Introduction to Business

Consumer goods

the physical and tangible goods sold to the general public. They include cars and washing machines (durable consumer goods). Food and drinks (non-durable consumer goods)

Cosumer Services

non-tangible products that are sold to the general public. Includes hotel accommodation and insurance services.

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.

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 by other firms

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

Quaternary sector business activity

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

Private sector

comprises 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

Privatisation

the sale of public sector organisations to the private sector

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 permanent finance and, in return, has full control of the business and is able to keep all of 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 confirming part 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

a limited company, often a large business, with the legal right to sell shares to the general public - share prices are 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 maximising returns to owners

Triple bottom line

the three objectives of social enterprises: economic, social and environmental

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 finance businesses, usually not traditional commercial banks

Public-private partnership (PPP)

Involvement of the private sector, in the form of management expertise and/or financial investment, in public sector projects aimed at benefiting the public

Private Finance Initiative (PFI)

investment by private sector organisations in public sector projects

Non-profit organisation

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

Non-governmental organization (NGO)

a legally constituted body with no participation or representation of any government which has a specific aim and purpose

Charities

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

Mission statement

A statement of the business's core aims, phrased in a way to motivate employees and to stimulate interest by outside groups

Vision statement

A statement of what the organisation would like to achieve or accomplish in the long term

Corporate aims

The long-term goals which a business hopes to achieve

Divisional/operational objectives

Short-or-medium-term goals targets - usually specific in nature - which must be achieved for an organisation to attain its corporate aims.

Strategy

A long-term plan of action for the whole organisation, designed to achieve a particular goal

Tactic

Short-term policy or decision aimed at resolving a particular problem or meeting a specific part of the overall strategy

Ethics

Moral guidelines that determine decision making

Ethical code (code of conduct)

A document detailing a company's rules and guidelines 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 organisation

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

SWOT 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, market development, product development and diversification.

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

Stakeholder concept

The view that businesses and their managers have responsibilities to a wide range of groups, not just stakeholders

Internal stakeholders

employees, managers, shareholders

External shareholders

customers, suppliers, government, banks and other creditors, special interest groups (pressure groups, community) and competitors

STEEPLE analysis

an acronym standing for social, technological, economic, environmental, political, legal and ethical external factors that impact on business; 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

Six months (two quarters) of falling 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 electronic technology to gather, store, process and communicate information

Computer-aided design (CAD)

Using computers and IT when designing products

Computer-aided manufacturing (CAM)

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

Fiscal policy

Changes in government spending levels and tax rates

Inflation

The rate of change in the average level of prices

Cost-Push inflation

Caused by irising costs forcing businesses to increase prices

Demand-pull inflation

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

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 with the available inputs (resources) - this scale can only be increased in the long term by employing more of all inputs

Economies of scale

Reduction in a firms unit (average) costs of production that result from an increase in the scale of operations

Diseconomies of scale

Factors 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 businesses, either from 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 an 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

Joint venture

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

Strategic alliances

Agreements between firms in which each agrees to commit resources to achieve an agreed set of objectives

Franchise

A business that uses the name, logo and trading systems of an existing successful business

Globalisation

The growing integration of countries through increased freedom of global movement of goods, capital and people

Free trade

No restrictions or trade barriers exist that might prevent or limit trade between countries

Protectionism

Using barriers to free trade, such as tariffs and quotas, to protect a country's own domestic industries

Multinational company or business

Business organisation that has its headquarters in one country, but with operating branches, factories and assembly plants in other countries

Organisational planning

Process of identifying an organisation's immediate and long-term objectives, and formulating and monitoring specific strategies to achieve them; it also involves employee and resource allocation to allow for the effective completion of projects

Project

A specific and temporary activity with a star and a end date, clear goals, defines responsibilities and budget

Project management

Using modern management techniques to carry out and complete a project from start to finish in order to achieve pre-set targets of quality, time and cost.

Fishbone diagram

A visual identification of many potential causes of a problem

Decision tree

A diagram that sets out the options connected with a decision and the outcomes and economic returns that may result

Expected value

The likely financial result of an outcome obtained by multiplying the probability of an event occurring by the forecast economic return if it does occur

Force-field analysis

An analytical process used to map the opposing forces within an environment (such as a business) where change is taking place

Gantt chart

A visual representation of a project schedule in which a series of horizontal lines shows the amount of work planned in certain periods of time