business ial unit 3 flash cards

Flashcards of key vocabulary from lecture notes to help prepare for an exam.

Break even

When a business generates just enough revenue to cover its total costs.

Corporate aim

The specific goal a corporation hopes to achieve.

Mission statement

A brief statement written by the business describing its purpose and objectives, designed to cover its present operations.

Shareholder

Somebody who owns shares in a company or business.

SMART

Acronym for attributes of a good objective: specific, measurable, agreed, realistic, time specific.

Stakeholder

Somebody who has invested money in a business or has an important connection with it. They are therefore affected by the success or failure of the business.

Vision

A view of what the corporation wants to be like in the future.

Specific

Clear.

Measurable

Quantifiable element by a number e.g. increasing sales by 30%.

Agreed

Happy & understand the objectives.

Realistic

The objective should be achievable.

Time specific

Timeframe required to achieve the objectives.

Departmental and functional objectives

The objectives of a department within a business. These set the daily goals that may include human resource, finance, operations, logistics, and marketing.

Corporate strategy

The plans and policies developed to meet a company’s objectives. It is concerned with what range of activities the business needs to undertake in order to achieve its goals.

Customer base

A group of customers that make continual repeat purchases from a business.

Diversification

Developing new products in new markets.

Market development

The marketing of existing products in the new markets.

Market penetration

Using tactics such as the marketing mix to increase the growth of existing products in an existing market.

Portfolio analysis

A method of categorising all the products of a firms to decide where each one fits within the strategic plans.

Product development

Marketing new or modified products in existing markets.

Theoretical model

A situation that could exist but doesn’t really.

Market penetration

To achieve growth in existing markets with existing products; by brand loyalty, use products more frequently.

Product development

Concern marketing new or modified products in existing markets; e.g. iPhone, iPad.

Market development

Involves the marketing of existing products in new markets; it needs to understand local habits, tastes, and needs.

Diversification

When new products are developed for new markets; it reduces risk from over-dependence on existing markets and products.

Cost leadership

Lowest cost producer in the market, meaning that the business can offer the lowest price.

Differentiation

A business operating in a mass market with a unique position.

Focus

Targeting a narrow range of customers in one of ways e.g. niche marketing focusing on a very narrow segment of the market.

Star

High growth & competition; require investment.

Cash cows

Low growth of product with high market share; generate cash for investing in other areas.

Question marks

A product with low market shares in high growth market; consume a lot of cash but give little return.

Dog

Low market share in low growth market; they should be sold or divested.

External audit

An audit of the external environment in which a business finds itself, such as the market within which it operates or government restrictions on its operations.

Flotation

The sale of company shares to public for the first time. The shares are then traded on the stock market.

Internal audit

An analysis of business itself and how it operates.

Strategic planning

A process which involves making the vision for the future of a business easier to understand.

SWOT analysis

An analysis of the internal strengths and weakness of the business and the opportunities and threats presented by its external environment.

Trade association

An organization whose members are all involved in the same industry or trade. The organization pursues the interests of these businesses.

Cartel

A group of business that act together to reduce competition in a market- by fixing prices.

Monopoly

A market dominated by a single business.

Oligopoly

A market dominated a few large businesses.

Peer-to-peer(P2P) lending

Providing loans to individuals or businesses through online services that match lenders with borrowers.

PESTLE analysis

Analysis of the external political, economic, social, technological, legal, and environmental factors affecting a business.

Predatory pricing

Setting a low price to force rivals outs of business.

Rivaly

The competition that exists between business operating in the same market.

Diseconomies of scale

Rising long-run average costs as a business expands beyond its minimum efficient scale.

Economies of scale

The reduction in average costs experiences by a business as output increases.

External economies of scale

The reductions in costs to all businesses from the industry grows.

Indivisibility

The physical inability, or economic inappropriateness, of running a machine or some other piece of equipment at below its optimal operational capacity.

Internal economies of scale

When production rises leading to lower average cost.

Minimum efficient scales

The output that minimizes long-run average cost.

Organic growth

A business growth strategy that involves a business growing gradually using its own resources.

Inorganic growth

A business growth strategy that involves two or more businesses joining together to form one much larger one.

Venture capitalist

Provider of funds for small- or medium-sized companies that may be considered too risky for other investors.

Economies of scale

A reduction in average cost when output increases.

Internal economies of scale

When production rises, it leads to lower average cost(AC).

Internal economies of scale examples

Technical, Managerial, Purchasing, Financial and Risk-bearing.

External economies of scale.

The reductions in costs that any business within an industry might benefit from as the industry grows.

External economies of scale examples

Labour, Commercial and support services, and Cooperation.

Franchising

A business model where a business owner (the franchisor) allows another person (the franchisee) to trade under their name.

Retained profit

Profit after tax is ploughed back into the business.

Stake

A financial interest in a business which entitles the investor to part-ownership.

Acquisition

The purchase of one company by another.

Backward vertical integration

Joining with a business in the previous stage of production.

Conglomerate

A very large single business organization made up of many different businesses producing unrelated products.

Forward vertical integration

Joining with a business in the next stage of production.

Globalisation(of a market)

Where markets become so large that products cloud be sold anywhere in the world.

Horizontal integration

The joining together of two businesses as a result of merger or takeover.

Merger

Occurs when two or more businesses join together and operate as one.

Regulatory intervention

Control by the relevant authorities such as the Competition Commission.

Synergy

The combining of two or more activities or businesses which creates a better outcome then the sum of the individual parts.

Takeover

The process of one business buying another.

Vertical integration

The joining of two businesses at different stages of production.

Horizontal integration

A firm merges with another firm which is in the same stage and industry, e.g., two car manufacturers merge.

Backward vertical integration

A firm merges with another firm within the earlier stage or supplier of raw material, e.g., coffee manufacturing & coffee farm.

Forward vertical integration

A firm merges with another firm in the next stage which is closer to consumers, e.g., coffee manufacturing & coffee shop.

Conglomerate merger

The merger of two firms which make different products, e.g., coffee manufacturing merges with hotel.

Overtrading

A situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast.

Technical diseconomies

Large businesses may overuse plants, machinery and equipment, which can lead to inefficiency in the production.

Bureaucracy

It occurs when too much resources are used in administration e.g., paperwork.

Centring

A method used to calculate a moving average, where the average is plotted or calculated in relation to the central figure.

Correlation

The relationship between two sets of variables.

Correlation coefficient

A measure of the extent of the relationship between two sets of variables.

Extrapolation

Forecasting future trends based on past data.

Line of best fit

A straight line drawn through the centre of a group of data points plotted on a scatter graph.

Moving average

A succession of averages derived from successive segments of series values.

Scatter graph

A graph showing the performance of one variable against another independent variable on a variety of occasions. It is used to show whether a correlation exists between the variables.

Time-series analysis

A method that allows a business to predict future levels from past figures.

Average rate of return or accounting rate of return(ARR)

A method of investment appraisal that measures the net return per annum as a percentage of the initial spending.

Capital cost

The amount of money spend when setting up a new venture.

Cash in flow

The cash coming into the business such as that from sales or bank loans.

Cash out flow

The cash going out of business when payments are made to workers or suppliers, for example.

Discounted cash flow(DCF)

A method of investment appraisal that takes interest rates into account by calculating the present value of future income.

Investment

The purchase of capital goods.

Investment appraisal

The evaluation of an investment project to determine whether or not it is likely to be worthwhile.

Net cash flow

Cash in flows minus cash out flows.

Net present value(NPV)

The present value of future income from an investment project, minus cost.

Opportunity cost

When choosing between different alternatives, the opportunity cost is the benefit lost from the next best alternative to the one that has been chosen.

Payback period

The amount of time it takes to recover the cost of an investment project.

Present value

The value today of a sum of money available in the future.