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Need
A good or service that is essential for living.
Want
A good or service that people would like to have but is not necessary for living.
Economic problem
There are unlimited wants but limited resources to produce the goods and services to satisfy wants.
Factors of production
Resources needed to produce goods and services; includes land, labour, capital, and enterprise.
Scarcity
The lack of sufficient products to fulfil the total wants of the population.
Opportunity Cost
The next best alternative given up by choosing another item.
Specialization
When people and businesses concentrate on what they are best at.
Division of labour
When the production process is split up into different tasks and each worker performs one of these tasks.
Business
Combines factors of production to make products (goods and services) which satisfy people's wants.
Added Value
The difference between the selling price of a product and the cost of bought-in materials and components.
Primary Sector
Extracts and uses natural resources to produce raw materials used by other businesses.
Secondary Sector
Manufactures goods using raw materials provided by the Primary Sector.
Tertiary Sector
Provides services to customers and other sectors of industry.
De-industrialization
A decline in the importance of the secondary, manufacturing sector of industry in a country.
Mixed Economy
Has both a private sector and a public sector.
Private Sector
Businesses not owned by government; aim to run profitably.
Public Sector
Government-owned, controlled businesses and organizations.
Capital
Money invested into business by owners.
Entrepreneur
A person who organizes, operates and takes the risk for a new business venture.
Business Plan
Document containing the business objectives and important details about operations, finance and ownership.
Capital Employed
Total value of capital used in the business.
Internal Growth
When a business expands its existing operations.
External Growth
When a business takes over or merges with another business.
Integrations/Merger
When two businesses agree to join their firms together to make one business.
Takeover/Acquisition
One business buys out the owners of another business which then becomes part of the 'predator' business.
Horizontal Integration
When one company merges with or takes over another in the same industry and stage of production.
Vertical Integration
When one company merges with or takes over another at a different stage of production.
Conglomerate Integration/Diversification
When one company merges with or takes over another in a completely different industry.
Sole Trader
Business owned by one person.
Limited Liability
The liability of shareholders in a company is only limited to the amount they invested.
Unlimited Liability
The owners of a business can be held responsible for the debts of the business.
Partnership
A form of business in which two or more people agree to jointly own a business.
Partnership Agreement
The written legal agreement between partners.
Unincorporated Business
Business that does not have a separate legal entity.
Incorporated Business
Companies that have a separate legal status from their owners.
Private Limited Company (LTD)
An incorporated business owned by shareholders whose shares can’t be sold to the general public.
Public Limited Company (PLC)
Business owned by shareholders but can sell shares to the public.
Shareholders
Owners of a limited company who buy shares representing part ownership.
Annual General Meeting
A legal requirement for all companies where shareholders vote on the Board of Directors.
Dividend
Payments made to shareholders from the profit of a company.
Franchise
Business based upon the use of brand names and trading methods of an existing business.
Business Objective
Aims and targets that a business works towards.
Profit
Total income (sales revenue) minus total costs.
Market share
Proportion of total market sales achieved by one business.
Social Enterprise
Has social objectives as well as an aim to make profit.
Stakeholder
A person or group with a direct interest in the performance and activities of a business.
Motivation
The reason why employees want to work hard and effectively for the business.
Wage
Payment for work, usually paid weekly.
Salary
Payment for work, usually paid monthly.
Commission
Payment relating to the number of sales made.
Profit sharing
Proportion of company’s profits paid to employees.
Bonus
Additional payment above basic pay as reward for good work.
Performance-related pay
Pay related to effectiveness of employee output.
Share ownership
Shares of a company given to employees so they become part owners.
Time Rate
The amount paid to an employee for one hour of work.
Piece Rate
Amount paid for each unit of output.
Teamworking
Involves using groups of employees and allocating specific tasks.
Training
The process of improving an employee’s skills.
Promotion
The advancement of employees in an organisation.
Appraisal
Method of assessing the effectiveness of employees.
Fringe benefits
Non-financial rewards given to employees.
Job satisfaction
Enjoyment derived from feeling that you have done a good job.
Job rotation
Workers swap tasks for a specific time.
Job enlargement
Extra tasks of similar level are added to a worker’s job description.
Job enrichment
Adding tasks that require more skill and/or responsibility.
Organizational structure
Refers to levels of management and division of responsibilities.
Organisation chart
A diagram that outlines the internal management structure.
Hierarchy
Levels of management from highest to lowest.
Chain of command
Structure which allows instructions to be passed down.
Span of control
Number of subordinates directly under a manager.
Directors
Senior managers leading a department or division.
Line managers
Have direct responsibility over people below them.
Supervisors
Junior managers controlling employees below them.
Staff managers
Specialists providing support to line managers.
Delegation
Giving subordinates authority to perform tasks.
Leadership styles
Different approaches to dealing with people in authority.
Autocratic leadership
Manager expects to be in charge and to have orders followed.
Democratic leadership
Gets employees involved in decision making.
Laissez-faire leadership
Makes objectives known; workers organize their own work.
Trade union
Group of workers ensuring their interests are protected.
Closed shop
All members must be members of the same trade union.
Recruitment
Process from identifying the need to employ someone.
Employee Selection
Process of evaluating candidates for a job.
Job analysis
Identifies and records job responsibilities.
Job description
Outlines responsibilities and duties for a specific job.
Job specification
Outlines requirements for a specified job.
Internal recruitment
Filling vacancy with an existing employee.
External recruitment
Filling vacancy with someone who is not an existing employee.
Part-time
Employment between 1 and 35 hours per week.
Full-time
Employment for 35 or more hours per week.
Induction training
Introduction to new employees on firm’s activities.
On-the-job training
Training by watching experienced workers.
Off-the-job training
Training outside the workplace, by specialists.
Workforce planning
Establishing the number and skills of workforce needed.
Redundancy
Employee is no longer needed; job loss not due to work.
Dismissal
When employment ends against employee's will.
Ethical decision
Decision taken based on the moral code of the firm.
Industrial tribunal
Legal meeting considering workers’ complaints.
Contract of employment
Legal agreement listing duties and responsibilities.
Communication
Transferring a message from sender to receiver.
