Business key terms - Topic 1

Acquisition

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

Average cost

Cost per unit of output.

Backward vertical intergration

Business amalgamates with another firm at an earlier stage of production

Conglomerates

Businesses with diverse products across different industries.

Demerger

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

Diseconomies of scale

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

Economies of scale

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

External diseconomies of scale

Industry growth raises average costs.

External economies of scale

Average cost falls as industry grows, benefiting all firms.

External growth

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

Financial economies of scale

Large firms save on interest due to lower risk.

Forward vertical integration

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

Franchising

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

Horizontal integration

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

Internal diseconomies of scale

Internal issues raise average costs as a firm grows.

Internal economies of scale

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

Internal growth

A business grows using its own capabilities and resources to

increase the scale of its operations and sales revenue.

Joint venture

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

Lateral integration

Firms with similar operations but non-competing merge.

Marketing economies of scale

Larger firms afford specialist managers for efficiency.

Merger

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

Optimal level of output

Most efficient scale where average cost is minimised.

Purchaser

Acquiring company in an acquisition or takeover.

Purchasing economies of scale

Large organizations save on bulk purchases.

Risk bearing economies of scale

Larger firms can handle greater risks.

Specialisation economies of scale

Larger firms hire specialists for increase productivity.

Strategic alliances

Organisations join for external growth without forming a new entity.

Synergy

Combined operations create greater output and efficiency.

Takeover

Company buys controlling interest without target's approval.

Target company

Purchased organisation in an acquisition or takeover.

Technical economies of scale

Cost savings from large-scale processes and machinery.

Vertical integration

Integration between businesses at different production stages.

Market share

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

Market size

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

Calculation of market share

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

Corporate social responsibility (CSR)

Businesses consider ethical and environmental impact.

Ethical code of practice

Documented beliefs guiding acceptable behavior.

Ethical objectives

Organisational goals based on moral guidelines.

Ethics

Moral principles guiding decision-making

Mission statement

Organisation’s purpose declaration

Objectives

Goals including growth, profit maximisation and ethics

Strategic objectives

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

Strategies

The methods to achieve long-term goals,

Tactics

The methods used to achieve goals.

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.

Vision statement

Long-term aspirations of the organisation

Microfinance providers

Offer the opportunity to receive funding

Linear production

Taking resources from the earth and disposing them.

Circular production

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

Labour unions

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

Suppliers

Are external stakeholders who provide goods and services to organisations

Ways to stop conflict

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

First mover advantage

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

Deindustrialisation

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

Market development

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

4 parts of business cycle

Peak, recession, trough, expansion

The x and y axis of business cycle

GDP, Time

Diseconomies of scale graph x and y

Average cost, Output

SMART objectives

Specific, measureable, achievable, relevant and time specific

Conflict

Disputes among stakeholders leading to tension

Customers

Business clients seeking value for money

Directors

Senior executives elected by shareholders.

Shareholder

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

Employees

Staff with an interest in the organisation

External stakeholders

Individuals and organisations with a direct interest in business activities.

Finaciers

Those who provide financial advice to a company

Government

Ruling authority ensuring business compliance with laws.

Internal stakeholders

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

Local community

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

Managers

Internal stakeholders overseeing daily operations.

Pressure groups

Individuals with common concerns seeking to influence organization behavior.

Gross domestic product (GDP)

Value of a country’s annual output or income

Host country

Nation allowing multinational companies to set up within its borders.

Multinational company (MNC)

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

Protectionist policies

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

Calculation of GDP

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

Fiscal policy

Government spending and taxation

Expansionary fiscal policy

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

Contractionary fiscal policy

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

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.

Calculation of sales and revenue

revenue = total sales x price

Calculation of gross profit

revenue - cost of production

Calculation of net profit

revenue - cost of production - tax

Consumers

The people or organizations that actually use a product.

Customers

The people or organizations that buy the product.

Deed of partnership

the legal contract signed by the owners of a partnership.

Incorporation

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

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.

Social enterprises

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

1st D of DEADER

Definition

1st E of DEADER

Examples

A of DEADER

Advantages

2nd D of DEADER

Disadvantages

2nd E of DEADER

Evaluation

R of DEADER

Recommendations

Market penetration (Ansof tool)

selling existing products to existing markets.

Market development (Ansof tool)

selling existing products to new markets

Product development (Ansof tool)

selling new products to existing markets

Diversification

selling new products to new markets