- Need: A good or service essential for living.
- Want: A good or service which people willl like to have but not which is essential for living.
- Economic Problem: There exist unlimited want but limited resources to produce them to satisfy those wants.
- Factors of production: Are those resources needed to produce goods or services. These are four factors of production and they are in limited supply.
- Scarcity: The lack of sufficient products to fulfill the total wants of the population.
- Opportunity cost: The next best alternative given up by choosing another item.
- Specialization: It occurs when people and businesses concentrate on what they are best at.
- Division of labour: When the production process is split in to different tasks and each worker performs one of these tasks.
- Businesses: Combine factors of production to make products which satisfy peoples wants.
- Added value: The difference b/w the selling price of a product and the cost of bought in materials and components.
- Primary sector: The industry extracts and uses the natural resources of the earth to produce raw materials used by other businesses.
- Secondary sector: Industry manufactures goods using the raw materials provided by the primary sector
- Tertiary sector: Industry provides services to consumers and the other sectors of industry.
- De-industrialisation: It occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.
- Mixed economy: It has both a private sector and public sector.
- Capital: The money invested into a business by the owners.
- Entrepreneur: A person who organises, operates and takes the risk for a new business venture.
- Business plan: A document containing the business objectives and important details about the operations, finance and owners of the new business.
- Capital employed: The total value of capital used in the business.
- Internal growth: Occurs when a business expands its existing operations.
- External growth: When a business takes over or merges with another business. Also, called integration.
- Merger: When the owners of two businesses agree to join their firms together to make one business.
- Takeover: When one business buys out the owners of another business.
- Horizontal integration: When one firm merges with or takes over another one in the same industry at the same stage of production.
- Vertical integration: When one firm merges with or takes over another one in the same industry but at a different stage of production.
- Conglomerate integration: When one firm merges with or takes over a firm in a completely different industry. Also known as diversification.
- Sole Trader: A business owned by one person.
- Limited liability: The liability of shareholders in a company is only limited to the amount they invested.
- Unlimited liability: The owners of a business can be held responsible for the debts of a business they own.
- Partnership: A form of business in which two or more people agree to jointly own a business.
- Partnership agreement: The written and legal agreement b/w business partners.
- Unincorporated business: One that does not have a separate legal identity.
- Incorporated businesses: Companies that have separate legal status from their owners.
- Shareholders: The owners of a limited company.
- Annual general meeting: A legal requirement for all companies.
- Dividends: Payments made to shareholders from the profits of a company.
- Franchise: A business based upon the use of the brand names, promotional logos and trading methods of an existing successful business.
- Business objectives: The aims or targets that a business works towards.
- Profit: Total sales revenue less total costs.
- Market share: The proportion of total market sales achieved by one business.
- Social enterprise: Social objectives as well as an aim to make a profit to reinvest back into the business.
- Stakeholder: Any person or group with a direct interest in business.
- Motivation: The reason why employees want to work hard and effectively for a business.
- Wage: Payment for work, usually paid weekly.
- Salary: Payment for work, usually paid monthly.
- Commission: Payment relating to the number of sales made.
- Profit sharing: A system whereby a proportion of the companys profits is paid out to employees.
- Bonus: Additional amount of payment above basic pay as a reward for good work.
- Share ownership: Where shares in the company are given to employees so that they become part owners in the company.
- Job satisfaction: The enjoyment derived from feeling that you have done a good job.
- Job rotation: Involves workers swapping round and doing each specific task for only a limited time and then changing round again.
- Job enlargement: Where extra tasks of a similar level of work are added to a workers job description.
- Job enrichment: Involves looking at jobs and adding tasks that require more skill and/or responsibility.
- Organizational Structure: refers to the level of management and division of responsibilities within an organization.
- Chain of Command: it is the structure in an organization which allows instructions to be passed down from senior management to lower levels of management.
- Span of Control: number of subordinates working directly under a manager.
- Leadership styles: the different approaches to dealing with people when in a position of authority.
- Autocratic leadership style: The manager is in charge.
- democratic leadership style: Get employees involved in the decision-making process.
- Laissez–faire: Make their own decision and organize their own work.
- Trade union: is a group of workers who have joined together to ensure that their interests are protected.
- Recruitment: the process from identifying that the business needs to employee someone up to the point at which applications have arrived at the business.
- Job analysis: identifies and records the responsibilities and tasks relating to a job.
- Job description: outlines the responsibilities and duties to be carried out by someone employed to do a specific job.
- Job specification: a document which outlines the requirements, qualifications, expertise, characteristics.
- Internal recruitment: is when a vacancy is filled by someone who is existing employee of the business.
- External recruitment: when a vacancy is filled by someone who is not an existing employee and will be new to the business.
- Part-time: employment often considered to be for 1-35 hours in a week
- Full-time: employees will usually work 35+ a week.
- Induction training: an introduction given to a new employee, explaining what the business is about
- On-the-job training: occurs by watching a more experienced worker doing the job.
- Off-the-job training: involves being trained away from the workplace, usually by specialist trainers.
- Redundancy: when an employee is no longer needed and so loses their job.
- Internal communication: is between members of the same organization.
- External communication: is between the organization and other organizations or individuals.
- Market share: the percentage of total market sales held by one brand or business.
- Mass market: where there is a very large number of sales of a product.
- Niche market: a small usually specialised, segment of a much larger market
- market segment: an identifiable sub- group of a whole market in which consumers have similar characteristics or preferences.
- product-oriented business: a business whose main focus of activity is on the product itself.
- market-oriented business: a business which carries out market research to find out consumer wants before a product is developed and produced.
- market research: the process of gathering, analysing and interpreting information about a market.
- primary research: the collection and collation of original data.
- secondary research: information that has already been collected and is available for use by others.
- a quota sample: is when people are selected on the basis of certain characteristics for market research.
- a focus group: a group of people who are a representative of the target market.
- the marketing mix: a term used to describe all the activities which go into marketing a product or service. The four Ps- product, price, place and promotion.
- USP (Unique selling point): the special feature of a product that differentiates it from the products of competitors.
- the brand name: the unique name of a product that distinguishes it from other brand.
- brand loyalty: is when consumers keep buying the same brand again and again instead of choosing a competitor’s brand.
- brand image: an image or identity given to a product which makes it unique from its competitors’ brands.
cost –plus pricing: is the cost of manufacturing the product plus a profit mark-up.
- competitive pricing: is when the product is priced in line with or just below competitors’ prices to try to capture more of the market.
- penetration pricing: is when the price is set lower than the competitors’ prices in order to be able to enter a new market.
- promotional skimming: is when a product is sold at a very low price for a short period of time.
- price skimming: is where a high price is set for a new product on the market.
- lean production: Cuts down on waste and therefore increase efficiency,
- kaizen: a Japanese term meaning continuous improvement through the elimination of waste.
- just–in-time: a production method that involves eliminating the to hold inventories of raw materials
- flow production: large quantities of a product are produced in a continuous process.
- batch production: where a quantity of one product is made, then a quantity of another item will be produced.
- fixed costs: costs which do not vary with the number of items sold or produced.
- variable costs: are costs which vary directly with the number of items sold or produced.
- economies of scale: the factors that lead to a reduction in average cost as a business increases in size.
- diseconomies of scale: the factors that lead to an increase in average costs as a business grows beyond a size.
- revenue: Total revenue = quantity sold x price.
- break-even point: is the level of sales at which total costs = total revenue.
- quality control: the checking for quality at the end of the production process
- quality assurance: checking for the quality standards throughout the production process
- total quality management: the continuous improvement of products and processes by focusing on quality at each stage of production.
- working capital: is the finance needed by a business to pay its day to day costs.
- start-up capital: the finance needed by a new business to pay for current assets.
- internal finance: is obtained from within the business.
- external finance: is obtained from sources outside
- micro-finance: is providing financial services to poor people.
- cash inflow: they are the sums of money received by a business during a period of time.
- cash outflow: the sums of money paid out by a business during a period of time.
- profit: Total sales revenue – Total costs
- net cash flow: it is the difference between inflows and outflows.
- an income statement: a document that contains income, costs of a period of time
- gross profit: Gross profit = sales revenue – cost of goods sold
- net profit: the profit made by a business after all costs have been deducted from sales revenue.
- retained profit: is the net profit reinvested back into a company, after deducting tax and payments to owners.
- Balance sheet: shows the value of a business’s assets and liabilities.
- Asset: those items of value which are owned by the business.
- liabilities: are debts owed by the business.
- non-current assets: items owned by the business for more than one year.
- current assets: owned by a business and used within one year.
- non-current liabilities: are long term debts owed by the business.
- current liabilities: are short term debts owed by the business.
- liquidity: is the ability of a business to pay back its short term debts.
- capital employed: is shareholders’ equity plus non current liabilities and is the total long term and permanent capital invested in a business.
- inflation: increase in the average price level of goods and services over time.
- unemployment: when people who are willing and able to work cannot find a job.
- economic growth: when a country’s gross domestic product increases – more goods and services are produced than in the previous year.
- gross domestic product: the total value of output of goods and services in a country.
- fiscal policy: any change by the government in tax rates or public sector spending.
- direct taxes: are paid directly from incomes.
- indirect tax: are added to the prices of goods and taxpayers pay the tax as they purchase the goods
- import tariff: a tax on an imported product.
- import quota: a physical limit to the quantity of a product that can be imported.
- monetary policy: a change in interest rates by the government or central bank
- exchange rate appreciation: the rise in the value of a currency compared to other currencies.
- private costs: are the cost paid by business.
- private benefits: are gains to a business.
- external costs: costs paid for by the rest of the society other than the business, as a result of business activity.
- external benefits: are the gains to the rest of society, other than the business, resulting from business activity.
- Pressure group: made up of people who want to change business decisions and they take action.
- globalization: describe increases in worldwide trade and movement of people and capital between countries.
- multinational businesses: are those with factories, production or service operations in more than one country.
- currency appreciation: occurs when the value of currency rises
- currency depreciation: occurs when the value of a currency falls
