added value
difference between a product’s price and the total cost of the inputs that went into making it; extra worth created in the production process
aim
long-term goals of a business, often expressed in the firm’s mission statement
Ansoff’s matrix
tool to analyse product and market growth strategies
backward vertical integration
business buys a firm operating in an earlier stage of production, e.g. firm buys supplier
business
organisation involved in the production of goods and/or provision of services
business cycle
cyclical fluctuations in economic activity; the business cycle shows that economies typically move through a pattern of economic growth with the phases: recovery, boom, recession, trough
business plan
report detailing how a business sets out to achieve its aims and objectives
capital
all non-natural resources used in the production process, e.g. money, machines, buildings
charities
non-profit organisations established to support good causes
company
business that is owned by shareholders with a separate legal identity from its owners
conflict
situation where people have disagreements or certain matters due to differences in their opinions
conglomerates
businesses with a diversified range of products and operations in different industries, e.g. Virgin
corporate social responsibility CSR
consideration of ethical and environmental issues relating to business activity
deregulation
removal of government rules and regulations which constrain an industry
differentiation
firm makes its products distinct from those of its competitors, e.g. by packaging, by branding
diseconomies of scale
cost disadvantages of growth as unit costs eventually rise as a firm grows, e.g. lack of control
diversification
growth strategy that involves selling new products in new markets
economic growth
increase in the GDP of a country
economies of scale
cost advantages of growth as unit costs eventually decrease as a firm grows, e.g. bulk buying
ethics
moral values that determine and affect business behaviour and decision-making
entrepreneurs
people who organise the other 3 factors or production and take the risk
exchange rate
value of a currency in terms of another currency
external growth
business grows by collaborating, buying up or merging with another firm
external stakeholders
are not part of the organisation but have direct interest in its actions, e.g. customers, suppliers, government
factors of production
inputs necessary for the production process (land, labour, capital, entrepreneurship)
forward vertical integration
business buys a firm operating in a later stage of production, e.g. firm buys costumer
franchise
agreement between a franchisor selling its rights to other businesses to allow them to sell products under its name in return for a fee, e.g. McDonald’s, Subway, Benetton
free trade
trade without trade barriers
globalization
integration and interdependence of economic, social, technical and cultural issues of the world’s economies
Gross Domestic Product (GDP)
total value of all goods and services produced in an economy in one year
horizontal integration
business buys a firm operating in the same stage of production, e.g. firm buys competitor
inflation
steady increase in the price level
interest rate
price of borrowed money
internal growth
business grows by using its own resources to increase the scale of its operations and sales revenue
internal stakeholders
are members of the organisation, e.g. employees, shareholders, managers
joint venture
two or more different organisations share costs, risks, control and rewards and form a separate legal enterprise, e.g. Sony-Ericsson
labour
physical and mental effort
land
all natural resources, e.g. land itself, water, wood
limited liability
restriction on the amount of money the owners of a company can lose if the business goes into bankruptcy
market development
growth strategy that involves selling existing products in new markets
market penetration
growth strategy that involves selling more existing products in existing markets
merger
form of external growth whereby two or more firms agree to form a new organisation
mission statement
declaration of an organisation’s overall purpose
multinational corporations (MNCs)
companies that operate production or service facilities outside their home country
non-governmental organisations (NGOs)
private sector organisations that operate for the benefit of others rather than aiming to make a profit, e.g. Oxfam, Amnesty International
objectives
short-term targets of an organisation
partnerships
form of business owned by 2 – 20 people with shared responsibilities and burdens of running and owning the business
PEST analysis
decision-making framework used to analyse the opportunities and threats of the political, economic, social and technological environment
pressure groups
individuals with a common concern who seek to place demands on organisations to act in a particular way or to influence a change in their behaviour
primary sector
cultivation or extraction of natural resources, e.g. farming, mining, fishing, forestry
private limited company
business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public
private sector
part of the economy under the control of private individuals or businesses
protectionism
any measure taken by a government to protect the domestic industry from foreign competition
public limited company
business owned by shareholders with limited liability whose shares can be bought by or sold to the general public via a stock exchange
public sector
part of the economy under the control of the government
secondary sector
construction and manufacturing of products
shareholders
owners of a company
SMART objectives
objectives that are specific, measurable, achievable, realistic and time-specific
sole trader
self-employed person who runs the business on their own and has sole responsibility for its success or failure
stakeholders
individuals or organisations that have direct interest in the activities and performance of a business
stock exchange
market place for trading stocks and shares of public limited companies, e.g. LSE, NYSE
strategic alliance
two or more different organisations share costs, risks, control and rewards, but don’t form a separate legal enterprise, e.g. Star Alliance
strategy
medium- to long-term methods that businesses can use to achieve its goals
SWOT analysis
analytical tool used to assess internal strengths and weaknesses and external opportunities and threats
tactics
short-term methods that businesses can use to achieve their objectives
takeover or acquisition
form of external growth whereby on firm buys up another by purchasing enough shares to hold a majority
tertiary sector
provision of services
unemployment
number of people in a country who are willing and able to work but cannot find a job
unlimited liability
feature of sole traders and partners who are legally liable for all money owed to their creditors, even if it means that they have to sell their personal possessions to pay for this
vision statement
organisation’s long-term aspirations, i.e. where it ultimately wants to be
consumers
people or organizations who actually use a product
cooperative
for-profit social enterprise set up, owned and run by their members
customers
people or organizations who buy a product
ethical code of practice
documented beliefs and philosophies of an organization
initial public offering
(IPO) occurs when a business sells all or part of its business to shareholders on a stock exchange for the first time
microfinance
type of financial service aimed at entrepreneurs of small very businesses
needs
basic necessities that a person must have to survive
optimal level of output
most efficient sale of operation for a business which occurs at the level of output where average costs of production are minimized
product
refers to both goods and services: goods are physical products, services are intangible products
public-private partnership
government creates commercial partnerships with the private sector to provide certain goods or services
social enterprise
revenue-generating business with social objectives at the core of their operations and can be for-profit and non-profit, but all surpluses are reinvested for the social purpose
STEEPLE analysis
analytical framework used to analyse the opportunities and threats of the external environment (social, technological, economic, environmental, political, legal and ethical environments)
structural change
shift of the relative share of national output and employment that is attributed to each business sector
want
people’s desires
