Business chapter 1 terms
Unit 1.1: What is a Business?
Primary sector: The part of the economy engaged in extraction (such as of minerals or oil) or production of raw materials (farming, fishing, forestry, raising livestock, and quarrying).
Secondary sector: The part of the economy engaged in the production of finished goods (ie the manufacturing sector of the economy).
Tertiary sector: The part of the economy engaged in the delivery of services, such as banking, healthcare and restaurants.
Quaternary sector: The part of the economy engaged in the production, processing and transmission of information. Whereas some consider the quaternary sector a subset of the tertiary sector, others emphasize that quaternary sector activities are based on advanced knowledge and include information technology services, consultancy, and research and development.
Business plan: A road map that provides a detailed account of a business’s goals and how it plans to achieve those goals. It is a guide that lays out a business’s functions from finance, human resources and marketing to operations and other elements essential to its success. It can be used to attract investment for the business as well as keep it on track.
Unit 1.2: Types of Business Entities
Private sector: The portion of an economy not controlled or owned by the government.
Public sector: Those portions of the economy owned or controlled by the government, such as government services, public schools, and state-owned corporations.
Sole trader: A business owned and operated by one person. No legal distinction exists between the business and the owner. Thus, the owner has unlimited liability for the liabilities of the business, and the business ceases to exist when the owner dies.
Partnership: A business owned and operated by two or more people. No legal distinction exists between the business and the partners, each of whom are legally responsible for 100% of the liabilities of the partnership.
For-profit social enterprise: An organization with many similarities to a normal social enterprise, except that it often earns a profit, some of which might be distributed to owners. The primary aim of a for-profit social enterprise is to provide a social service.
Cooperative: Business organization owned and operated by its members, who share any profits. Cooperatives exist in many industries but are common in agriculture.
Non-profit social enterprise: An organization with many similarities to a normal social enterprise, except that it is less willing to (and often does not) earn a profit or surplus. The primary aim of a non-profit social enterprise is to provide a social service.
Unit 1.3: Business Objectives
Vision statement: An inspirational, forward-looking statement which encapsulates the philosophy, vision or set of principles which steers the direction and behaviour of an organization-.
Mission statement: States a company’s purpose and explains why the business exists. A mission statement generally includes the business’s aims and, whether expressly stated or implied, indicates its most important values.
Business objectives: The articulated, measurable targets that a business must meet to achieve the aims or long-term goals of the business. It is critical that objectives are specific and measurable.
Strategic objectives: The long-term goals of a business that indicate how the business intends to fulfil its mission. Strategic objectives usually include performance goals, such as increasing market share or improving profitability.
Tactical objectives: Short- to medium-term targets that, if consistently met, allow a business to achieve its strategic objectives.
Corporate Social Responsibility (CSR): The view that businesses, rather than focusing solely on increasing shareholder value, should contribute to the economic, social, and environmental well-being of society.
SWOT analysis: SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal aspects influencing an organization, while opportunities and threats are external factors affecting an organization.
Ansoff matrix: A tool that provides a business with a framework to analyse and plan its growth strategies. The four growth strategies it includes are: market penetration, market development, product development, and diversification.
Circular business models: Models that signify the diverse ways in which goods and services are produced and consumed. These models explore how organizations create, offer and deliver value to their stakeholders while reducing environmental pressure and social costs resulting from economic activity.
Unit 1.4: Stakeholders
Stakeholder: A person or organization that affects or is affected by a business. Stakeholders are often classified as internal versus external, market versus non-market, or primary versus secondary.
Internal stakeholder: A stakeholder who is internal to (inside) the business, such as an employee, a manager, or shareholders.
External stakeholder: A stakeholder who is external to (outside) the business or organization, such as suppliers, customers, government, media, or the community.
Unit 1.5: Growth and Evolution
STEEPLE analysis: STEEPLE stands for Social, Technological, Economic, Environmental, Political, Legal and Ethical. STEEPLE analysis is a useful tool for a business that aims to study its external environment.
Economy of scale: The decrease in per unit production cost as output or activity increases.
Diseconomy of scale: The increase in per unit production cost as output or activity increases.
Fixed costs: Costs which do not change according to the amount of goods or services produced by the business.
Variable costs: Costs which increase or decrease according to the amount of goods or services produced-.
Internal growth: Sometimes referred to as organic growth, this occurs when a business grows by relying on its own resources and capabilities: investment in new products, or new sales channels, or more stores etc to increase sales.
External growth: Occurs when a business expands with the aid of resources and capabilities not developed internally by the company itself. Instead, the company obtains these new resources and capabilities by acquiring another company or forming some type of relationship, like a joint venture, with another organization-.
Merger: Occurs when two companies that are theoretically “equal” legally become one company.
Acquisition: When one company purchases a majority or all the shares of another company.
Takeover: When one company acquires a majority or all the shares in another company. When the word “takeover” is used, the situation usually means that the company being acquired does not welcome the acquisition.
Unit 1.6: Multinational Companies (MNCs)
Globalization: The process by which the world’s regional economies are becoming one integrated global unit.