chap 1-3

Primary sector business activity

Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed.

Secondary sector business activity

Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes-making and construction.

Tertiary sector business activity

Firms providing services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels and tourism.

Quaternary sector business activity

Businesses providing information services, such as computing, web design, ICT, management consultancy and R&D.

Industrialisation

The growing importance of secondary sector manufacturing industries in developing countries.

Public sector

Organizations accountable to and controlled by central or local government (the state).

Private sector

Businesses owned and controlled by individuals or groups of individuals.

Mixed economy

Economic resources are owned and controlled by both private and 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, and controlled by the state.

Public corporation

A business enterprise owned and controlled by the state - also known as a nationalized industry.

Sole trader

A business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits.

Unlimited liability

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

Partnership

A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.

Limited liability

The only liability or potential loss a shareholder has, if the company fails, is the amount invested in the company, not the total wealth of the shareholder.

Share

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

Shareholder

A person or 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 cannot 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 and can be bought and sold by the public.

Cooperative

A jointly owned business operated by members for their mutual benefit, to produce or distribute goods or services.

Franchise

The legal right to use the name, logo, and trading systems of an existing successful business.

Franchiser

A person or business that sells the right to open stores and sell products or services, using the brand name and brand identity.

Franchisee

A person or business that buys the right from the franchiser to operate the franchise.

Joint venture

Two or more businesses agree to work closely together on a particular project and create a separate business division to do so.

Social enterprise

A business with mainly social objectives that re-invests most of its profits into benefiting society rather than maximizing returns to owners.

Deindustrialisation

A decline in the importance of secondary sector activity and an increase in the tertiary sector.

Memorandum of Association

This states the name of the company, the address of the head office, the maximum share capital and the declared aims of the business.

Articles of Association

This document covers the internal workings and control of the business, the names of directors and the procedures to be followed at meetings.

Unlimited Liability

Whereby the owners personal possessions and property can be taken to pay off the debts of the business, should it fail.

Primary sector business activity

Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed.

Secondary sector business activity

Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes-making and construction.

Tertiary sector business activity

Firms providing services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels and tourism.

Quaternary sector business activity

Businesses providing information services, such as computing, web design, ICT, management consultancy and R&D.

Industrialisation

The growing importance of secondary sector manufacturing industries in developing countries.

Public sector

Organizations accountable to and controlled by central or local government (the state).

Private sector

Businesses owned and controlled by individuals or groups of individuals.

Mixed economy

Economic resources are owned and controlled by both private and 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, and controlled by the state.

Public corporation

A business enterprise owned and controlled by the state - also known as a nationalized industry.

Sole trader

A business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits.

Unlimited liability

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

Partnership

A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.

Limited liability

The only liability or potential loss a shareholder has, if the company fails, is the amount invested in the company, not the total wealth of the shareholder.

Share

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

Shareholder

A person or 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 cannot 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 and can be bought and sold by the public.

Cooperative

A jointly owned business operated by members for their mutual benefit, to produce or distribute goods or services.

Franchise

The legal right to use the name, logo, and trading systems of an existing successful business.

Franchiser

A person or business that sells the right to open stores and sell products or services, using the brand name and brand identity.

Franchisee

A person or business that buys the right from the franchiser to operate the franchise.

Joint venture

Two or more businesses agree to work closely together on a particular project and create a separate business division to do so.

Social enterprise

A business with mainly social objectives that re-invests most of its profits into benefiting society rather than maximizing returns to owners.

Deindustrialisation

A decline in the importance of secondary sector activity and an increase in the tertiary sector.

Memorandum of Association

This states the name of the company, the address of the head office, the maximum share capital and the declared aims of the business.

Articles of Association

This document covers the internal workings and control of the business, the names of directors and the procedures to be followed at meetings.

Unlimited Liability

Whereby the owners personal possessions and property can be taken to pay off the debts of the business, should it fail.

Revenue

The total value of sales made during the trading period (selling price x quantity sold).

Capital Employed

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

Market Capitalization

The total value of a company's issued shares.

Market Share

Sales of the business as a proportion of total market sales.

Organic Growth

Expansion of a business by means of opening new branches, shops, or factories (also known as internal growth).

External Growth

Business expansion achieved by integrating with another business by either merger or takeover.

Merger

An agreement by owners and managers of two businesses to bring them together in a new combined business. This is often referred to as a friendly merger.

Takeover

When a company buys more than 50% of the shares of another company and becomes its controlling owner. It can be called an acquisition.

Horizontal Integration

Integration with a business in the same industry and at the same stage of production.

Vertical Integration

Integration with a business in the same industry.

Forward Vertical Integration

Vertical integration with a customer business.

Backward Vertical Integration

Vertical integration with a supplier business.

Conglomerate Integration

Integration with a business in a different industry.

Synergy

Literally means that 'the whole is greater than the sum of parts' - it is often assumed that the new business will be more successful than the original separate businesses.

Strategic Alliance

Agreement between two organisations to commit resources to achieving a specific objective while remaining independent.

Number of Employees

A measure of business size based on the number of people employed by the business.

Revenue/Sales Turnover

This is often used as a measure of size, especially when comparing businesses in the same industry; it is the total value of sales.

Capital Employed

A measure of business size which is the total value of all long-term finance invested in the business.

Market Capitalisation

A measure of business size calculated by current share price x total number of shares issued.

Market Share

A relative measure, if a firm has a high amount of this, it must be among the leaders in the industry and comparatively large.

Small Business

Businesses employing few people and with relatively low annual revenue are considered this.

Importance of Small Firms

These create employment, variety/choice. and competition, supply specialist goods and services, and they all began small.

Advantages of Small Businesses

Can be managed/controlled by the owner, adapt quickly to customer needs, offer personal service; it is often family-owned; it can usually be started with low capital investment.

Disadvantages of Small Businesses

Limited access to finance sources, the the owner has a large burden of responsibilities. They may not be diversified, they have high costs due to little economies of scale.

Strengths of Family Businesses

Commitment, reliability and pride, knowledge continuity are all strengths of this type of business.

Weaknesses of Family Businesses

Succession/continuity problems, informality, tradition, and conflicts are weaknesses of this type of business.

Importance of Small Businesses in the Economy

Help generate economic growth, amount to a high percentage of all employers, create a high percentage of all new jobs, and are often innovative.

Reasons for Business Growth

To increase profits, increased market share, increased economies of scale, increased power and status, and a reduced risk of being a takeover target.

Organic Growth Example

opening more shops in new locations to grow the business.

Disadvantages of Horizontal Integration

May bring bad publicity, customer opposition, and monopoly investigation.

Poor Management Skills

Entrepreneurs often lack skills in leadership, decision-making, cash management, planning, marketing, and communication.

Local Businesses

Operate in small, well-defined parts of a country without aiming for national expansion.

National Businesses

Have branches or operations across a country but do not operate or sell internationally.

International Businesses

Sell products in more than one country through foreign agents or online selling.

Multinational Businesses

Have operations (production or selling) in more than one country with a established base outside their domestic economy.

Multinational Business

A business organization that has its headquarters in one country, but with operating branches, factories, and assembly plants in other countries.

Intrapreneur

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

Qualities of Successful Entrepreneurs

Innovation, commitment, self-motivation, multi-skilled, leadership skills, self-confidence, risk-taking.

Barriers to Entrepreneurship

Lack of a business opportunity, insufficient capital, cost of good locations, competition, lack of a customer base.

Role of Enterprise in Economic Development

Employment creation, economic growth, business survival, innovation, exports, personal development.