Business key terms - Topic 1

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Acquisition

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99 Terms

1

Acquisition

One company buying a controlling interest in another, approved by the target company's board.

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Average cost

Cost per unit of output.

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Backward vertical intergration

Business amalgamates with another firm at an earlier stage of production

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Conglomerates

Businesses with diverse products across different industries.

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Demerger

Company sells part of its business, splitting into two or more.

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Diseconomies of scale

Cost disadvantages as a firm grows, (e.g. average costs rise)

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Economies of scale

Advantages of company growth leading to lower average costs with larger production.

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External diseconomies of scale

Industry growth raises average costs.

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External economies of scale

Average cost falls as industry grows, benefiting all firms.

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External growth

Business grows by collaborating, merging, or buying other organizations.

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Financial economies of scale

Large firms save on interest due to lower risk.

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Forward vertical integration

Firm amalgamates with another firm operating at a later stage of production.

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Franchising

Franchisor sells rights for others to sell products under its name for a royalty fee.

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Horizontal integration

Business amalgamates with another firm operating at the same stage of production

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Internal diseconomies of scale

Internal issues raise average costs as a firm grows.

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Internal economies of scale

Cost advantages within a growing organization (e.g. materials in bulk)

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Internal growth

A business grows using its own capabilities and resources to

increase the scale of its operations and sales revenue.

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Joint venture

Two or more organisations creating a separate legal enterprise to achieve a goal

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Lateral integration

Firms with similar operations but non-competing merge.

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Marketing economies of scale

Larger firms afford specialist managers for efficiency.

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Merger

A form of external growth where two or more firms form a new organization.

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Optimal level of output

Most efficient scale where average cost is minimized.

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Purchaser

Acquiring company in an acquisition or takeover.

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Purchasing economies of scale

Large organizations save on bulk purchases.

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Risk bearing economies of scale

Larger firms can handle greater risks.

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Specialisation economies of scale

Larger firms hire specialists for increase productivity.

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Strategic alliances

Organisations join for external growth without forming a new entity.

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Synergy

Combined operations create greater output and efficiency.

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Takeover

Company buys controlling interest without target's approval.

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Target company

Purchased organisation in an acquisition or takeover.

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Technical economies of scale

Cost savings from large-scale processes and machinery.

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Vertical integration

Integration between businesses at different production stages.

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Market share

Firm's sales revenue as a percentage of the total market's sales revenue.

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Market size

Total number of customers or sales revenue in a market, indicating potential buyers.

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Calculation of market share

Market share % = firms sales divide by total sales in market x 100

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Corporate social responsibility (CSR)

Businesses consider ethical and environmental impact.

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Ethical code of practice

Documented beliefs guiding acceptable behavior.

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Ethical objectives

Organisational goals based on moral guidelines.

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Ethics

Moral principles guiding decision-making

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Mission statement

Organisation’s purpose declaration

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Objectives

Goals including growth, profit maximisation and ethics

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Strategic objectives

the longer-term goals of a business, such as profit maximization, growth, market standing and increased market share.

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Strategies

The methods to achieve long-term goals,

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Tactics

The methods used to achieve goals.

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Tactical objectives

short-term goals that affect a unit of the organization. They are specific goals that guide the daily functioning of certain departments or operations.

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Vision statement

Long-term aspirations of the organisation

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Microfinance providers

Offer the opportunity to receive funding

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Linear production

Taking resources from the earth and disposing them.

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Circular production

aims to minimise waste and maximise resource efficiency by closing the loop through recycling.

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Labour unions

organisation of workers formed to protect the rights and advance the interests of its members concerning wages, benefits, and working conditions.

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Suppliers

Are external stakeholders who provide goods and services to organisations

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Ways to stop conflict

increase transparency through managers and employees, and tie compensation to long term company performance

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First mover advantage

an advantage gained by a company that first introduces a product or service to the market.

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Deindustrialisation

when a country or region sees a decrease in its manufacturing activity.

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Market development

When a company tries to sell its existing products or services in new markets or to new customer groups.

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5 parts of business cycle

Peak, recession, trough, expansion

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The x and y axis of business cycle

GDP, Time

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Diseconomies of scale graph x and y

Average cost, Output

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SMART objectives

Specific, measureable, achievable, relevant and time specific

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Conflict

Disputes among stakeholders leading to tension

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Customers

Business clients seeking value for money

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Directors

Senior executives elected by shareholders.

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Shareholder

a person, company, or institution that owns at least one share of a company's stock or in a mutual fund

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Employees

Staff with an interest in the organisation

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External stakeholders

Individuals and organisations with a direct interest in business activities.

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Finaciers

Those who provide financial advice to a company

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Government

Ruling authority ensuring business compliance with laws.

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Internal stakeholders

Members within the organization including employees, managers, directors, and shareholders.

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Local community

Public and businesses interested in organization activities, job creation, and social responsibility.

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Managers

Internal stakeholders overseeing daily operations.

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Pressure groups

Individuals with common concerns seeking to influence organization behavior.

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Gross domestic product (GDP)

Value of a country’s annual output or income

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Host country

Nation allowing multinational companies to set up within its borders.

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Multinational company (MNC)

Organization operating in multiple countries, often with headquarters in its home country.

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Protectionist policies

Measures to reduce competitiveness of imports, like tariffs, quotas, and trade restrictions.

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Calculation of GDP

Consumer spending + Investments business + Government spending + (Exports - Imports)

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Fiscal policy

Government spending and taxation

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Expansionary fiscal policy

Increasing one of the GDP=C+I+G+(X-M).

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Contractionary fiscal policy

Decreasing one of the GDP=C+I+G+(X-M).

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Monetary policy


The actions taken by a country's central bank to manage its money supply and interest rates in order to influence economic conditions like inflation and growth.

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Calculation of sales and revenue

revenue = total sales x price

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Calculation of net profit

revenue - cost of production

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Calculation of gross profit

revenue - cost of production - tax

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Consumers

The people or organizations that actually use a product.

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Customers

The people or organizations that buy the product.

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Deed of partnership

the legal contract signed by the owners of a partnership.

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Incorporation

There is a legal difference between the owners of a company and the business itself

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Initial public offering (IPO)

When a business sells all or part of its business to shareholders on a public stock

exchange for the first time.

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Social enterprises

Revenue-generating businesses with social objectives at the core of their operations.

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90

1st D of DEADER

Definition

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1st E of DEADER

Examples

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A of DEADER

Advantages

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2nd D of DEADER

Disadvantages

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2nd E of DEADER

Evaluation

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R of DEADER

Recommendations

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Market penetration (Ansof tool)

selling existing products to existing markets.

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Market development (Ansof tool)

selling existing products to new markets

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Product development (Ansof tool)

selling new products to existing markets

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Diversification

selling new products to new markets

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