Unit 7 Key Terms

Mission statement

Mission statement

Summarises why a business exists and helps a company respond to change and make decisions that align with its vision.

Vision statement

It outlines the company's long-term goals and aspirations for the future in terms of its long-term growth and impact on the world.

Corporate objectives

They relate to the business as a whole. They are usually set by the top management of the business and they provide the focus for setting more detailed objectives for the main functional activities of the business

Strategic objectives

They are high-level and measurable goals outlining what an organisation wants to achieve, with a clearly defined deadline

Shareholder returns

The profit or loss from net share price change, plus any dividends received over a given period

Dividends

The overall appreciation in the stock's price per share, plus any dividends paid by the company, during a particular measured interval

Short-termism

An excessive focus on short-term results at the expense of long-term interests

Strategy

The strategic initiatives a company pursues to create value for the organisation and its stakeholders and gain a competitive advantage in the market

Tactics

The individual steps and actions that will get you there

Functional decisions

The process of making choices by identifying a decision, gathering information, and assessing alternative resolutions

Balance sheet

A financial statement used in accounting

Assets

A resource of value that you own or lease that helps you run your business

Liabilities

The legal debts a company owes to third-party creditors

Statement of financial position

A financial statement that summarises a company's assets (what it owns), liabilities (what it owes), and equity (assets less liabilities) on a particular date

Consolidated balance sheet

A financial statement that presents the combined financial position of a parent company and its subsidiaries

Working capital

The money your business needs to be able to operate from day to day

Capital

The money used to build, run, or grow a business

Currency

A means of exchanging commodities and service

Exchange rate

The rate at which one currency can be exchanged for another currency

Emerging market

An economy that experiences considerable economic growth and possesses some, but not all, characteristics of a developed econom

Multinational business

A company that operates in its home country, as well as in other countries around the world

BRIC countries

It was designed to bring together the world's most important developing countries, to challenge the political and economic power of the wealthier nations of North America and Western Europe

CAD – computer aided design

The use of computer-based software to aid in design processes

CAM – computer aided manufacturing

The use of software and computer-controlled machinery to automate a manufacturing process

Sensitivity analysis

A financial modelling tool used to analyse how different values of an independent variable affect a particular dependent variable under a certain set of assumptions

Inventories

Any item of property held in stock by a firm, including finished goods ready for sale, goods in the process of production, raw materials, and goods that will be consumed in the process of producing goods to be sold

Mortgages

A loan used to purchase or maintain a home, plot of land, or other real estate

Debentures

A type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years

Depreciation

An accounting method for estimating that decline over time

Income statement

A financial statement that shows you the company's income and expenditures

Ratio analysis

The analysis of various pieces of financial information in the financial statements of a business

Window dressing

A short-term strategy used by companies and funds to make their financial reports and portfolios look more appealing to clients, consumers, and investors

Labour or employee retention

An organisation's ability to hold on to its employees

Core competencies

The resources and capabilities that comprise the strategic advantages of a business

Research and development

Any activity that leads to the innovation of new products, processes, or services or improvements to those that already exist

Profit quality

The degree to which profit is likely to continue into the future, i.e. the sustainability of the profit

Employee engagement

The level of enthusiasm and dedication a worker feels toward their job

Balanced scorecard

A strategic management performance metric that helps companies identify and improve their internal operations to help their external outcomes

GDP – gross domestic product

Measures the monetary value of final goods and services—that is, those that are bought by the final user—produced in a country in a given period of time

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators

Taxation

A percentage of income or spending paid by individuals and businesses to the government

Demography

The socio-economic characteristics of a population that businesses use to identify the product preferences and purchasing behaviours of customers

Migration

The movement of people, especially workers, between countries

Urbanisation

The increase in the proportion of people living in towns and cities

Ethical behaviour

Requires firms to act in ways that stakeholders consider to be both fair and honest

Barrier to entry

The high startup costs or other obstacles that prevent new competitors from easily entering an industry or area of business

Investment appraisal

The analysis done to consider the profitability of an investment over the life of an asset alongside considerations of affordability and strategic fit

Ethics

Implementing appropriate business policies and practices with regard to arguably controversial subjects

Fair trade

A system of trading with a developing country in which a good price is paid for their exports, and the people who produce the goods have good working conditions and are paid a fair wage

Sustainability

A company's strategy and actions to reduce adverse environmental and social impacts resulting from business operations in a particular market

Corporate (Social) responsibility

A company's strategy and actions to reduce adverse environmental and social impacts resulting from business operations in a particular market

Corporate (social) responsibility reports

They are annual publications that detail a company's sustainability efforts to its stakeholders

Regulation

Rules about how businesses operate, often in the form of government intervention in markets

Privatisation

When a government-owned business, operation, or property becomes owned by a private, nongovernment party

Monopoly

A market structure that consists of a single seller or producer and no close substitutes

Infrastructure

The basic physical systems of a business, region, or nation and often involves the production of public goods or production processes

Financial services

A broad range of more specific activities such as banking, investing, and insurance

Globalisation

The spread of products, technology, information, and jobs across nations

Cartels

Where two or more businesses agree not to compete with each other

Mergers

An agreement that unites two existing companies into one new company

Takeovers

When one company makes a successful bid to assume control of or acquire another

Dominate market position

If it has substantial market power on the relevant market such that it can behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers

Anti-competition practices

Actions taken by a business or organisation to limit, restrict or eliminate competition in a market, usually in order to gain an unfair advantage or dominate the market

Collective bargaining

A voluntary process through which employers and workers discuss and negotiate their relations, in particular terms and conditions of work

Fiscal policy

The use of government spending and taxation to influence the economy

Monetary policy

It is a set of tools used by a nation's central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements

Global strategy

It is a strategy that a company develops to expand into the global market

Pressure group

Any group of individuals who work together to exert an influence upon the decision-making of a company to achieve some specific outcome

Data analytics

It converts raw data into actionable insights

Discounting

The process of determining the present value of a payment or a stream of payments that is to be received in the future

Present value

The current value of a future sum of money or stream of cash flows

Return on capital employed (ROCE)

A financial ratio that can be used to assess a company's profitability and capital efficiency