Definitions unit#1

Chapter 1: Enterprise

1) BUSINESS: it is any activity in which we gather resources to produce goods and services to satisfy
the needs and wants of the customers, usually in return of a profit.
2) Customer: customer is an individual or business who pays for the good or service provided by
the business.
3) Consumer: consumer is an individual or business who utilizes the good or service to satisfy their
needs and wants.
4) Consumer goods: these are the goods used by the end consumer to satisfy their needs and
wants such as bread and cell phones.
5) Consumer services: these are the services used by the end consumer to satisfy their needs and
wants such as banking, health care.
6) Factors of productions: these are the resources required by the business to produce the goods
and services, there are four factors of production:
1) Land - this general term includes not only land itself but all the renewable and non-
renewable resources of nature, such as coal, crude oil and timber.
2) Labour - manual and skilled labour make up the workforce of the business.
3) Capital - this is not just the finance needed to set up a business and pay for its continuing
operations, but also all the manufactured resources used in production. These include
capital goods, such as computers, machines, factories, offices and vehicles.
4) Enterprise - this is the initiative and coordination provided by risk-taking individuals called
entrepreneurs. They combine the other factors of production into a unit capable of
producing goods and services. Enterprise provides the managing, decision-making and
coordinating roles.
7) Capital goods: these are the goods used by the business to produce other goods and services
such as machines and computers.
8) Added value: it is the difference between the selling price and the cost of raw materials brought
into the business.
9) Adding value: it is the continuous process in which the business increases the value of the good
and service by providing additional features and facilities.
10) Opportunity cost: it is the next best alternative forgone.
11) Multinational businesses: the businesses have operations in more than one country. This means
they have an established base for either producing or selling products outside their own
domestic economy.
12) Entrepreneur: is an individual who takes risk gathers resources, manages and controls the
business, in case of failure bears all the losses while in case of profits enjoys all the profits.
13) Intrapreneurs: they are individuals with in the business who come up with new ideas while the
risk is taken by the business owners.
14) Risk: they are the possible problems or issues a business might face, they can be planned and
prepared for beforehand.
15) Uncertainty: these are the problems which cannot be planned for beforehand as they are
unforeseen such as covid-19.
 16) Business plan: it is a detailed document containing the objectives, strategies and plan of actions
the business will follow to achieve its goals.

Chapter#2 business structure

1. Primary sector: it is part of the economy in which the businesses are involved in the extraction
of raw material and natural resources such as farming, fishing and mining.

2. Secondary sector:: it is also known as the manufacturing sector, in which the business processes
and adds value to the raw material extracted in the primary sector and converts them into semi-
finished or finished goods.

3. Tertiary sector: services sector is part of the economy in which the businesses are involved in
providing services to the consumers and other businesses.

4. Quaternary sector: it is part of the economy in which businesses are involved in innovation and
creating something new in the market such software houses, medical research agencies

5. Industrialization: it occurs when the importance of the secondary sector is increasing in the
economy usually in developing economies.

6. Deindustrialization: it occurs when the importance of secondary sector is declining in the

economy usually in developed economy
7. Public sector is part of the economy in which the resources are owned and controlled by the
government and their objective is social welfare.
8. Private sector is part of the economy in which the resources are owned and controlled by
individuals or group of individuals and their objective usually is profit maximization.
9. Market economic system is such in which resources are owned and controlled by private
individuals and their objective is profit maximization while there is no government intervention.
10. Planned economic system is such in which resources are owned and controlled by the
government and their objective is social welfare while there is no private ownership and choice.
11. Mixed economic system is such in which both public and private sectors are present. As they
work together to produce goods and services in the economy.
12. Public corporations: They are the businesses operating in the public sector, owned and
controlled by the government and their objective is social welfare.
13. Sole trader: It is a business owned and controlled by a single individual, it does not have
separate legal identity, continuity and has unlimited liability
14. Partnership: It is when 2 or more individual join their resources together and set up a business,
they do not have separate legal identity, continuity and have unlimited liability.
15. Private limited companies: It is an incorporated business which has separate legal identity,
continuity and limited liability while the business is not listed on the stock exchange.
16. Public limited companies: It is an incorporated business which has separate legal identity,
continuity and limited liability. While the business is listed on the stock exchange
17. Dividend: it is the part of the profit distributed amongst the shareholders.
18. Annual general meeting: it is legal requirement in which the shareholders are called for a
meeting to discuss future policies and strategies while the shareholders elect the directors.
 19. Article of association: it is a legal document containing the rules and regulations the company
follow.
20. Memorandum of association: it is a legal document containing the name of the company, the
address and the objectives of the business.
21. Cooperatives: It is a legal structure in which individuals or businesses join their resources
together and set up a business, they have equal ownership and rights while the profit and losses
are distributed equally
22. Franchise: It is the use of business name, logo and trading method of an existing successful
business, while being a franchise a business can be a sole trader, partnership or a limited
company
23. Joint ventures: It is when 2 or more business join their resources together for a particular
project, once the project is complete the venture ends
24. Social enterprise: It is a business operating in the private sector but it does not have profit
maximization as an objective, it generates a profit but the profit is reinvested back into the
business to benefit the society.

Size of business

1. Capital employed: the total value of money invested in the business. The formula to calculate
capital employed total assets less current liabilities.
2. Market capitalization: it is a method to measure the size of public limited companies. The
formula is current share price multiply by the total number of shares issued in the market.
3. Market share: it is that from the total sales of the market how much does the business has. The
formula is sales of the business divided by total sales of the market times 100.
4. Small business: they are the businesses which are operating on a limited scale catering to a
specific number of customers with a limited capital.
5. Family-owned businesses are those that are actively owned and managed by at least two
members of the same family.
6. Internal growth: it is also known as organic growth in which the business expands its operations
with its current resources.
7. External growth: it is when a business merges or takes over another business in the same or
different industry.
8. Horizontal integration: it is when a business merges or takes over another business in the same
industry and at the same level of operation.
9. Vertical forward integration: it is when a business merges or takes over another business in the
same industry but at the next level of operation.
10. Vertical backward integration: it is when a business merges or takes over another business in
the same industry but at the previous level of operations.
11. Conglomerate integration: it is also known as diversification, when a business merges or takes
over another business in a different industry.
12. Joint venture: when two or more business join their resources together and set up a business for
a specific project.
CHAPTER#4 BUSINESS OBJECTIVES

1) Objectives are the aims and goals of the business which gives the business a direction helps in
planning, allocation of resources, reviewing and controlling business activity.
2) Profit maximization it means producing at that level of output where the greatest
positive difference between total revenue and total costs is achieved.
3) Return on capital employed: it is the profitability measure in which the business evaluates how
return it has generated compared to the investment made in the business.
4) Profit satisficing this means aiming to achieve enough profit to keep the owners satisfied. This
objective is in contrast to profit maximisation where the aim is to earn as much profit as
possible.
5) Corporate social responsibility (CSR) it is an objective in which the business considers the impact
on the society rather than benefiting itself.
6) Social enterprise: it is a business operating in the private sector but it does not have profit
maximization as an objective. It works on the triple bottom line.
7) Ethics are the moral guidelines a business follows without any legal obligation on its own.
8) Business culture are the norms and beliefs of the organization on which the business operates.
9) Mission statement is a generic statement which tells about the organizations goals and aims and
stimulates interest of the internal and external stakeholders in the business activity.
10) Strategic decision making is when decisions impacting the business in the long term are made by
the senior management, once made the decisions cannot be easily reversed.
11) Tactical decision making is done at mid-level of the management where plans are made to
achieve the overall objective and implement the strategy successfully.
12) Operational decision making is done at the lowest level in which business makes decisions for
the day to day operations of the business.
13) Budget is a financial plan which the business develops and makes for a particular strategy to
ensure effective management of the financial resources.

Chapter#5 stakeholders in a business

1. Stakeholders they are the individuals or group of individuals who are directly or indirectly
affected or interested in the business activity
2. Trade union is a group of workers who have joined together to protect their rights and interest.
3. The traditional view of business is often called the shareholder concept. The shareholders are
the owners of the company and the company has a legally binding duty to put their needs first -
to take actions and to make decisions that will increase shareholder value. It is important to
remember that directors and managers ultimately owe their positions to shareholders, so it is
important to keep them satisfied.
4. The stakeholder concept is that there are many other parties involved and interested in
business activity than just the owners. The interests of groups such as local communities, the
public, government and environmental pressure groups should also be considered by business
decision- makers. If this does not happen, negative reactions from stakeholder groups can be
damaging.
5. Rationalization is an approach in which the business focuses on reducing the cost of operations
and reducing wastage.
6. Customer loyalty is when the customer makes repeat purchase from the same business again
and again as he or she is satisfied by their services.