All Definitions

May 12, 2015

Need A good or service essential for living

Want A good or service which people would like to have but which is not
essential for living. These are unlimited

Economic Results from their being unlimited wants but limited resources to
Problem provide the goods and services to satisfy these wants. This creates
scarcity

Factors of The resources need to produce goods or services. There are four
Production and are in limited supply

Scarcity The lack of sufficient products to satisfy the total wants of the
population

Opportunity The next best alternative given up by choosing another item

Cost

Division of When the production process is split up into different tasks and each
Labor worker performs one of these tasks
(Specialization)

Businesses Combine factors of production to make products which satisfy the

people’s wants

Business The aims or targets that a business works towards

Objectives

Value Added The difference between the selling price of a product or service and
the cost of bought in materials and components

Stakeholder Any person or group with direct interest in the performance and
activities of a business

Primary Sector Extracts and uses the natural resources of the Earth

Secondary Manufactures goods using the raw materials provided by the primary
Sector sector

Tertiary Sector Provides services to consumers and the other sectors of industry

De- When there is a decline in the importance of the secondary sector

industrialization industry in a country

Free Market No government control over factors of production

Economy

Monopoly Business which controls all of the market for a product

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Command Does not have a private sector as all resources are owned by the
Economy state

Mixed Has both a public and a private sector

Economy

Capital The money invested into a business by the owners

Profit The surplus after total costs have been subtracted from the sales
revenue

Internal Growth When a business expands its existing operations

External When a business takes over or merges with another business

Growth

Merger When owners of two companies agree to join together their firms to
make one business

Takeover When one business buys out the owners of another business which
then becomes part of the predator business

Horizontal When one firm merges with or takes over another one in the same
Integration industry at the same stage of production

Vertical When one firm merges with or takes over another one in the same
Integration industry but at different stages of production

Conglomerate When one firm merges with or takes a firm in a completely different
Integration industry

Limited Liability The owners of a company cannot be held responsible for the debts of
the company they own and their liability is only limited to the
investment they made in buying the shares

Partnership Written and legal agreement between business partners

Agreement

Unincorporated One that does not have a separate legal identity

Business

Shareholders The owners of a company who buy shares which represent part
ownership of the company

Prospectus A detailed document issued by the directors of a company when they

are converting it to a PLC status. It is an invitation to the general
public to buy shares in the newly formed PLC.

Annual General A legal requirement for all companies in which it is voted on who
Meeting should be on the Board of Directors for the upcoming year

Dividends Payments made to shareholders from the profits of a company after it

has paid corporation tax. They are the return to the shareholders for
investing in the business

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Franchise A business based upon the use of the brand names, promotional
logos and trading methods of an existing successful business

Inflation The 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 When a country’s GDP increases

Growth

Balance of Records the difference between a country’s exports and imports

Payments

Real Income The value of income and falls when the prices rise faster than money
income

Gross The total value of output of goods and services in a country in one
Domestic year
Product

Exports The goods and services sod from one country to another country

Imports Goods and services bought in by one country from another country

Exchange Rate The price of one currency in terms of another

E.R. The fall in the value of currency compared with other currencies- it
Depreciation buys less of another currency than before

E.R. The rise in the value of currency compared with other currencies- it
Appreciation buys more of another currency than before

Fiscal Policy Any change by the government in tax rates or public sector spending

Direct Taxes Paid directly from incomes

Indirect Taxes Added to the prices of goods and the taxpayers pay the tax as they
purchase the goods

Disposable The level of income a taxpayer has after paying income tax
Income

Import Tariff A tax on an imported product

Import Quota A physical limit to the quantity of a product that can be imported

Monetary A change in the interest rates by the government or central bank

Policy

Supply Side Used by the government to improve the efficient supply of the goods
Policy and services in their country

Ethical Decision taken by a manager because of the moral code observed in

Decision that firm

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Industrial Legal meeting which considers workers’ complaints of unfair
Tribunal dismissal or discrimination at work

Contract of Legal agreement between employer and employee listing the rights
Employment and responsibilities of the workers

Planning Given by a government body to allow a business to build a factory in

Permission a particular location

Development A region of a country where businesses will receive financial support

Area to establish there due to the high unemployment in that area

Constraint Something that limits or controls the actions and decisions of a

company

External Constraints over which a business has no direct control

Constraint

Social When a business takes decisions that may benefit stakeholders other
Responsibility than shareholders

Pressure Formed by people who share a common interest and who will take
Groups action to try and change the government policy or business decisions

Cost-Benefit Valuation by a government agency of all the external and private

Analysis costs and benefits resulting from a business decision

External Costs The costs paid by the rest of the society other than the business as a
result of a business decision

External The gains to the rest of the society other than the business resulting
Benefits from a business decision

Private Cost The costs of a business decision actually paid for by the business

Private Benefit The financial gains made by a business as a result of a business

decision

Social Cost Addition of the private and external costs of a business decision

Social Benefit Addition of the private and external benefits of a business decision

Fixed Costs Costs which do not vary with the number of items sold or produced in
(Overhead the short term. They have to be paid whether or not the business is
Costs) making any sales

Variable Costs Costs which vary with the number of items sold or produced. They
(Direct Costs) can be directly related to or identified with a particular product

Total Cost Fixed and variable costs combined

Break-even Graphs which show how the costs and revenues of a business
Charts change with sales. They show the level of sales a business must
make in order to break even

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Revenue The income during a period of time from the sale of goods and
services

Total Revenue Price multiplied by quantity sold

Break-even The level of sales at which total costs equal total revenue
Point

Contribution The selling price less variable cost

Marginal Costs The extra costs that a business will incur by producing one more unit
of output

Average Cost Total cost of production divided by total output

per Unit

Economies of Factors that lead to a reduction in average costs as a business

Scale increases in size

Forecasts Predictions of the future

Trend Underlying movement or direction of data over time

Line of Best Fit Line drawn through a series of points which best show the trend of
that data

Budgets Plans for the future containing financial or numerical targets

Accounts Financial records of a firm’s transactions

Final Accounts Produced at the end of the financial year and give details of the profit
or loss made over the year and the worth of the business

Trading Shows how the gross profit of a business is calculated

Account

Cost of Goods Cost of producing or buying in the goods actually sold by a business
Sold during a time period

Sales Revenue Income to a business during a period of time from the sale of goods
and services

Gross Profit Made when sales revenue is greater than the cost of goods sold

Net Profit Profit made by a business after all the costs have been deducted
form sales revenue

Profit and Loss Shows the net profit and retained profit of a business
Account

Depreciation The fall in the value of a fixed asset over time

Appropriation That part of the profit and loss account which shows how the profit
Account will be distributed after tax- either given as dividends or kept in as
retained profits

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Retained Profit The net profit reinvested back into a company after deducting tax and
payments to owners such as dividends

Balance Sheet Shows the value of a business’s assets and liabilities at a particular
time

Assets Those items of value which are owned by the business

Liabilities Items owed by the business

Return on Shows how much profit is made as a proportion of the capital that
Capital has been invested in the business
Employed

Liquidity Ability of a business to pay back its short-term debts

Cash-Flow The cash inflows and outflows of a business over a period of time

Cash Flow The stages between paying out cash for labor, materials etc. and
Cycle receiving cash from the sale of goods

Cash Flow An estimate of future cash inflows and outflows of a business, usually
Forecast on a month by month basis. This will then show the expected cash
balance at the end of each month

Opening Cash The amount of cash held by the business at the start of the month
Balance

Net Cash Flow The difference between inflow and outflow of cash

Closing Cash Amount of cash held by the business at the end of each month. This
Balance becomes the next month’s opening cash balance

Start-up Capital The finance needed by a new business to pay for essential fixed and
current assets before it can start trading

Capital Money spent on fixed assets which will last longer than a year
Expenditure

Revenue Money spent on day-to-day expenses which do not involve the

Expenditure purchase of a long-term asset

Organizational Refers to the levels of management and division of responsibilities

Structure within an organization

Job Description Outlines the responsibilities and duties to be carried out by someone
employed to do a specific job

Delegation Giving authority to a subordinate to perform particular tasks. The final

responsibility, however, remains in the hands of the manager

Chain of The structure in an organization which allows instructions to be

Command passed down from senior management to lower levels of
management

Span of Control Number of subordinates working directly under a manager

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Line Managers Have direct authority over subordinates in their department. They are
able to take decisions in their departmental area

Staff Managers Specialist advisers who provide support to line managers and to the
Board of Directors

Decentralized Many decisions are not taken at the center of the business but
Management instead are delegated to a lower level of management
Structure

Centralized Most decisions are taken at the center or higher levels of

Management management
Structure

Strategic Very important decisions which can affect the overall success of the
Decisions business

Tactical Tactical decisions are medium term, less complex decisions made by
Decisions middle managers

Operational Day-to-day decisions which will be taken by a lower level of

Decisions management

Communication The transferring of a message from the sender to the receiver who
understands the message

Medium of The method used to send a message

Communication

Feedback The reply from the receiver which shows whether the message has
arrived, been understood and, if necessary, been acted upon

One-way Involves a message which does not call for or require a response
Communication

Two-way When the receiver gives a response to the message and there is
Communication discussion about it

Internal When messages are sent between people working in the same
Communication organization

External When messages are sent between one organization and another
Communication organization or an outside individual

Communication The ways in which members of a group communicate with one

Nets another

Motivation The reason why employees want to work hard and effectively for the
business

Wage A payment for work, usually paid weekly

Salary Payment for work, usually paid monthly

Commission Payment relating to the number of sales made

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Profit-Sharing A system whereby a proportion of the company’s profits is paid out to
the employees

Bonus An additional amount of payment above basic pay as a reward for

good work

Performance- Pay which is related to the effectiveness of the employee

Related Pay

Appraisal A method of assessing the effectiveness of an employee

Fringe Benefits Non-financial rewards given to employees

Job Enjoyment derived from feeling that you have done a good job
Satisfaction

Job Rotation Involves workers swapping round and doing each specific task for
only a limited time and then changing round again

Job Extra tasks of a similar level of work are added to a worker’s job
Enlargement description

Job Enrichment Involves looking at jobs and adding tasks that require more skill
and/or responsibility

Leadership Different approaches to dealing with people in a position of authority

Styles

Autocratic When the manager expects to be in charge of the business and have
Leadership their orders followed- there is little/no opportunity for workers to
comment on anything

Democratic Involves a team guided by a leader where all individuals are involved
Leadership in the decision-making process to determine what needs to be done
and how it should be done.

Leave-to-do Laissez-faire leaders allow followers to have complete freedom to

Leadership make decisions concerning the completion of their work. It allows
followers a high degree of autonomy and self-rule, while at the same
time offering guidance and support when requested

Formal Group A group designated to carry out specific tasks within a business

Informal Group Group of people who form independently of any official groups set up
within a business and who have similar interests or something else in
common

Job Analysis Identifies and records the responsibilities and tasks related to a job

Job Document which outlines the requirements, qualifications, expertise,

Specification physical characteristics etc. for a specified job

Internal When a vacancy is filled by someone who is an existing employee of

Recruitment a business

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External When a vacancy is filled by someone who is not an existing
Recruitment employee and will be new to the business

Inundation Introduction given to a new employee, explaining the firm’s activities,

Training customs and procedures and introducing them to fellow workers

On-the-job Watching a more experienced worker doing the job

Training

Off-the-job Involves being away from the workplace, usually by specialist

Training trainers

Workforce Establishing the workforce needed by the business for the

Planning foreseeable future in terms of the number and skills of the employees
required

Redundancy When an employee is no longer needed and so loses their job- not
due to any aspect of their work being unsatisfactory

Trade Union Group of workers who have joined together to ensure their interests
are protected

Craft Union Trade union which represents a particular type of skilled worker

General Union Trade union which represents workers from a variety of trades and
industry- they are often unskilled or semi-skilled

Industrial Union Trade union which represents all types of workers in a particular
industry

White-Collar Trade union which represents non-manual workers

Union

Closed Shop All employees must be a member of the same trade union

Single-Union A firm will deal with only one trade union and no others
Agreement

Employer Groups of employers who join together to give benefits to their

Associations members

Negotiation Joint decision making involving bargaining between representatives

of the management and of the workforce within a firm in hopes to
arrive at a mutually acceptable agreement

Collective Negotiations between one or more trade unions and one or more
Bargaining employers on pay and conditions of employment

Productivity Workers and management agree on an increase in benefits, in return

Agreement for an increase in productivity

Industrial Action taken by the trade unions to decrease or halt production

Action

Strike When employees refuse to work

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Picketing When employees who are taking industrial action stand outside their
workplace to prevent or protest at the delivery of goods, arrival and
departure of other employees etc.

Work-to-Rule Rules are strictly obeyed so that work is slowed down

Go Slow Employees do their normal tasks but slower than usual

Non- Employees refuse to comply with the new working practices

cooperation

Overtime Ban Employees refuse to work longer than their normal working hours

No-Strike When trade unions and management agree to have pay disputes
Agreement settled by an independent arbitrator instead of taking strike action

Arbitrator Listens to both sides in the industrial dispute and then gives a ruling
on what they think is fair to both sides

Lock-Out Employees are locked out of their workplace by the employers

Worker When employees contribute to decision-making in the business

Participation

Works Councils Committees of workers who are consulted or informed on matters

that affect employees

Market Where buyers and sellers come together to exchange products for
money

Product- A business whose main focus of activity is the product itself

Oriented

Market- A business which carries out market research to find out consumer
Oriented wants before a product is developed and produced

Marketing Financial plan for the marketing of a product or product range for
Budget some specified period of time

Marketing Management process which identifies customer wants, anticipates

future wants and then goes about satisfying them profitably

Market Share The percentage of total market sales held by one brand or business

Market Market is divided up into groups of consumers who have similar

Segmentation needs

Mass Market A very large number of sales for a product

Niche Market Small, specialized segment of a much larger market

Primary Collection and collation of original data via direct contact with
Research potential or existing customers
(Field
Research)

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Secondary Information which has already been collected and is available for use
Research by others
(Desk
Research)

Questionnaire Set of questions to be answered as a means of collecting data for

market research

Consumer Groups of people who agree to provide information about a specific

Panels product or general spending patterns over a period of time

Random When people are selected at random as a source of information for

Sample market research

Quota Sample When people are selected on the basis of certain characteristics as a
source of information for market research

Brand Name Unique name of a product that distinguishes it from other brands

Brand Loyalty When consumers keep buying the same brand again and again
instead of choosing a competitor’s brand

Brand Image Image or identity given to a product which gives it a personality of its
own and distinguishes it from its competitors brands

Packaging The physical container or wrapping for a product- also used for
promotion and selling appeal

Product Life Describes the stages a product will pass through from its
Cycle introduction, through its growth until it is mature and then finally its
decline

Trade Cycle A cycle or series of cycles of economic expansion and contraction

Cost-Plus Cost of manufacturing the product plus a profit mark-up

Pricing

Penetration When prices are set lower than the competitors’ prices in order to be
Pricing able to enter a new market

Price Skimming High price set for a new product on the market due to its novelty
factor

Competitive Product is priced in line with or just below competitors’ prices to try to
Pricing capture more of the market

Promotional When a product is sold at a very low price for a short period of time
Pricing

Psychological When particular attention is paid to the effect that the price of a
Pricing product will have upon the consumers’ perceptions of the product

Informative The emphasis of advertising or sales promotion is to give full

Advertising information about the product

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Persuasive Advertising or promotion which is trying to persuade the consumer
Advertising that they really need the product and should buy it

Target Refers to the people who are potential buyers of a product or service
Audience

AIDA Model Simple way of planning an advert’s design. It stands for attention,
interest, desire and action

Channel of The means by which a product is passed from the place of

Distribution production to the customer or retailer

Agent An independent person or business that is appointed to deal with the

sales and distribution of a product or range of products. The agent
will either put an additional amount on the price to cover their
expenses or will receive a commission on sales

Productivity Output measured against the inputs used to create it

Job Production A single product is made at a time

Batch A quantity of one product is made, then a quantity of another item will
Production be produced depending on the orders which come in

Flow Large quantities of a product are produced in a continuous process

Production
(Mass
Production)

Lead Time Margin of time between the date when stock is obtained and the date
when it is sold

Lean Techniques used by businesses to cut down on waste and therefore

Production increase efficiency

Kaizen A process of continuous improvement through the elimination of

waste

Just-in-Time Production method that involves reducing or virtually eliminating the

need to hold stocks of raw materials or unsold stocks of the finished
products. Supplies arrive just at the time they are needed

Quality Control A system of maintaining standards in manufactured products by

testing a sample of the output against the specification.

Quality The maintenance of a desired level of quality in a service or product,

Assurance especially by means of attention to every stage of the process of
delivery or production.

Total Quality Continuous improvement of products and processes by focusing on

Management quality at each stage of production

Common Result of an agreement between countries to use the same currency

Currency for all business and other transactions- e.g. euro in EU

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Globalization The process by which businesses or other organizations develop
international influence or start operating on an international scale

Multinational A business with factories, production or service operations in more

(Transnational) than one country
Businesses

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