Business Studies Unit 1: Business Activity, Enterprise, Organisation & Objectives

Vocabulary practice flashcards covering Business Activity, Factors of Production, Enterprise, Growth, Business Organisations, Objectives, and Stakeholders from Unit 1.

Business

An organisation that combines factors of production to make products (goods and services) that satisfy people's wants.

Goods

Tangible products made by businesses to be sold to customers (e.g. cars, clothes).

Services

Intangible products provided by businesses to customers (e.g. banking, transport).

Land

All natural resources provided by nature used in production.

Labour

The number of people available to make products and the skills they have.

Capital

Finance, machinery and equipment needed for manufacture or provision of services. Also defined as money invested by owners.

Enterprise

The skill and risk-taking ability of the entrepreneur who brings the other factors together.

Scarcity

The economic problem where factors of production are in limited supply, so there is never enough to satisfy all the unlimited wants of the population.

Opportunity cost

The value of the next best alternative given up when choosing one option over another.

Added value

The difference calculated as: $\text{Added value} = \text{Selling price} - \text{Cost of bought-in materials \& resources}$.

Primary sector

Economic sector that extracts and uses natural resources from the earth to produce raw materials (e.g. mining, farming, fishing).

Secondary sector

Economic sector that manufactures goods using raw materials from the primary sector (e.g. car manufacturing, construction).

Tertiary sector

Economic sector that provides goods and services to consumers and other sectors (e.g. banking, retail, transport).

Private sector

The part of the economy owned by individuals or companies, usually run for profit, where competition and profit motives drive efficiency and innovation.

Public sector

The part of the economy owned and controlled by the government to provide essential services (e.g. health, education) funded by taxes with no profit requirement.

Entrepreneur

A person who has an idea for a new business, starts it up, and accepts the risks of the venture.

Business plan

A written document describing a business, its objectives, strategies, market, and financial forecasts that reduces risk by providing clear guidelines and targets.

Internal growth

Expanding using the business's own resources, without merging with or buying another business (also known as organic growth).

Takeover

A form of external growth where one business buys out the owners of another, which then becomes part of the predator business.

Merger

A form of external growth where the owners of two businesses agree to join their businesses together to form one new business.

Horizontal integration

Integration occurring when a business merges with or takes over a firm in the same industry at the same stage of production.

Vertical — forward integration

Integration with a business closer to the consumer (e.g. a manufacturer takes over a retailer).

Vertical — backward integration

Integration with a business closer to raw material supply (e.g. a manufacturer takes over a supplier).

Unincorporated

A business structure where the business and its owner are the same legal entity (e.g. sole trader, partnership) and the owner has unlimited liability.

Incorporated

A business registered with Companies House that is its own separate legal entity (e.g. Ltd, plc), where owners have limited liability.

Unlimited liability

A legal condition where owners can be held personally responsible for all debts of the business, putting personal wealth (house, car, savings) at risk.

Limited liability

A legal protection where shareholders can only lose the amount they originally invested in shares, keeping personal wealth protected.

Bankruptcy

The legal state when an individual is unable to pay their personal debts.

Insolvent

The financial state when a business is unable to pay its debts.

Sole trader

A business owned and controlled by one person, carrying unlimited liability and having no separate legal identity.

Partnership

A business structure where at least two people agree to own and run a business together, typically governed by a deed of partnership.

Private limited company (Ltd)

An incorporated business where shares can only be sold to family, friends, or specialist investors, and not to the general public.

Public limited company (plc)

An incorporated business that can sell shares to the general public on a stock exchange following an Initial Public Offering (IPO).

Divorce of ownership and control

A scenario where shareholders own a public limited company (plc) but directors and managers control it day-to-day, potentially pursuing different objectives.

Annual General Meeting (AGM)

A legal requirement for all plcs where shareholders attend and vote on the Board of Directors for the coming year.

Dividends

Payments made to shareholders from after-tax profit as a return on their investment.

Franchise

A business based on the brand name, logo, and product ideas of an existing successful business.

Franchisor

The original business that sells the right to a franchisee to use its name and idea.

Franchisee

A person or business that buys the licence to operate an outlet of an existing business from the franchisor.

Joint venture

An arrangement where two or more businesses start a new project together, sharing capital, risks, and profits.

Social enterprise

A business with social and environmental objectives as well as a financial aim to make profit, which is reinvested back into the business rather than distributed as personal profit.

Business objective

An aim or target that a business works towards.

Profit

The surplus remaining after total costs have been subtracted from total revenue.

Market share

The percentage of total market sales held by one brand or business, calculated as: $\text{Market share (\%)} = \left(\frac{\text{Sales revenue of business}}{\text{Total market sales revenue}}\right) \times 100$.

Stakeholder

Any person or group with a direct interest in the performance and activities of a business.

Internal stakeholders

Individuals or groups who work within or own the business: owners, shareholders, managers, and employees.

External stakeholders

Individuals or groups separate from the business but with a direct interest: customers, suppliers, banks, government, and the local community.