ALL KEY TERMS

Adding value

The processes of creating value by transforming the inputs into business activity so that the value of what is created is greater than the costs involved

Enterprise

A process whereby business opportunities are identified and exploited for commercial gain

Corporate objective

The specific (SMART) targets that the business as a whole wants to achieve

Functional objectives

The specific objectives set for the individual functional areas of a business, designed to support the achievement of corporate objectives

Limited liability

Where shareholders in a compnay are only liable for the amount they have invested in the share capital

Unlimited liability

Where the owners of the business are legally inseparable from the business they run, making them liable for the debts of the business

External environment

Features of the business environment that are outside of the control of a business

Market capitalisation

The total market value of the issued share capital of a company based on the latest share price

Flotation

The admission of the shares of a public company to a stock exchange and subsequent trading in those shares

Shareholder

An owner of a business

Stakeholder

Someone who has an interest in the activities of a business

Leadership style

The manner and approach of providing direction, implementing plans, and motivating people

Management

Management is the art of getting things done through people

Opportunity cost

The benefits foregone of the next best alternative as result of a decision

Scientific decision-making

Decision taken on the basis of analysis of data and evidence

Big data

Huge, often unstructured data sets that exceed the processing capacity of conventional database systems

Expected value

Financial value of an outcome calculated by multiplying the estimated financial effect by its probability

Net gain

The expected value of each outcome less the costs associated with the decision

Marketing objectives

Marketing objectives are specific, measurable goals that a business sets to guide its marketing efforts over a certain period of time.

Marketing research

Collection of data to obtain insight and knowledge into the needs and wants of customers and the structure and dynamics of a market

Primary data

Research data collected first-hand for a specific purpose

Secondary data

Existing research data that has been collected and analysed for a different purpose

Quantitative research

Research based on numerical data

Qualitative research

Research based on views and opinions

Extrapolation

The use of trends established by historical data to make predictions about future values

Correlation

A method of forecasting that looks at the strength of a relationship between tow variables

Confidence intervals

Th percentage probability that an estimated range of possible values in fact includes the actual value being estimated

Market size

The overall size (value or volume) or demand for a specific market

Market growth

The percentage rate of growth in market size over a period

Market share

The proportion of market size held by each competitor in a market

Marketing mix

The combination of elements used by a business to enable it to meet the needs and expectations of customers

Market segmentation

Involves dividing a market into parts that reflect different customer needs and wants

Niche market

A smaller segment of a larger market, where customers have specific needs and wants & successful products are highly differentiated

Mass market

The largest part of the market, where there are many similar (undifferentiated) products offered by competitors

Target market

The set of customers sharing common needs and wants that a business tries to connect with

Product differentiation

Where a product has a value proposition that is sustainably different from the competition

Price elasticity of demand

Measures the extent to which the quantity of product demanded is affected by a change in price

Income elasticity of demand

Measures the extent to which the quantity of a product demanded is affected by a change in income

Product

Any good or service is that capable of satisfying customer needs and wants

Product life cycle

A predictive model of the stages a product goes through from development to decline

Boston matrix

A model use to analyse the strategic position of product and brand portfolios

Cost - plus pricing

Price is set by applying a percentage margin based on the unit costs of production or supply

Price skimming

Charging a premium price when a product is first launched in order to maximise revenue per unit

Penetration pricing

Offering a significantly lower price than normal in an attempt to maximise volume sold and to build an installed base of product users

Dynamic pricing

Setting flexible prices for products or services based on current market demands

Distribution channel

The route a product takes from production to final

Multichannel distribution

Where a business uses more than one channel of distribution

Sales promotion

Tactical, point of sale material or other incentives designed to stimulate purchases

Advertising

Paid for communication aimed at informing or persuading

Direct marketing

Sending promotional materials and messages directly to the target audience

Promotional mix

The mix of activities and appraoches taken to promotion a product

Innovation

Practical application of new inventions into marketable products or services

Capacity

The potential output of a business measured in terms of units of output over a specific period

Capacity utilisation

The proportion (percentage) of a business’ capacity that is actually being used over a specific period

Spare (excess) capacity

Where actual output is less than capacity

Excess demand

Where demand for a business’ products or services is greater than the business capacity

Labour productivity

A measure of output per employee

Unit labour costs

Average labour cost per unit output produced

Unit cost

The average cost per unit produced, as measured over a particular time period

Economy of scale

The effect of unit costs falling as output rises

Quality control

An approach to managing quality by inspecting production output before it is delivered to the customer

Quality assurance

A series of processes that aim to build quality into the production process

Stock-out

Where a business is unable to satisfy customer deamnd due to inventory being unavailable

Re-order level

The inventory quantity at which a replacement order is triggered

Lead time

The period between placing an order and the receipt of inventory

Buffer stock

Inventory held as a contingency in case of unexpected orders so that such orders can be met and in case of any delays from suppliers

Lean production

Organising production and operations to minimise waste

Cell production

A form of team working that helps ensure worker commitment, as each cell si responsible for a complete unit of work

Just-In-Time (JIT)

A manufacturing system in which materials or components are delivered immediately before they are required in production

Supplier

A person or business that is the source of goods and services

Supply chain

The network of all the resources and suppliers involved in the creation and sale of a product

Capital structure

The long-term financial base of a business split between equity sources and long-term debt

Debt/equity ratio

The proportion of business capital provided by long-term debt

Cost minimisation

Strategy that aims to achieve the most cost-effective way of delivering goods and services to the required level of quality

Gross profit

Calculated as total sales less total costs of sales

Operating profit

Calculated as gross profit less fixed costs and other overheads

Budget

Financial plan for the future concerning the revenues and costs of a business

Variance analysis

Calculating and investigating the differences between actual results and the budget

Positive variance

Actual result is better than budget

Adverse variance

Actual result is worse than budget

Cash flow forecast

An analysis of estimated cash inflows and cash outflows over a future period and the resulting impact on cash balances

Working capital

The cash tied up by a business in inventories held and amounts owed by customers, less amounts owed to creditors

Credit control

The management of amounts owed on credit by the customers of a business

Human resource management

The strategies and activities involved in the management of human resources in a business

Soft HRM

An approach to HRM that sees people as the most important asset in a business

Hard HRM

An approach to HRM that aims to make the most efficient use of people in a business

Labour turnover

The proportion of a firm’s workforce that leaves during the course of a year

Absenteeism

The incidence of unauthorised absence from work

Hierarchy

The structure and number of layers of management and supervision in an organisation

Span of control

The number of employees who are directly supervised by a manager

Delegation

Where responsibility for carrying out a task or role is passed onto someone else in the business

Empowerment

Delegating power to employees so that they can make their own decisions

Delayering

The process of removing one or more layers from the organisational structure

Centralisation

An organisational structure where authority rests with senior management at the centre of the business

Decentralisation

An organisational structure structure where authority is delegated further down the hierarchy, away from the centre

Redundancy

Where an employee is dismissed because the role/job no longer exists or is required

Redeployment

Moving employees to different jobs, departments or locations within the same business

Employment engagement

Employees are deeply integrated into their work, including supporting the values of the organisation

Job design

A job design technique that is a variation on the concept of job enlargement. Job enrichment adds new sources of job satisfaction by increasing the level of responsibility of the employee

Employee representation

The formal or informal methods of involving employees in decision-making within an organisation