DEFINITIONS

6 External influences on business activity

Privatisation - Selling state-owned and controlled business organisations to investors in the

private sector

Nationalisation - The transfer of privately owned businesses to state (government)

Minimum Wages - Employers are not allowed to pay less than the set minimum

Monopoly - A market in which there is only one supplier with no close competitors

Collusion - Businesses agree to work together and restrict competition by fixing prices and
sharing contracts between themselves

Social Audits - A report on the impact a business has on society

Demographic - Relating to the structure of the population

Globalisation - The increasing freedom of movement of goods, capital and people around
the world

Information Technology (IT) - The use of electronic technology to gather, store, process and
communicate information

Job enrichment - Aims to use the full capabilities of workers by giving them the opportunity
to do more challenging and fulfilling work

Protectionism - The use of barriers to free trade to protect a countrys domestic industries

TariMs - A tax imposed on an imported product

Quotas - A physical limit placed on the quantity of imports of certain products

Voluntary export limits - Agreed limits to the quantity of certain goods sold by one country
to another (possibly discourage the setting of tariMs/quotas)

Free international trade - trade with no restrictions or barriers that might prevent or limit
trade between countries

Greenwashing - giving a false impression or providing misleading information about how a

companys products are environmentally sound and sustainable
Environmental audits - assess the impact of the activites and decisions of a business on
the environment

Sustainability - activities that meet the needs of the present without compromising the
ability of future generations t o meet their needs

Green consumerism - the trend for consumers to only buy products that are produced
sustainably without environmental damage

Market failure - when markets fail to achieve the most eMicient allocation of resources,
resulting in under- or overproduction of certain goods or services

External Costs - the costs of an economic activity that are not paid for by the producer or
consumer, but by the rest of society

Macroeconomic objectives - the goals a government is aiming to achieve for the whole
economy

Economic growth - an increase in a country's productive potential, measured by an

increase in its real GDP

Gross domestic product (GDP) - the total value of goods and services produced in a
country in one year

Real GDP - gross domestic product data adjusted for the eMects of inflation

Inflation - an increase in the average price level of goods and services resulting in a fall in
the value of money

Unemployment - when members of the working population are willing and able to work but
are unable to find a job

Imports - goods and services purchased from other countries

Exports - goods and services sold to consumers and businesses in other countries

Exchange rate - the price of one currency in terms of another

Recession - a decline in real GDP of two or more quarters (at least six months)

Business investment - expenditure by businesses on capital equipment, new technology

and research and development

Labour productivity - average output per employee in a given time period. Formula:

Labour productivity = Total output in a given time period / Total workers employed
Business cycle - the regular swings in output, measured by real GDP, that occur in most
economies, varying from boom conditions to recession

Deflation - a fall in the average price level of goods and services

Hyperinflation - very high and accelerating inflation, which quickly erodes the real value of
the local currency.

Working population - all those in the population of working age who are willing and able to
work

Cyclical unemployment - unemployment caused by low demand for goods and services
during a period of slow economic growth or a recession

Structural unemployment - unemployment caused by the decline in important industries,

leading to significant job losses in one sector of industry

Frictional unemployment - unemployment caused by workers losing or leaving jobs and

taking a substantial period of time to find alternative employment

Monetary policy - decisions about the level of interest rates and the supply of money in the
economy

Fiscal policy - decisions about government expenditure, tax rates and government
borrowing.

Budget deficit - the value of government spending exceeds revenue from taxation

Budget surplus - the value of taxation revenue exceeds the value of government spending

Supply-side policies - government measures that aim to improve the competitiveness of

markets and the economy

Excahnge rate depreciation - a fall in the external value of a currency as measured by its
exchange rate against other currencies

Exchange rate appreciation - a rise in the external value of a currency as measured by its
exchange rate against other currencies

Common currency - a currency that is used by more than one country

Eurozone - countries in the European Union that all use the euro currency
8 Business Stratgey

Strategic management - analysis of the current business situation, setting long-term

objectives, deciding on business strategies to achieve them and then implementing these
strategies

Strategic analysis - the process o f conducting research into the business environment and
into the business itself, in order to help identify future strategies

Strategic choice - the process that leads to a decision to choose a particular strategy from
various alternatives and the techniques used to help make the choice

Strategic implementation - the process of planning, allocating and controlling resources to

support the chosen strategy

Blue ocean strategy - one that exploits uncontested market space through product
diMerentiation and low cost

Red ocean stategy - one that competes with rivals in existing markets

Scenario planning - identifying possible future situations and how the business might
respond to them

SWOT analysis - a form of strategic analysis that identifies and analyses the main internal
strengths and weaknesses, and external opportunities and threats, that will influence the
future direction and success of a business

PEST analysis - the strategic analysis of a firm's macro environment, including political,
economic, social and technological factors

Five forces analysis - A technique for analysing competitive forces with an industry

Core competencies - an important business capability that gives a firm competitive

advantage

Core products - product based on a business's core competencies, but not necessarily for
the final consumer or end user

AnsoM matrix - a model used to show the degree of risk associated with the four growth
strategies of market penetration, market development, product development and
diversification
Market penetration - achieving higher market shares in existing markets with existing
products

Product development - the development and sale of new products or new developments of
existing products in existing markets.

Market development - the strategy of selling existing products i n new markets

Diversification - the process of selling diMerent, unrelated goods or services in new

markets.

Force-field analysis - a technique for identifying and analysing the positive factors that
support a decision (driving forces) and negative factors that constrain it (restraining forces).

Decision trees - a diagram that sets out the options connected with a decision and the
outcomes and economic returns that may result

Expected value - the likely financial result of an outcome obtained by multiplying the
probability of an event occurring by the forecast economic return if it does occur

9 Corporate Planning And Implementation

Corporate plan - a plan containing details of a business's central objectives and the
strategies to achieve them

Corporate planning - the process used by companies to set long-term plans to meet
certain objectives, such as business growth and higher return on capital employed

Corporate culture - the values, attitudes and beliefs of the people working in an
organisation that aMect the way they interact with each other, and with external
stakeholders

Power culture - a culture that concentrates power among just a few people

Role culture - a culture in which each member of staM has a clearly defined job title and
role

Task culture - a culture based on cooperation and teamwork

Person culture - a culture in which individuals are given the freedom to express themselves
fully and make decisions for themselves.
Entrepreneurial culture - a culture that encourages management and workers to take risks,
to come up with new ideas and test out new business ventures.

Transformational leadership - the leader works with teams to identify the need for change,
creates a vision to inspire people to accept change and implements change with the
cooperation of the team

Change management - planning, implementing, controlling and reviewing the movement of

an organisation from its current state to a new one

Business process re-engineering - fundamentally rethinking and redesigning the processes

of a business to achieve a dramatic improvement in performance.

Project champion - a person appointed to support a project and drive it forward by

explaining the benefits of change and assisting and supporting the team putting change
into practice

Project groups - groups created b y a n organisation to address a problem that requires

input from diMerent specialists

Contingency planning - a plan for preparing an organisation's resources for unlikely events

Crisis management - the process of dealing with a sudden emergency event

Continuity planning - preparing resources so that the business can continue operations
after a major crisis

13 Organisational Structure

Organisational structure - the internal, formal framework of a business that shows the way
in which management is organised and linked together, and how authority is passed
through the organisation

Functional structure - departments have clearly defined roles and responsibilities in a

specialist area such as marketing, finance, human resources, or operations

Functional manager - senior employee who has authority over a complete organisational
unit

Hierarchial structure - a structure consisting of multiple levels in which all members of the
organisation, apart from one, are subordinate to someone else
Levels of hierarchy - a stage of the organisational structure where all personnel have equal
status and authority

Spans of control - the number of subordinate employees directly accountable to a

manager

Chain of command - this is the route through which authority from the chief executive and
the board of directors is passed down through an organisation.

Divisional organisational structure - a structure that organises the activities o f a business

around geographical areas or product groups

Delayering - removal of one or more of the levels of hierarchy from an organisational

structure

Matrix structure - an organisational structure that creates project teams that cut across
traditional functional departments

Delegation - passing authority down the organisational hierarchy

Accountability - the obligation of the individual to account for and explain their actions and
to disclose the results of their work honestly

Control - to measure and supervise an employee's performance

Authority - the power to give orders and make decisions

Centralisation - keeping all the important decision-making powers within head oMice or the
centre of the organisation

Decentralisation - decision-making powers are passed down the hierarchy to empower

subordinates and area or product managers

Line managers - managers who have direct authority over people, decisions and resources
within the hierarchy of an organisation

StaM managers - managers who, as specialists, provide support, information and

assistance to senior line managers
14 Business Communication

EMective communication - the exchange of information between people or groups, with

feedback.

Communication methods - the media used to communicate messages.

Visual communication - conveying information or ideas in forms that can be seen

Spoken commuication - sending messages by word of mouth between two or more people

Written communication - any type of message that makes use of written words

Electronic communication - sending messages using media such a s computers, email or

video conferencing

Information overload - the receipt of too much information, preventing important messages
being identified and acted upon

Formal communication channels - the oMicial communication networks and routes used
within an organisation

One-way communication - messages sent in one direction, from the sender to the receiver,
with no feedback expected

Two-way communication - communication between two or more people involving the

transmission of messages that encourage response and feedback

Vertical communication - when people from diMerent levels in a hierarchy communicate

with each other

Horizontal communication - when people on the same level of hierarchy communicate

with each other

Communication barriers - reasons why communication fails

Informal communication - unoMicial channels of communication that exist between

informal groups within an organisation
15 Leadership

Leadership - the art of motivating a group of people towards achieving a common objective.

Informal leaders - a person who has no formal authority but has the respect of colleagues
and some power over them

Emotional intelligence (EI) - the ability to understand one's own emotions, and those of
others, to achieve better business performance

Emotional quotient (EQ) - the level of a person's emotional intelligence as recorded in a

standardised test

16 HRM strategy

HRM strategy - a long-term plan for the management of an organisation's human resources

Hard HRM - an approach to managing employees that focuses on cutting costs

Soft HRM - an approach to managing employees that focuses on their development so that
they reach self-fulfilment and are motivated to work hard and stay with the business

Full-time employment contracts - an employment contract that is for a complete working

week

Permanent employment contracts - a contract that employs a worker unless they are
dismissed, made redundant or decide to leave the organisation

Temporary employment contracts - the contract is only oMered for a fixed period of time
such as six months. The contract can be renewed, but the employer does not have to do
this

Part-time employment contracts - workers are only contracted to work for a certain number
of hours each week (less than the full-time working week).

Zero-hours contract - an employment contract that does not guarantee a minimum number
of hours per week, but the worker is expected to be available for work when called by the
employer
Gig economy - an employment mix in which temporary, flexible jobs are common and
workers are hired as independent contractors or freelance employees (also called contract
labour)

Flexible employment contracts - a contract that allows employees more control over their
work-life balance, including options to work from home, flexible start and finish times, to
work part-time or to job share

Flexitime arragements - a flexible way of working that allows employees to fit their working
hours around their individual needs, and to accommodate other commitments outside of
work

Home working - when an employee works from home, often for a specific number of days
per week, but keeps contact with the oMice by means of modern IT communications (also
referred to as teleworking)

Annualised hours contracts - a contract oMering a specific number of hours of work over
the whole year, but with some flexibility about when those hours are worked

Job sharing - a work schedule in which two employees voluntarily share the responsibilities
of one full-time job. They receive a salary and benefits on a pro-rata basis

Compressed working hours - the number of hours per week of a full-time job, but worked in
fewer days (e.g. 4/10: working 4 days for 10 hours per day)

Shift work - work that takes place on a schedule outside the traditional 9.00 a.m. to 5.00
p.m. day. It can involve evening or night shifts, early morning shifts and rotating shifts

Absenteeism - a measure of the rate of workforce absence as a proportion of the employee

total. Formula:

Absenteeism = number of days of employee absence / Total number of workdays × 100

Management by objectives (MBO) - establishing a management information system to

compare actual performance and achievements against pre-set objectives for each
department or employee
21 Marketing Analysis

Price elasticity of demand (PED) - a measure of the responsiveness of demand for a

product following a change in its price. Formula:

P E D = Percentage change in quantity demanded / Percentage change in price

Income elasticity of demand - a measure of the responsiveness of demand for a product

following a change in consumer incomes. Formula:

Income elasticity = % Change in demand for the product / % Change in consumer incomes

Inferior good - a product that experiences an increase in demand when consumer incomes
fall

Promotional elasticity of demand - a measure o f the responsiveness of demand for a

product following a change in the amount spent on promoting it. Formula:

Promotional ED = % Change in demand for the product / % Change in promotional

spending

New product development (NPD) - the design, creation and marketing of new goods and
services

Research and development (R&D) - the scientific research and technical development of
new products and processes

Test marketing - the launch of the product on a small-scale market to test consumers'
reactions to it