Business terms AS

Consumer good

the physical and tangible goods sold to the general public – they include durable consumer goods like cars and washing machines, and non durable consumer goods like food, drinks and sweets that can be used only once.

Consumer services

the non tangible products sold to the general public – they include hotel accommodation, insurance services and train journeys.

Capital goods

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

Creating value

increasing the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for.

Added value

the difference between the costs of purchasing bought-in materials and the price the finished goods are sold for.

Opportunity cost

the benefit of the next most desired option which is given up.

Entrepreneur

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

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.

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, and clothes-making and construction.

Tertiary sector business activity

firms that provide services to consumers and other businesses such as retailing, transport, banking

Public sector

comprises organisations accountable to and controlled by the central or local government.

Private sector

comprises of businesses owned and controlled by individuals or groups of individuals.

Mixed economy

economic resources are owned and controlled by both private and public sector.

Free-market economy

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

Command economy

economic resources are owned, planned and controlled by the state

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.

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.

Share

a certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.

Shareholder

a person or institution owning shares in a limited company.

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.

Memorandum of association

this states the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business.

Articles of association

this document covers the internal working and control of the business-for example, the names of the directors and the procedures to be followed at meetings etc

Joint venture

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

Franchise

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

Holding company

a business organisation that owns and controls a number of separate businesses, but does not unite them into one unified company.

Public corporation

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

Revenue

total value of sales made by a business in a given time period. Capital employed – the total value of all the long term finance invested in the business.

Market capitalisation

the total value of a company’s issued shares.

Market share

sales of the business as a proportion of total market sales.

Internal growth

business expansion by opening new branches, hops or factories (also known as organic growth)

Mission statement

a statement of the business’s core aims, phrased to motivate employees and stimulate interest by outside groups.

Corporate social responsibility

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

Management by objectives

a method of coordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager and employee.

Ethical code (code of conduct)

a document detailing a company’s rules and guidelines on staff behaviour that all employees must follow.

Stakeholders

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

Stakeholder concept

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

Corporate social responsibility

the concept that accesses that businesses should consider the interests of society in their activities and decisions beyond the legal obligations that they have.

Manager

responsible for setting objectives, organising resources and motivating staff to meet the organisation’s aims.

Autocratic leadership

a style of leadership that keeps all decision-making at the centre of the organisation.

Democratic leadership

a leadership style that promotes workers' active participation in decisions.

Paternalistic leadership

a leadership style based on the approach that the manager is in a better position than the workers to know what is best for an organisation.

Laissez-faire leadership

a leadership style that leaves much of the business decision-making to the workforce – a ‘hands off’ style approach and the reverse of the autocratic style.

Informal leader

a person who has no formal authority but has the respect of colleagues and some power over them.

Emotional intelligence

the ability of managers to understand their own emotions, and those of the people they work with, to achieve better business performance.

Motivation

the internal and external factors that stimulate people to take actions that lead to achieving a goal.

Self-actualisation

a sense of fulfilment reached by feeling enriched and developed by what one has learned and achieved.

Motivating factors (motivators)

aspects of a worker’s job that can lead to positive job satisfaction, such as achievement, recognition, meaningful and interesting work and advancement at work.

Hygiene factor

aspects of a worker’s job that have the potential to cause dissatisfaction, such as pay, working conditions, status and over-supervision by managers.

Job enrichment

aims to use workers' full capabilities by allowing them to do more challenging and fulfilling work.

Time based wage rate

payment to a worker made for each period of time worked, e.g.; one hour.

Piece rate

a payment to a worker for each unit produced.

Salary

annual income that is usually paid on a monthly basis.

Commission

a payment to a salesperson for each sale made.

Bonus

a payment made in addition to the contracted wage or salary.

Profit sharing

– a bonus for staff based on the profits of the business-usually paid as a proportion of basic salary.

Performance-related pay

a bonus scheme to reward staff for above-average work performance.

Fringe benefits

benefits given, separate from pay, by an employer to the same or all employees.

Job rotation

increasing the flexibility of employees in the variety of work they do by switching from one job to another.

Job enlargement

attempting to increase the scope of a job by broadening the tasks undertaken.

Job redesign

involves restructuring a job-usually with employees’ involvement and agreement- to make work more interesting, satisfying and challenging.

Quality circles

voluntary groups of workers who meet regularly to discuss work-related problems and issues.

Worker participation

workers are actively encouraged to become involved in decision-making within the organisation

Team working

production is organised so that groups of workers undertake complete units of work.

Human resource management (HRM)

the strategic approach to the effective management of an organisation’s workers so that they help the business gain a competitive advantage.

Recruitment

the process of identifying the need for a new employee, defining the job that needs to be filled and the type of person needed to fill it, and attracting suitable candidates for the job.

Selection

involves the series of steps by which the candidates are interviewed, tested and screened to choose the most suitable person for the vacant post.

Job description

a detailed list of the key points about the job to be filled-stating all of its key tasks and responsibilities.

Person specification

a detailed list of the qualities, skills and qualifications that a successful applicant will need to have.

Employment contract

a legal document that sets out the terms and conditions governing a worker’s job.

Labour turnover

measures the rate at which employees are leaving an organisation. It is measure by: Number of employees leaving in 1 year/average number of people employed * 100

Training

work-related education to increase workforce skill and efficiency.

Induction training

introductory training programme to familiarise new recruits with the systems used in the business and the layout of the business site.

On-the-job training

instruction at the place of work on how a job should be carried out.

Off-the-job training

all training undertaken away from the business, e.g. work related college courses.

Employee appraisal

the process of assessing the effectiveness of an employee judged against pre-set objectives.

Dismissal

being dismissed or sacked from a job due to incompetence of breach or discipline.

Unfair dismissal

ending a worker’s employment contract for a reason that the law regards as being unfair.

Redundancy

when a job is no longer required, the employee doing this job becomes unnecessary through no fault of their own.

Work-life balance

a situation in which employee are able to give the right amount of time and effort to work and to their personal life outside work, for example to family or other interests.

Equality policy

practices and processes aimed at achieving a fair organisation where everyone is treated in the same way and has the opportunity to fulfil their potential.

Diversity policy

practices and processes aimed at creating a mixed workforce and placing positive value on diversity in the workplace.

Marketing

the management task that links the business to the customer by identifying and meeting the needs of customers’ .done by getting the right product to the right place at the right time.

Marketing objectives

the goals set for the marketing department to help the business achieve its overall objectives.

Marketing strategy

long-term plan established for achieving marketing objectives.

Market orientation

an outward-looking approach basing product decisions on consumer demand, as established by market research.

Asset-led marketing

an approach to marketing that bases strategy on the firm’s existing strengths and assets instead of purely on what the customer wants.

Product orientation

an inward-looking approach that focuses on making products that can be made-or have been made for a long time-and then trying to sell them.

Social marketing

this approach considers not only the demands of consumers but also the effects on all members of the public involved in some way when firms meet these demands.

Demand

the quantity of a product that consumers are willing and able to buy at a given price in a time period.

Supply

the quantity of a product that firms are prepared to supply at a given price in a time period.

Equilibrium price

the market price that equates supply and demand for a product.

Market size

the total level of sales of all producers within a market.

Market growth

the percentage change in the total size of a market (volume or value) over a period of time.

Market share

the percentage of total sales in the total market sold by one business. This is calculated by the following formula: Firm’s sales in time period/total market sales in time period * 100

Direct competitor

a business that provides the same or very similar goods or services.