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Business Studies Definitions

Unit 1/2/3

Unit 1: Marketing and Finance

Marketing The anticipation and satisfying of customer needs in


order to delight them and to meet the needs of the firm

Market Where buyers and sellers come together

Market Size The volume of sales of a product


OR
The value of sales of a product

Market Growth The % change in sales over a given period

Market Share The % of total sales of a product achieved by a firm or


specific brand

Market Analysis Study of market conditions to assist firmʼs plans

Market Segmentation Classification of [potential] customers into groups, each


of which responds differently to different products or
marketing approaches

Segmentation Analysis Use of quantitative and qualitative data to discover the


types of consumer who will buy a given product

Market Research The systematic and objective collection, analysis, and


evaluation of information that is intended to assist
marketing

Primary Market Research First-hand collection of data for specific purpose

Secondary Market Research Use of information already collected for another


purpose

Confidence Level The degree to which the statistics are a reliable


predictor of reality (usually 95%)

Quota Sample Group chosen as they comprise of different segments

Quantitative Research Research based on numbers

Qualitative Research Research based on subjective factors

Marketing Objectives Goals of the marketing function in the firm

Marketing Strategies Long or medium-term plans devised at SMT level

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Marketing Tactics Short-term marketing measures to meet the needs of a
short term threat or opportunity

Niche Marketing Targeting a product at a small segment of a larger


market

Mass Marketing Aiming a product at all of the market

Product Life Cycle The stages that a product passes through during its
lifetime: development, introduction, growth, maturity,
decline

Product Portfolio Range of products made by a firm

Adding Value Increasing the worth of resources by modifying them

Product Differentiation The degree to which consumers see a particular brand


as being unique and different to others

Extension Strategies Methods used to lengthen the life cycle of a product by


preventing or delaying it from reaching the decline
stage of the life cycle

Determinism Something will occur if you expect it to happen

Boston Matrix Classifies products according to the market share and


the rate of growth of the market in which the product is
sold

Unique Selling Point (USP) A feature of a product or service that allows it to be


differentiated from other products

Product Good/service provided by the business

Product Design Make-up of the product making it work well and look
good

Product Development A new or improved product for release into an existing


market

Branding The process of differentiating a product from its


competitors through the name, sign, symbol, design, or
slogan linked to the product

Cost-plus Pricing Price set at average cost per unity plus desired profit
margin

Contribution Pricing Price is set to cover average variable costs per unit and
a sum to pay towards fixed costs and profit

Price Discrimination Pricing where a firm charges a higher price to some


customers for the same product as they will pay it

Price Skimming High price set to yield high profit margin

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Penetration Pricing Strategy where low prices are set to break into a
market or to increase market share

Price Leadership Where large companies sets market price which


smaller firms tend to follow

Price Taking Where small firms follow the price set by the market
leader

Predator Pricing Where firms set very low prices in order to drive other
firms out of the market

Loss Leader Where a firm sets a very low price for its product(s) in
order to encourage consumers to buy other products
which provide profit for the firm

Psychological Pricing Intended to give impression of value

Above-the-line Promotion Advertising through media e.g. TV

Below-the-line Promotion All other promotion e.g. Direct Mail

Distribution Channels Channels through which a product passes from the


manufacturer to the consumer

Distribution Targets Objectives given to staff encouraging them to gain as


much shelf space in as many outlets as possible

Price elasticity of demand The responsiveness of a change in demand of a


product to a change in price

Income elasticity of demand The responsiveness of a change in demand of a


product to a change in income

Profit Revenue - total costs

Revenue Selling price/unit x total units sold

Fixed Costs Do not vary with output, short term

Variable Costs Do vary with output, short term

Total Costs Fixed costs + variable costs

Direct Costs Related directly to the product

Indirect Costs Cannot be related directly to the product

Contribution per Unit Selling price/unit - direct costs/unit

Break-even Output Level of output where total sales are equal to total
costs of production

Cash Flow Amount of money flowing in and out of the company

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Net Cash Flow Cash inflows - cash outflows

Cash Inflows Receipts of cash

Cash Outflows Payments of cash

Cash Flow Forecasting Estimating the expected cash inflows and cash
outflows over a period of time

Debt Factoring When a bank (usually) buys the right to collect the
money from the credit sales of the firm

Working Capital The day-to-day finance used in business

Liquidity Ability to convert an asset into cash without loss or


delay

Trading Profit Difference between the income received from normal


activity and costs incurred with this

Retained Profit Profit reinvested in the company rather than distributed


to shareholders

Asset Any item owned by the firm

Share Capital Money provided by shareholders in return for partial


ownership of the firm

Venture Profits Finance provided to small/medium companies seeking


growth but considered risky by other lenders

Loan Capital Money received by an organisation in return for


payment of interest and time constraints

Debenture Long-term loan made to a business at an agreed fixed


% rate of interest and time constraints

Bank Loan Money provided by a bank for an agreed purpose

Bank Overdraft Where someone is allowed to overspend on their


current account in the bank to an agreed level

Budget Agreed plan establishing in financial terms the policy to


be pursued and the outcomes of that policy

Zero Budgeting Where managers must justify all of the money allocated
to them

Favourable Variance When costs are lower than expected or revenue is


higher than expected

Adverse Variance When costs are higher than expected or revenue is


lower than expected

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Cost Centre An identifiable part of the company for which costs can
be calculated

Profit Centre An identifiable part of the company for which costs and
revenue can be calculated

Unit 2: People & Operations Management

Mission Statement A qualitative statement of an organisationʼs aims


describing the general purpose of the organisation

Corporate Aims The long-term intentions of a business

Objectives Targets that must be achieved in order to achieve the


stated aims of the firm, department, or team

Delegation The process of passing authority down the hierarchy


from a manager to a subordinate

Responsibility Being accountable for oneʼs actions

Authority The ability or power to carry out a task

Accountability The extent to which a named individual is held


responsible for the success or failure of a policy,
project, or task

Empowerment Giving employees the means by which they can


exercise power over their working lives

Consultation Asking employees for their views on various issues that


will affect them and the business

Laissez-faire Leadership Where the leader has minimal input in the decision-
making process and leaves the running of the business
to the staff

Democratic Leadership Running the business on the basis of decisions agreed


by the majority through two-way communication

Paternalistic Leadership Leadership where management decides whatʼs best for


employees. Autocratic in many ways, although
decisions are made in employeesʼ best interests

Autocratic Leadership An approach which assumes that information and


decision making should be kept at the top of the
organisation. Use of power by the giving of orders
rather than delegating or consulting.

Change Management The anticipation, organisation, introduction, and


evaluation of modifications to business strategy and
operation

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Motivation The causes of peopleʼs actions - why people behave as
they do

Motivation Theory The study of factors that influence the behavior of


people in the workplace

Scientific Management Business decision making based on data that are


researched and tested quantitatively in order to
improve the efficiency of an organisation (Taylor)

Job Enrichment A means of giving employees greater responsibility and


offering them challenges that allow them to utilise their
skills fully

Job Enlargement Increasing the scope of a job, either by job enrichment


or by job rotation

Teamwork A system where production is organised into large units


of work and a group of employees work together in
order to meet shared objectives

Piecework Payment based on the number of items a worker


produces

Performance-related Pay A bonus or salary increase usually awarded for above


(PRP) average employee performance

Profit Sharing Financial incentive in which a proportion of the firmʼs


profit is divided among its employees in the form of
bonuses

Share Ownership A financial incentive whereby companies give shares to


their employees or sell them at rates below market
price

Share Options A financial incentive in which chief executives and


senior management are given the choice of buying a
fixed number of shares at a fixed price

Fringe Benefits Benefits received by employees in addition to their


wages or salary

Workforce Planning Where a business forecasts how many and what type
of employees it needs now and in the future, and
matches up the appropriate employees with the needs
of the firm

Internal Recruitment Filling a job vacancy by selecting a person who is


already employed within the organisation

External Recruitment Filling a job vacancy by advertising outside the firm

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Training The provision of work-related education, either off-the-
job or on-the-job, involving employees being taught
new skills or improving skills they already have

Induction Training Education for new employees which usually involves


learning about the way the business works rather than
about the particular job the employee will do

On-the-job Training Where an employees learns skills by seeing how it is


carried out by a more experienced employee

Off-the-job Training All forms of employee education apart from that at the
immediate workplace

Operations Management The process that uses the resources of the business to
provide the right products for the customer

Productive Efficiency A measurement of the cost of producing 1 unit of a


product. The lower the unit costs, the greater the level
of efficiency

Productivity A measurement of the efficiency of the firm in terms of


its ability to convert inputs into outputs

Economies of Scale The advantages that an organisation gains due to an


increase in size. These cause an increase in productive
efficiency (↓avg. cost/unit)

Diseconomies of Scale The disadvantages that a firm experiences due to an


increase in size. (↑cost/production)

Capacity The maximum total level of output that a business can


produce in a given time period. A company producing at
this level is said to be operating at full capacity

Capacity Utilisation The percentage of a firmʼs total possible production


level that is being reached

Under-Utilisation of Capacity When a firmʼs output is below the maximum possible.


Represents a waste of resources and spending on
fixed assets is unnecessary

Job Production The manufacture of a one-off, specialised product,


made individually to a certain specification

Batch Production A method of production in which groups of products go


through the various stages of production together, until
the products are completed

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Flow Production A method of production based on manufacturing a
product by using a continued flow of assembly. Once
an individual product completes a stage of its
production, it moves on to the next stage and is
replaced on the conveyor by the next product, which is
assembled in the same way

Capital-Intensive Production Method which use a high level of capital equipment in


comparison to other inputs such as labour

Labour-Intensive Production Method which use a high level of labour in comparison


to capital equipment

Stock Control The management of levels of raw materials, work-in-


progress and finished goods in order to reduce storage
costs whilst still meeting customer demand

Just-In-Time (JIT) Items of stock arrive just at the time they are needed
for production. Eliminates the need for stock

Quality Features of a product allowing it to satisfy customers

Quality Control A system that uses inspection as a way of finding any


faults in the product. It is the finished product that is
inspected, rather than products still in production

Quality Assurance A system that aims to achieve quality by organising


every process to get the product ʻright first timeʼ and to
prevent mistakes from happening. Often carried out by
multiple workers

Total Quality Management A culture of quality involving all employees of a firm


(TQM)

Benchmarking The process of setting competitive standards based on


the achievements of other firms, against which an
organisation will monitor its progress.

Kaizen Groups Policy where small changes are made in order to


improve quality and efficiency.

Unit 3: External Influences, Objectives & Strategy

PESTL Analysis Assessing the likely impact of the political, economic,


social, technological, and legal factors in the external
environment of a business

Monopoly A single producer within a market in theory but in


practice one with ≥25% market share

Business Cycle Pattern of ups and downs in demand and output within
an economy

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Boom High levels of customer demand, business confidence,
profits, and investment

Recession Falling demand, output, profit, business confidence,


and little investment

Slump Very low levels of consumer demand, investment,


business confidence, and failing businesses

Recovery Slowly rising levels of demand, investment, and


increased confidence

GDP Total value of a countryʼs output over one year

GNP Total value of a countryʼs output over one year plus net
income from abroad. Used more

Interest Rate The costs of borrowing money and the return for
lending money. Set by the Monetary Policy Committee

Exchange Rate The price of one countryʼs currency in terms of another

Inflation An increase in the general level of prices of goods


within an economy. Fall in the purchasing power of
money

Deflation A decrease in the general level of prices of goods


within and economy. Rise in the purchasing power of
money.

Cost-Push Inflation Occurs when there is an increase in the costs of


production forcing prices up

Demand-Pull Inflation Where prices rise because there is excess demand in


the economy

Social Responsibility The duties of a company towards employees,


customers, society, and the environment

Ethical Behaviour Actions and decisions that are seen to be morally


correct

Technological Change Adapting new applications of practical or mechanical


sciences to industry and commerce

Franchise When a business (franchisor) gives the right to supply


its product to another business (franchisee). Itʼs is a
business method that involves the licensing of
trademarks and methods of doing business
Patent An official document granting the holder to the right to
be the only producer or user of the product or process

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Incorporated Business Has a legal identity that is separate from the individual
owners. The business can own assets, owe money,
and enter into contracts

Unincorporated Business No distinction in law between the individual owner of


the business or the company itself

Unlimited Liability Owners of the business are liable for all the debts that
the business may incur

Limited Liability Where the owners of the business are liable for the
share capital they invested into the firm and nothing
else

Sole Trader A business owned by one person

Private Limited Company A small to medium-sized company usually run by a


(LTD) small group of individuals who own it

Public Limited Company A business with limited liability, a share capital of over
(PLC) £50,000, and, generally, a wide spread of shareholders

Business Plan A report describing the marketing strategy, operational


issues, and financial implications of a business start-up

Corporate Aims The long-term intention of a business

Stakeholder An individual or group with a direct interest in the


activities and performance of an organisation

SWOT Analysis Technique which allows a company to assess its overall


position. The internal audit of the company represents
the present position of the product or company
(strengths and weaknesses) whereas the external audit
represents the future potential of the company
(opportunities and threats)

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