UNIT 1 BM VOCAB

BUSINESS ORGANISATION AND ENVIRONMENT

Needs

Are the basic necessities that a person must have to survive

Wants

Are people’s desires, that is to say the things they would like to have.

Consumers

People or organizations who actually use a product.

Customers

People or organizations who buy the product.

Entrepreneurs

Owners or operators of an organization who manage, organize and plan the other 3 factors of production. They are risk-takers who exploit business opportunities in return for profits.

Intrapreneurship

The act of behaving as an entrepreneur as an employee within a large business organization. Intrapreneurs work in an entrepreneurial capacity, with authority to create products or new processes for an organization.

Business

Organization involved in the production of goods and/or the provision of services.

Business plan

Document that sets out the business idea, its goals and objectives and other details of how the business will operate (such as its marketing, operations and finance).

Product

Refers to both goods and services.

A good is a physical product and a service is an intangible product.

Factors of production (inputs)

These are the human, physical and financial resources needed by business to produce goods or services.

* Land: physical space and resources
* Labour: worforce
* Capital: finance and capital goods
* Enterprise: driving force of business (management, decision making and coordinating role)

Business functions

* Human resources management
* Finance and accounts
* Marketing
* Operations management

Economic sectors

Primary, secondary, terciary and quaternary sectors

Primary sector

Firms that extract natural resources so that they can be used and processed by other firms. Like farming, fishing, oil extraction, etc.  

Secondary sector

Firms that manufacture and process products from natural resources. Including computers, brewing, baking, clothing and construction.

Tertiary sector

Firms that provide services to consumers and other businesses such as transportation and distribution.

Quaternary sector

Focused on information technology business and information service providers.

Integrated chain of production

When companies fulfill various economic sectors. (e.g. YPF does the extract, manufacture and distribute/provide service.)

Deindustrialisation

General decline in the importance of secondary sector activity and an increase in the tertiary sector.

USP

Unique selling proposition: what makes the customer buy your product/service and not your competition´s. → Not only can it be a material reason but also a perception.

Recession

Situation in which the economy stops growing -→ six months (two quarters) of falling GDP (negative growth)

Depression

An even worse situation than a recession, the economy is failing, people lose jobs and there isn’t much profit

Company

Business that is owned by shareholders. It has been issued a certificate of incorporation, giving it a separate legal identity from its owners

Cooperatives

Group of people acting together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically. Are not about making big profits for shareholders, but creating value for customers and secure employment for workers.

Incorporation

Means that there is a legal difference between the owners of a company and the business itself. This ensures that the owners are protected by limited liability.

Limited liability

Restriction on the amount of money that owners can lose if their business goes bankrupt.

Unlimited liability

Feature of sole traders and partnerships who are legally liable for all money owed to its creditors.

Sole trader

A business owned by one person, that may or may not have other employees, who will provide the permanent finance, will have full control of the business and will be able to keep all of the profits. They have unlimited liability.

Partnerships

Business owned by 2 or up to 20 people to carry on a business together, with shared capital investment and usually shared responsibilities.

Private sector

Part of the economy run by private individuals and businesses

Public sector

Part of the economy that is owned and controlled by the government

Deed of partnership

Legal contract signed by the owners of the company. The formal deeds specify the name and the responsibilities of each partner and their share of any profits and losses.

Microfinance

The provision of very small loans by specialist finance businesses, usually not traditional commercial banks.

Usually aimed at entrepreneurs of small businesses, especially at females and those on low incomes.

Charities

A non-profit organization set up to raise money to help people in need or to support causes that require funding. They are dependent on private contributions.

Non-governamental organizations (NGO)

A legally constituted body with no participation or representation of any government which has a specific aim and purpose. These are usually international organisations to tackle issues that support the public good

Social enterprises

A for-profit business with mainly social objectives that reinvest most of its profits into benefiting society rather than maximising returns to owners.

Public corporations

Business enterprise owned and managed by the government. They may not be profitable but they are essential: transportation, education, health and security. The main source of funding are taxes.

Stock exchange

Market place for trading stocks and shares of public limited companies

IPO: Initial Public Offering

Selling for the first time the company’s shares to the general public

Private limited company

A small to medium sized business that is owned by shareholders who are often members of the same family. This company cannot sell shares to the general public.

Public limited company

Often a large business with the legal right to sell shares to the general public via a stock exchange. All shareholders enjoy limited liability.

Public-private partnerships (PPPs)

Involvement of the private sector, in the form of management expertise and/or financial investment in public sector projects aimed at benefiting the public. Usually for infrastructure projects.

Types of PPPs:

* Government funded but privately managed
* Private sector-funded but government managed (also know as Private finance initiative (PFI): investemnt by private sector organisations in public sector projects)
* Goverment-directed but private-sector finance and management

Privatisation

Sale of public organisation to the private sector

Nationalisation

The sale of private organisations to the government.

Free-Market economy

Economic resources are owned largely by the private sector with very little state intervention. They are determined by the market. Relies on the hands of individuals and businesses. Depends on the offer and demand

Planned or Command economy

Economic resources are owned, planned and controlled by the government. The decisions are taken by the government. Government intervention: Government can put a maximum and minimum limit on certain products to protect the customers

Mixed economy

Most common system of economy Part of the decision making depends on the market but there is some level of government intervention

Triple bottom line

* Social: to provide jobs or support for local communities
* Economic: to make a profit to reinvest back into the business and provide some return to the owners
* Environmental: to protect the environment and to manage the business in an environmentally sustainable way

Aims

The overall target or the long-term goals of the business, often expressed in the mission statement.

Strategy

A long term plan of action for the whole organization designed to achieve a particular goal

Tactics

a short term policy aimed at resolving a particular problem or meeting a specific part of the overall strategy

Objectives

Relatively short-term targets of an organization and are often expressed as SMART objectives.

SMART objectives

Targets that are:

* Specific
* Measurable
* Attainable
* Realistic
* Time-specific

Mission statement

Declaration of an organization’s overall purpose. States business’s core aims, phrased to motivate employees and stimulate interest in outside groups.

Vision statment

An organization’s long-term aspirations. What the business would like to achieve in the long term.

Ethics

Moral principles that guide decision-making and strategy. Morals are concerned with what is considered to be right and wrong, from society’s point of view.

Ethical code (code of conduct)

a document detailing a company's rules and guidelines on staff behavior that must be followed by all employees

Corporate social responsibilities (CSR)

concept applied to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment (external impact of business activities)

Social audits

An independent report on the impact a business has on society and measures its CSR. This can cover: Pollution levels, Health and safety record, Sources of supplies, Employee benefit schemes, Customer satisfaction, Contribution to the community

Ansoff’s Matrix

Model used to show the degree of risk associated with the 4 growth strategies of:

• Market penetration: achieving higher market shares in existing markets with existing products

• Market development: strategy of selling existing products in new markets

• Product development: development and sale of new products or new developments of existing products in existing markets

• Diversification: Process of selling different, unrelated goods or services in new markets

Hierarchy of Objectives

* Aim
* Mission
* Corporate objectives
* Divisional objectives
* Departamental objectives
* Individual targets

Corporate aims

The long-term goals which a business hopes to achieve (depends on the company, not all the aims have to be present at the same time)

These can be:

* Profit maximization
* Profit satisficing
* Increase market share
* Survival
* Growth
* Maximizing short-term sales revenue
* Maximizing shareholder value

SWOT Analysis

A form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence the future direction and success of a business.

Stakeholders

People or groups of people who can be affected by, and therefore have an interest in, any action by an organisation.

Internal stakeholders

Members of the organization (employees, managers, shareholders, etc.)

External stakeholders

Individuals and organizations that are not part of the organization but have a direct interest in its activities and performance (government, customers, suppliers, pressure groups, etc.)

Conflict

Situations where stakeholders have disagreements on certain matters due to differences in their opinions. This can lead to arguments and tension between the various stakeholders.

Shareholders

Owners (individuals or organizations) of a limited liability company.

Stakeholder mapping (or stakeholder analysis)

Is a management tool used to determine the key stakeholders of an organization based on the varying degrees of power and interest of the various stakeholder groups.

Methods of conflict resolution

Arbitration: mediation between both parts of the conflict (workers and managers) by an independent arbitrator

\
Workers participation: Negotiating with the workers, listening to their opinions, having employees in charge of identifying the workers needs

\
Profit-sharing schemes: making the workers take part in the profits to reduce conflict between workers and shareholders over the allocation of profits and to share the benefits of the business

\
Share-ownership schemes: giving workers bonifications in shares instead of money

Economic growth

increases in the level of a country’s gross domestic product or GDP (total value of output)

Unemployment

people in an economy willing and able to work who cannot find employment

Interest rate

the value of interest in one country

Exchange rate

the value of one currency in terms of another currency

Information technology (IT)

the use of electronic technology to gather, store, process and communicate information

Fiscal policy

changes in government spending levels and tax rates

Monetary policy

changes in the level of interest rates which make loan capital more or less expensive

Inflation

The rate of change in the average level of prices

* Cost-push inflation: caused by rising costs forcing businesses to increase prices
* Demand-pull inflation: caused by excess demand in an economy (e.g. economic boom → allowing businesses to raise their prices)

Business cycle

Fluctuation in the level of business activity over time.

4 stages: peak, trough, contraction/recession and expansion

Deregulation

Removal of government rules and regulations which constrain an industry to enhance efficiency and encourage more competition within the industry.

Protectionist measures

Measures taken by a government to safeguard its industries from overseas competitors. They are a threat to businesses trying to operate in a foreign market.

STEEPLE analysis

an acronym standing for social, technological, economic, environmental, political, legal and ethical external factors that impact on business; it refers to a framework for analyzing the external environmental factors affecting business objectives and strategies

Scale of operations

The maximum output that can be achieved using the available inputs (resources) This scale can only be increased in the long term by employing more of all inputs

Economies of scale

Reduction in a firm's unit (average) costs of production that result from an increase in the scale of operations.

* Purchasing economies (bulk-buying bring discounts)
* Technical economies (able to buy machinery)
* Financial economies (need more financing)
* Marketing economies (marketing costs rise with business size, but not at the same rate)
* Managerial economies (more staff)

Diseconomies of scale

Factors that cause average cost of production to rise when the scale of operation is increased -→ Disadvantages of growth

* Communication problems
* Alienation of the workforce
* Poor coordination and slow decision making

Large-scale production - unit costs

Combined effect of economies of scale and diseconomies of scale on unit (average costs

Internal growth

Expansion of a business by means of opening new branches, shops or factories By doing more of what they do (Ansoff’s Matrix)

External growth

Business expansion achieved by means of merging with or taking over another business, from either the same or a different industry Instead of developing ideas by themselves, they buy other businesses (M&A)

Mergers

an agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly merged business.

Takeovers/Aquisition

when a company buys over 50% of the shares of another company and becomes the controlling owner

Globalization

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

Optimal level of output

The most efficient scale of operation for a business which occurs at the level of output where average costs of production are minimized.

Forms of external growth

* Horizontal integration: same industry, same stage of production
* Forward vertical integration: same industry, but a customer of the existing business (towards customer)
* Backward vertical integration: same industry but a supplier of the existing business (towards supplier)
* Conglomerate integration: merger with or takeover of a business in a different industry

Joint Ventures (JV)

Two or more business agree to work closely together on a particular project and create a separate business division to do so

Strategic alliance

agreements between firms in which each agrees to commit resources to achieve an agreed set of objectives

Franchise

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

* Franchiser (owner of the brand) and franchisee (the one with some money decides to open a store)
* Franchise agreement: contract between franchisee and franchisor which provides all the terms and conditions

Free trade

No restriction or trade barriers exist that might prevent or limit trade between countries. Campaigns against protectionism

Protectionism

Using barriers to free trade, such as tariffs and quotas, to protect a country’s own domestic industries

Tariffs (transportation tax) affect the price of the product, so that the price is not as cheap, so it won’t damage the county’s industry

Quotas (cupos): limit of the supply that a country can receive during one year

Multinational corporations (MNC´s)

Business organization that has its headquarters in one country, but with operating branches, factories and assembly plants in other countries Business that operates in more than one country

\

Organizational planning tools

Various methods that businesses use to aid their decision making

Gantt Chart

A visual representation of a project schedule.

Shows all the tasks taken in a particular project against a timescale.