business igcse keywords

business

organisation that produces goods and services

goods

physical products

services

non-physical products

output

amount of goods or work produced by a person, machine or factory

consumer goods

goods and services sold to consumers rather than businesses

producer goods

goods and services produced by one business for another

private sector

business organisations owned by individuals or groups of individuals

public sector

owned by central or local government

entrepreneur

person who takes risks and sets up businesses

objectives

goals or targets set by a business

financial objectives

1. survival

2. profit

3. increase market share

4. financial security

non-financial objectives

1. social objectives

2. personal satisfaction

3. challenge

4. independence and control

profit satisficing

making enough profit to satisfy the needs of the business owner

dividends

share of the profit paid to the shareholders of a company

large business

business that employs more than 250 people

small business

business that employs fewer than 50 people

revenue

money from the sale of goods and services

unincorporated

business where there is no legal difference between the owner and the business

incorporated

business that has a separate legal identity from that of its owners

sole trader

business owned by a single person

unlimited liability

owner of a business is personally liable for all business debts

advantages of a sole trader

1. owner keeps all profit

2. independence

3. simple to set up

4. may qualify for government help

disadvantages of a sole trader

1. unlimited liability

2. struggle to raise finance

3. no continuity

4. too small to exploit economies of scale

partnership

business owned by between 2 and 20 people

deed of partnership

binding legal document that states formal rights of partners

advantages of partnerships

1. easy to set up

2. specialisation

3. more capital raised

4. financial information not published

disadvantages of partnerships

1. unlimited liability

2. profit shared

3. partners may fall out

4. legally binding

limited partnership

partnership where some partners contribute capital and enjoy a share of profit but do not take part in running the business

limited liability

business owner is only liable for the original amount invested in the business

franchise

structure in which a business allows another operator to trade under their name

advantages to franchisee

1. less risk

2. back-up support

3. predictable set-up costs

4. national marketing

disadvantages to franchisee

1. profit shared with franchisor

2. strict contracts

3. lack of independence

4. can be expensive

advantages to franchisor

1. fast method of growth

2. cheap method of growth

3. franchisees take some risk

4. franchisees more motivated

disadvantages to franchisor

1. potential profit shared

2. reputation may be damaged

3. cost of support may be high

social enterprise

business that aims to improve human or environmental wellbeing

venture capitalists

specialist investors who provide money for business purposes

limited companies

business organisations that have a separate legal identity from that of their owners

limited liability

shareholders are legally responsible for the debts of a company according to how many shares they own

advantages of private limited companies

1. limited liability

2. more capital

3. control cannot be lost

4. continuity

disadvantages of private limited companies

1. financial information is made public

2. profit shared

3. shares take time to transfer

4. cannot raise huge amounts of money

public limited company

a limited company who’s shares are freely sold and traded, with a minimum share capital of £50 000

advantages of public limited companies

1. large amounts of capital raised

2. limited liability

3. exploit economies of scale

4. shares can be bought and sold easily

disadvantages of public limited companies

1. expensive set up costs

2. control can be lost

3. financial information made public

4. managers may take control

multinational company

large business with production in at least 2 countries

features of a multinational company

1. huge assets

2. experienced executives and managers

3. powerful advertising

4. highly advanced technology

5. high influential economically and politically

6. exploit huge economies of scale

7. ownership and control entered in host country

productivity

rate at which goods are produced and the amount produced

public corporations

business organisations owned and controlled by the government

features of public corporations

1. state owned

2. created by law

3. incorporation

4. state funded

5. public services

6. public accountability

natural monopoly

market where it is more efficient to have just one organisation meeting total market demand

reasons for public ownership of businesses

1. avoid wasteful duplication

2. maintain control of strategic industries

3. save jobs

4. fill gaps left by private sector

5. serve unprofitable regions

reasons against public ownership of businesses

1. cost to government

2. inefficiency

3. political interference

4. difficult to control

privatisation

transfer of public sector resources to the private sector

factors affecting location

1. proximity to market

2. proximity to labour

3. proximity to materials

4. proximity to competitors

trade bloc

group of countries situated in the same region that join together and enjoy trade free of barriers

globalisation

growing integration of world’s economies

features of globalisation

1. goods and services are traded freely across international borders

2. people are free to live and work in any country

3. high levels of interdependence

4. capital can flow freely between different countries

5. free exchange of technology and intellectual property

intellectual property

people’s knowledge or creative ideas that have commercial value and are protectable under different forms of copyright

saturate

to offer so much of a product for sale that there is more than people want to buy

visible trade

trade in physical goods

invisible trade

trade in services

exports

goods and services sold overseas

imports

goods and services bought from overseas

exchange rate

value of one currency in terms of another

fiscal policy

using changes in taxation and government expenditure to manage economy

external factors

PEST - political, economical, social, technological

measures of success of a business

1. revenue

2. profit

3. growth

4. marketshare

5. customer satisfaction

6. employee satisfaction

7. shareholder satisfaction

overtrading

taking on more work than a business can afford to fund effectively

inventory

stocks of goods

reasons for business failure

1. cash-flow problems

2. lack of finance

3. not competitive

4. failure to adapt to changes in the market

average total cost

Where unit costs fall when output increases

brand

having a unique name/logo/identity

Current liabilities

Debts that the company must pay in the short term (in less than a year)

market segment

part of a market where consumers have similar characteristics

revenue

income from sales

variable costs

costs that change when output changes

above the line promotion

The use of mass media methods to promote a large audience

branding

A name/symbol/design that identifies and differentiates a product from other products

break-even

When total costs are the same as total sales

capital intensive production

Production methods that make more use of machinery than labour

commission

payment made to an employee linked to the number of sales made

crowdfunding

raising money from many people for a new project via the internet

delegation

the passing of responsibility to a subordinate

demographics

A particular section of the population

Diseconomies of scale

an increase in average costs per units

e-tailers

the use of electronic systems to sell goods or services

Economies of scale

When average costs fall as a result of business increasing in size

Fixed costs

Costs that do not vary with level of output

fringe benefits

Additional benefits over and above the normal wage or salary

Globalisation

Companies operating internationally across the world

Hierarchical structure

A structure with many levels

Insolvency

When a business can no longer meet its debts

Inventory

Inventory is the goods a business has for sale

Job production

A method of production that involves completing one unit of output at a time

Job share

Two part time employees share a single job

Multinational business

A business that is operational in more than one country

Liquidity

How easily a business can change its assets into cash

Non current assets

An investment owned for longer than a year

Non current liabilities

Debts that are payable after 12 months

Overdraft

An agreement to draw more money from a bank account that it has in it

Person specification

Details of the qualifications experience in the person appointed