IB Business Management Terms

above-the-line promotion

a form of promotion that is undertaken by a business by paying for communication with consumers, e.g. advertising

acid test ratio

liquid assets - current liabilities

accountability

the obligation of an individual to account for his or her activities and to disclose results in a transparent way

adverse variance

exists when the difference between the budgeted and actual figure leads to a lower than expected profit

advertising elasticity

measures the responsiveness of demand for a product following a change in the advertising spending on it

agent

business with the authority to act on behalf of another firm, e.g. to market its products

annual forecasted net cash flow

forecasted cash inflow/forecasted cash outflows

Ansoff's matrix

a model used to show the degree of risk associated with the four growth strategies of market penetration, market development, product development and diversification

arbitration

resolving an industrial dispute by using an independent third party to judge and recommend an appropriate solution

asset-led marketing

an approach to marketing that bases strategy on the firm's existing strengths and assets instead of purely on what the customer wants

assets

items of monetary value that are owned by a business

autocratic leadership

a style of leadership that keeps all decision-making at the centre of the organisation

average rate of return (ARR)

measures the annual profitability of an investment as a percentage of the initial investment

backward vertical integration

integration with a business in the same industry but a supplier of the existing business

bad debt

unpaid customers' bills that are now very unlikely to ever be paid

balance sheet

an accounting statement that records the values of a business's assets, liabilities and shareholders' equity at one point in time

batch production

producing a limited number of identical products - each item in the batch passes through one stage of production before passing on to the next stage

below-the-line promotion

promotion that is not a directly paid-for means of communication but based on short-term incentives to purchase, e.g. sales promotion techniques

benchmarking

comparing the performance - including quality - of a business with performance standards throughout the industry

Boston Matrix

a method of analysing the product portfolio of a business in terms of market share and market growth

brand

an identifying symbol, name, image or trade mark that distinguishes a product from its competitors

brand awareness

extent to which a brand is recognised by potential customers and is correctly associated with a particular product - can be expressed as a percentage of the target market

brand development

measures the infiltration of a product's sales, usually per thousand population. If 100 people in1000 buy a product, it has a brand development of 10

brand loyalty

the faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands

break-even point of production

the level of output at which total costs equal total revenue

break-even revenue

the amount of revenue needed to cover both fixed and variable costs so that the business breaks even

budget

a detailed financial plan for the future

budget holder

individual responsible for the initial setting and achievement of a budget

buffer stocks

the minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or production rates increase

bureaucracy

an organisational system with standardised procedures and rules

business plan

a written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts

business process outsourcing (BPO)

a form of outsourcing which uses a third party to take responsibility for certain business functions, such as human resources and finance

business process re-engineering

Fundamentally rethinking and redesigning the processes of a business to achieve a dramatic improvement in performance

business strategy

a long-term plan of action for the whole organisation, designed to meet the needs of markets and to fulfil stakeholder expectations

capacity shortage

when the demand for a business's products exceeds production capacity

capacity utilisation

the proportion of maximum output capacity currently being achieved

capital employed

(non-current assets + current assets) current liabilities OR non-current liabilities + shareholders equity

capital goods

physical goods that are used by industry to aid in the production of other goods and services, such as machines and commercial vehicles

cash flow

the sum of cash payments to a business (inflows)less the sum of cash payments made by it (outflows)

cash inflows

payments in cash received by a business, such as those from customers (debtors) or from the bank, e.g. receiving a loan

cash-flow forecast

estimate of a firm's future cash inflows and outflows

cell production

splitting flow production into self-contained groups that are responsible for whole work units

centralisation

keeping all of the important decision making powers within head office or the centre of the organisation

chain of command

this is the route through which authority is passed down an organisation - from the chief executive and the board of directors

change management

planning, implementing, controlling and reviewing the movement of an organisation from its current state to a new one

channel of distribution

this refers to the chain of intermediaries a product passes through from producer to final consumer

closing cash balance

cash held at the end of the month becomes next month's opening balance

cluster sampling

using one or a number of specific groups to draw samples from and not selecting from the whole population, e.g. using one town or region

collective bargaining

the negotiations between employees' representatives (trade unions) and employers and their representatives on issues of common interest such as pay and conditions of work

command economy

economic resources are owned, planned and controlled by the state

commission

a payment to a sales person for each sale made

communication barriers

reasons why communication fails

communication media

the methods used to communicate message

company or corporate branding

the company name is applied to products and this becomes the brand name

competition-based pricing

a firm will base its price upon the price set by its competitors

computer-aided design

using computers and IT when designing products

computer-aided manufacturing

the use of computers and computer-controlled machinery to speed up the production process and make it more flexible

conciliation

the use of a third party in industrial disputes to encourage both employer and union to discuss inacceptable compromise solution

conglomerate integration

merger with or takeover of a business in a different industry

consumer durables

manufactured products that can be re-used and are expected to have a reasonably long-life, such as cars and washing machines

consumer goods

the physical and tangible goods sold tithe general public. They include cars and washing machines, which are referred to as durable consumer goods. Non-durable consumer goods include food, drinks and sweets that can only be used once

consumer markets

markets for goods and services bought by the final user of them

consumer profile

a quantified picture of consumers of a firm's products, showing proportions of age groups, income levels, location, gender and social class

consumer services

non-tangible products that are sold to the general public and include hotel accommodation, insurance services and train journeys

contingency planning

preparing the immediate steps to be taken by an organisation in the event of a crisis or emergency

contract of employment

a legal document that sets out the terms and conditions governing a worker's job

contribution costing

costing method that only allocates direct costs to cost/profit centres not overhead costs

contribution-cost pricing

setting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and profit

contribution per unit

selling price of a product less variable costs per unit

co-ordinated marketing mix

key marketing decisions complement each other and work together to give customers a consistent message about the product

copyright

legal right to protect and be the sole beneficiary from artistic and literary works

core competence

an important business capability that gives it a competitive advantage

core product

product made from a business's core competencies, but not for final consumer or 'end' user

corporate image

consumer perception of the company behind a brand

corporate or strategic objectives

important, broadly defined targets that a business must reach to achieve its overall aim

corporate plan

a methodical plan containing details of the organisation's central objectives and the strategies to be followed to achieve them

corporate social responsibility

this concept applies 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

cost centre

a section of a business, such as a department, to which costs can be allocated or charged

cost of sales (or cost of goods sold)

this is the direct cost of purchasing the goods that were sold during the financial year

cost-plus pricing

adding a fixed mark-up for profit to the unit price of a product

cost-push inflation

caused by rising costs forcing businesses to increase prices

credit control

monitoring of debts to ensure that credit periods are not exceeded

creditor days ratio

trade creditors / credit purchases 365

creditors

suppliers who have agreed to supply products or services on credit and who have not yet been paid

crisis management

steps taken by an organisation to limit the damage from a crisis by handling, retaining and resolving it

criterion rate or level

the minimum level (maximum for payback period) set by management for investment appraisal results for a project to be accepted

critical path

the sequence of activities that must be completed on time for the whole project to be completed by the agreed date

critical path analysis

planning technique that identifies all tasks in a project, puts them in the correct sequence and allows for the identification of the critical path

cross elasticity

measures the responsiveness of demand for a product following the change in the price of another product

current ratio

current assets/current liabilities

cyclical variations

variations in sales occurring over periods of time of much more than a year - they are related to the business cycle

debentures or long-term bonds

bonds issued by companies to raise debt finance, often with a fixed rate of interest

debtor days (days' sales in receivables)

trade debtors (accounts receivable)/ sales turnover x 365 (days)

debtors

customers who have bought products on credit and will pay cash at an agreed date in the future

decentralisation

decision-making powers are passed down the organisation to empower subordinates and regional/product managers

decision tree

a diagram that sets out the options connected with a decision and the outcomes and economic returns that may result

delayering

removal of one or more of the levels of hierarchy from an organisational structure

delegated budgets

control over budgets is given to less senior management

delegation

passing authority down the organisational hierarchy

demand-pull inflation

caused by excess demand in an economy, e.g. an economic boom, allowing businesses to raise prices