Business Final Exam

Unit 1,2,3,4,5 and Toolkit

Primary Sector

A business involved in the cultivation of natural resources (farming, mining)

Secondary Sector

Businesses concerned with the construction and manufacturing of products

Tertiary Sector

Businesses involved with the provision of services to customers

Quaternary Sector

A subcategory of tertiary sector - involved in research

Cooperatives

For-Profit social enterprises set up, owned and run by their members (employees or customers)

Company

A limited liability business that is owned by Shareholders

Incorporation

A legal difference between the owners and the business itself

Limited Liability

A restriction to the amount of money that owners of a company can lose

Private Sector

A part of the economy run by private individuals and businesses, rather than the giverment

Privately - Held Company

A business thats shares cannot be shared n the Stock exchange

A publicly-held company

Incorporation that allows shareholders to purchase and sell shares

Public Sector

The part of the economy controlled by the government (roads, public healthcare)

Social Enterprise

Revenue-generating businesses with social objectives at the core of their operations. All profits are reinvested for social purpose

Unlimited Liability

When sole traders/partnerships are soley responsibe to pay back all creditors, even in debt

Corporate Social Responsibility (CSR)

Conscientious consdieration of ethical and enviromental practices related to a business

Mission Statement

Declaration of overall purpose

Strategic Objectives

Long-term goals (profit maximization, growth, etc)

Tactical objectives

Short-term goals that affect a unit of organisation - guiding the daily functions

Vision Statement

Long-term aspirations - where the business wants to be

Directors

Senior Executives elected by the company’s shareholders

External Stakeholders

Individuals and Organizations not a part of the business but have a direct interest in the performance (customers, suppliers, government)

Internal Stakeholders

Members of the organisation (employees, shareholders)

Pressure Groups

Individuals with a common concern who seek a change in an organisation

Stakeholder Mapping

A model that asseses the relative interest of stakeholders and their influence in an organisation

Acquisiton

A method of external growth when one company buys a controlling interest in another company

Backward Vertical Integration

When a business merges with a firm operating in an earlier stage of production (car manufacturer taking over tire supplier)

Comglomerates

Businesses providing a diversified range of products and that operate in a range of industries

Demerger

When a company sells off a part of its business, separating into two or more businesses.

DisEconomies of scale

Cost disadvantages of growth

Economies of scale

Lower average costs of production as a firm operates on a larger scale

External Diseconomies of scale

Occur due to factors beyond its control which causes average cost production to increase

External Economies of scale

cost-saving advantages that benefit an entire industry

External Growth

Occurs when a businesses grows and evolves by buying or merging with other businesses

Financial economies of scale

Cost savings made by large firms as banks and other lenders charge lower interest because larger businesses represent lower risk

Forward Vertical Integration

A growth strategy that occurs with the merging of a firm operating at a later stage of production (book publisher)

Horizontal Integration

External growth strategy that occurs when a business merges with a firm operates in the same stage of production

Internal diseconomies of scale

Occur due to internal problems of mismanagement, causing average costs of production to increase as a firm grows

Internal economies of scale

Occur within a particular organisation as it grows in size

Internal Growth

Occurs when a business grows using its own capabilities and resources to increase the scale of its operations and sales revenue

Joint Venture

Growth Strategy that combines the contributions and responsibilities of two or more different organisations in a shared project

Lateral Integration

External growth of firms that have similar operations but don’t directly compete with each other

Marketing economies of scale

Occurs when larger businesses can afford to hire specialist managers, improving overall efficiency

Merger

A form of external growth whereby two firms agree to firm a new organisation

Purchasing Economies of Scale

When larger organizations can afford to but stock in bulk, saving money & effiency.

Risk-Bearing economies of scale

occur when large firms can bear greater risks than smaller ones due to having a greater product portfolio

Specialization economies of scale

Occur when larger firms can afford to hire and train specialist workers, helping boost their level of output

Synergy

A benefit of growth that occurs when the whole is greater than the sum of the individual parts when two or more business operations are combined - creates greater output

Technical Economies of Scale

When larger businesses achieve lower per-unit production costs by utilizing specialised machinery

Vertical Integration

Occurs between businesses that are at different stages

Concentration Ratio

An indicator of the degree of competition in an industry

Market Concentration

The degree of competitiveness that exists within a market

Market Orientation

Marketing approach adopted by business that are outward looking - focusing on making products they can sell rather than make

Market Share

Organizations portion of the total sales revenue in an industry

Market Size

Magnitude of industry - value of sales revenue from all the businesses

Marketing

The management process of predicting, identifying and meeting the needs and wants of customers

Product Orientation

Marketing approach used by businesses that are inward looking as they focus on selling products that they can make

Consumer Profiles

Demographic and phycographic characteristics of consumers in different markets (age, gender)

Diffferentiation

Distinguishing your business/product from others

Market segmentation

The process of categorizing customers into distinct groups with similar characteristics

Marketing Audit

Review of current position of an organization’s marketing mix - strengths and weaknesses

Market Segment

A distinct group of customers with similar charcteristics

Product Position Map

A visual tool that reveals customers perceptions of a product or brand in relation to others in the market

Repositioning

Changing the markets perception of a firms product or brand

Segmentation

Categorising customers into distinct groups with similar charcteristics

Ad-Hoc market research

Market research conducted as and when required in order to deal with a specific issue

A market Anlysis

A secondary market research revealing characteristics, trends and outlook for a particular product

Brand Switching

When consumers turn to alternative brands mainly because orginal brand has lost appeal

Extension Strategy

Attempts by marketers to lengthen the life cycle of a particular product

Genericised

Brands that are so popular they become synonymous with the name of the product itself (iphone)

Innovators

Consumers who strive to be the first to own a certain product

Marketing Myopia

Exists when a business becomes complacent about its product strategy, failing to keep up with market changes

Cost-plus pricing

Adding a specific amount of profit to the cost per unit of output in order to determine selling price

Loss leader pricing

Setting the price of a good or service below its cost of production

Penetration Pricing

Setting low prices in order to gain entry into a new market

Above the Line (ATL) Promotion

Paid-for promotion through mass media

Below the Line (BTL) Promotion

Doesn’t use paid-for mass media sources - free samples, discount vouchers

Point of Sale

The promotion of goods in retail stores where customers can purchase goods

Public Relations

Marketing activities aimed at establishing and protecting the desired image of an organisation

Through the Line (TTL) promotion

Above and Below the line promotion

Intermediaries

Agents or other businesses (distributors) that act as a middle person in the distribution channel

Specialty channels of distribution

Any indirect way to distribute products that does not involve retailers (e-commerce, vending machines)

The 7ps Model

The marketing of services which includes 3 additional Ps (people, processes, physical evidence) in addition to the traditional 4 ps in the marketing mix (promotion, product, price and place)

Capital Expenditure

The investment spending on non-current assets (machinery, equipment)

Colllateral

The financial guarantee for securing external loan capital to finance investment expenditure

Revenue Expenditure

The day-to-day spending of a business

Crowd Funding

Raising finance for a business or project by getting small amounts of money from a large number of people

Loan Capital

Medium-to-long term sources of interest-bearing finance obtained from commercial lenders (mortgages, business development)

Overdrafts

Allow a business to spend in excess of the amount in its bank account up to a predetermined limit

Share Capital

The money raised from selling shares in a limited liability company

Share Issue

An existing publicly held company raises further finance by selling more of its sales

Trade Credit

Allows a business to postpone payments.

Balance Sheet

Snapshot of a firms financial situation, containing information about an organizations assets, liabilities and the capital invested by the owners

Book Value

The value of an asset as shown on a balance sheet

Cost of Sales (COS)

The direct costs of producting or purchasing stock that has been sold to customers

Depreciation

The fall in value of a non-current asset over time

Goodwill

An intangible asset which exists when the value of a firm exceeds its book value

Share Capital

The amount of money raised through the sale of shares - shows the value raised when the shares were first sold, rather than their current market value

Acid Test Ratio

A liquidity ratio that measures a firms ability to meet its short-term debts, ignoring stock

Capital Employed

Value of all long-term sources of finance for a business

Current Ratio

Short-term liquidity ratio that calculates the ability of a business to meet its debts within the next twelve months