CCEA Business Studies A2 Unit 1

Mission Statement

A short statement defining the underlying aims and objectives of the organisation. It provides the framework for running the business.

Aim

Long-term plans of the business from which its corporate objectives are derived.

Corporate Strategy

An overall plan with clearly defined objectives that provides a clear sense of direction and assists decision making with an organisation.

Business objectives

A goal which a business is seeking to achieve.

Strategic Objectives

These are objectives set for the whole organisation by senior management. They will have long-term implications and involve major uses of resources.

Functional Objectives

These are objectives designed to improve the efficiency of business operations in areas such as production, marketing and sales, human resources, finance, and research and development. They can only be effective if there is co-operation between the business functions.

SMART Objectives

Objectives set by the businesses which are specific, measurable, attainable, realistic and time-based. This will allow for monitoring and evaluation of performance by management.

Profit Maximisation

Producing at a level of output which generates the most profit for a business

Profit Satisfaction

Generating sufficient profit to satisfy owners and relevant stakeholders such as management.

Growth

An objective chosen to allow the firm to become competitive, to dominate the market, to diversify and reduce risks.

Survival

A possible objective for a business during early stages of trading, during a recession or in response to a threat from a takeover.

Corporate Image

An objective chosen to enhance the reputation of the business in relation to ethics and social responsibility. It is the mental picture that springs up at the mention of a firm's name.

Environment

An objective chosen when the firm is pursuing policies to reduce the negative impact of its activities on the environment.

Conflict

The contradiction of ideas or objectives, which generally mean that one objective cannot be achieved or that it might be achievable at the expense of another objective.

Organisational Culture

This is the way a business does things and the way that people in the business expects things to be done. It shapes staff behaviour and attitude and how they make decisions.

Power Culture

Refers to organisations where decision making is limited to one/or a small number of people.

Role Culture

Refers to bureaucratic firms where authority is defined by job title.

Person Culture

Refers to a loose organisation of individual workers e.g. professional partnerships such as accountants or solicitors.

Task Culture

This places an emphasis on tasks and getting things done.

Stakeholders

Individuals or groups who have a genuine interest in a particular business and will be affected by or can affect the activities undertaken by that business. Stakeholders can be internal or external to the business.

Stakeholders Objectives

These are the goals of people who have an interest in the business.

Stakeholders Conflict

This can occur in business when stakeholders objectives are different.

Communication

The passing on of ideas and information. For communication to be effective, it must be transmitted, received and understood.

Channel of Communication

The route by which a message is communicated from sender to the receiver.

Effective Communication

This occurs if the message is received and understood by the receiver and there is appropriate feedback.

Barriers to Communication

Something that prevents effective communication from taking place e.g. inappropriate choice of communication channel.

Methods of Communication

The written, oral or technological methods used to communicate a message.

Economies of Scale

A reduction in unit costs achieved as the scale of production increases.

Internal Economies of Scale

Economies of scale that are achieved as a result of a firm growing internally.

External Economies of Scale

Economies of scale that are achieved by a firm as a result of growth in the industry in which it operates.

Diseconomies of Scale

The cost per unit increases as output expands. This can happen when a company becomes too large.

Business Plan

A set of documents prepared by a firm's management to summarize its operational and financial objectives for the near future and to show how they will be achieved.

SWOT Analysis

An analysis of internal strengths and weaknesses and the external threats and opportunities facing a business.

PESTLE Analysis

An analysis of the political, economic, social, technological, legislative and environmental impacts affecting a business.

Ansoff Matrix

A decision making model used by marketing managers to help them adapt to changing situations and developing new strategies for growth that consider new and existing products and new and existing markets.

Boston Matrix

A decision making tool used by a business that has to manage a product portfolio. It examines its products in relation to market share and market growth.

Porter's Generic Strategy

Four "generic" business strategies that could be adopted in order to gain competitive advantage. The strategies relate to the extent to which the scope of a business' activities are narrow versus broad and the extent to which a business seeks to differentiate its products.

Bowman's Strategy Clock

A model that explores the options for strategic positioning - i.e. how a product should be positioned to give it the most competitive position in the market. Its purpose is to illustrate that a business will have a variety of options of how to position a product based on two dimensions - price and perceived value.

Balanced Scorecard

Measurement for four key strategic perspectives upon which the success of a business can be assessed. It generally uses three non-financial topic areas and one financial. These may include performance in the following areas: Financial performance, Customer satisfaction, Internal Business Processes and Learning and Growth.

Elkington's Triple Bottom Line

An influential model that helps share the corporate social responsibility agenda. The concept encourages the assessment of overall business performance based on three important areas: Profit, People and Planet.

Key Performance Indicators (KPIs)

A KPI is a type of performance measurement that helps you understand how your organisation or department is performing.

Internal Sources of Finance

These are funds available from within the business e.g. retained profit and money gained from selling assets no longer used in the firm.

External Sources of Finance

These are funds available from outside the business e.g. loan, overdraft, hire purchase, leasing, trade credit, mortgage.

Decision Tree

A Decision Tree is a graphical presentation of a decision-making process within a business which aims to highlight the most cost effective decision.

Square

Squares represent points at which management decisions have to be made. They are referred to as decision nodes.

Branches

Branches show the different alternative options.

Circles

Circles represent points at which one of a number of outcomes may occur. These are referred to as chance nodes.

Probability

The branches coming from the circle show the likelihood of the occurrence e.g. 0.6 shows there is a 60% chance of an occurrence happening.

Returns

The expected values/outcomes of each alternative.

Expected Values

The financial outcomes from a specific course of action adjusted to allow for the probability of it occurring.

Contingency

A contingency is a possible future occurrence; therefore, this brings about a need for plans to deal with future possible opportunities and threats.

Contingency Plan

A contingency plan of a business is designed to cope with any problems that may arise from a crisis relating to finance, human resources, corporate image, product or legal.

Risk Management

Taking steps to reduce risk for a business.

Crisis

An unexpected event that threatens the wellbeing of a company.

Crisis Management

Handling potentially dangerous events for a business.

Income Statement

Summaries income/expenses and details the profit/losses made by the business in the accounting period.

Sales Revenue

Income earned in the accounting period from trading activities.

Opening Inventories

Inventories that the organisation has at the start of the trading period, carried over from the previous trading period.

Purchases

Additional inventories bought by the business for re-sale.

Closing Inventories

The amount of unsold inventories left at the end of the trading period.

Cost of Sales

Opening Inventories + Purchases - Closing Inventories

Gross Profit

Sales Revenue - Cost of Sales

Net Profit

Gross Profit - Expenses

Statement of Financial Position

Details in summary format, the financial position of the business.

Assets

Items of value held by a business which is likely to generate future income.

Non-Current Assets

Assets that the business expects to retain ownership of, for a period of at least one year e.g. plant and machinery. These assets are held to help with the day to day running of the organisation. They are not usually acquired for profitable resale purposes.

Current Assets

Assets that the business expects to turn into cash within one year e.g. inventories/trade receivables/cash/bank.

Trade Receivables

Money that is owed from customers to the business arising from goods sold on credit.

Non-Current Liabilities

Debts that the business is required to meet in a future accounting period i.e. beyond one year e.g. bank loan or debenture.

Current Liabilities

Liabilities that the business expects to pay within a one-year accounting period e.g. tax owed, proposed dividend/overdraft.

Trade Payables

Money that is owed from the business to a supplier who provided goods/services on credit.

Equity

The value of funds within the business which can be attributed to the owner/s.

Tangible Assets

These include property/ premises, plant/machinery/equipment/vehicles: items that may be physically viewed.

Intangible Assets

Intellectual rights/property/goodwill/programming

rights/music rights: items which are not physical in nature.

Disclosure

Groups of assets are presented within the Statement of Financial Position according to the length of time a business expects to retain ownership of the asset.

Dividend

A proportion of a company's profits paid to the owners of shares in a particular company.

Share Capital

Money introduced into the business through the sale of shares.

Reserves

These are shareholder's funds built up over the years, e.g. share premiums, revaluations and retained profit.