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Need
A good or service essential for living.
Want
A good or service which people would like to have but is not essential for living.
Economic problem
The existence of unlimited wants but limited resources to satisfy those wants, creating scarcity.
Scarcity
The lack of sufficient products to fulfill the total wants of the population.
Opportunity cost
The next best alternative given up by choosing another item.
Specialisation
When people and businesses concentrate on what they are best at.
Division of labor
When the production process is split into different tasks and each worker performs one task.
Added value
The difference between the selling price of a product and the cost of bought-in materials and components.
Primary production
Involves the extraction of raw materials from the earth.
Secondary production
Involves the manufacturing of goods using raw materials.
Tertiary production
Involves the provision of services.
Public sector
Businesses owned and controlled by the government.
Private sector
Businesses owned and controlled by individuals or groups of individuals.
Entrepreneur
A person who organizes, operates, and takes the risk for a new business venture.
Business plan
A document containing business objectives and important details about operations, finance, and owners.
Capital employed
The total value of capital used in the business.
Internal growth
Occurs when a business expands its existing operations.
External growth
When a business takes over or merges with another business.
Takeover or acquisition
When one business buys out the owners of another business.
Merger
When the owners of two businesses agree to join their businesses together.
Horizontal integration
When one business merges with or takes over another in the same industry at the same stage of production.
Vertical integration
When one business merges with or takes over another in the same industry but at a different stage of production.
Conglomerate integration
When one business merges with or takes over a business in a completely different industry.
Sole trader
A business owned and controlled by one person.
Partnership
A business owned and controlled by two or more people.
Private limited company
A company owned by shareholders, but shares cannot be sold to the general public.
Public limited company
A company owned by shareholders, with shares that can be sold to the general public.
Franchise
A business model where a business allows another operator to trade under its name.
Joint venture
An agreement between two or more businesses to work together on a project.
Unincorporated business
The business and owner are considered the same legal entity.
Limited company
The business and owners are considered separate legal entities.
Limited liability
The owners' personal assets are protected if the business fails.
Business objectives
Goals set by a business to guide its actions.
Social enterprise
A business with social objectives as well as an aim to make a profit.
Stakeholders
Individuals or groups with an interest in a business.
Motivation
The reason why employees want to work hard and effectively for the business.
Wage
Payment for work, usually paid weekly.
Time rate
The amount paid for one hour of work.
Piece rate
An amount paid for each unit of output.
Salary
Payment for work, usually paid monthly.
Bonus
An additional payment above basic pay as a reward for good work.
Commission
Payment relating to the number of sales made.
Profit sharing
A system whereby a proportion of the company’s profits is paid out to employees.
Job satisfaction
The enjoyment derived from feeling that you have done a good job.
Job rotation
Workers swap around doing each specific task for a limited time.
Job enrichment
Adding tasks to a job that require more skill and/or responsibility.
Teamworking
Using groups of workers and allocating specific tasks and responsibilities to them.
Training
The process of improving a worker’s skills.
Promotion
The advancement of an employee in an organization.
Organizational structure
The levels of management and division of responsibilities within an organization.
Organizational chart
A diagram that outlines the internal management structure.
Hierarchy
The levels of management in any organization.
Level of hierarchy
Managers/supervisors/other employees with a similar level of responsibility.
Chain of command
Structure allowing instructions to be passed down from senior management.
Span of control
The number of subordinates working directly under a manager.
Directors
Senior managers who lead a particular department or division.
Line managers
Managers who have direct responsibility for people below them.
Supervisors
Junior managers who have direct control over the employees below them.
Staff managers
Specialists who provide support to line managers.
Delegation
Giving a subordinate the authority to perform particular tasks.
Leadership styles
The approaches to dealing with people and making decisions in authority.
Autocratic leadership
The manager expects to be in charge and have their orders followed.
Democratic leadership
Involves other employees in the decision-making process.
Laissez-faire leadership
Makes broad objectives known but allows employees to make their own decisions.
Recruitment
The process of identifying a need to employ someone until applications arrive.
Employee selection
Evaluating candidates for a specific job and selecting one based on organizational needs.
Job analysis
Identifies and records the responsibilities and tasks of a job.
Job description
Outlines the responsibilities and duties of a specific job.
Job specification
Outlines requirements and qualifications for a job.
Internal recruitment
Filling a vacancy with an existing employee.
External recruitment
Filling a vacancy with someone who is new to the business.
Part-time employment
Considered to be between 1 and 30–35 hours a week.
Full-time employment
Usually works 35 hours or more a week.
Induction training
Introduction given to a new employee about the business's activities.
On-the-job training
Training occurs by watching a more experienced worker.
Off-the-job training
Training away from the workplace by specialists.
Workforce planning
Establishing the needed workforce for the foreseeable future.
Dismissal
When employment ends against the employee's will.
Internal communication
Communication between people within the same organization.
External communication
Communication between an organization and people outside of it.
One-way communication
A message sent with no feedback from the receiver.
Two-way communication
A message sent with feedback from the receiver.
Verbal communication
Using spoken words to send a message.
Written communication
Using written words to convey a message.
Communication barriers
Factors preventing effective communication.
Market segmentation
Dividing a market into smaller groups of customers with similar needs.
Niche market
A small, specialized market segment.
Mass market
A large market with a wide range of customers.
Market research
Gathering, analyzing, and interpreting information about a market.
Product-oriented business
A business focused on the product itself.
Market-oriented business
A business that conducts market research before product development.
Marketing budget
A financial plan for the marketing of a product for a specific period.
Primary research
Collection and collation of original data via direct contact with customers.
Secondary research
Uses information already collected and available for use.
Questionnaire
A set of questions for data collection in market research.
Online surveys
Surveys completed over the internet.
Interviews
Asking individuals a series of questions, often face-to-face.
Focus group
A group representing the target market for discussion.
Sample
The group selected to respond to a market research exercise.
Random sample
People selected at random for market research.
Note 
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