All Key Terms

Advertising,involves paid for communications

Aim,a general goal of a business

Air pollution,when harmful gases are released into the atmosphere, causing illnesses in the human population and animals as well as harming planets

Apps (or applications),pieces of software designed for a specific purpose and for use on smartphones and tablets

Asset,something of value that is owned by a business; examples include land, buildings, vehicles and machinery

Authority,the power to control others and to make decisions

Average rate of return (ARR),compares the average yearly profit from an investment with the cost of the investment and is stated as a percentage

Boston Matrix,a way of analysing a product’s share and growth in their market

Brand image,how consumers view a product or group of products – what qualities they offer and what makes them distinctive

Break-even chart,shows a business’s costs and revenues and the level of production needed to break-even

Break-even output,the level of production at which a business’s total costs and revenue from sales are equal

Buffer stocks,raw materials and components that are held by a business to protect it from interruptions to supplies of these items

Building societies,organisations that offer a range of financial services; their major business is providing savings accounts and lending money for the purpose of buying property

Business plan,a document setting out what a business does and what it hopes to achieve in the future

Business planning,the process of producing a business plan

Cash,the notes and coins that a business holds or the money in its bank accounts

Cash cow,a product that has a high market share in a low-growth market

Cash flow,the money that flows into and out of a business on a day-to-day basis

Cash flow forecast,a plan of the expected inflows and outflows to and from a business over a future period of time

Cash flow statement,a record of the cash inflows and outflows that took place over an earlier period of time

Cash inflow,money received by a business from its activities

Cash outflow,money paid by a business to finance its activities

Centralisation,when a small number of senior managers in a business take all the important decisions

Chain of command,the line of authority within a business along which communication passes

Channel of distribution,the way in which ownership of a product is transferred from the producer to the consumer

Closing balance,the amount of money available to a business at the end of an accounting period

Cloud computing,a general term for the delivery of specialist computing services, such as the storage of very large amounts of data, provided by businesses using the internet

Collateral,an asset that a bank holds as security for the repayment of a loan

Commission,a method of payment which is based on the level of sales achieved by an employee

Communication,the exchange of information between two or more people

Company,a business that has its own legal identity; it can own items, own money, sue and be sued

Competition,exists when more than one business is attempting to attract the same customers in a market

Competitive pricing,matching the prices that competitors charge

Consumer,someone who buys a product from a business

Consumer law,laws that have been introduced to prevent businesses from treating their customers unfairly

Consumer spending,the value of goods and services bought by consumers over a time period, usually a month or a year

Contract of employment,a legal document stating the hours, rates of pay, duties and other conditions under which a person is employed

Costs,the spending that is necessary to set up and run a business

Cost plus pricing,where the products are priced by covering the cost of it to the retailer and adding a percentage on top

Curriculum vitae (CV),provides information about a person, including qualifications, employment history and interests

Customer,someone who buys a product from a business

Customer engagement,when a business puts the customer’s requirements at the heart of its operations and results in customers having a good experience with the business

Customer loyalty,when a business’s customers make repeat purchases because they prefer the business’s products to those of its rivals

Customer satisfaction,the extent to which customers are pleased with the products they have bought and whether they would make repeat purchases

Customer service,the part of a business’s activities that is concerned with meeting customers’ needs as fully as possible

Data analysis,involves gathering and examining data to provide useful information that can be used for decision-making

Decentralisation,allows employees working in all areas of the business to take decisions

Deed of Partnership,an agreement between partners that sets out the rules of the partnership, such as how profits will be divided and how the partnership will be valued if someone wants to leave

Delayering,the removal of one or more levels of hierarchy from a business’s organisational structure

Delegation,the passing down of authority to more junior employees

Demand,the amount of a product that customers wish to purchase at the current price over a period of time

Digital communication,the transmission of information electronically between computing devices

Direct marketing,when there is a direct link from the producer to the customer with no intermediaries

Directors,appointed by shareholders to lead the management of the company

Discrimination,treating one person differently from another without having good reasons to do so

Diseconomies of scale,when the cost per unit increases as a business expands

Disposal of waste,the removal or dumping of unwanted raw materials, the by-products of manufacturing or finished goods

Distribution channel,how the ownership of a product passes from the producer to the final customer

Diversification,when a business starts selling new products in new markets

Dividends,the part of a company’s profits paid out to shareholders each year

Dog,a product with a low market share in a low-growth market

E-commerce,the act of buying or selling a product using an electronic system such as the internet (also referred to as electronic commerce)

Economic climate,the state of key factors within a country such as the level of goods and services produced and the number of jobs available

Economies of scale,when a business’s unit costs of production fall as its output rises and the business expands

Economy,made up of millions of individual consumers, many thousands of businesses and governments; all take decisions on what to buy and produce

Employees,people who work for a business

Employment law,a set of rules that set out the rights and responsibilities of those people who work for a business

Enterprise,another word for a business; it also refers to the skills of the people involved in the business to identify business opportunities and bring together resources to meet these opportunities

Entrepreneur,someone who is willing to take the risks involved in starting a new business

Entrepreneurship,the ability to be an entrepreneur – to take risks to develop a business idea

Environment,the natural world in which we live; it is the landscape and its natural features such as the seas, rivers, forests and mountains

Environmental reporting,the publication of a business’s environmental performance to the general public

Environmental responsibility,the taking of decisions by businesses, consumers, governments and other groups with the intention of protecting the environment

Equality Act 2010,a law that prevents discrimination against employees on the basis of age, disability, gender reassignment, race and religion as well as on other grounds

Ethical objectives,targets set by a business to help it ensure that its decisions are morally correct, for example in treating its staff fairly

Ethics,whether a business decision is thought to be morally right or wrong; an ethical decision is made on the basis of what is judged to be morally right

Exchange,when someone gives up something in return for something else, e.g. a business exchanges a product for money

Exchange rate,the price of one currency expressed in terms of another

Expansion,when an enterprise becomes bigger by increasing its output and sales

Exports,goods and services produced by a business in one country and sold in another

Extension strategies,attempts to maintain the sales of a product and prevent it from entering the decline stage of the product life cycle

External costs,when a business’s activities result in harmful effects on other people not directly involved in production

External growth,occurs when a business gets bigger by joining or buying other businesses (also known as integration)

External recruitment,filling a job vacancy from any suitable person not already employed by the business

External source of finance,money that comes from outside the business, for example, a loan from a bank

Extranets,similar to intranets but can also be accessed by other organisations such as suppliers

Factors of production,the inputs (land, labour, capital and enterprise) that are used to provide goods and services

Fair trade products,those for which customers pay higher prices and offer better trading terms, such as payments with orders; the aim is to improve the living standards of people in poorer countries where the products are produced

Financial ratio,compares two figures from a business’s financial statements

Fixed costs,those costs that do not change when a business changes its output

Flat organisational structure,has few levels of hierarchy, comparatively wide spans of control and a short chain of command

Flotation,when a private limited company (ltd) becomes a public limited company (plc) and has its shares listed on the Stock Exchange

Flow production,when an item moves continuously from one stage of the production process to another

Focus group,a small group of people selected to give their views on a particular business issue, such as a brand image

Franchise,when a franchisor sells the rights to its products to a franchisee; this is usually in return for a fee and percentage of turnover

Franchisee,someone who buys a franchise usually in return for a fee and percentage of turnover

Franchising,when one business sells the right to another business to use its name and sell its products

Franchisor,someone who sells a franchise usually in return for a fee and percentage of turnover

Fringe benefits,the ‘extras’ that employees may receive in addition to their pay, for example, a company car

Full-time employment,when someone works a number of hours equal to the normal working week, normally between 35 and 40 hours