ALL Business Management Key Terms

Above the line (ATL) promotion

Form of promotion that refers to any form of paid-for promotional technique through independent consumer media.

Academic journals

Also known as scholarly journals, these are publications that contain the latest educational research and academic theory.

Accountability

The extent to which a person is held responsible for the success or failure of a task, job, or project. It allows senior managers to have better control over the running of their organizations.

Accounting rate of return (ARR)

Also referred to as the average rate of return, this method of investment appraisal calculates the average annual profit of an investment project expressed as a percentage of the amount of invested.

Acid test ratio

Also known as the quick ratio, this short-term liquidity ratio measures an organization's ability to pay its short-term debts without having to sell any stock (inventories).

Accumulated depreciation

This refers to the accrued value of non-current assets, most of which fall in value over time due to depreciation.

Acquired needs theory (HL only)

D. McClelland's theory of motivation, based on three types of needs that must be satisfied in order to improve motivation: the need for achievement, power, and affiliation.

Acquisition

External growth method that involves one company purchasing a controlling interest in another company. The objective is to expand its operations, gain market share, and/or achieve strategic objectives.

Ad-hoc market research

Market research conducted as and when required for a specific problem that the organization is facing.

Adams' equity theory

Motivation Theory suggests that people make social comparisons of fairness in the workplace, based on the ratio of their input (effort) to output (rewards). The theory is named after John Stacey Adams.

Adding value

The process of producing a particular good or service that is worth more than the cost of the resources used to produce it. It is the difference between the price of a good or service and the cost of making it.

Adaptive cultures

A type of organizational culture that exists in organizations that are responsive and receptive to change. Organizations with adaptive cultures tend to be highly creative and embrace, rather than resist, change.

Adverse variance

This discrepancy in the budget occurs when profit is lower than expected, due to costs being higher than expected and/or revenues being lower than predicted.

Advertising

A form of promotion in the marketing mix that uses visual and/or audio marketing communications to inform and persuade people to buy a certain good or service.

Ageing population

A higher mean (average) age of the population.

Agents

Also known as brokers, these independent intermediaries help to sell a vendor's products in return for commission, e.g., real estate agents.

Algorithm

A set of rules or procedures that AI follows to solve problems and process information.

Appraisal

Also known as a performance review, this is the formal procedure of assessing the performance and effectiveness of an employee, in relation to his/her job description.

Arbitration

Method of stakeholder conflict resolution with all stakeholder groups in conflict agreeing to accept the decision or judgement of the independent arbitrator.

Artificial intelligence (AI)

This is an area of computer science that develops the ability of smart machines to perform tasks rather than natural or human intelligence, e.g., voice activated commands on smart devices.

Artificial neural networks (ANN)

These are a feature of critical infrastructure and refer to the use of learning algorithms that can learn things, solve problems, and make decisions independently by processing new data as these are received.

Assets

The possessions owned by a business, which have a monetary value, e.g., buildings, land, machinery, equipment, inventories, and cash.

Autocratic management (leadership)

Management style that involves centralised and autonomous decision-making, without input from others in the organization.

Autonomy

is a key determinant of motivation in Deci & Ryan's motivation theory, which refers to a person being self-sufficient to direct and have control of our own lives.

Average costs

This is the cost per unit of output. It is calculated by the formula: AC = TC ÷ Q where: AC = Average cost TC = Total cost, and Q = Quantity of output.

Average rate of return (ARR)

A method of investment appraisal that calculates the average annual profit of an investment project expressed as a percentage of the initial amount of money invested in the project.

Average revenue

This is the amount a business receives from its customers per unit of a good or service sold. Mathematically, AR = TR ÷ Q = P where: AR = Average revenue TR = Total revenue Q = Quantity of output, and P = Price.

Backwards vertical integration

A method of external growth that involves a company buying another company that is further away from the consumer in the chain of production.

Bad debt

This occurs when a debtor is unable to pay outstanding invoices to the business. The result is it reduces the cash inflows for the vendor (seller).

Balance sheet

Also known as the statement of financial position, this set of final accounts shows the value of a firm's assets, liabilities, and the owners' investment (or equity) in the business, at a particular point in time.

Bankruptcy

Sometimes referred to receivership or corporate liquidation, this means a situation when a person or business declares that they can no longer pay back their debts, so the entity collapses (fails).

Bar charts

These are visual graphs that present categorised data and compare figures in a study, e.g., sales figures during different time periods.

Bargain products

Goods or services that are those perceived by customers to be of high quality but sold at a low price.

Barriers to communication

Refers to the various factors that can prevent information being transferred effectively or accurately.

Batch production

Operations method that involves producing a set of identical products, with work on each batch being fully completed before production switches to another batch, which may have slightly different specifications.

Below the line (BTL) promotion

Form of promotion that refers to all forms of advertising or promotion that do not use external media agents.

Benchmarking (or yardstick)

The routine process of an organization comparing its products, processes (operations) and performance to that of its competitors or its own historical standards.

Big data

This refers to access to extensive amounts of unprocessed (raw) and processed (structured) data from a broad range of sources.

Boston Consulting Group (BCG) matrix

A management tool used to examine the product portfolio of a business by determining whether each product has high or low market share in a market that has high or low market growth.

Break-even

This condition exists when a firm's sales revenues cover all of its production costs.

Break-even analysis

This is a business management tool used to determine the level of sales volume needed to cover all the costs associated with the output of a particular good or service.

Break-even chart

This is a graphical illustration of an organization's production costs, sales revenues, and profits (or loss) at given levels of output.

Break-even point (BEP)

This is the point on a break-even chart where the firm's total costs equal its total revenue, shown by the intersection of the TR and TC curves.

Break-even quantity (BEQ)

The quantity of sales (sales volume) required for a firm to reach break-even. It is found by using the formula: BEQ = Fixed costs / (Price - Average variable cost).

Break-even revenue

This is the value of the output needed to break-even.

Brand

A brand is the registered name used to identify a product of a particular business organization.

Branding

This is the practice of using an exclusive name (brand), symbol, or design which identifies a specific product or business.

Brand awareness

The degree of customer knowledge and recognition of a particular brand in order to gain more customers.

Brand development

Part of a firm's marketing strategy in communicating the value of a brand and what the brand stands for.

Brand loyalty

The degree of customer devotion to a particular brand.

Brand switching

This is the opposite of brand loyalty and occurs when consumers turn to alternative brands, mainly because the original brand has lost some of its former appeal.

Brand value

The expected earning potential of a brand, i.e., the likely future earning potential (value) of a particular brand.

Budget

A detailed financial plan for the future, usually involving the expected costs and revenues or a cash flow forecast, for a pre-determined period of time.

Budgetary control

The financial methods used to attempt to balance actual outcomes with budgeted outcomes. This is achieved by systematic observations and corrective measures to minimize variances.

Bulk-increasing industries

Describes the businesses that need to be located near to their customer as the final product (such as hand-made home furniture) is bulkier and heavier than the raw materials used to make it.

Bulk-reducing industries

Describes the businesses that need to be located near to the raw materials needed to produce a certain good, e.g., breweries should locate where there is a readily available supply of barley and water, as the weight of the final output is less than that of the raw materials.

Business

A decision-making organization established to produce goods and/or provide services.

Business angels

Wealthy and successful private individuals who risk their own money in a business venture that has high growth potential.

Business etiquette

This refers to the mannerisms and customs by which business is conducted in different parts of the world.

Bureaucracy

The administrative systems within an organization, such as the formal policies and procedures of the business. It includes the formal rules, regulations, and procedures of the organization.

Capacity utilization

Refers to the extent to which an organization operates at its maximum level (known as the firm's productive capacity).

Capacity utilization rate

Measures a firm's actual output as a percentage of its capacity (maximum potential output), at a particular point in time.

Capital employed

The value of the funds used to operate the business and to generate a financial return for the organization. It is the sum of non-current assets and equity finance.

Capital expenditure

An organization's spending on the purchase or acquisition of non-current assets or capital equipment, e.g., spending on buildings (premises), machinery, equipment and tools.

Capital intensive production

This refers to the manufacturing of a good or provision of a service that relies mainly on the use of machinery and capital equipment, e.g., conveyor belts and automated production systems.

Capital outlay (or principal)

Refers to the initial amount of money invested in a project or capital purchase.

Capital productivity

This measures how efficiently an organization's non-current assets are used to generate output for the business.

Cash

This refers to the money an organization has either "in hand" (at its premises) and/or "at bank" (i.e., in its bank account). It is the most liquid type of current assets.

Cash Cows

are products in the Boston Consulting Group (BCG) matrix that enjoy high market share in a low growth (mature) market. They are the products that earn a business the most sales revenues.

Cash flow

The movement of an organization's cash inflows (cash received from the sale of goods and services) and cash outflows (used to pay for the costs of running the business).

Cash flow forecasting

A quantitative technique used to predict how cash is likely to flow into and out of the business for a particular period of time.

Cash flow problems

These are liquidity issues that arise when an organization has insufficient funds to run its business, i.e., when net cash flow is negative.

Cash inflow

Refers to the money coming into a business from earnings (sales revenue) and other sources of finance, such as crowdfunding.

Cash outflow

Refers to the money going out of a business to pay for its costs, such as the purchase of raw materials or the payment of wages and salaries.

Centralization

The situation where decision-making is predominantly made by a very small group of senior managers at the top of the organizational hierarchy.

Chain

A chain (of businesses) refers to a series of interconnected business outlets owned or managed by the same company, operating under a common brand. These outlets share standardized products, services, and corporate policies, benefiting from brand consistency and economies of scale.

Chain of command

The formal lines of authority in an organization. It can be seen via an organizational chart, which shows the formal path through which commands and decisions are communicated from senior managers to subordinates.

A chance node (or probability node)

In a decision tree, a chance node refers to the probable outcomes of different decisions.

Change management

Refers to processes and techniques used to plan, implement, and evaluate changes in business operations.

Chatbots

AI-powered virtual assistants that simulate human conversations, often used for customer service and online interactions.

Circular business models (CBMs)

Strategies and approaches that prioritize sustainability and environmental responsibility by minimizing waste and maximizing resource efficiency.

Circular supply models

A type of circular business model that focus on replacing virgin natural resources with renewable, recyclable, and/or biodegradable resource inputs.

Cloud computing

This is a virtual, computer generated online space that enables businesses to store, organize, manage, process, and retrieve data in safe and efficient ways.

Closure

This occurs when employers temporarily shut the business in response to extreme industrial action of its employee (such as strike action).

Closing balance

Found in a cash flow forecast, this refers to the value of cash held by a business at the end of a trading period (usually on the last trading day of the month).

Clustering

This occurs when businesses choose to locate near other firms operating in related industries in order to benefit from passing trade and demand for products in complementary markets.

Collateral

Refers to the financial guarantee, using a firm's non-current assets, for the purpose of securing loan capital.

Collective bargaining

The process of negotiation of working conditions and pay between employer and employees, or their representatives (such as a trade union and a senior management team).

Commission

Type of financial payment system that rewards workers a certain percentage of the sales of each good or service that they are responsible for completing.

Communication

The transfer of information from one entity to another. It is vital to how a business operates.

Companies (corporations)

A company is any business organization that is owned by its shareholders, who have limited liability. They comprise of privately held companies and publicly held companies.

Competence

The second key determinant of motivation in Deci & Ryan's motivation theory, which refers to a person's capacity and confidence to learn and do things to enhance their mastery in what they desire to do and the things that are important to them.

Competitors

These are the firm's rivals, which operate in the same industry and contest for the same customers.

Competitive pricing

This pricing method involves a business setting the price of its products at the same or similar level charged by competitors in the market.

Conciliation

Method of stakeholder conflict resolution which aims to align the incompatible interests of different stakeholder groups by helping different parties to better understand each other's interests.

Consumer goods

These are products bought for personal consumption, rather than for business use, e.g., home appliances, furniture, food and drink, and house plants.

Consumer panel

A type of primary market research comprised of people who belong to the firm's target segment(s), referred to in order to gather their expert feedback.

Continuous market research

A type of market research that is conducted on an ongoing basis, rather than a one-off basis.

Contribution

The amount remaining from sales revenue after deducting variable costs, which can then be used to cover fixed costs and generate profit. It is calculated using the formula: Contribution per unit = Price - Average variable cost, i.e., P - AVC.

Contribution pricing

A pricing method that involves setting the price of a product at a level higher than the direct costs. Hence, the sale of each product earn the firm a positive contribution towards paying its indirect costs.