Merger
An agreement between business owners to combine two businesses owners and operate as a larger one
Takeover
Purchasing another business from it’s owner
Horizontal integration
Joining two businesses in the same industry and stage of production (e.g two hairdressing business)
Vertical backward integration
Joining two businesses in the same industry but a different stage or production, towards the supplier (e.g a computer manufacturers takeover of a ‘chip’ maker)
Diversification
Joining two businesses in different industries (e.g an insurance company merges with a publishing business)
Vertical forward integration
Joining two businesses in the same industry but a different stage of production, towards the customer (e.g a farmer’s takeover a butcher’s shop)
Limited company
A business recognised as a legal unit that offers investors (shareholders) limited liability
Private limited company (ltd)
A company that cannot sell shares to the general public. It is not listed on the Stock Exchange
Public limited company (PLC)
A company able to sell shares to the general public by being listed on the Stock Exchange
Limited liability
Investors (shareholders) in a limited company can only lose their investment in the business if it fails; they cannot be forced to sell assets to pay off firm’s debts
Shareholders
Part owners of a limited company - they own shares in it
Dividend
Payment made to shareholders from company profits - usually made annually
Divorce between ownership and control
When directors control public limited company and thousands of shareholders own it, but the two groups may have different objectives
Ethical objective
A business aim to ‘do the right thing’ according to the values and beliefs of managers, even if this is not the most profitable way (e.g. pay workers in low-wage countries above average rates)
Environmental objective
A business aim to protect the environment during its operations (e.g. to recycle waste water). This will reduce social costs
Social costs
The costs of business activity, including both financial and costs paid by the firm and the costs on society (e.g. factory pollution)
Social benefits
The benefits of a business activity, not just to the firm but to society (e.g. new jobs created by business expansion)
Globalisation
Increasing trend for goods to be traded internationally and or companies to locate abroad
Offshoring
Making products or parts of products in other countries. Services can be offshored too, as with telephone call centres moving to India
Multinational
A business with operations in more than one country
