Unit 1

Primary Sector

The sector of the economy involved in the extraction, harvesting, and conversion of natural resources into raw materials for use by other firms.

Secondary Sector

The sector of the economy where businesses process raw materials and semi-finished products into tangible finished goods through manufacturing or construction.

Tertiary Sector

The sector of the economy focused on providing intangible services to private individuals or other business organizations rather than physical goods.

Quaternary Sector

A sub-category of the tertiary sector focused on knowledge-based activities involving the creation and sharing of information and intellectual property.

Resource Inputs

The four factors of production (land, labour, capital, and enterprise) that are combined by a business to facilitate the production process.

Added Value

The difference between the cost of purchasing raw materials and the final selling price, representing the wealth created during the production process.

Factors of Production

The four categories of resources necessary for the production of any good or service: land, labour, capital, and enterprise.

Land

All natural resources that are available for production, including renewable and non-renewable resources found on or below the earth.

Labour

The physical and mental human effort used in the production process, representing the human resource available to a firm.

Capital

The man-made resources used in the production of other goods and services, consisting of both fixed assets and working capital.

Enterprise

The human skill and initiative required to organize the other three factors of production and take the financial risks of a business venture.

Capital-intensive

A production method that relies heavily on machinery and technology relative to the amount of labour employed.

Labour-intensive

A production method that relies primarily on human effort and manual skills rather than machinery or automation.

Product Outputs

The final result of the production process, which can be categorized as either tangible goods or intangible services sold to consumers.

Goods

Physical, tangible products that can be touched and stored, which are produced by the secondary sector.

Services

Intangible products that are consumed at the point of sale and cannot be stored or held, provided by the tertiary sector.

Human Resources

The department responsible for managing the workforce, including recruitment, training, appraisal, and ensuring legal compliance with employment laws.

Marketing

The function responsible for identifying and meeting customer needs by managing the marketing mix to generate sales.

Finance and Accounts

The department responsible for managing the organization's money, ensuring accurate financial record-keeping and the availability of funds.

Operations Management

The function responsible for the transformation process of converting inputs into finished outputs efficiently and effectively.

Sectoral Change

A long-term shift in the relative share of national output and employment accounted for by each of the four sectors of industry.

Structural Change

A significant shift in the way an industry or economy is organized, often driven by technological advancements or changes in government policy.

Business Idea

A commercial concept that is usually centered on a specific product or service that fulfills a market gap or need.

Planning

The systematic process of setting organizational objectives and determining the specific strategies and tactics required to achieve them.

Entrepreneurship

The process of identifying business opportunities and organizing resources to start a new venture while assuming the financial risks involved.

Sole Trader

A business owned and operated by a single person who has full control and receives all profits, but suffers from unlimited liability.

Partnership

A for-profit business owned by two or more people who share responsibility and profits according to a legal deed of partnership.

Privately Held Company (Ltd)

An incorporated business owned by shareholders where shares are sold privately and cannot be traded on a public stock exchange.

Publicly Held Company (Plc)

An incorporated business that is able to sell its shares to the general public through a stock exchange, providing access to large amounts of capital.

Private Sector Companies

Organizations owned and controlled by private individuals or groups, primarily operated for the purpose of making a profit.

Public Sector Companies

Organizations owned and controlled by the government, typically established to provide essential public services rather than maximizing profit.

Cooperatives

For-profit social enterprises owned and democratically controlled by their members, who share the benefits and profits of the organization.

Corporation/Company

A legal entity that is incorporated and has a separate legal personality from its owners, providing shareholders with limited liability.

Shareholder

An individual or institution that owns shares in a limited company, entitling them to a portion of the profits (dividends) and voting rights.

Social Enterprise

A revenue-generating business with social or environmental objectives at its core, reinvesting surpluses back into the mission.

For-profit Social Enterprise

A business that operates for profit but prioritizes social objectives over maximizing returns for owners.

Non-profit Social Enterprise

An organization run in a business-like manner but where all surplus is reinvested into its social or environmental goals.

NGO (Non-Governmental Organization)

A private-sector, non-profit organization that operates independently of the government to support social or humanitarian causes.

Charity

A specific type of non-profit organization that provides voluntary support for those in need, often enjoying tax-exempt status.

Vision Statement

An optimistic, long-term aspiration of where the organization wants to be in the future, acting as a source of inspiration.

Mission Statement

A declaration of an organization's core purpose, outlining what the business does and why it exists in the present.

Business Objectives

The specific, measurable goals or targets that an organization sets to achieve its long-term aims.

Strategic Objectives

Long-term, high-level goals set by senior management to achieve the organization's mission, usually spanning several years.

Tactical Objectives

Medium-term goals set by departmental heads to help achieve the broader strategic objectives of the organization.

Operational Objectives

Short-term, day-to-day targets set for individuals or teams to ensure the smooth running of the business.

Corporate Social Responsibility (CSR)

The concept that a business has an obligation to act morally towards all stakeholders and the environment beyond legal requirements.

SMART Objectives

A framework for setting effective goals that are Specific, Measurable, Achievable, Relevant, and Time-bound.

Stakeholder

Any individual or group that has a direct interest in, or is affected by, the activities and performance of a business.

Internal Stakeholders

Individuals or groups within the organization, such as employees, managers, and shareholders.

External Stakeholders

Groups outside the organization that are affected by its activities, such as customers, suppliers, the government, and the local community.

Stakeholder Conflict

A situation where the interests of different stakeholder groups are incompatible, requiring management to prioritize certain needs over others.

Changes in the Internal Environment

Factors within the organization's control (strengths and weaknesses) that change over time, such as staff morale or financial health.

Changes in the External Environment

Factors outside the organization's control (opportunities and threats) that impact the business, often categorized using STEEPLE.

Growth Strategies

Approaches that use internal strengths to exploit external opportunities (SO strategies).

Defensive Strategies

Approaches used to minimize internal weaknesses and avoid external threats (WT strategies).

Re-orientation Strategies

Approaches focused on overcoming internal weaknesses to exploit external opportunities (WO strategies).

Defusing Strategies

Approaches that use internal strengths to reduce the impact of external threats (ST strategies).

Economies of Scale

Reductions in the average cost of production as the scale of operations increases in the long run.

Internal Economies of Scale

Cost savings arising from the growth of the firm itself, such as technical, financial, or managerial efficiencies.

External Economies of Scale

Cost savings arising from the growth of the industry as a whole, benefiting all firms within that industry.

Diseconomies of Scale

An increase in the average cost of production as a firm grows beyond its optimum size, leading to inefficiencies.

Internal Diseconomies of Scale

Higher unit costs due to firm-level inefficiencies, such as communication breakdown or poor coordination.

External Diseconomies of Scale

Higher unit costs due to industry growth, such as increased traffic congestion or higher rental costs in a localized area.

Average Cost

The total cost of production divided by the number of units produced, representing the cost per unit.

Fixed Costs

Costs that do not change with the level of output in the short run, such as rent or insurance.

Variable Costs

Costs that change in direct proportion to the level of output, such as raw material costs.

Internal Growth (Organic)

Growth achieved when a business expands using its own resources and profits rather than merging with other firms.

External Growth (Inorganic)

Growth achieved through integration with other organizations, such as through mergers or acquisitions.

Merger

A form of external growth where two or more firms agree to join and form a single, new legal entity.

Acquisition/Takeover

When one company buys a controlling interest (more than 50% of the shares) in another company, often against its will.

Joint Venture

A growth strategy where two or more businesses agree to work together on a specific project by creating a separate, new legal entity.

Strategic Alliance

An agreement between two or more firms to cooperate on a project for mutual benefit without creating a separate legal entity.

Franchise

A legal agreement where a franchisor allows a franchisee to trade using its name, logo, and business model in return for a fee and royalties.

Horizontal Integration

Integration between firms operating in the same industry and at the same stage of the production process.

Vertical Integration

Integration between firms at different stages of the same production process.

Forward Vertical Integration

Integration with a business further forward in the supply chain, usually toward the end consumer.

Conglomeration

External growth strategy. Corporation composed of several, often unrelated, subsidiaries operating across different industries, acting under one parent company, leading to a diversified portfolio.

Multinational Corporation (MNC)

A business organization that has its headquarters in one country but has operating facilities in two or more countries.

Globalisation

The process by which the world's economies, cultures, and populations become increasingly integrated and interdependent.