IB Business Terms

Definitions for IB business syllabus

Input

factors of production

output

goods and services

consumer goods

The physical and tangible goods sold to the general public

Consumer Services

The non-tangible products sold to the general public

capital goods

The physical goods used by industry to aid in the production of other goods and services

factors of production

land, labor, capital, enterprise

Entrepreneur

Someone who takes the financial risk of starting and managing a new venture

Intrapreneur

someone within a large corporation who takes direct responsibility for turning an idea into a profitable finished product

private sector

Businesses owned and controlled by individuals or groups of individuals

public sector

organisations controlled by the government

mixed economy

Economic resources are owned and controlled by both private and public sectors

free market economy

Economic resources are owned largely by the private sector with very little state intervention

command economy

Economic resources are owned, planned and controlled by the state

Privatization

the sale of public sector organizations to the private sector

sole trader

A business in which one person provides the permanent finance and has full control of the business

Partnership

a business formed by two or more people

share holder

individuals that buy/own shares in a limited company

Private limited company

A small to medium sized business that is owned by shareholders. This company cannot sell shares to the general public.

public limited company

A large business with legal right to sell shares to public.

Social enterprise

A business with mainly social objectives that reinvests most of its profits into benefiting society

microfinance

very small loans by specialist finance businesses

public-private partnership

non-profit organization

any organization that has aims other than making profit

non-governmental organization

an organization with no representation of any government which has a specific aim or purpose

Mission Statement

A statement of the business's core aims used to motivate employees

vision statement

A statement of what the organisation would like to achieve or accomplish in the long term

Corporate Social Responsibility

business taking responsibility for the impact their decisions and activities

stakeholders

people or groups affected or have an interest in any action a business takes.

social audit

An independent report on the impact a business has on society.

Scale of Operation

maximum output that can be achieved using the available inputs

economies of scale

reduction in a firm's average costs of production that result from an increase in the scale of operations.

diseconomies of scale

factors that cause average costs of production to rise when the scale of operation is increased

join venture

two or more businesses agree to work together on a particular project and create a separate business division to do so.

strategic alliance

agreement between firms to cooperate in pursuit of a joint goal

Franchise

A business that uses the name, logo and trading systems of an existing successful business

globalisation

the growing integration of countries through increased freedom of global movement of goods, capital and people

free trade

the lack of trade restrictions among countries

Protectionism

using barriers to free trade to protect a country's own domestic industries

multinational business

business with headquarters in one country, but with operating branches and franchises around the world

start-up capital

Capital needed by an entrepreneur to set up a business

Working Capital

The finance needed by a business to pay its day-to-day costs.

Retained profit

profit left after all deductions and is given back to the company as a source of finance

Liquidity

ability of a firm to pay its short-term debts

overdraft

bank agrees to a business borrowing up to an agreed limit as and when required

Debt factoring

selling of claims over debtors in exchange for immediate liquidity

Leasing

obtaining the use of equipment and paying a rental charge over a fixed period

equity finance

permanent finance raised by the sale of shares

long-term loans

loans that don't have to be repaid for at least one year

fixed costs

costs that do not vary with output

variable costs

costs that vary with output

marginal costs

the extra cost of producing one more unit of output

revenue

income received from the sale of a product

total revenue

total income from the sales of all units of the product

break-even point

the level of output at which total costs equal total revenue

Dividends

share of profits paid to shareholders as a return for investing in the company

Marketing

responsible for identifying and meeting the needs

Marketing size

the total level of sales of all producers within a market

Market growth

The percentage change in the total size of a market over a period of time.

ease of entry

the lack of barriers for the establishment of new competitors in a market

homogeneous products

goods that are physically identical

Segmentation

dividing the market into distinct groups of consumers who share common tastes and requirements

Target Marketing

focusing marketing activity on particular segments of the market

Mass Marketing

selling to the whole market using a standardized product and the same marketing activity

Market Orientation

basing product decisions on consumer demand as established by market research

Product Orientation

making products that have been made for a long time and then trying to sell them

social marketing

considers the demands of consumers and the effect on all members of public society involved

market share

the percentage of sales in the total market sold by one business

Market leadership

when a business has the highest market share of all firms that operate in that market

marketing objectives

the goals set for the marketing departme nt to help the business achieve its overall objectives

consumer profile

a quantified picture of consumers of a firm's products

niche market

a small and specific part of a larger market

Niche Marketing

identifying and exploiting a small segment of a larger market by developing products to suit it

Unique selling point

differentiating factor that makes a company's product unique, designed to motivate customers to buy

branding

the name, symbol, or design used to identify firm's product

overheads

indirect expenses that are not chargeable to a particular part of work or production.

penetration pricing

Setting a low price when launching a new product in order to get established in the market

market skimming

setting a high price for a new product when a firm has a unique product

psychological pricing

setting prices that have special appeal to target customers

price discrimination

when a business sells the same product to different consumers at different prices

predatory pricing

selling a product below cost to drive competitors out of the market

promotion

any form of communication used to inform, persuade, or remind

above-the-line promotion

a form of promotion that is undertaken by a business by paying for communication with consumers

below-the-line promotion

Promotion that is not a directly paid-for means of communication but based on short-term incentives to purchase

Abraham Maslow

A theorist who classified the needs of employees of a firm into a series of levels - a hierarchy of needs.

Assets

resources owned by a business or person

Auditing

The process of checking the financial statements of a firm

autocratic leadership

A form of leadership where the leader makes decisions and sets objectives independently of the others in the firm without involving them in the decision making process.

Batch production

method of production where a limited number of identical goods are produced, often for a specific order.

Capital employed

The total amount of capital that the firm has and is using to produce their goods and services.

Cash Flow

The movement of cash in an out of the business.

Cash flow forecast

A projection of what a company expects its cash inflows and cash outflows to be over a period of time.

chain of command

The way in which orders are passed down through the business

channels of communication

The methods or routes used to convey information from one person or area of the firm to others.

competitive based pricing

A pricing method where the price charged by competitors is the main determinant of an individual firm's own decision on price.

capital expenditures

purchase of assets that are expected to last for more than one year

Contract of employment

A written legal document setting out the terms and conditions of employment.

Contribution pricing

A method of pricing where the price charged is based on the variable costs of production.

cost-based pricing

A method of pricing where the firm adds a percentage mark-up to its costs to determine the price they are going to charge for their products.

De-layering

reducing the number of layers of management.

demand-based pricing

A method of pricing where an organisation decides the price to charge based as far as possible on what consumers are prepared to pay.