Business IGCSE defenitions

All of the defenitions that you might need for IGCSE business

Needs

Items that are essential for survival. These include food, water, warmth, and shelter.

Wants

Items that are desired and often make life more enjoyable, but that are not essential to survival.

The Economic Problem

Needs and wants are unlimited, but the resources required to satisfy these are limited. This creates scarcity.

Factors of Production

The resources combined to make goods and services. It includes land, labour, capital, and enterprise. They are in limited supply.

Scarcity

The lack of or limited availability of resources to fulfil the total wants of the population.

Opportunity Cost

An alternative lost when a decision is made.

Specialisation

The process where a business focuses on a particular industry or segment of a market.

Division of Labour

When employees concentrate on a part of the manufacturing process and become highly skilled, resulting in greater efficiency on individual tasks.

Businesses

combine factors of production to make products (goods and services) which satisfy people’s wants.

Added Value

The difference between the selling price of a product and the cost of bought-in materials and components.

Economy

An economy is a system that organises the money, industry, and trade of a country or region.

Primary Sector

The removal of natural materials from the land to gather the raw material or food needed for the production process carried out by other businesses.

Secondary Sector

The process of combining the raw materials extracted from the primary sector resulting in finished goods.

Tertiary Sector

Provides services to consumers and the other sectors of industry.

Deindustrialization

Occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.

Mixed Economy

Comprises activity from both the private and public sectors.

Capital

The money invested into a business by the owners.

Less Developed Countries

Less economically developed countries with the majority of economic activity in the primary sector. Access to basic needs such as clean water and food is in shorter supply.

Demand

The quantity of goods or services that a consumer is willing and able to buy at a given price.

Developed Economy

A developed economy is one where there is sustained economic growth and long-term economic stability.

Developing Economy

A developing economy is seen to be in a transition period moving away from a reliance on primary sector activities to more manufacturing and production in the secondary sector.

Private Sector

All business organisations that are owned and operated by individuals or groups, with no government involvement.

Public Sector

All business organisations that are owned and operated by the government.

Entrepreneur

a person who organises, operates and takes the risk for a new business venture.

Business plan

a document containing the business objectives and important details about the operations, finance and owners of the new business.

Capital employed

the total value of capital used in the business.

Internal Growth

Expansion of existing operations within the current business.

External Growth

Expansion achieved by taking over or merging with another business.

Takeover or Acquisition

One business purchases another by buying 51% or more of the business’s shares.

Merger

Owners of two businesses agree to combine their businesses, forming a new, single entity.

Horizontal Integration

Merging with or taking over another business in the same industry and at the same stage of production.

Vertical Integration

Merging with or taking over another business in the same industry but at a different stage of production. This can be either forward or backward integration.

Conglomerate integration

when one business merges with or takes over a business in a completely different industry. This is also known as diversification.

Sole Trader

A business that is owned and operated by one person.

Unlimited Liability

Where the owner of the business is responsible for all of the business’s debts. Their liability is not limited to the investment they made in the business.

Limited Liability

When a business goes into debt, owners will only lose the amount they invested and not have to sell their personal belongings to settle those debts.

Partnership

A business that is owned and operated by two or more people.

A partnership agreement

the written and legal agreement between business partners. It is not essential for partners to have such an agreement but it is always recommended.

Unincorporated Business

No separation between the company and the owners in law.

Incorporated businesses

Companies that have separate legal status from their owners.

Shareholders

Owners of a limited company. They buy shares which represent part-ownership of the company.

Private Limited Companies

Businesses owned by shareholders but they cannot sell shares to the public.

Public Limited Companies

Businesses owned by shareholders, and they can sell shares to the public. Additionally, their shares are tradable on the Stock Exchange.

Annual General Meeting

A meeting for the shareholders of a limited company held every year, where directors provide feedback on the business strategy.

Dividends

Payments made to shareholders from the profits (after tax) of a company. They are the return to shareholders for investing in the company.

Franchise

A form of business where the owner (the franchisor) sells the right to another entrepreneur or business (the franchisee) to sell their products under their brand name.

Franchisee

Someone who has bought the rights to supply the goods and services of a recognized brand from a franchisor.

Franchisor

An entrepreneur or business who sells a franchise.

Joint Venture

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

Public Corporation

A business that is owned and operated by the state (government).

Business objectives

aims or targets that a business sets out to achieve

Market Share

The sales of a business's products as a percentage of the total sales of all businesses in the same market.

Social Enterprise

A private enterprise which uses profits to pursue environmental or social objectives.

Stakeholder

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

Marketing

The process of identifying, anticipating and satisfying customer needs profitably.

Customer

a person, business or other organisation which buys goods or services from a business.

Customer Loyalty

Existing customers continually buying products from the same business.

Customer Relationships

Communicating with customers to encourage them to become loyal to the business and its products.

Consumer

a person who buys goods or services for personal use – not to re-sell.

Mass Market

The majority of the potential consumers in a market.

Niche market

is a small, usually specialised, segment of a much larger market.

Market Segment

A group of consumers who share common characteristics.

Market Segmentation

Breaking the market into clearly identifiable groups with shared characteristics.

Market Research

The process of gathering and interpreting information about a market, competitors or customers.

Product-Oriented Business

Main focus of activity is on the product itself, finding the customers at a later sta

Market-Oriented Business

Carries out market research to find out consumer wants before a product is developed and produced.

Target market

The specific segment of the market that a business aims to sell to.

Marketing Budget

the plan for the money that will be spent on marketing for a given product.

Primary Market Research

Information that is collected for the first time and for a specific business needs.

Secondary Market Research

collection of data that has been conducted for another purpose and is not specific to the business needs.

Questionnaire

A set of questions to be answered as a means of collecting data for market research.

Online Surveys

Require the target sample to answer a series of questions over the internet.

Interviews

Involve asking individuals a series of questions, often face-to-face or over the phone.

Focus Group

A small group of potential consumers discuss a product or service led by a market researcher.

Sample

A selection of the potential population whose views and opinions are likely to represent the whole population.

Random Sample

People are selected at random as a source of information for market research.

Quota Sample

People are selected on the basis of certain characteristics (such as age, gender, or income) as a source of information for market research.

Marketing Mix

The combination of the factors product, price, promotion and place that need to be considered when trying to sell products. These activities are often summarised as the four Ps

USP

is the special feature of a product that differentiates it from the products of competitors.

Brand Name

The unique name of a product that distinguishes it from other brands.

Brand Loyalty

When consumers keep buying the same brand again and again instead of choosing a competitor’s brand.

Brand Image

An image or identity given to a product which gives it a personality of its own and distinguishes it from its competitors’ brands.

Packaging

is the physical container or wrapping for a product. It serves to contain, identify, describe, protect, display and promote it.

Product Life Cycle

A model that shows the sales of a product over time. It Describes a product's journey from introduction, growth, maturity, to decline.

Extension strategy

a way of keeping a product at the maturity stage of the life cycle and extending the cycle.

Cost-Plus Pricing

Cost of manufacturing the product plus a profit mark-up.

Competitive Pricing

Product priced in line with or just below competitors’ prices to capture more of the market.

Penetration Pricing

Price set lower than competitors’ prices to enter a new market.

Price Skimming

A pricing strategy that involves setting a very high price at the launch, which is gradually reduced over time, to present an image of quality.

Dynamic Pricing

Businesses change product prices, usually when selling online, depending on the level of demand.

Price Elasticity of Demand

How much demand for a product will change following a change in price.

Price Inelastic Demand

If a product is price inelastic, then an increase in its price will have little or no impact on demand for that product.

Price Elastic Demand

If a product is price elastic, then an increase in its price will lead to a decrease in demand.

Distribution channels

The path a product takes from producer to consumer.

Promotion

Any activity a business uses to raise awareness and inform consumers about the benefits of its goods and services.

Advertising

Paid-for communication with potential customers about a product to encourage them to buy it.

Target Audience

People who are potential buyers of a product or service.

Sales Promotions

Incentives such as special offers or special deals aimed at consumers to achieve short-term increases in sales.

Social Media Marketing

Creating and sharing content on social media for marketing goals and engagement.

Viral Marketing

Consumers are encouraged to share information online about the products of a business.