Business- Key Terms

Key Terms

Competitor

Any business that sells the same or similar products or services in the same market.

Qualitative Data

Data based on our thoughts, feeling and opinions. It includes descriptive information.

Quantitative Data

Data expressed numerically using figures and statistics. Includes: percentages, percentage change and averages.

Goods

A tangible (physical) object which can be purchased.

Service

An intangible product that can be purchased.

Producer Goods

A product that a business sells to other businesses.

Consumer Goods

A product sold to the end user.

Durable

Goods that tend to have a long life of over 3 years. They are used until they break.

Non-durable

Goods used for a short period of time. Often single-use items.

Personal service

Aimed directly at consumers.

Commercial service

Used by businesses. Example: accounting, website support, logistics

Public sector

An organization run and controlled by the government. Exist for the good of society.

Private sector

A business that is run for the benefit of individuals.

Factors of Production

Resources a business needs to make a product or a service. These include: land, labour, capital, enterprise.

Business Aim

The long term objective of the business. Its aim might be to become the biggest business in the sector.

Business Objective

A short or medium target of a business needed to reach its aim. Example: a business increasing their sales by 20% in the next 5 years.

SMART objective

A goal that is: specific, measurable, achievable, realistic, time-bound

Stakeholder

Anyone or any organisation that has an interest in the business that is either a public limited company (PLC) or a private limited company (LTD).

3 Internal Stakeholders

Owners

Managers

Employees

3 External Stakeholders

Customers

The Government

Suppliers

Shareholder

Somebody who owns a part of a business that is either a PLC or a LTD.

Stakeholder Conflict

When 2 or more people or organisations in the business have different opinions on how the business should be run. Example: customers want cheaper prices but owners want higher profits.

Stakeholder Influence

Involves the power a stakeholder has over the business. Stakeholders can influence decision making, operational influences, costs, revenues and profits.

Pressure Group

A group of people who get together to express their objections to an organisation’s actions.

Limited Liability

Where a business has its own legal identity. If the business goes into debt, the owner is only responsible for what they have already invested.

Unlimited Liability

Where the business does not a seperate legal identity. If the business goes into debt, the owner is responsible for paying off all debts. Personal assets are at risk.

Sole Trader

A single person running and owning a business with unlimited liability.

Partnership

A business with 2-20 people that has unlimited liability. Partners must complete a deed of partnership.

Public Limited Company (PLC)

A business with limited liability. Shares can be sold to anyone via the Stock Exchange.

Private Limited Company (LTD)

A form of business that has limited liability. Often owned by groups of family and friends and registered with Companies House.

Co-operative

A business or organisation owned by its workers/customers/producers/members who have a common purpose or aim.

Charity

Non-profitable organisations that aim to raise money to support a cause.

Economies of Scale

The average costs (of production, distribution, and sales) fall as the business increases the amount of product that it produces, distributes and sells. Reduces unit cost.

3 Types of Economies of Scale

Purchasing

Technical

Financial

Internal (organic) Growth

Using resources from within the business to expand in steady stages. Can take a long time and requires owners to reinvest profits into the business.

3 Ways A Business Can Grow Internally

Launching new products

Hiring more staff + equipment

Selling its products in new markets

External Growth (intergration)

Involves a business buying or joining existing businesses. Growth by acquisition, takeover or merger

Merger

When two or more businesses join together to form a new business. The businesses tend to be of a similar size.

Takeover (acquisition)

When one business buys another business by acquiring control. Can involve the business buying the whole or part of the business.

Horizontal Intergration

When two businesses that are in the same industry and are at the same stage of production become one business.

Vertical Intergration

When two business that are in the same industry but are at different stages of the supply chain become one business.

Forward Vertical Intergration

When a business merges or takes over a customer base.

Backwards Vertical Intergration

When a business merges or takes over a supplier

Conglomerate Integration

When two businesses that are unrelated join together. The businesses operate in different markets and have no connection with each other.

Franchisor

A business which allows a franchisee to sell using their processes, experience and name in return for royalties.

Franchisee

A business which pays royalties for the right to sell goods/services using established processes, and to do so under the name of the business.

Royalty

The fee a franchisee pays to a franchisor to use its model and name

3 Factors that Influence Business Location

The market

Labour supplies

Materials and raw materials

3 Factors that Influence Business Site

Cost of site

Size of site

Footfall

3 ways in which technology effects business:

Enables businesses to make new products'

Enables the use of new production methods

Changes the way products are bought

2 examples of technology administration might use:

Spreadsheets

Databases

2 examples of technology that could be used to communicate:

Website design

Video conferencing

2 examples of how technology could be used during recruitment:

Website

Online test

2 examples of how technology stock control might use:

JIT stock measurement

Sales predications

What does CAD stand for?

Computer Aided Design

What does CAM stand for?

Computer Aided Manufacture

Define CAD

Use of computer software to design new products in 3D.

Define CAM

Using computers to control machines to undertake the production of goods.

Define e-commerce

Electronic commerce involves the buying and selling of goods and services via the internet.

Define m-commerce

Mobile commerce involves buying goods and services through handheld mobile devices such as smartphones.

List 3 advantages of e-commerce and m-commerce.

Sell 24/7 days a week

Recieve payments immediately

Products and services can be delivered to a range of locations

List 3 disadvantages of e-commerce and m-commerce

Employees may need new skills

Customers can’t see or try on products before buying

Customers must wait for products to be delivered

Define digital media

Involves the use of text messages, emails, internet based messaging services and web chats.

Define social media

Involves websites and applications which allow users to create and share information, ideas and interests with other individuals, communities and networks.

List 3 activities a business uses digital and social media for

Marketing and promotion

Interacting with customers

Responding to complaints

List 3 affects digital and social has on communication

Made communication easier and cheaper

Cheap, effective and targeted advertising

Customers can easily ask questions and express their views about the business

List 3 advantages of using new technology

Less wasteage

New sales avenues

More effective marketing and promotion

List 3 disadvantages of using new technology

Increased risk of job cuts

Security risk in relation to data and fraud

Required regular updates

2 Advantages of Being Ethical

Improves the businesses’s reputation

It has a positive impact on the businesses’s image.

2 Disadvantages of Being Ethical

Costs go up

Prices may need to rise, which can reduce sales.

4 Environmental Costs

Climate Change

Traffic Congestion

Pollution

Waste

Sustainability

Where businesses act responsibly to protect the environment and ensure that resources are available for future generations.

3 Ways a Business Can Be More Sustainable

Use less water

Minimise waste

Set up recycling programs

2 Advantages of Being Environmentally Friendly

Avoid legal fines

Less waste means savings

2 Disadvantages of Being Environmentally Friendly

Costs go up

Prices might increase, leading to less sales

The Economy

The production, distribution and use of goods and services in a country.

Consumer Income

Money people earn from working or from their investments.

Disposable Income

The money left over after paying bills, taxes, and other necessary costs.

Unemployment

The number of people who are able and willing to work but don’t have a job.

How does unemployment impact consumers?

Lower living standards

Stress of looking for a job

Social and emotional effects

How does unemployment impact businesses?

People have less money to spend, so businesses may sell less.

How does unemployment impact the government?

They get less tax money

Have to spend more on welfare support for unemployed people

Inflation

When the general price of goods and services keeps going up over time.

Deflation

When the general price of goods and services keeps going down over time

Interest

The cost of borrowing money or the reward you get for saving money.

Tax

Money that people and businesses pay to the goverment.

Owner’s Capital

Money invested by the owner from personal savings or personal assets.

Retained Profit

Profit kept in the business instead of being paid out to owners or shareholders.

Selling Assets

Selling business property like machinery or buildings to raise funds.

Family and Friends

Borrowing money from close personal connections often with flexible terms.

Bank Loan

Borrowing money from the bank which is repaid with interest over an agreed period of time.

Overdrafts

A short-term credit facility from a bank that allows a business to spend more money that is currently in its bank account, up to an agreed limit.

Venture Capitalists and Business Angels

Investors provide funds in exchange for equity or a share in profits.

New Partners

Bringing new partners who contribute capital and share responsibilities.

Share Issue

Selling shares to new or existing investors to raise funds.

Trade Credit

Delaying payments to suppliers for goods and services to improve cash flow.

Leasing

Renting equipment instead of purchasing outright to avoid large upfront costs.

Hire Purchase

Paying for an asset in instalments over time instead of a lump sum.Gov

Government Grants

Financial support from the government for a specific purpose with no repayment required.

Batch Production

Small number of identical products are made at once. Batches can be made as often as required.