Business: Project 1 Key Terms and Definitions

Organization

A structured group of people formed to achieve common goals

Business

An organization that produces or purchases goods or services and then sells them; most businesses seek profit by selling their products for more than the cost of obtaining them

Customer

The buyer of a good or service

Consumer

The user of a good or service

Problem-solution fit

The match between a business's product and the problem of intended customers

Value

The worth assigned to a good or service based on its perceived fit with customers' needs and wants; businesses create value by offering products that solve customers' problems or satisfy their interests

Value creation

Occurs when a business can charge customers a price that exceeds the cost of providing the product

Revenue

The money received in exchange for goods or services

Profit

Revenue minus the cost of making the product and operating the business

Market

A place, real or virtual, where buyers and sellers can exchange goods and services

Market price

The price generally charged by firms throughout the market

Monopoly

A market with only one seller

Rival businesses

Other businesses that compete in the same market as a given firm

Competitive advantage

A firm's position of superiority over competitors

Product differentiation

Offering something that is unavailable from competitors

Barriers to entry

Obstacles that deter new competitors from entering a market

Intellectual property rights

Legal rights, such as patents, copyrights, and trademarks that protect creations of the mind

PESTEL analysis

A tool for assessing the business environment based on political, economic, social, technological, environmental, and legal factors

Subsidy

Financial assistance—such as cash payments, tax breaks, or low-interest loans—that a government provides to promote business activity

Mandate

An order from the government to perform an action, such as providing nutrition labels

Viable

Able to succeed in a specific market or situation

Entrepreneur

Someone who creates a business by initiating the activities, organizing the inputs, and assuming many of the risks of running the business

Opportunity

A set of circumstances favorable for the creation of value by offering a new or modified good or service

Market research

The process of observing, surveying, or interviewing customers, analyzing trends, or studying competitors in order to identify unmet needs

Technical research

The application of scientific and engineering principles to investigate new products or the improvement of existing ones

Design thinking

A problem-solving process with five stages: (1) empathize with the target audience; (2) define the problem; (3) ideate about solutions; (4) create a prototype; and (5) test the product

Prototype

A preliminary depiction or model of a product that is created to explore and validate ideas

Minimum viable product (MVP)

The simplest version of a product that serves its intended purpose and allows for customer feedback

Brainstorming

The technique of encouraging participants to think freely and propose ideas without fear of criticism

Core values

Underlying principles and beliefs that shape decision making for companies and individuals

Core competencies

Capabilities or strengths that enable an individual or a business to stand out among rivals and deliver value in unique ways

Vision statement

A concise summary of an organization's most important values and aspirations

Mission statement

A brief description of why an organization exists and what it does to achieve its long-term goals

Social enterprise

An organization that adopts commercial strategies primarily to achieve social objectives

Nonprofit organization

An organization that does not generate profit for its owners; if revenues exceed costs, the excess is reinvested back into the organization

Business ethics

The application of ethical standards to all aspects of a business

Incentive

Anything that motivates or encourages a person to do something

Code of conduct

A document that details the rules, expectations, and standards for conduct within an organization

Ethical dilemma

A situation that arises when core values conflict with business goals or with each other

Internal stakeholders

Those directly involved in the activities of an organization, such as employees, managers, owners, and members of the board of directors

External stakeholders

Those outside of an organization who are affected by its activities, such as customers, suppliers, lenders, community members, retailers, and government agencies

Sole proprietorship

A business that is owned and controlled by one person

Partnership

A business involving two or more people who share ownership, management, and profits and losses

Limited liability company (LLC)

A business structure offering legal protection for owners by separating personal from business assets

Corporation

A business owned by shareholders that is a legal entity apart from its owners

Organizational structure

A framework that defines the hierarchy, roles, and relationships of people and departments within an organization

Board of directors

A group of people elected by company shareholders to oversee the organization's leadership and strategy

Chief executive officer (CEO)

The highest ranking executive in a corporation

Outsourcing

A business's hiring of another business to handle some of its functions

Sales

The activities that generate revenue by finding potential customers, engaging them, and converting them into buyers

Marketing

The process of generating awareness of a company's brand and helping people find value in the company's products

Research and development department

A department focusing on innovation by developing and improving goods and services to meet customers' needs

Operations department

A department overseeing the production process and developing systems to deliver products to customers

Finance department

A department responsible for managing a business's financial dealings

Accounting department

A department that keeps track of day-to-day transactions related to a business's earnings, expenditures, assets, and liabilities

Human resources department

A department focused on putting people with the right skills, knowledge, and motivation in the right places to serve the needs of a business and its various departments

Artisan processes

Production processes involving skilled craftspeople who employ traditional, nonmechanized methods to make goods in limited quantities

Mass-production processes

Production processes that involve manufacturing large quantities of a standardized good

Supply chain

A network of people, processes, and organizations that provide everything necessary for the creation and delivery of a good or service

Distributor

A business that typically buys products from manufacturers and sells them to retail stores

Distribution centers

Facilities that specialize in receiving items from manufacturers, suppliers, or storage facilities that are quickly sent to retailers or customers