SQA Higher Business

gross profit percentage

Measures the profit made from buying and selling stock

Profitability ratio

mark-up ratio

Measures how much has been added to the cost of goods as profit

Profitability ratio

net profit percentage

Measures the profit made after the business has paid all business expenses

Profitability ratio

return on capital employed

Measures the return on the capital invested in the business by the owner or shareholder.

Efficiency ratio

current ratio/working capital ratio

Shows the ability of a business to pay its short term debts.

Liquidity ratio

acid test ratio

Shows the ability of a business to pay its short-term debts in a crisis situation

Liquidity ratio

job production

A single product is custom-made to a customer's own specification.

batch production

The production of groups of similar products. No item in a group goes to the next stage until all are ready.

flow production

A process in which production items move continuously from one operation to the next. Each part of the process leads to the eventual production of the final product with the aid of machinery to save labour costs.

labour-intensive production

Manufacturers rely heavily on their workforce rather than machinery to manufacture their products.

capital-intensive production

Manufacturers rely heavily on machinery and automation in their production process.

delayering

Reducing staff levels by cutting out levels of management to flatten the structure. It creates a smaller hierarchy where each manager has an increased span of control.

downsizing

Involves removing certain areas of the organisation's activities by closing factories or merging divisions together.

hierarchical structure

Tall pyramid with many management levels

flat structure

Low pyramid with few management levels

entrepreneurial structure

Used in small businesses

Decisions are made by few people at the core of the organisation

matrix structure

Teams are made by bringing together members of different departments to carry out a complex task

decentralised structure

Control and decision-making is delegated to departments, which relieves senior management from routine day-to-day tasks and burdens

centralised structure

Control and decision-making lies with top management in head office. Top management are more likely to possess higher quality decision making skills

line relationship

Exists between a manager and their subordinates

Vertical relationship

lateral relationship

Exists between staff on the same horizontal level

functional relationship

Exists where a specialist function is given to a department e.g. HR and that department is given responsibility for the function throughout the organisation

staff relationship

Someone has an advisory relationship with another member of staff. He/she has no authority over departments as he/she only advices

informal relationship

Develop between staff at breaks, during work and when socialising. This builds up a range of sources staff can seek advice from.

functional grouping

Departments where staff have similar skills and expertise and do similar jobs.

product/service grouping

Departments where each deals with a different product or product range.

customer grouping

Divisions dealing with different types of customer.

place grouping

Divisions deal with different geographical areas

technology grouping

Grouping in which a manufacturing company groups its business activities according to technological or production processes.

Quality Measures

Benchmarking

Quality Control

Quality Assurance

Quality Circles

Quality Management (good training, constant auditing, purchase of good quality materials)

Benchmarking

Copying the best techniques used by another organisation regarded as the 'best'

Quality Control

A manufacturer passes a sample of their raw materials and the final product through a quality control check. Any unacceptable products are then discarded as waste or sent back for reworking. This ensures that substandard products are not sold to customers.

Quality Assurance

At certain points in the production process, products are checked to ensure that they meet agreed quality standards. All aspects of the production process are looked at to ensure that errors do not occur.

Quality Circles

Small groups of workers meeting at regular intervals to discuss where improvements can be made in the production process. Suggestions are then made to management for approval before being implemented.

Penetration Pricing

Initial low price which then is raised once customer loyalty is built.

Promotional Pricing

Prices are reduced for a short period of time to inject life in to a product

Loss Leaders

Advertise products at low, unprofitable prices to encourage customers into their shop where an overall profit can be made

Price Discrimination

Different prices can be charged depending on the time or place e.g. train tickets

Market Skimming

Company launches a new product at a high price to recoup R&D costs and then the price will gradually fall in line with competitors

Personal Selling

Products are sold by experienced sales personnel

Direct contact can be made to the retailer or consumer

Can be tailor-made to customer requirements

Demonstrations of the product or service can be shown

Mail Order

Goods sold via catalogues

Offers credit facilities

No need for High Street stores

Internet Selling

Making use of websites to sell products

Consumers can order online from offices or homes

Is available worldwide

Can be accessed 24/7

Specialist Magazines

Used to describe and sell specialised products or services

Customers who are sent or purchase the magazine are directly interested

Consumers can phone in orders or speak to specialists

De-integration

This occurs when a business cuts back on or sells minor areas of their business in order to concentrate on core areas. This also provides funds from selling off less profitable areas.

De-merger

This occurs when a business splits into two separate organisations to raise cash for investment. It concentrates on its core activities and cuts costs to make it more efficient.

Divestment

This occurs when a business sells its business assets or a subsidiary company to raise finance. E.g. when Morrisons bought Safeway, they identified a number of surplus stores to divest.

Asset Stripping

This occurs when a business buys another and sells off the profitable sections bit by bit, and closes down the loss-making sections. A business may be worth more when sold bit by bit rather than the overall price it was purchased for.

Outsourcing

This involves one firm hiring another to supply parts or to do a job instead of the firm doing it themselves.

Management buy out and buy in

A management buy out happens when top managers buy the business they work for from the current owners. The managers then own the business.

A management buy in happens when a group of managers from outside the business takes over the business and runs it.

written information

Information can be in the form of text (e.g. letters, memos, reports, emails)

Good for passing on information to confirm verbal messages, good for passing on information to be kept and used later, easy to collect.

oral information

Verbal and sound information(e.g. from telephone calls, presentations, meetings and conversations or discussions)

Good for discussions, providing advice and simple instructions. It provides an immediate response. However, it is less formal than written information and can be easily forgotten.

pictorial information

Information in the form of pictures and photos.

Used for passing on information that can be easily remembered, making documents more attractive and to emphasise a point. However, a relevant picture which illustrates a point may be hard to find.

graphical information

Information in the form of graphs and charts. (e.g. pie chart, line graph and bar graph).

Good way to display numerical information clearly, emphasise points and make comparisons.(e.g. between monthly sales, company performance).

numerical information

Information in the form of numbers (often as tables and spreadsheets)

Allows an organisation to make financial predictions, perform calculations and analyse its financial performance especially if using a spreadsheet)

quantitative information

Information that can be measured and which is normally expressed in numerical form.

Helps an organisation to analyse information and make accurate forecasts.

qualitative information

Information that is expressed in words and is descriptive, and involves judgements or opinions.

Allows an organisation to find out people's opinions about, for example, its products, advertising and new initiatives. However, this information can be biased and be difficult to analyse.

networks

LANs link up terminals and allow information to be shared to each terminal. One of the computers in the network is the fileserver that controls the hard disk containing the data files. Information that may be of interest to many users is held centrally. Users access the fileserver, as required, avoiding the need for duplicate files.

A LAN can be linked via communication lines to become a WAN. Computers can be linked nationally and internationally.

Email

-provides instant communication

-it can reach to customers worldwide

- it is cost effective as large numbers of mail items can be read, replied to, forward to other users, filed or deleted very quickly

-the same message may be sent to many users at the press of a key

videoconferencing

This enables people in different locations to have meetings without the need to travel. It saves on travelling and accommodation costs. Less work time is lost through travelling.

However, connections can be poor or disrupted. If meetings are international then time differences can be a problem. There is a limit to how many people who can be effectively involved.

internet

This allows firms to access vast quantities of information via their computers such as government statistics, information about competitors and new products on the market. They can advertise their products on websites and use banking services.

However, it may be time consuming to access suitable information due to the quantity available and there is no guarantee as to how up to date or accurate information is. Also, staff may use the internet unnecessarily so productivity decreases.

e commerce

Many businesses use their websites to sell their products and services to customers. Their products and services are displayed on their websites and customers can order online. This allows companies to sell products and services worldwide and internet only businesses can cut costs by not having retail premises and large numbers of sales staff.

However, personal contact with customers is lost and many customers are wary of purchasing only due to security.

interactive dvd

Commonly used for staff training. It allows the user to control a video using a computer.

CAM

Computer Aided Manufacture

Type of technology used by manufacturers that allows robots and computer-controlled machines in production. Saves on labour costs.

random sampling

Individuals are pre-selected from a list, perhaps the telephone directory or electoral register. The interviewer makes a number of calls to randomly choose people from the list. It is expensive to operate as the people who have been selected must be interviewed - if they are not in, the interviewer must return at another time to obtain their responses. This limits bias being introduced, but a larger sample is required if the sample is to be representative of the whole population.

stratified random sampling

This makes a random group more representative of the whole population. The sample if divided up into segments based on how the population is divided up. For example, if the researcher knows that 10% of the population are in social-economic group AB, 50% in C and 40% in DE, they will ensure that that the people interviewed make up parallel figures.

quota sampling

The researcher is given instructions as to the number of people to interview and their characteristics. It is the job of the researcher to find the people who fit the categories required. This is cheaper than random sampling.

into the pipeline promotions

These are offered by manufacturers to retailers to encourage them to stock their products.

out of the pipeline promotions

There are offered by the retailer to the final customer to encourage purchases to be made.

fixed assets

Items which the business owns and will be kept for longer than one year

current assets

Items which the business owns and will be kept for less than one year

Debentures

A loan where there fixed interest is paid over a stated period of the loan and then the full amount is to be paid back

shares

Investment in a company that receives a dividend each year if profits allow

Cash budget

A statement which lists all likely inflows and outflows of cash on a monthly basis.

A prediction so adjustments can be made to expediture or income such as:

Leasing equipment

Increasing revenue

Invest in assets for the future

Borrowing arranged

Applying for a bank loan

More likely to convince a lender that the money can be paid back

Prince's Youth Trust

Gives advice, training and grants to young people starting a business

Inland Revenue

Gives advice on taxation matters

Careers Scotland

Provides assistance with recruitment and training, information on local Labour markets and employment law

Local Authorities

Offer help in locating premises, planning matters, loans, grants and subsidised premises

Banks

Advices on sources of finance and drawing business plans

short term finance

Bank Overdraft

Trade Credit

Factoring

Grant

Retained Profits

medium term finance

Bank Loan

Leasing

Hire Purchase

long term finance

Owner's Savings

Share Issue

Debentures

Venture Capital

venture capital

Provide finance when banks decide a loan is too risky. They accept more risky loans

hire purchase

A deposit is made for a vehicle with the rest of the purchase price being paid for in instalments. The cost is spread, making it easier to afford and the company owns the vehicle at the end of the instalments.

quality information

Timely

Objective

Accurate

Appropriate

Available

Complete

Concise

Cost Effective

mission statement

Could be released to the press which would help market the business and its products

Issued to all employees allowing them to see the firm's objectives and aims linked to their roles as employees

Improve the image of the organisation which would increase sales

role of marketing

-Help to raise awareness of a product or service

-Help to raise organisation's profile in the market

-Encourage customers to purchase

-Target new customers and return existing ones

-Allow an organisation to know customer's wants

-Assist with monitoring trends in the market

-Allow an organisation to meet its strategic objectives

role of operations

-Purchasing of raw materials to meet production

requirements

-Managing control of stocks

-Ensuring appropriate methods of production are used

-Warehousing and distribution of end products

-Using quality techniques to ensure maximum quality output is achieved from minimum outputs

role of finance

-Payment of wages and salaries

-Maintenance of financial records

-Payment of accounts and credit control

-Production of organisation's annual accounts

-Analysis of accounting information

-Preparation and monitoring of internal financial information

role of human resources

-To recruit and retrain quality staff

-To train, develop and approve staff to ensure they have the skills to produce best quality output

-To manage positive employee relations

-To ensure safe working conditions

-To ensure that all staff are treated fairly with regards to equality legislation

types of ICT

Networks

Email

Videoconferencing

Internet

E-commerce

Interactive DVD

Computer aided manufacture (CAM)

Types of software

Databases

Spreadsheets

Word processing

Desktop publishing

Presentation packages

Computer and design

uses of information

-Helps monitor and control the business

-Assists in decision making

-Measures performance

-Identifies new business opportunities

product orientation

A company first manufactures a product and then tries to persuade a customer to buy it.

No market research

Product research and product testing are key

marketing orientation

A business puts the customers' needs at the centre of the company's decision making process

Market research and testing are key

field research techniques

Personal interview

Focus group

Telephone survey

Postal survey

Customer audit

Hall test

EPOS (electronic point of sale)

Observation

Test marketing

product extension strategies

Improve the product

Change the packaging

Change the channel of distribution

Change product prices

Change the promotional activities

Change the use the customers have for the product

Rebrand the product name

Product line extensions

effective stock control

Set a maximum stock level

Set a minimum stock level

Set a re-order level

Set a re-order quantity

having too much stock

High storage costs

High maintenance costs

High security costs

High insurance costs

Large amount of space taken up

Money tied up

Unsold stocks that can decay

Theft by employees

having too little stock

Unable to cope with market changes

Run out of stock

Less able to cope with material shortages

Lost sales

Lost customers

Poor reputation gained

job description

States job title, location, tasks, duties and responsibilities.

States conditions of service e.g. holiday entitlement, benefits and hours of work

Preparation means that the organisation has thought out the tasks they wish the job holder to undertake