business final key terms

Business

any organisation that uses resources to meet the needs of customers by providing a product or service that they demand. Business activity at all stages involves adding value to resources such as raw materials and semi-finished goods and making them more desirable to - and thus valued by - the final purchaser.

Consumer Goods

the physical and tangible goods sold to the general public. They include cars and washing machines, which are referred to as durable consumer goods. Nondurable consumer goods include food, drinks and sweets that can only be used once.

Consumer Services

non-tangible products that are sold to the general public and include hotel accommodation, insurance services and train journeys.

Capital Goods

physical goods that are used by industry to aid in the production of other goods and services such as machines and commercial vehicles.

Business Inputs

human, physical, and financial resources needed by business to produce goods or services. Including land (w/ resources), labour (manual and skilled), capital (including capital goods), enterprise (management, coordination, decision-making, driving force).

Human Resource (HR) Management

identifies the workforce needs of the business, recruits, selects and trains appropriate employees and provides motivational systems to help retain workers and encourage them to work productively. It also draws up contracts of employment.

Finance and Accounts

responsibility for monitoring the flow of finance into and out of the business, keeping and analysing accounts and providing financial information to both senior management and other departments.

Marketing

responsible for market research and for analysing the results of such research so that consumer wants can be correctly identified. Once a product is available for sale, the marketing function will have to make important decisions concerning its pricing, how and where to promote it and how to sell it and distribute it for sale.

Operations Management (production function)

responsibility for ensuring adequate resources are available for production, maintaining production and quality levels and achieving high levels of productive efficiency. Important in traditional manufacturing. In services firms, the operations management will have the objective of ensuring that the processes for the delivery of the service are well tested, consistent, and understood by all employees.

Primary sector

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

Secondary sector

firms that manufacture and process products from natural resources, including computers, brewing, baking, clothing, and construction.

Tertiary sector

firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism, and telecommunications.

Quaternary sector

is focused on information technology (IT) businesses and information service providers such as research and development, business consulting and information gathering.

Entrepreneur

someone who takes the financial risk of starting and managing a new venture.

Intrapreneur

someone within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through using 'entrepreneurial talents' such as risk-taking and innovation

Business plan

a written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts.

Public sector

comprises of businesses accountable to and controlled by central or local government (the state).

Private sector

comprise of businesses accountable to and controlled by individuals or groups of individuals.

Mixed Economy

economic resources are owned and controlled by both the public and private sectors.

Free market economy

economic resources are largely owned by the private sector with very little state intervention.

Command economy

economic resources are own, planned, and controlled by the state.

Privatisation

the sale of the public sector organizations to the private sector. (trend)

Public Corporation

a business enterprise owned and controlled by the state - also known as nationalised industry or public sector enterprise.

Sole Trader

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

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 showing part of ownership of a company and entitling the shareholder to dividends and certain shareholder rights.

Shareholders

individuals or institutions that buy/own shares in a limited company.

Private Limited Company

a small to medium sized business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the general public.

Public Limited Company (plc/inc)

a limited company, often a large business, with the legal right to sell shares to the general public; its share price is quoted on the national stock exchange.

Social Enterprise

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

Triple Bottom Line

3 objectives of Social enterprises

Cooperative

a group of people acting together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically.

Microfinance

the provision of very small loans by specialist financial businesses, usually not traditional commercial banks.

Public-private Partnerships (PPP)

involvement of the private sector, in the form of management expertise and/or financial investment, in public sector projects aimed at benefitting the public.

Private Finance Initiative (PFI)

private sector funded. Investment by private sector organizations in public sector projects.

Non-profit organizations

any organization that has aims other than making and distributing profit and which is usually governed by a voluntary board.

Non-governmental organisation (NGO)

a legally constituted body with no participation or representation of any government which has a specific aim and purpose, e.g. supporting disadvantaged groups in developing countries or advocating the protection of human rights.

Charity

an organization set up to raise money to help people in need or to support causes that require funding.

Short-termism

major investors in plc. often focus more on the short-term growth of the business. This can be damaging to long-term investment plans of the business. Directors long terms (status/personal growth)

Mission Statement

a statement of a business's core aims, phrased in a way to motivate employees and to stimulate interest by outside groups. (overall) reason for existence, philosophies, goals and ambitions, stakeholders understand their desire, execution of vision, more specific.

Vision statement

a statement of what the organization would like to achieve or accomplish in the long term. (specific, image of future) future directions, inspiration, core ideas and values, guidance.

Corporate Aims

the long-term goals which a business hopes to achieve. guide to obtain mission statement.

Common

profit maximization (producing at the level of output where the greatest positive diference between total revenue and total costs is achieved).

Profit Satisfacing

enough profit to keep owners happy but not overwork to get max profit.

Divisional/operational objectives

short- or medium-term goals or targets - usually specific in nature - which must be achieved for an organization to attain its corporate aims. Day to day per employee.

S.M.A.R.T

Specific (what the business does + specific to that business. Ex

Strategy

a long-term plan of action for the whole organization, designed to achieve a particular goal. Big overlying object of the business. How? With what actions? Long term and whole organization.

Tactic

short-term policy or decision aimed at resolving a particular problem or meeting a specific part of the overall strategy. Departmental, across departments. How for day to day operational objectives.

Ethics

moral guidelines that determine decision-making.

Ethical code (Code of Conduct)

a document detailing a company's rules and guidelines on staff behaviour that must be followed by all employees.

Stakeholders

people or groups of people who can be affected by, and therefore have an interest in, any action by an organization.

Corporate Social responsibility

this concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities, and the environment.

Social audit

an independent report on the impact a business has on society. This can cover pollution levels, health and safety record, sources of supplies, customer satisfaction and contribution to the community.

S.W.O.T Analysis

a form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence the future direction and success of a business.

Ansoff's matrix

a model used to show the degree of risk associated with the 4 growth strategies of

Market penetration

achieving higher market shares in existing markets with existing products.

Product development

the development and sale of new products or new developments of existing products in existing markets.

Market development

the strategy of selling existing products in new markets.

Diversification

the process of selling different, unrelated goods or services in new markets.

Memorandum and Articles of Association

where limited companies must state their overall objectives of their business.

Shareholder concept

traditional, legally binding duty to take decisions that will increase shareholders' value.

Stakeholder concept

the view that businesses are their managers have responsibilities to a wide range of groups, not just shareholders.

Internal stakeholders

3 Main group each with their own interest employees, managers, shareholders.

External stakeholders

6 customers, suppliers, government, banks and creditors, special interest groups*, competitors.

*Special interest groups

pressure groups (ex. pollution), community action groups concerned about local impact.

Arbitration

to resolve industrial disputes between workers and managers. Bring in arbitrator to decide fair solution.

Worker participation

to improve communication, decision-making and reduce potential conflicts between workers and managers, e.g. works councils, employee directors.

Profit-sharing schemes

to reduce conflict between workers and shareholders over the allocation of profits and to share the benefits of company success. Workforce is allocated a share of annual profits before these are paid out as dividends to shareholders.

Share-ownership schemes

to reduce conflict between workers, managers and shareholders. Letting employees get shares (fixed price). Sometimes aligns interests of employees and shareholders.

STEEPLE analysis

an acronym standing for social, technological, economic, environment, political, legal and ethical external factors that impact on businesses; it refers to a framework for analyzing the external environmental factors affecting business objectives and strategies.

Internet

the worldwide web of communication links between computers.

Economic growth

increases in the level of a country's gross domestic product or GDP (total value of output).

Recession

6 months (2 quarters (3 months each)) of failing GDP (negative growth).

Unemployment

the number of people in an economy willing and able to work who cannot find employment.

Exchange rate

the value of one currency in terms of another currency.

Information Technology

the use of electric technology to gather, store, process and communicate information.

Enterprise Resource Planning (ERP)

allow managers to review sales, costs and other operating data on one integrated software platform and communicate with suppliers and customers about each order or contract.

Computer-aided design (CAD)

using computer and IT when designing products.

Computer-aided manufacturing (CAM)

the use of computers and computer-controlled machines to speed up the production process and make it more flexible.

Business-to-business (B2B) marketing

the marketing of products of services to other businesses and organizations.

Fiscal policy

changes in government spending levels and tax rate.

Inflation

the rate of change in the average level of prices.

Cost-push inflation

caused by rising costs forcing businesses to increase prices.

Demand-pull inflation

caused by excess demand in economy, e.g an economic boom, allowing businesses to raise prices.

Appreciation (exchange rates)

increases in a currency's value against other currencies.

Depreciation

decreases in a currency's value against other currencies.

Ex. €1\= $1 €0.80\= $1

appreciation in euros and depreciation in dollar.

Monetary Policy

changes in the level of interest rates which make loan capital more or less expensive.

Scale of operation

the maximum output that can be achieved using the available inputs (resources) - this scale can only be increased in the long term by employing more of all inputs

Economies of scale

Reductions in a firm's unit (average) costs of production that result from an increase in the scale of operations.

Diseconomies of scale

actors that cause average costs of production to rise when the scale of operation is increased.

Internal Growth

expansion of a business by means of opening new branches, shops or factories (also known as organic growth)

External Growth

business expansion achieved by means of merging with or taking over another business, from either the same or a different industry

Merger

an agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly merged business

Takeover

when a company buys over 50% of the shares of another company and becomes the controlling owner - often referred to as 'acquisition'

Horizontal integration

integration with a firm in the same industry and at the same stage of production.

Forward Vertical integration

integration with a business in the same industry but a customer of the existing business.

Backward Vertical integration

integration with a business in the same industry but a supplier of the existing business.

Conglomerate integration

merger with or takeover of a business in a different industry.