Aims These are the long-term goals that provide direction for setting objectives.

They are often

expressed in the form of a mission statement. A typical corporate aim might be 'to become
Europes number 1 car manufacturer'. From this aim, a company can set a number of objectives
and targets, such as to increase the quality of its products, to improve productivity levels, or to
increase the effectiveness of its promotional campaigns.
This means preparing for unwanted and unlikely possibilities. A business may produce a
Contingency contingency plan in case of:
planning
1. A severe recession
2. An environmental disaster
3. A sudden strike by its workforce

Contingency plans enable a business to be in a better position to manage a crisis, rather than to
try and simply cope with it when it occurs.
These are the goals of the whole company. These should be based upon the companys aims and
Corporate mission statement. Each department should then set its objectives based on the corporate
objectives objectives. Examples of corporate objectives include:

1. To achieve long-term growth.

2. To diversify the range of products and markets.
3. To maximize profits.

Crisis This is the response of an organisation to a crisis (e.g. a fire, terrorist activity, natural disaster).
management Many companies will have some sort of contingency plan to cater for such situations, but it is
rare that the actual crisis will go according to plan. It is likely that the person in charge at the
time of the crisis will manage the crisis in a very authoritarian fashion, as he needs to make quick
and effective decisions without the time for discussion and consultation with others.

Decision tree This is a diagram that sets out the various possible options available to a business when it makes
a decision (such as an investment) plus the probable outcomes that might result from each option.
A decision tree also shows the likely probability of each option occurring and it sets out the
likely amounts of money that can be expected at the end of each branch. Essentially, a decision
tree shows the average amounts of money that are likely to be received if the decision was taken
many times.

Mission This outlines the aims of a business in an attempt to provide a sense of direction and shared
statement purpose for the stakeholders of the business. It often states what the business has done, what it
would like to do and the strategies that it will use to achieve its overall aims.

Objectives These are the medium- to long-term goals and targets of a business. Objectives must be
achievable and realistic if they are to be of any use to employees, since an unrealistic objective is
likely to act as a de- motivator to the workforce. Objectives need to be agreed through
consultation with employees, rather than simply being set by the managers and Directors. This
gives the employees a sense of belonging and responsibility which is likely to lead to higher
levels of motivation and job satisfaction.

Stakeholder This is an individual, or a group of people, with a direct interest (financial or otherwise) in a
business. The main stakeholders are employees, shareholders, customers, the government,
suppliers, creditors, pressure groups and the local community. Each group of stakeholders is
likely to want the business to achieve a different objective or to follow a different course of
action. These differing opinions and views often, inevitably, result in conflict between the

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 stakeholder group and the business.

Strategy This is a medium- to long-term course of action, which will enable the business to achieve its
objectives. The strategy would include what needed to be done, the resources required and the
likely timescale involved.

SWOT This is an investigation into the strengths (e.g. high level of market share), weaknesses (e.g. high
analysis gearing), opportunities (e.g. new markets to break into), and threats (eg new competitors entering
the industry) that a business is faced with at a specific point in time. Strengths and weaknesses
are internal factors which the business has direct control over, while opportunities and threats
arise from the external environment and are, therefore, more unpredictable and potentially
dangerous.

External This means obtaining sources of finance from outside the firm. This can be done in one of three
financing ways: debt (such as loans), share capital, or grants from the Government.

External This is a factor outside the control of the business, which directly affects the business. The
constraint main types of external constraint include consumer tastes, competitors' actions, economic
circumstances, legal constraints, social attitudes, and pressure group activity.

Flotation This is the term given to the initial launch of a company on to the stock market, by offering its
shares to the general public.

Franchise This is a business which is based upon the name, products, trademarks, logos, etc. of an existing,
successful business. To obtain a franchise involves the payment of an initial fee plus the ongoing
payment of a royalty based on sales revenue.

Franchisee This is a person or company who has bought a franchise (i.e. the rights to use the name,
products, trademarks, logos, etc. of another company (the franchisor).

Franchisor This is the successful business which will sell the rights to its business name, products, etc. to
suitable franchisees. This can be a far cheaper and easier way to expand the company than the
alternative of opening more branches itself.

Horizontal This occurs where a firm takes over or merges with another firm at the same stage of production
integration (i.e. the two firms were in direct competition with each-other).

Internal This is a factor that restricts the business from achieving its objectives, but it is within the
constraint control of the business. The main internal constraints are finance, marketing, people and
production.

Internal This is the generation of cash from within the company's resources/accounts. This can be
financing obtained from retained profits, working capital, and the sale of fixed assets.

Lease This is a way of securing and using property for a restricted period of time. When the lease runs
out, the ownership of the property returns to the freeholder (the owner).

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Leasing This is a method of securing and using fixed assets (other than property) without the need for the
initial cash outlays needed to purchase the asset.

Limited This is the idea that the owners of a company (shareholders) are only responsible for the amount
liability of money that they have invested into the company, rather than their personal assets. Thus if a
firm becomes insolvent, the maximum that creditors can receive is the shareholders' initial
investment. The word 'Ltd' or 'PLC' appear after the company's name to inform creditors that the
business has limited liability.

Management This occurs when managers from outside a company buy up the shares and take control of the
buy-in company. This strategy is pursued if the managers believe that they can run the firm more
efficiently than the current management.

Management This occurs when the managers of a business buy out the shareholders, and therefore own and
buy-out control the business. The management believe that they can improve the profitability and
(MBO) efficiency of the business.

Merger This is an agreement between the managements and shareholders of two companies to bring both
firms together under a common board of directors. It is also referred to as amalgamation or
integration.

Multinational This is a business organisation which has its headquarters in one country, but has manufacturing
plants in many other countries.

Ordinary These are purchased in order to have part ownership in either a Private Limited Company or in a
share Public Limited Company (PLC). At the end of each financial year ordinary shareholders receive
a dividend per share that they own, but only after debenture holders, preference shareholders,
long-term debt holders and the government (through taxes) have been paid. They are, therefore,
often said to have the last claim on the profits of the company. Similarly, if the company
becomes insolvent and goes into liquidation, ordinary shareholders are the last group of people to
receive any return, after all other debts have been paid.

Partnership This is a business organisation where two or more people trade together under the Partnership
Act of 1890. Most partners in a partnership will have unlimited liability, which means each
partner is liable for the debts of the other partners. Common examples of partnerships include
solicitors, doctors, veterinarians and accountants. Forming a partnership allows more capital to
be used in the business than is the case with a sole trader, and the pressures and responsibilities
involved in running the business are spread over several individuals.

Preference This is a share paying a fixed dividend, which is considerably less risky than an ordinary share. If
share the company becomes insolvent and goes into liquidation, then preference shareholders would be
repaid in full before ordinary shareholders. This is also true of dividends, which are paid to
preference shareholders before ordinary shareholders receive theirs. Preference shares therefore
carry less risk than ordinary shares, but they also carry no voting rights or rights to a share of the
companys profitability.

Primary This is that part of the economy consisting of agriculture, fishing and the extractive industries
sector such as oil exploration and mining.

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Private This is a small to medium-sized business that is usually run by a small number of people
limited (shareholders) and in many cases it is a family run business. The shareholders can determine
company their own objectives without the emphasis on short-term profits, that are so common among
public limited companies.

Private sector This is that part of the economy which is owned and controlled by private individuals and
shareholders and is, therefore, out of the governments direct control. The remainder of the
economy is called the public sector.

Public This is another name for a nationalised industry that is an enterprise owned by the government /
corporation state, which offers a product or service for sale.

Public sector This is that part of the economy which is directly owned and / or controlled by the government /
state. The public sector includes public corporations (nationalised industries), public services
(such as the National Health Service) and local services (such as swimming pools, street
cleaning, libraries, etc.).

Public limited This is a company with limited liability that has over 50,000 of share capital and a very large
company number of shareholders. PLCs are the only type of company allowed to be quoted on the Stock
(PLC) Exchange. These companies have to disclose their annual accounts, are open to take-over bids.

Prospectus This is a document which companies have to produce when they go public (ie when they wish to
float on the Stock Exchange). It gives details about the company's activities and anticipated
future profits. It has to conform to the Companies Act 1985 and be handed to the Registrar of
Companies.

Sale and This is a contract to raise cash by selling the freehold to a piece of property and then buying it
leaseback back on a long-term lease. This ensures that the firm can stay in its premises and therefore can
carry on trading as if nothing has happened. The money released through this process enables the
firm to improve its liquidity position, although its owns less fixed assets than before.

Secondary This is that part of the economy involved in the making and manufacturing of goods. Over the
sector. past twenty years, the UK has seen a large decline in the number of people employed in the
secondary sector of the economy, due to firstly a fall in demand for the output and secondly due
to the replacement of workers by machines (mechanization).

Sole trader This is an individual who owns and controls his / her own business. Common examples of sole
traders include corner shops, newsagents and market traders. They have unlimited liability for
their debts and often have little available finance for expansion. They often employ waged
workers, yet keep all the profit (after tax) for themselves.

Stock This is a market for securities (the collective name for stocks and shares). The London Stock
Exchange Exchange is one of the biggest in the world after Tokyo and New York. Its main functions are to
enable firms or governments to raise capital and to provide a market in second-hand shares and
government stocks.

Take-over This involves purchasing over 50 per cent of the share capital of a company and then being able
to exert full control over it. This process is also known as acquisition or integration.

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Take-over bid This is an attempt by a company to buy a controlling interest (i.e. over 50% of the ordinary
shares) in another company. This is done by offering the target firm's shareholders a significantly
higher price for their shares than the prevailing market price.

Tertiary This is that part of the economy concerned with providing goods and services to customers. It is
sector the largest sector in terms of employment in the UK, accounting for over two-thirds of the
workforce.

Unlimited This refers to the fact that the owners of certain business organisations (sole traders and
liability partnerships) are not limited to the extent of their debts. They will have to sell off their own
assets and use their own personal wealth, if necessary, to meet the debts of their business. If the
business debts are greater than their own personal wealth, then the business may be forced into
bankruptcy.

Vertical This occurs when two firms join together (through a merger or a take-over) that operate in the
integration same industry, but at different stages in the production chain. Backward vertical integration
means buying out a supplier (e.g. a car manufacturer buying a components supplier). Forward
vertical integration means buying out a customer (e.g. the car manufacturer buying up a chain of
car showrooms).

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