific.

Public Sector

Businesses owned and controlled by the government to provide goods and services for the public.

Private Sector

Businesses owned and controlled by individuals or groups of individuals whose main aim is profit.

Sole Trader

A business owned and run by one person with unlimited liability and full control of profits and decisions.

Partnership

A business owned by two or more people (up to 20) who share capital, profits, and decision-making. Partners have unlimited liability.

Private Limited Company (Ltd)

A small- to medium-sized incorporated business owned by shareholders, with limited liability, whose shares cannot be sold to the public.

Public Limited Company (Plc)

A large incorporated business whose shares can be traded on the stock exchange; shareholders enjoy limited liability.

Economies of Scale

Cost advantages a business gains as output increases, leading to a reduction in average cost per unit.

Mission Statement

A written declaration of an organisation’s core purpose, aims, and values to guide its actions and motivate employees.

Business Objective

A specific, measurable target that a business aims to achieve within a certain time period to help meet its overall aims.

Management

The process of setting objectives, organising resources, leading, and controlling employees to achieve business goals.

Leadership

The ability to influence, motivate, and direct people towards achieving common organisational objectives.

Autocratic Leadership

A style where the manager makes all decisions alone, with little input from employees.

Democratic Leadership

A leadership style where employees are encouraged to participate in decision-making, improving motivation and creativity.

Laissez-Faire Leadership

A “hands-off” leadership style where employees make decisions with minimal supervision.

Motivation

The internal and external factors that stimulate people to take actions leading to the achievement of business goals.

Maslow’s Hierarchy of Needs

A motivation theory suggesting that human needs are arranged in a hierarchy — from basic physical needs to self-actualisation — and must be met step by step.

Herzberg’s Two-Factor Theory

Proposes that motivators (e.g. achievement) cause job satisfaction, while hygiene factors (e.g. pay, supervision) prevent dissatisfaction but don’t motivate.

Taylor’s Scientific Management

Motivation theory based on improving efficiency by measuring and controlling how tasks are done, rewarding workers by results.

Mayo’s Human Relations Theory

States that social needs, teamwork, and attention from management improve motivation and productivity.

Labour Turnover

The rate at which employees leave an organisation, calculated as: No. leaving in a year ÷ average employed × 100.

Dismissal

When an employee is legally terminated from a job due to misconduct or poor performance.

Redundancy

When an employee loses their job because their position is no longer needed, not because of poor performance.

On-the-Job Training

Training that takes place while the employee works, using the business’s equipment and methods.

Off-the-Job Training

Training provided outside the workplace by external trainers to improve skills or qualifications.

Work–Life Balance

The ability of employees to divide time effectively between work responsibilities and personal life to reduce stress and increase motivation.

Marketing

The management process responsible for identifying, anticipating, and satisfying customer needs profitably.

Market Orientation

A business approach focused on researching and responding to customer needs before producing goods or services.

Product Orientation

When a business focuses on product quality and innovation rather than customer preferences.

Market Share

The percentage of total market sales achieved by one business.

Market Segmentation

Dividing a market into smaller groups of consumers with similar needs or characteristics.

Niche Marketing

Targeting a small, specific segment of the market with specialised products.

Mass Marketing

Producing and promoting a single product for the entire market without segmentation.

Marketing Mix (4 Ps)

The combination of Product, Price, Promotion, and Place strategies used to satisfy customers and achieve marketing objectives.

Product Life Cycle

The stages a product passes through — introduction, growth, maturity, and decline — showing its sales pattern over time.

Extension Strategies

Marketing actions used to prolong a product’s maturity stage, e.g. redesigning packaging or entering new markets.

Unique Selling Point (USP)

A feature that differentiates a product from competitors and makes it stand out to consumers.

Branding

A name, symbol, or design that identifies and differentiates a product from competitors.

Above-the-Line Promotion

Paid advertising through mass media such as TV, radio, or newspapers.

Below-the-Line Promotion

Non-paid or direct methods to encourage purchases, such as sales promotions, discounts, or personal selling.

E-Commerce

The buying and selling of goods and services through the internet.

Productivity

A measure of efficiency: output per worker over a period of time.

Efficiency

Producing goods and services using the least possible amount of resources.

Effectiveness

Achieving organisational objectives by producing the right products in the right way.

Job Production

Producing one single product at a time to meet specific customer requirements.

Batch Production

Producing a limited quantity of identical items in groups or batches.

Flow (Mass) Production

A continuous production process where identical products move through a sequence of operations.

Lean Production

An approach to reduce waste and improve efficiency using methods such as JIT and Kaizen.

Just-in-Time (JIT)

A stock control method where materials arrive exactly when needed for production, minimising storage costs.

Quality Control

Checking finished goods to ensure they meet required standards.

Quality Assurance

A system of setting agreed standards at each stage of production to prevent defects.

Capacity Utilisation

A measure of how fully resources are used.

Economies of Scale

Cost advantages gained when production becomes large-scale, reducing average unit costs.

Diseconomies of Scale

Rising average costs when a business becomes too large and inefficient.

Stock Control

Monitoring and managing inventory to ensure the right quantity is available without excessive cost.

Fixed Costs

Costs that do not change with the level of output (e.g. rent, salaries).

Variable Costs

Costs that vary directly with the level of output (e.g. raw materials).

Total Costs

The sum of fixed and variable costs.

Revenue (Sales Revenue)

The total income received from selling goods and services.

Profit

The surplus remaining after total costs are subtracted from total revenue.

Break-Even Point

The level of output at which total revenue equals total cost — no profit, no loss.

Margin of Safety

The difference between actual sales and break-even sales, showing how much sales can fall before losses occur.

Liquidity

The ability of a business to pay its short-term debts.

Working Capital

The funds available for day-to-day operations.

Cash Flow Forecast

An estimate of a business’s future cash inflows and outflows to predict liquidity needs.

Capital Expenditure

Spending on non-current assets that will be used for more than one year, e.g. machinery or buildings.

Revenue Expenditure

Spending on daily operating costs such as wages and materials.

Retained Profit

Profit kept within the business after tax and dividends, used for reinvestment.

Sources of Finance

Ways a business obtains money, either internal (retained profit, sale of assets) or external (bank loans, overdrafts, share capital).

Insolvency

When a business cannot pay its debts as they fall due.