Cambridge IGCSE Business Studies - Key Vocabulary

This flashcard set covers key vocabulary from the Cambridge IGCSE Business Studies Fourth Edition textbook, focusing on definitions and concepts.

Need

A good or service essential for living.

Want

A good or service which people would like to have, but which is not essential for living. People's wants are unlimited.

The Economic Problem

There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.

Factors of Production

Those resources needed to produce goods or services. There are four factors of production and they are in limited supply: Land, Labour, Capital, and Enterprise.

Scarcity

The lack of sufficient products to fulfil the total wants of the population.

Opportunity Cost

The next best alternative given up by choosing another item.

Specialisation

Occurs when people and businesses concentrate on what they are best at.

Division of Labour

When the production process is split up into different tasks and each worker performs one of these tasks. It is a form of specialisation.

Businesses

Combine factors of production to make products (goods and services) which satisfy people's wants.

Added Value

The difference between the selling price of a product and the cost of bought in materials and components.

Primary Sector

Extracts and uses the natural resources of the earth to produce raw materials used by other businesses.

Secondary Sector

Manufactures goods using the raw materials provided by the primary sector.

Tertiary Sector

Provides services to consumers and the other sectors of industry.

De-industrialisation

Occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.

Mixed Economy

Has both a private sector and a public (state) sector.

Capital

The money invested into a business by the owners.

Entrepreneur

A person who organises, operates and takes the risk for a new business venture.

Business Plan

A document containing the business objectives and important details about the operations, finance and owners of the new business.

Capital Employed

The total value of capital used in the business.

Internal Growth

Occurs when a business expands its existing operations.

External Growth

Is when a business takes over or merges with another business. It is often called integration as one firm is integrated into another one.

Merger

Is when the owners of two businesses agree to join their firms together to make one business.

Takeover

Is when one business buys out the owners of another business which then becomes part of the 'predator' business (the firm which has taken it over).

Horizontal Integration

Is when one firm merges with or takes over another one in the same industry at the same stage of production.

Vertical Integration

Is when one firm merges with or takes over another one in the same industry but at a different stage of production. Vertical integration can be forward or backward.

Conglomerate Integration

Is when one firm merges with or takes over a firm in a completely different industry. This is also known as diversification.

Sole Trader

A business owned by one person.

Limited Liability

Means that the liability of shareholders in a company is only limited to the amount they invested.

Unlimited Liability

Means that the owners of a business can be held responsible for the debts of the business they own. Their liability is not limited to the investment they made in the business.

Partnership

Is a form of business in which two or more people agree to jointly own a business.

Partnership Agreement

Is the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended.

Unincorporated Business

Is one that does not have a separate legal identity. Sole traders and partnerships are unincorporated businesses.

Incorporated Businesses

Are companies that have separate legal status from their owners.

Shareholders

Are the owners of a limited company. They buy shares which represent part ownership of a company.

Annual General Meeting

A legal requirement for all companies. Shareholders may attend and vote on who they want to be on the Board of Directors for the coming year.

Dividends

Are payments made to shareholders from the profits (after tax) of a company. They are the return to shareholders for investing in the company.

Business Objectives

The aims or targets that a business works towards.

Profit

Total income of a business (sales revenue) less total costs.

Market Share

The proportion of total market sales achieved by one business.

Social Enterprise

Has social objectives as well as an aim to make a profit to reinvest back into the business.

Stakeholder

Is any person or group with a direct interest in the performance and activities of a business.

Motivation

Is the reason why employees want to work hard and work effectively for the business.

Wage

Is a payment for work, usually paid weekly.

Salary

Is a payment for work, usually paid monthly.

Commission

Is payment relating to the number of sales made.

Profit Sharing

Is a system whereby a proportion of the company's profits is paid out to employees.

Bonus

Is an additional amount of payment above basic pay as a reward for good work.

Performance-Related Pay

Is pay which is related to the effectiveness of the employee where their output can easily be measured.

Share Ownership

Is where shares in the company are given to employees so that they become part owners in the company.

Appraisal

Is a method of assessing the effectiveness of an employee.

Fringe Benefits

Are non-financial rewards given to employees.

Job Satisfaction

Is the enjoyment derived from feeling that you have done a good job.

Job Rotation

Involves workers swapping round and doing each specific task for only a limited time and then changing round again.

Job Enlargement

Is where extra tasks of a similar level of work are added to a worker's job description.

Job Enrichment

Involves looking at jobs and adding tasks that require more skill and/or responsibility.

Organisational Structure

Refers to the levels of management and division of responsibilities within an organisation.

Chain of Command

Is the structure in an organisation which allows instructions to be passed down from senior management to lower levels of management.

Span of Control

Is the number of subordinates working directly under a manager.

Line Managers

Have direct responsibility over people below them in the hierarchy of an organisation.

Staff Managers

Are specialists who provide support, information and assistance to line managers.

Delegation

Means giving a subordinate the authority to perform particular tasks.

Leadership Styles

Are the different approaches to dealing with people when in a position of authority- autocratic, laissez-faire or democratic.

Autocratic Leadership

Is where the manager expects to be in charge of the business and to have their orders followed.

Democratic Leadership

Gets other employees involved in the decision-making process.

Laissez-faire Leadership

Makes the broad objectives of the business known to employees, but then they are left to make their own decisions and organise their own work.

Trade Union

Is a group of workers who have joined together to ensure their interests are protected.

Closed Shop

All employees must be a member of the same trade union.

Recruitment

Is the process from identifying that the business needs to employ someone up to the point at which applications have arrived at the business.

Job Analysis

Identifies and records the responsibilities and tasks relating to a job.

Job Description

Outlines the responsibilities and duties to be carried out by someone employed to do a specific job.

Job Specification

Is a document which outlines the requirements, qualifications, expertise, physical characteristics, etc. for a specified job.

Internal Recruitment

Is when a vacancy is filled by someone who is an existing employee of the business.

External Recruitment

Is when a vacancy is filled by someone who is not an existing employee and will be new to the business.

Part-time Employment

Is often considered to be between 1 and 30-35 hours a week.

Full-time Employees

Employees will usually work 35 hours or more a week.

Induction Training

Is an introduction given to a new employee, explaining the firm's activities, customs and procedures and introducing them to their fellow workers.

On-the-Job Training

Occurs by watching a more experienced worker doing the job.

Off-the-Job Training

Involves being trained away from the workplace, usually by specialist trainers.

Workforce Planning

Establishing the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required.

Redundancy

Is when an employee is no longer needed and so loses their job. It is not due to any aspect of their work being unsatisfactory.

Industrial Tribunal

A legal meeting which considers workers' complaints of unfair dismissal or discrimination at work.

Contract of Employment

A legal agreement between employer and employee listing the rights and responsibilities of workers.

Ethical decision

• a decision taken by a manager or a company because of the moral code observed by the firm.

Communication

Is the transferring of a message from the sender to the receiver, who understands the message.

Message

Is the information or instructions being passed by the sender to the receiver.

Internal Communication

Is between members of the same organisation.

External Communication

Is between the organisation and other organisations or individuals.

Transmitter/Sender

The person starting off the process by sending the message.

Medium of Communication

The method used to send a message, for example, a letter is a method of written communication and a meeting is a method of verbal communication.

Receiver

The person who receives the message.

Feedback

The reply from the receiver which shows whether the message has arrived, been understood and, if necessary, acted upon.

One-way Communication

Involves a message which does not call for or require a response.

Two-way Communication

Is when the receiver gives a response to the message and there is a discussion about it.

Formal Communication

Is when messages are sent through established channels using professional language.

Informal Communication

Is when information is sent and received casually with the use of everyday language.

Communication Barriers

Are factors that stop effective communication of messages.

Product-Orientated

A business is one whose main focus of activity is on the product itself.

Market-Orientated

A business is one which carries out market research to find out consumer wants before a product is developed and produced.

Marketing Budget

Is a financial plan for the marketing of a product or product range for some specified period of time. It specifies how much money is available to market the product or range, so that the Marketing department know how much they may spend.

Market Research

Is the process of gathering, analysing and interpreting information about a market.