section 1 business and its environment terms

Enterprise

the action of showing initiative to take the risk to set up a business

Entrepreneur

an individual who has the idea for a new business

Customer

an individual consumer/organisation that purchases goods/services from a business

Consumer

an individual who purchases goods + services for personal use

Consumer goods

the physical + tangible goods sold to consumers that are not intended for resale (eg. foods/cars/furniture)

Consumer services

the non-tangible products sold to consumers that are not intended for resale (eg. hotel/insurance/banking)

Factors of production

the resources needed by business to produce goods/services

Capital goods

the physical goods used by industry to aid in the production of other goods + services (eg. machines/commercial vehicles)

Adding value

increasing the difference b/w the cost of brought-in inputs (materials) + the selling price of the finished goods

Added value

the difference b/w the cost of purchasing bought-in inputs (materials) + the selling price of the finished goods

Branding

the process of differentiating a product by developing a symbol/name/image/trademark for it

Opportunity cost

the next best alternative that is given up

Multinational businesses

a business organisation that has its headquarters in 1 country, but with operating branches/factories/assembly plants in other countries

Intrapreneur

a business employee who takes direct responsibility for turning an idea into a profitable new product/business venture

Business plan

a written document that describes a business + objectives + strategies + the market its in + financial forecasts

Primary sector business activity

firms engaged in industries that extract natural resources so that they can be used + processed (eg. farming/fishing)

Secondary sector business activity

firms that can manufacture + process products from natural resources (eg. baking/construction)

Tertiary sector business activity

firms providing services to consumers + other businesses (eg. retail/transport)

Quaternary sector business activity

businesses providing information services (eg. computing/web design)

Industrialisation

the growing relative importance of secondary sector activity in developing countries

Deindustrialisation

the decline in the relative importance of the primary/secondary sectors + the increase in relative importance of the tertiary/quaternary sectors

Public sector

organisations accountable to + controlled by central/local government/state

Private sector

businesses owned + controlled by individuals/groups of individuals

Mixed economy

economic resources are owned + controlled by both private & public sectors

Free-market economy

economic resources are owned largely by the private sector with very little state intervention

Command economy

economic resources are owned + planned + controlled by the state

Public corporation

a business enterprise owned + controlled by the state (aka nationalised industry)

Privatisation

government-owned firms are sold to the private sector (in terms of ownership/control)

Sole trader

a business in which 1 person provides the permanent finance + in return has full control of the business + is able to keep all the profits

Partnership

a business formed by 2 or more people to carry on a business together, w/shared capital investment + responsibilities

Unlimited liability

business owners have full legal responsibility for the debts of the business

Limited liability

the only liability/potential loss a shareholder has if the company fails, the amount invested in the company, not the total wealth of the shareholder

Share

a certificate confirming part-ownership of a company + entitling the shareholder owner to dividends + certain shareholder rights

Shareholder

a person/institution owning shares in a limited company

Private limited company

a business that is owned by shareholders who are often members of the same family - this company can’t sell shares to the general public

Initial public offering (IPO)

an offer to the public to buy shares in a public limited company

Public limited company (plc)

a company whose shares are traded on a stock exchange + can be bought/sold by the public

Memorandum of Association

this states the name of the company, the address of the head office + how it can be contacted, the maximum share capital for which the company seeks authorisation + the declared aims of business

Articles of Association

document covering the internal workings + control of the business, the names of directors + the procedures to be followed @ meetings

Cooperatives

a jointly owned business operated by members for their mutual benefit, to produce/distribute goods/services (eg. consumers’ cooperatives/farmers’ cooperatives)

Franchise

the legal right to use the name, logo + trading systems of an existing successful business

Franchiser

a person/business that sells the right to open stores + sell products/services, using the brand name + brand identity

Franchisee

a person/business that buys the right from the franchiser to operate the franchise

Joint venture

2/more businesses agree to work closely together on a particular project + create a separate business division to do so

Social enterprise

a business w/mainly social objectives that re-invest most of its profits into benefitting society rather than maximising returns to owners

Revenue

total value of sales made during the trading period = selling price x quantity sold

Capital employed

total value of all long-term finance invested in the business

Market capitalisation

total value of a company’s issued shared

Market share

sales of the business as a proportion of total market sales

Organic growth (internal growth)

expansion of a business by opening new branches/shops/factories

External growth

business expansion achieved by integrating w/another business by merger/takeover

Merger

an agreement by owners + managers of 2 businesses to bring them together in a new combined business (often called a friendly merger)

Takeover (acquisition)

when a company buys more than 50% of the shares of another company + becomes its controlling owner

Horizontal integration

integration w/a business in the same industry + @ the same stage of production

Vertical integration

integration w/a business in the same industry

Forward vertical integration

vertical integration w/a customer business

Backward vertical integration

vertical integration w/a supplier business

Conglomerate integration

integration w/a business in a different industry

Synergy

‘the whole is greater than the sum of parts’, often summed that the new business will be more successful than the original separate businesses

Strategic alliance

agreement b/w 2 organisations to commit resources to achieving a specific objective while remaining independent

Business objective

a stated measurable target that a business plans to achieve

Corporate social responsibility

when businesses consider the interests of society by taking responsibility for the impact of their decisions & activities on customers, employees, communities + the environment

Pressure group

organisations created by people w/common interest or aim, who put pressure on businesses & governments to change policies so that an objective is reached

Triple bottom line

the 3 objectives of social enterprises

SMART objectives

aims that are specific/measureable/achieveable/realistic/time-related

Business aim

a long-term goal that a business hopes to achieve

Mission statement

a brief statement of the business’s core aims, phrased in a way to motivate employees + to stimulate interest from outside groups

Annual report (company report)

a document that gives details of a company’s activities over the year, including its financial accounts

Business strategy

a long-term plan of action for a business, designed to achieve a particular objective

Tactic

a short-term action as part of an overall strategy

Target

a short-term goal that must be reached before an overall objective can be achieved

Budget

a detailed financial plan for the future

Ethical code (code of conduct)

a document detailing a company’s rules + guidelines on staff behaviour that must be followed by all employees

Stakeholders

individuals/groups who can be affected by + have an interest in, any action taken by an organisation

External stakeholders

individuals/groups who are separate from the business but are affected by/interested in its operations

Internal stakeholders

individuals/groups who are within the business/own it + are affected by the operations of the business

Trade union

an organisation of working people w/the objective of improving the pay & working conditions of its members + providing them w/support & legal services

Stakeholder concept (/theory)

the view that businesses + their managers have responsibilities to a wide range of groups, not just shareholders