Chapter 1: Business Activity

1- Need: A need is a good or service essential for living.

2- Want: A want is good or service which people would like to have, but which is not essential
for living. People’s wants are unlimited.
3- Economic Problem: There exist unlimited wants but limited resources to produce the goods
and services to satisfy those wants. This create scarcity.
4- Factors of Production: Factors of production are those resources needed to produce goods
and services. There are four factors of production and they are in limited supply.
5- Scarcity: Scarcity is the lack of sufficient products to fulfil the total wants of the population.
6- Opportunity Cost: Opportunity cost is the next best alternative given by choosing another
item.
7- Specialization: Specialization occurs when people and businesses concentrate on what they
are best at.
8- Division of Labor: Division of labor is when the production process is split into different tasks
and each worker performs one of these tasks. It is a form of specialization.
9- Business: Business combine factors of production which satisfy people’s wants.
10- Added Value: Added value is the difference between the selling price of a product and the
cost of bought-in materials and components.

Chapter 2: Classification of Business

1- Primary Sector: The primary sector of industry extracts and uses the natural resources of
Earth to produce raw materials used by other businesses.
2- Secondary Sector: The secondary sector of industry manufactures good using the raw
materials provided by the primary sector.
3- Tertiary Sector: The tertiary sector of industry provides service to consumers and other
sectors of industry.
4- De-industrialization: De-industrialization occurs when there is a decline in the importance of
the secondary, manufacturing sector of industry in a country.
5- Mixed Economy: A mixed economy has both private sector and public sector.
6- Capital: Capital is the money invested into a business by the owners.

Chapter 3: Enterprise, business growth, and size

1- Entrepreneur: Entrepreneur is a person who organizes, operates and takes the risk for a new
business venture.
2- Business plan: A business plan is a document containing the business objectives and the
operations, finance and owners of the new business.
3- Capital Employed: Capital employed is the total value of capital used in the business.
4- Internal Growth: Internal growth occurs when a business expands its existing operations.
5- External Growth: External growth is when a business takeover or merges with another
business. It is often called integration as one business is integrated into another one.
6- Takeover: A takeover is when business buys the owner of another business, which becomes
part of the ‘predator’ business.
7- Merger: A merger is when owners of two business agree to join their businesses together to
make one business.
8- Horizontal Integration: Horizontal integration is when one business merges with or takes
over another one in same industry at the same stage of production.
9- Vertical Integration: Vertical integration is when one business merges with or takes over
another one in same industry at the different stage of production. Vertical integration can be
forward or backward.
10- Conglomerate Integration: Conglomerate integration is when one business merges with or
takes over another one in a completely different industry. This is also known as diversification.

Chapter 4: Types of business organization

1- Sole Trader: Sole trader is a business owned by one person.

2- Limited Liability: Limited liability means that the liability of shareholders in a company is
limited to only the amount they invested.
3- Unlimited Liability: Unlimited liability means that the owners of a business can be held
responsible for the debts of the business they own. Their liability in not limited to the
investment they made in the business.
4- Partnership: Partnership is a form of business in which two or more people agree to jointly
own a business.
5- Partnership agreement: A partnership agreement is the written and legal agreement
between business partners. It is not essential for partners to have such an agreement but it is
always recommended.
6- Unincorporated business: An unincorporated business is one that does not have a separate
legal identity. Sole trader and partnership are unincorporated business.
7- Incorporated business: Incorporated business are the companies that have separate legal
status from their owners.
8- Shareholder: Shareholders are the owners of a limited company. They buy shares which
represent part-ownership of the company.
9- Private Limited Company: Private limited companies are businesses owned by shareholders
but they can’t sell shares to the public.
10- Public Limited Company: Public limited companies are the business owned by
shareholders but they can sell shares to the public and their shares are tradeable on the stock.
11- Annual General Meeting: An Annual General Meeting is a legal requirement for all
companies. Shareholders may attend and vote on who they want to be on the Board of
Directors for the coming year.
12- Dividends: Dividends are payments made to shareholders from the profits of a company.
They are the return to shareholders for investing in the company.
13- Franchise: A franchise is a business based upon the use of the brand names, promotional
logos and trading methods of an existing successful business. The franchisee buys the license to
operate this business from the franchisor.
14- Join Ventures: A joint venture is where two or more businesses start a new project
together, sharing capital, risks and profits.
15- Public Corporation: A public corporation is a business in the public sector that is owned
and controlled by the government.

Chapter 5: Business objectives and stakeholder objective

1- Business Objectives: Business objectives are the aims or targets that a business works
towards.
2- Profit: Profit is total income of a business less total cost.
3- Market Share: Market share is the percentage of total market sales held by one business or
brand.
4- Social Enterprise: A social enterprise has social objectives as well as an aim to make a profit
to reinvest back into the business.
5- Stakeholder: A stakeholder is any person or group with direct interest in the performance
and activities of a business.

Chapter 6: Motivation Employees

1- Motivation: Motivation is the reason why employees want to work hard and work
effectively for the business.
2- Wage: A wage is payment for work, usually paid weekly.
3- Time Rate: Time rate is the amount paid to an employee for one hour of work.
4- Piece rate: Piece rate is an amount paid for each unit of output.
5- Salary: A salary is payment for work, usually paid monthly.
6- Bonus: A bonus is an additional amount of payment above basic pay as a reward for good
work.
7- Commission: Commission is payment relating to the number of sales made.
8- Profit Sharing: Profit sharing is a system whereby a proportion of the company’s profit is
paid out to employees.
9- Job Satisfaction: Job satisfaction is the enjoyment derived from feeling that you have done a
good job.
10- Job Rotation: Job rotation involves workers swapping around and doing each specific task
for only limited time and then changing around again.
11- Job enrichment: Job enrichment involves looking at jobs and adding tasks that require
more skill and responsibility.
12- Training: Training is the process of improving a worker’s skills.
13- Promotion: Promotion is the advancement of an employee in an organization, for example,
to a higher job.

Chapter 7: Organization and Management

1-Organization Structure: Organizational structure refers to the levels of management and

division of responsibilities within an organization.
2- Organization Chart: Organizational chart refers to a diagram that outlines the internal
management structure.
3- Hierarchy: Hierarchy refers to the levels of management in any organization, from the
highest to lowest.
4- Level of Hierarchy: A Level of hierarchy refers to managers other employees who are given a
similar level of responsibility in an organization.
5- Chain of Command: Chain of command is the structure in an organization which allows
instructions to be passed down from senior management to lower levels of management.
6- Span of Control: The span of control is the number of subordinates wording directly under a
manger.
7- Directors: Directors are senior managers who lead a particular department or division of a
business.
8- Line Managers: Line managers are senior managers who lead a particular department or
division of a business.
9- Supervisors: Supervisors are junior managers who have direct control over the employees
below them in the organizational structure.
10- Staff Managers: Staff managers are specialists who provide support, information and
assistance to line managers.
11- Delegation: Delegation means giving a subordinate the authority to perform particular
tasks.
12- Leadership Styles: Leadership styles are the different approaches to dealing with people
and making decisions when in a position of authority – autocratic, democratic, laiseez-faire.
13- Autocratic Leadership: Autocratic leadership is where the manager expects to be in charge
of the business and to have their orders followed.
14- Democratic Leadership: Democratic leadership gets other employees involved in the
decision making process.
15- Laiseez-faire Leadership: Laiseez-faire leadership makes the board objectives of the
business known to employees, but then they are left to make their own decision and organize
their own work.
16- Trade Union: A trade union is a group of employees who have joined together to ensure
their interests are protected:
17- Closed Shop: A closed shop is when all employees must be a member of the same trader
union.