interactive glossary of key terms ro61: introduction to business cambridge national in business and...

INTERACTIVE GLOSSARY OF KEY TERMS

www.time2resources.co.uk

RO61: Introduction to Business

Cambridge National in Business and Enterprise


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ABCDEFGHIJKLM

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Lo1: Understand business ownership

Lo2: Understand business objectives

Lo3: Understand key functional areas

Lo4: Understand how external factors impact on businesses

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Lo3: Understand key functional areas Finance Marketing Production and operations Human resource management




Sole trader Partnership Private limited company (lt

d) Public limited company (pl

c) Unlimited liability Limited liability Capital Asset Debt Deed of partnership Sleeping partners

Shareholders Dividends Incorporation Memorandum of associatio

n Articles of association Stock exchange Flotation



Business objectives SMART objectives Profit Social benefit Sales Market share Effective service Survival Growth Ethical Sustainable Business planning


Lo3: Understand key functional areasFinance

Raising finance Bank loan Overdraft Mortgage Interest rate Friends and family Grants Fixed costs Variable costs Total costs Revenues Profit Loss Cash flow Cash in Cash out

Cash flow statements Opening balance Closing balance Net cash flow Receipts Payments Credit Sales Credit purchases Break even point Break even charts Contribution Contribution per unit


Lo3: Understand key functional areasMarketing

Marketing Market Segmentation Demographic segmentation Geographic segmentation Socio-economic group Market mapping Market research Primary market research Secondary market research Questionnaires Focus groups Survey Supplier feedback Customer feedback Internet research

Marketing mix Product Price Promotion Place Unique selling point Product portfolio Demand Price skimming Penetration pricing Psychological pricing Loss leader Promotional mix Wholesaler Retailer


Lo3: Understand key functional areasProduction and operations

Job production Batch production Flow production Factors of production Specialisation Division of labour Quality control Quality Quality assurance Quality standards Total quality management Resource control Logistics


Lo3: Understand key functional areasHuman resource management

Human resource management

Recruitment Full-time employee Part-time employee Internal recruitment External recruitment Personal recommendation Advertising Interview

Training On the job training Off the job training Induction training Retention Pay Working conditions Performance management



Social factors Demographics Technological factors Environmental factors Green working practices Green consumerism Ethical factors Carbon footprint Corporate social responsibi

lity Political factors

Legislation Health and safety Minimum wage Copyright Patent Trade marks Economic factors Employment Interest rate Inflation Exchange rates Recession Recovery


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Break even pointClosing balanceContributionContribution per unitLossMarket shareNet cash flowOpening balanceProfitRevenueTotal cost

www.time2resources.co.uk ABC

A and B

Advertising Articles of association Asset

Bank loan Batch production Break even charts Break even point Business objectives Business planning


C and D

Capital Carbon footprint Cash flow Cash flow statements Cash in Cash out Closing balance Contribution Contribution per unit Copyright Corporate social responsibi

lity Credit purchases Credit Sales Customer feedback

Debt Deed of partnership Demand Demographic segmentation

Demographics Dividends Division of labour


E and F

Economic factors Effective service Employment Environmental factors Ethical Ethical factors Exchange rates External recruitment

Factors of production Fixed costs Flotation Flow production Focus groups Friends and family Full-time employee


G and H

Geographic segmentation Grants Green consumerism Green working practices Growth

Health and safety Human resource managem

ent


I, J and K

Incorporation Induction training Inflation Interest rate Internal recruitment Internet research Interview

Job production

There are no words beginning with K


L and M

Legislation Limited liability Logistics Loss Loss leader

Market mapping Market research Market Segmentation Market share Marketing Marketing mix Memorandum of associatio

n Minimum wage Mortgage


N and O

Net cash flow Off the job training On the job training Opening balance Overdraft


P

Partnership Part-time employee Patent Pay Payments Penetration pricing Performance management Personal recommendation Political factors Price skimming Primary market research

Private limited company (ltd)

Product portfolio Product Price Promotion Place Profit Promotional mix Psychological pricing Public limited company (plc

)


Q and R

Quality Quality assurance Quality control Quality standards Questionnaires

Raising finance Receipts Recession Recovery Recruitment Resource control Retailer Retention Revenues


S

Sales Secondary market research Shareholders Sleeping partners SMART objectives Social benefit Social factors Socio-economic group

Sole trader Specialisation Stock exchange Supplier feedback Survey Survival Sustainable


T and U

Technological factors Total costs Total quality management Trade marks Training

Unique selling point Unlimited liability


V, W, X, Y and Z

Variable costs Wholesaler Working conditions

There are no words with X,Y and Z


Advertising


Within recruitment a method used to attract potential candidates to apply for a vacant position within a business

Media used may be wide ranging from local newspapers and specialist magazines to notices in shop windows or on a staff board

Within marketing advertising also refers to a promotional method that involves the use of media to communicate with existing and potential consumers

ABC123

Related words:Recruitment Personal recommendation Interview

Articles of association


A formal documentation which outlines the rules and regulations to be followed when a company is formed

Outlines: The responsibility of the directors Nature of the business Rights of shareholders

Is completed with the memorandum of association to form a company

ABC123

Related words:Memorandum of association

Private limited company Public limited company

Asset


Anything that is owned by the businessCan be long term assets that will stay in the

business for longer than a year e.g. premises, vehicles and machinery

Or short term assets that will change on a regular basis e.g. stock, cash and debtors (customers who owe money)

A sole trader’s personal assets can be used to pay off the businesses debts

ABC123

Related words:Sole trader Unlimited liability Debt

Bank loan


A set amount of money provided to a business to be repaid, with interest, over a predetermined period of time

An external source of finance

ABC123

Related words:Raising finance Overdraft Mortgage Interest rate

Batch production


Identical items are produced in groups (batches), each item passing through the production process at the same time

Allows for cheaper and quicker production of individual items

More uniform products Variation can be achieved in different batchesRequires a mix of capital (machinery) and

labour resources

ABC123

Related words:Job production Flow production Factors of production

Break even charts


A visual representation of total costs and total revenues identifying the point at which break even is achieved i.e. where the TC line and the TR line cross

Break even point is read in units off the horizontal axis

Can be used to read the loss or profit of a business at given levels of output

ABC123

Related words:Total costs Revenues Break even point

Break even point


The level of output at which the business is making neither a profit nor a loss, the point at which TC=TR

Selling Price – Variable Cost (per unit) = Contribution (per unit)

Fixed Costs / Contribution (per unit) = Break even output

Can be read off the horizontal axis on a break even chart

ABC123

Related words:Total costs Revenues Break even chart

Business objectives


A target that a business wants to achieve within a set period of time

For new businesses an objective may be one of survival before profit and then growth

Other objectives include market share, effective service, sales and social benefit

Objectives should be SMART

ABC123

Related words:SMART objectives Survival Profit Growth Social benefit

Sales Market share Effective service

Business planning


The steps an entrepreneur goes through before setting up a business, effective planning is important for short term survival and long term success

The process of planning will include: Setting objectives Raising finance Cash flow forecast Calculating break even

ABC123

Related words:Business objectives SMART objectives Survival

Capital


The money invested in a business

Initially this will be used to cover start-up expenses such as premises and vehicles

Can be raised from a number of sources including personal investments and bank loans

ABC123

Related words:Raising finance Asset Shareholders

Carbon footprint


The total amount of negative emissions e.g. greenhouse gases emitted by a business as a result of their operations

A business with an objective to be environmentally friendly will take steps to reduce their carbon footprint

Actions may include less packaging, sourcing materials locally and energy efficient sources

ABC123

Related words:Ethical factors Corporate social responsibility

Environmental factors

Cash flow


The movement of cash into and out of a business over a period of time

The relationship between cash inflows and cash outflows

Cash flow can be crucial to the survival of a business

ABC123

Related words:Cash in Cash out Cash flow statement Net cash flow

Cash flow statements


A financial document that shows the cash flowing into and out of a business over a period of time

Will show the closing balance at the end of each period (e.g. a month) to highlight any concerns such as a negative balance

Is included in the accounts to report on the businesses actions and performance to shareholders and other stakeholders

ABC123

Related words:Cash in Cash out Cash flow Net cash flow

Cash in


The receipt of cash into a business Shown on a cash flow statementExamples of cash inflows include:

Sale of goods Payment by debtors Loans received Sale of assets

ABC123

Related words:Cash flow Cash out Receipts Credit sales

Cash out


The transfer of cash from a businessShown on a cash flow statementExamples of cash outflows include:

Buying materials Paying expenses Repaying loans Buying capital equipment

ABC123

Related words:Cash flow Cash in Payments Credit purchases

Closing balance


The closing balance on a cash flow is the amount of money/cash left at the end of a period

Opening balance + cash inflows – cash outflows = closing balance

One month’s closing balance becomes the opening balance of the next period

ABC123

Related words:Cash flow Cash flow statement Net cash flow Opening balance

Contribution (Total)


The total amount of money contributed first towards fixed costs and then profit from all goods sold

Sales Revenue – Total Variable Costs = Total Contribution

Can also be calculated as: Contribution per unit x number of units

ABC123

Related words:Contribution per unit Fixed costs Break even point

Contribution per unit


The amount of money each unit sold contributes towards fixed costs and once breakeven has been achieved then contributes to profit

Selling Price – Variable Cost (per unit) = Contribution per unit

Contribution can be used to calculate the break even point

ABC123

Related words:Contribution Fixed costs Break even point

Copyright


Copyright is a legal protection for anyone that has produced work in a range of areas, these include: Literature Drama Music Art Recordings Broadcasts

It is illegal to use copyrighted work without the permission of the owner

ABC123

Related words:Legislation Patent Trademark

Corporate social responsibility


CSR is a firm’s decision to accept responsibility to its stakeholders for its social, environmental and ethical actions

A firm will produce a Corporate Social Report to set targets that will be used to meet its social responsibilities and to assess how far it has met previous targets

ABC123

Related words:Ethical factors Carbon footprint Green working practices

Credit purchases


Purchases made by a business where they pay the supplier at a later date e.g. 30 days credit terms

Credit purchases appear in the cash flow not in the month the goods are received but in the month the cash actually flows out of the business

ABC123

Related words:Cash out Cash flow Cash flow statement Payments

Credit sales

Credit sales


Sales made by a business where the customer’s payment is after the date of the sale e.g. they buy now but pay later

Credit sales appear in the cash flow not in the month the sale is made but in the month when the cash actually flows into the business

ABC123

Related words:Cash in Cash flow Cash flow statement Receipts

Credit purchases

Customer feedback


A form of primary market research that involves collecting opinions directly from the customer

Methods of collection include: Customer satisfaction survey Comment forms Data collection with registering a product e.g.

warranty

ABC123

Related words:Market research Primary market research Survey

Focus group

Debt


The total value of money owed by a businessForms of debt include bank loans, overdraft

and trade credit (money owed to suppliers)If a business can not cover its debts it may be

forced to sell its assetsA sole trader may be forced to sell personal

assets to cover the businesses debts

ABC123

Related words:Unlimited liability Asset Sole trader Capital

Deed of partnership


A legally binding agreement between two or more people who are in business together

It describes how the partnership will be run and the rights and duties of the partners

States basic information such as the business name and the names of the partners, the type of business and business address

The deed will also set out money invested and how profits will be shared

ABC123

Related words:Partnership Sleeping partner Limited liability

Demand


Demand shows the amount of goods or services that a consumer is willing and able to buy at a given price over a period of time. For a normal good as price falls demand will rise and vice versa

Factors affecting demand include price, competitors’ actions, consumer incomes, the success of the firm’s marketing and seasonal factors

ABC123

Related words:Marketing Price Product

Demographic segmentation


Demographic segmentation looks at the social and economic characteristics of customers and subgroups of the population

Market researchers will then attempt to create a clear picture of the type of consumer that will make up these segments

Examples might include age, sex or income

ABC123

Related words:Market segmentation Geographic segmentation

Socio-economic group Demographics

Demographics


Demography is the statistical study of human populations and demographic factors are those that influence these populations

Firms will have to take into account population trends. These include: An increase in the global population size An increase in the average age of UK society Falling EU birth rates

ABC123

Related words:Social factors Demographic segmentation Socio-economic group

Dividends


A percentage of profit paid to a share holder as a reward for their investment

Ordinary shareholders are only paid a dividend if the business can afford it

Higher dividends are paid to ordinary shareholders when the business has performed well

ABC123

Related words:Private limited company Public limited company Shareholders

Profit

Division of labour


Work is broken into small tasks and each employee is given responsibility for a single or limited number of tasks

The employees become specialised in their task(s)

Can be monotonous

Often associated with flow production

ABC123

Related words:Factors of production Specialisation Flow production

Economic factors


The economic environment consists of the key economic factors that influence the behaviour of businesses and their customers. These include: Interest Rates Exchange Rates Inflation Unemployment Economic Growth

ABC123

Related words:Recession Recovery Employment Interest rate Inflation

Exchange rate

Effective service


Customer service involves meeting or exceeding customer expectations

Providing an effective service can be a business objective in its own right

It will also help achieve other objectives such as sales and market share as satisfied customers are likely to return and spread positive word of mouth

ABC123

Related words: Business objectives SMART objectives Survival Profit

Growth Social benefit Sales Market share

Employment


The number of people who are actively engaged in work

Employment creates wealth in the economyIf employment is high more people have jobs

and therefore money which is good for the demand of goods and services

People, of working age, without jobs are classed as unemployed

ABC123

Related words:Economic factors Recession Recovery Interest rate Inflation

Exchange rate

Environmental factors


The variety of factors that impact on the environment due to the operations of organisations

This will include how they impact on: The natural environment – the natural resources that firms exploit

to produce goods and services The built environment – the man-made surroundings that provide

the setting for the production of goods and services

Issues include sources of energy, waste management, the use of eco-friendly products and organic produce

ABC123

Related words:Green consumerism Green working practices Carbon footprint

Corporate social responsibility

Ethical


The moral principles that support the decision making process for an entrepreneur and within the business

Being ethical might mean that a business will have to pay more for its supplies and turn down profitable contracts

However, it can act as a USP helping to attract customers

A business may set an objective of behaving in an ethical way

ABC123

Related words:Business objectives Sustainable Ethical factors

Ethical factors


The variety of factors that impact on the ethical behaviour of organisations

Ethical factors are often influenced by the attitudes of society

Factors include: Treating stakeholders fairly e.g. Employees, suppliers,

customers Respecting the environment Supporting good causes

ABC123

Related words:Carbon footprint Corporate social responsibility Ethical

Exchange rates


The value of a currency in terms of another e.g. £ : $

If a country is experiencing a strong exchange rate e.g. the £ is strong, then imports will be cheap and exports expensive SPICED (strong pound: imports cheaper, exports dearer)

If a country is experiencing a weak exchange rate e.g. the £ is weak, then imports will be expensive and exports cheap WPIDEC (weak pound: imports dearer, exports cheaper)

ABC123

Related words:Economic factors Recession Recovery Employment

Interest rate Inflation

External recruitment


External recruitment occurs when candidates for a position are recruited from outside of the organisation

This increases the talent available and provides new ideas

However, it increases recruitment costs and can upset internal candidates

ABC123

Related words:Recruitment Internal recruitment Advertising

Personal recommendations

Factors of production


The inputs that go into creating goods and services

The four factors of production are: Capital Entrepreneurial skill Land Labour

ABC123

Related words:Job production Batch production Flow production

Fixed costs


Costs to a business that stay the same regardless of output

Fixed costs include rent & rates, salaries and interest payments

Fixed costs are shown as a horizontal line on a breakeven chart

ABC123

Related words:Variable costs Total costs Contribution Contribution per unit

Flotation


The process of becoming a public limited company by issues shares on a stock market

Involves selling of a percentage of the business

Benefits include access to capital and raising the business’ profile

There are also additional responsibilities and costs

ABC123

Related words:Incorporation Shareholders Stock exchange

Public limited company

Flow production


A capital intensive production technique in which items flow along a production line in a continuous process

Suitable for mass production Large scale Identical items

Uses specialist machineryWorkers are each responsible for a small step

along the process, this involves: Specialisation and Division of Labour

ABC123

Related words:Job production Batch production Factors of production

Focus groups


A method of primary market research in which a group of people are asked about their views, opinions and reactions towards an aspect of a business e.g. a product or service, advertisement, idea or packaging

Allows the business to collect detailed feedback

Questions are asked in a group environment where participants are able to share opinions

ABC123

Related words:Market research Primary market research Customer feedback

Friends and family


A potential source of finance for small business

May be a loan which is to be repaid or investment to help a new business cover start-up costs

The money comes from a friend of the entrepreneur or family member

Money available is likely to be limited

ABC123

Related words:Raising finance Sole trader Capital Unlimited liability

Full-time employee


A person who is contracted to work over 30 hours per week for a business

Full-time employees may be more committed towards their jobs and better able to take advantage of training and promotion opportunities

ABC123

Related words:Recruitment Part-time employees Retention

Geographic segmentation


Defines market categories based on where people live e.g. regions, cities or neighbourhoods

People in different geographical areas display different characteristics

Many small businesses and business start-ups will target one geographical area at first and, if successful, expand into other areas

ABC123

Related words:Market segmentation Demographic segmentation

Socio-economic group

Grants


Financial support offered, normally by the Government, to entrepreneurs to ease the costs associated with start-ups

Grants will normally be awarded to help fund a specific project or aspect of start-up

Grants often do not need to be repaid and may be more accessible to not-for-profit or social enterprises

ABC123

Related words:Raising finance Sole trader Capital

Green consumerism


Actions taken by customers to consider ethical and environmental factors when making buying decisions

Actions can be positive e.g. Favouring organic produce or buying fair trade

Or negative e.g. avoiding businesses involved in child labour or with poor environmental records

ABC123

Related words:Green working practices Environmental factors Ethical factors

Green working practices


Actions taken by businesses to behave in an environmental and socially responsible manner

Actions may include: Reducing carbon footprint Recycling waste materials Sustainable energy sources Reduced packaging

ABC123

Related words:Green consumerism Environmental factors Ethical factors

Growth


A business objective often set for the medium to long term

After a business has achieved survival and profit it may then set an objective of growth

Growth can be measured by a number of factors including: Market share Market size Profit Number of employees

ABC123

Related words:Business objectives

SMART objectives Survival ProfitSocial benefit Sales Market share

Effective service

Health and safety


Legislation that looks after the well being (Health &Safety) of employees in the workplace

There are significant costs associated with H&S e.g. safety inspections and training

Accidents in the workplace have been substantially reduced due to H&S Laws

Laws include: 1974 Health and Safety at Work Act; 1981 Health and Safety Regulations;

1996 Health and Safety Regulations

ABC123

Related words:Legislation Working conditions Minimum wage



The function within a business that relates to the management and strategies involved in dealing with individuals that make up the workforce

HRM must ensure that there are enough employees with the required skills to maintain the running of the business on a day to day basis

ABC123

Related words:Recruitment Retention Pay Training Working conditions

Performance management

Incorporation


A business with a separate legal identity from its owners

The business can own assets, have liabilities and make legally binding contracts in its own right

Incorporated businesses include private and public limited companies

Incorporation is the process of becoming incorporated

ABC123

Related words:Private limited company Public limited company Flotation

Limited liability Shareholders

Induction training


Introductory training for employees new to an organisation

It provides staff with information that helps them to settle in and to understand the culture of a firm

However, it will increase initial cost and is often less personal than training from immediate colleagues or supervisors

ABC123

Related words:Training On the job Off the job Human resource management

Inflation


A general rise in prices or a fall in the value of money

There are two main types of inflation:o Cost push – an increase in input prices e.g. raw materials

and wageso Demand pull – an increase in demand allowing firms to

raise pricesThere are two main measurements:

o Retail Price Index (RPI) – a measurement of a ‘basket’ of goods and services representative of what people buy in the UK

o Consumer Price Index (CPI) – similar to RPI but it excludes housing costs. The Government has set a target of 2% for CPI

ABC123


Interest rate Exchange rate

Interest rate


The cost of borrowing or reward for saving money

Banks will charge businesses interest on bank loans and overdrafts

High interest rates may encourage saving and discourage spending

ABC123


Inflation Exchange rate

Internal recruitment


Internal recruitment occurs when candidates for a position are recruited from within the organisation

This will lower recruitment costs, improve promotion prospects and entail a quicker process

However, it reduces talent available and limits the number of applicants available for a position

ABC123

Related words:Recruitment External recruitment Advertising


Internet research


The use of the world wide web to collect primary or secondary data

Secondary sources could include the census for demographic data, company accounts of competitors or market intelligence reports

Primary sources could include social network blogs for customer feedback or online surveys

ABC123

Related words:Market research Secondary market research Demographics

Interview


This entails a question (and answer) session with a candidate, normally using the same questions for each candidate

It is the most commonly used method of selecting an employee for a job

Should be a two way process allowing the candidate to find out about the business and job as well as the employer assessing the suitability of the candidate

ABC123

Related words:Recruitment Advertising Human resource management

Job production


The production of one off items to meet the needs of each individual customer

Cheap and easy to set up, but more expensive to produce

Often a specialist service and therefore may be able to charge a premium price

Time consuming to produce; tend to be labour intensive

Meet specific needs of customers

ABC123

Related words:Batch production Flow production Factors of production

Legislation


Involves creating and enacting laws in order to protect individuals, firms and society as a whole

Laws are passed through UK Acts of Parliament and the UK is also subject to EU law

Legislation affecting businesses includes: Health and Safety Employment Law e.g. Minimum wage Copyright, trademarks and patents

ABC123

Related words:Health and safety Minimum wage Copyright Patent

Trademark

Limited liability


An investor’s liability/financial commitment is limited to the total amount invested or promised in share capital

An investor’s personal belongings (assets) are protected

This is one of the advantages of being a company rather than a sole trader

ABC123

Related words:Private limited company Public limited company

Unlimited liability Asset Incorporation

Logistics


The process of coordinating resources: Moving materials to the right place at the right time

to meet production targets Moving finished goods to the right place at the right

time to meet customer demandsImportant aspect of operational efficiency

both during the production process and at the end to distribute goods

ABC123

Related words:Factors of production Resource control Effective service

Loss


The deficit experienced by a business when total costs exceed total revenue

A firm making a loss is likely to take action to try and reduce this, including raising prices or reducing costs

Loss = Total Revenue – Total Costs (where TR<TC)

ABC123

Related words:Revenue Total costs Profit Break even chart

Loss leader


A pricing tactic that involves selling products at or below the cost of making the product

Loss leaders are commonplace in retailing. The idea is to entice the customer into the store in the hope that they will spend on other, full priced products

Loss leaders are likely to be heavily advertised so that potential customers are aware of the low price

ABC123

Related words:Price Price skimming Penetration pricing Psychological pricing

Market mapping


Plotting the key variables that differentiate products within the market against each other

A variety of market conditions might be represented on the map to identify trends and the relationship between consumers and products e.g. the price of the product versus the quality of the product

This can help a business identify problem areas or gaps in the product range that it produces

ABC123

Related words:Marketing Market segmentation Product portfolio

Market research


The collection, collation and analysis of data and information regarding a particular market

It can include both primary and secondary research

It is very important in order to inform an organisation regarding their marketing mix

ABC123

Related words:Primary market research Secondary market research

Questionnaires Focus groups Survey Supplier feedback Customer feedback

Internet research

Market segmentation


Market segmentation is the splitting of customers into categories in order to identify different types of consumer e.g. by age, gender, location or income

Understanding of market segmentation allows a business to better target its marketing mix to meet the needs of its customers

ABC123

Related words:Geographic segmentation Demographic segmentation


Market share


The proportion of total market sales that a particular firm has

Calculated as: Sales of firm / Total market sales x 100

A business with an objective of growth may take actions to increase market share e.g. increase promotion, change price, improve the product

ABC123

Related words:Business objective SMART objective Marketing

Marketing


The management process that allows a firm to identify, satisfy and revisit the requirements of the customer (normally at a profit)

Marketing involves carrying out market research, designing an integrated marketing mix and reviewing the competitiveness of the business

ABC123

Related words:Market segmentation Market research Marketing mix

Marketing mix


The combination of the 4ps of marketing through which a firm achieves its marketing objectives

The mix is the integration of: Product Price Place Promotion

To be effective a marketing mix must be integrated i.e. each component must complement the others

ABC123

Related words:Product Price Place Promotion

Memorandum of association


A formal document required to form a company and become incorporated

Outlines details of the company’s activities and shareholders

Is registered at Companies’ House

ABC123

Related words:Articles of association

Private limited company Public limited company

Minimum wage


The lowest amount of money a business can legally pay an employee

From October 2012 the minimum wage in the UK is: £6.19 - the main rate for workers aged 21 and over £4.98 - the 18-20 rate £3.68 - the 16-17 rate for workers above school

leaving age but under 18 £2.65 - the apprentice rate, for apprentices under 19

or 19 or over and in the first year of their apprenticeship

Source: http://www.direct.gov.uk

ABC123

Related words:Legislation Pay Retention Working conditions

http://www.direct.gov.uk/

Mortgage


A long term source of finance where the loan is secured against a specific asset such as a house or building

A mortgage is paid back with interest over a set period of time e.g. 25 years

Failure to make payments can result in the secured asset being repossessed by the lender

ABC123

Related words:Raising finance Bank loan Overdraft Capital Interest rate

Net cash flow


The balance of one month’s total cash inflows in relation to that month’s total cash outflows

Cash Inflows – Cash Outflows = Net Cash Flow

Shown on a cash flow forecast and cash flow statement

ABC123

Related words:Cash flow Cash in Cash out Opening balance

Closing balance

Off the job training


Any form of education, to improve an employee’s performance at work, that takes place away from the workplace

Specialists can deliver a higher quality of training for workers

However, this can be expensive

ABC123

Related words:Training On the job Induction training


On the job training


Any form of education, to improve an employee’s performance at work, that takes place within the workplace

This can be cost effective, often being delivered by people from within the organisation

Might not be as good quality as external training but will be specific to the business

ABC123

Related words:Training Induction training Off the job


Opening balance


The opening balance on a cash flow is the amount of money/cash left at the end of the previous period

Opening Balance + Cash Inflows – Cash Outflows = Closing Balance

One month’s closing balance becomes the opening balance of the next period

ABC123

Related words:Cash flow Cash flow statement Net cash flow Closing balance

Overdraft


The facility to borrow money, normally from a bank, in the short term

An overdraft can be used to help short term cash flow problems

Interest is payable on the amount overdrawn

ABC123

Related words:Raising finance Bank loan Capital Closing balance

Interest rate

Partnership


When two or more people join together to set up a business as a partnership

Each partner will contribute towards start up costs and be involved in decision making

Each partner would normally have unlimited liability

ABC123

Related words:Unlimited liability Deed of partnership Sleeping partners

Part-time employee


A person who is contracted to work less than 30 hours per week for a business

Part-time employees can offer greater flexibility to a business and may be a more affordable option for a new business

ABC123

Related words:Human resource management Full-time employees

Working conditions

Patent


A patent grants the holder, an individual or business, the sole right to use unique features of a new product or process

It gives the holder the right to stop others from making, using, importing or selling the innovation or invention without prior permission

ABC123

Related words:Legislation Copyright Trademark Unique selling point

Pay


The monetary reward given to employees in return for their services

Pay can serve to motivate employeesPay can be in the form of a wage or salary

and can also include bonuses, performance related pay or commission

In the UK there is a minimum rate of pay known as the minimum wage

ABC123

Related words:Human resource management Retention Working conditions

Minimum wage

Payments


Any money flowing out of the business to purchase equipment or meet day to day expenses e.g. wages and raw materials

Payments are shown as a cash outflow on a cash flow statement

Payments may be made in cash i.e. at the time of the transaction or on credit i.e. after the transaction

ABC123

Related words:Cash flow Cash flow statements Cash out Credit purchases

Penetration pricing


Setting a low initial price for a new product in order to get a foothold in the market and gain market share

Once the product has been launched and built up a customer base the firm may raise the price

May be a suitable pricing strategy for entering into a mass market

ABC123

Related words:Price Price skimming Loss leader Psychological pricing

Performance management


Activities taken by management to measure how effectively employees are carrying out their duties

Performance management or appraisal takes place to look at the performance of staff over a period of time

Management will review performance against agreed targets

Sometimes pay is partly based on performance (Performance Related Pay) Allows the firm to identify problem areas with staff

and take action to reduce these problemsABC123

Related words:Human resource management Working conditions Pay

Retention

Personal recommendation


A form of recruitment where an existing employee suggests a personal contact for a vacancy

Friends can act as a reference for new employees as they have an insight into the skills or integrity of a potential new recruit

A cheap form of recruitment

ABC123

Related words:Recruitment Internal recruitment External recruitment

Advertising

Place


The component within the marketing mix that defines both the physical location where a product is available as well as the distribution channel it has travelled through, from manufacturer to consumer

Intermediaries (middle men) within the distribution channel include wholesalers and retailers

ABC123

Related words:Marketing mix Wholesaler Retailer

Political factors


The political environment consists of the key political factors that influence the behaviour of businesses and their customers. These include:

The provision of products by the Government Government actions

Regulation Taxation Subsidies

Enlargement of the EU

ABC123

Related words:Economic factors Legislation Environmental factors

Price


The component within the marketing mix that defines the amount of money that is paid for a good or service by the customer

A business may try to compete on price by using tactics such as penetration pricing or loss leader

ABC123

Related words:Loss leader Price skimming Penetration pricing

Psychological pricing Marketing mix

Price skimming


Setting a high initial price for a new product in order to recoup high development costs

When a firm releases a new product it may charge a high price targeting a segment of the market known as ‘early adopters’, once this market has been ‘skimmed off’ the business may lower price

Firms may base their initial promotional campaign around this idea, trying to create a ‘must have’ mentality amongst their target market

ABC123

Related words:Price Loss leader Penetration pricing Psychological pricing

Primary market research


Primary market research (field research) involves the collection of first hand data that did not exist before

Therefore it is original data

It is collected for the specific needs of the business

Examples include questionnaires and focus groups

ABC123

Related words:Market research Secondary market research Questionnaire

Focus group Survey

Private limited company (ltd)


An incorporated business that is owned by shareholders who tend to be family and friends of the entrepreneur (s)

Shareholders in the business have limited liability

The company must have Ltd after its name

ABC123

Related words:Limited liability Public limited company Shareholders

Memorandum of association Articles of association Dividend

Product portfolio


This looks at the range of products and brands that a firm has under its control

A business may analyse its portfolio to help identify where every single one of its products is positioned in the market

Helps inform future marketing decisions

ABC123

Related words:Marketing Product Unique selling point

Product


The component of the marketing mix that looks at the goods and services that a firm provides Goods are physical or tangible products, you can touch

them e.g. a car or a television. Services are unphysical or intangible, they cannot be

touched e.g. financial consultancy or teaching

Firms may try to make their products stand out from the competition by having a unique feature (a USP)

ABC123

Related words:Marketing mix Product portfolio Unique selling point

Profit


The surplus money made by a business when total revenue exceeds total costs

Calculated as: Total Revenue – Total Cost

A firm may attempt to increase profit by: Reducing costs e.g. Find a cheaper supplier Increase revenue e.g. Introduce new promotions or

short term pricing tactics

ABC123

Related words:Business objective Revenue Total cost Loss

Promotion


This is that part of the marketing mix that informs and persuades customers about the product in order to sell that product

A firm will look at its promotional mix in order to increase the sales of its products

Promotion is designed to create Awareness, Interest, Desire and Action (AIDA)

ABC123

Related words:Marketing mix Promotional mix Demand

Promotional mix


The combination of promotional activities that a firm uses in order to create consumer awareness and generate sales

The promotional mix includes: Public Relations Branding Sales Promotions e.g. 3 for 2 Direct Selling Advertising

ABC123

Related words:Marketing mix Promotion Demand

Psychological pricing


A pricing tactic designed to make the consumer think that the product is cheaper than it actually is hence enticing the customer into making a purchase

A common example of psychological pricing is when a firm charges £9.99 rather than £10.00

ABC123

Related words:Price Price skimming Penetration pricing Loss leader

Public limited company (plc)


An incorporated business that is able to sell shares on the stock exchange

Shareholders in the business have limited liability

The business must have a minimum of £50,000 in share capital and ‘plc’ after its name

ABC123

Related words:Limited liability Private limited company Shareholders

Memorandum of association Articles of association Dividend

Quality


Quality means the ability of a product or service to meet customers’ expectations

Customers’ interpretation of quality may be influenced by a number of factors including: Price Brand Customer’s personal expectations and experiences Nature of product or service

ABC123

Related words:Quality control Quality assurance Quality standards

Total quality management

Quality assurance


The checking of a product or service at each stage of its production e.g. as it travels along a production line

Aims to avoid mistakes by getting the product right first time

It is reliant upon self-checking

It can be an expensive process

ABC123

Related words:Quality control Quality Quality standards


Quality control


The checking of a good or service before it is delivered to a customer i.e. at the end of the production process

It normally relies on an inspection process

As the product is only checked at the end it can lead to a high amount of waste

ABC123

Related words:Quality Quality assurance Quality standards


Quality standards


A system of accreditation that a firm can use to show that they have procedures in place to achieve a certain level of quality

The emphasis of the standards is on the implementation of quality processes and procedures

Examples include: ISO9000 Kite marks

ABC123

Related words:Quality control Quality assurance Quality


Questionnaires


A form of primary market research that involves a set of predetermined questions to be answered by the respondent

May include open and closed questions, but primarily closed i.e. choosing from a number of possible answers rather than writing freely

A relatively easy way to collect consumer opinions

ABC123

Related words:Market research Primary market research Survey

Customer feedback

Raising finance


The options available to a business when seeking to raise funds to support start-up or future growth

Finance may take internal or external forms: Internal sources of finance include: Retained profits

that can be ploughed back into the business External sources of finance include: Bank overdrafts

and loans, family and friends, shareholders, government grants

ABC123

Related words:Bank loan Overdraft Mortgage Friends and family Grants

Receipts


Any money flowing into the business from the sale of goods or services or from investments

Receipts are shown as a cash inflow on a cash flow statement

Receipts may be received in cash i.e. at the time of the transaction or on credit i.e. after the transaction

ABC123

Related words:Cash flow Cash flow statement Cash in Credit sales

Recession


• The rate of economic growth starts to fall due to a downturn

• The Government state that recession is officially two quarters of negative economic growth

• Characterised by:o Falling demando Unemployment begins to rise and some firms will go out of

businesso Confidence in the economy is low and most firms will reduce

investment

ABC123

Related words:Economic factors Recovery Employment Interest rate


Recovery


The rate of economic growth starts to rise due to an upturn in economic activity

• Characterised by:o Rising demando Unemployment begins to fallso Confidence in the economy is high and some firms will start

to invest in expansion plans

ABC123

Related words:Economic factors Recession Employment Interest rate


Recruitment


The steps undertaken by a business to identify a vacancy and attract suitable candidates

This can be internal or external recruitment

Effective recruitment is an important aspect of achieving operational efficiency

ABC123

Related words:Internal recruitment External recruitment Advertising


Resource control


The process of ensuring all the factors of production are coordinated effectively to meet operational objectives

Resources include: Labour Equipment Land Stock

ABC123

Related words:Logistics Assets Human resource management

Factors of production

Retailer


An organisation that sells goods or services to the general public or end user

Retailers are at the end of the channel of distribution

They can act as an intermediary between producers, wholesalers and the consumer

ABC123

Related words:Marketing mix Place Wholesaler

Retention


The ability to keep workers

High retention means that there is an established workforce who are staying with the business for a long period of time

Because labour turnover is low this saves on recruitment and training costs

ABC123

Related words:Human resource management Recruitment Pay

Working conditions Performance management

Revenues


The money coming into a business from the sale of goods or services

Calculated as: Selling price x quantity sold

For a business to make a profit total revenue must be higher than total costs

ABC123

Related words:Total costs Profit Loss Break even point Break even charts

Sales


The process of selling goods and services to customers in exchange for money

Sales generate revenue for a businessA business may set an objective to achieve ‘x’

amount of sales within ‘y’ amount of timeIndividuals within a business may also be set

sales targets

ABC123

Related words:Business objectives SMART objectives Survival Profit

Growth Social benefit Market share Effective service

Secondary market research


Secondary market research (desk research) is research that has already been undertaken by another organisation and therefore already exists

It may not meet the exact needs of the business but is often more comprehensive than small scale primary research

Examples include business accounts, market intelligence reports and census figures

ABC123

Related words:Market research Primary market research Internet research

Shareholders


Investors who are part owners of a company

Shareholders will receive a dividend, a share of the profit, in return for their investment

Shareholders have a voting right proportional to the number of shares held

Liability is limited to the sum invested

ABC123

Related words:Limited liability Private limited company Public limited company

Dividend

Sleeping partners


A person who has invested in a partnership but is not involved in the day to day running of it

May still be involved in major decisions and will enjoy a share of the profits

ABC123

Related words:Partnership Deed of partnership Capital

SMART objectives


An acronym used to frame the goals of a business

Smart objectives will be: Specific – clearly set out so employees understand

what the objective is Measureable – to know when the objective is achieved Achievable – a belief that objectives are attainable Realistic – employees should be able to carry out tasks

to meet the objective Time-based – setting a target date

ABC123

Related words:Business objectives Survival Profit Growth

Social benefit Sales Market share Effective service

Social benefit


An objective to provide support for a good cause

This may include: Charity Community Research

A social enterprise will use all profits for social benefit

A profit orientated business may have an objective of supporting a social benefit

ABC123

Related words:Business objectives SMART objectives Survival Profit

Growth Sales Market share Effective service

Social factors


Changes to the characteristics and attitudes of society over time

A business should be aware of trends in social factors and be able to change the composition of its marketing mix in order to meet the needs of a changing market

Possible changes resulting from social trends include: Ethical trading Sourcing of sustainable materials Demographics Reduction/recycling of packaging Online retailing Retailer purchasing power ABC123

Related words:Demographics

Demographic segmentation Socio-economic group



A way of dividing the population into groups based on the income of the head of the household. This is used for market research purposes A – Higher managerial e.g. company directors B – Intermediate managerial e.g. bank manager C2 – Supervisory and junior management D – Skilled manual e.g. plumbers, electricians etc. E – Dependent on the state e.g. unemployed,

pensioners etc. A way of targeting a market segment based on people’s

lifestyle

ABC123

Related words:Market segmentation Demographic segmentation

Geographic segmentation

Sole trader


An individual who owns and runs their own business

A sole trader has unlimited liability and is therefore responsible for all the debts of the business

A sole trader is unincorporated i.e. The sole trader and the business have the same legal identity

ABC123

Related words:Unlimited liability Capital Asset Debt Friends and family

Specialisation


An employee, as a result of division of labour, performs a single or limited number of tasks in which they become experts/specialists

Can result in greater efficiency and hence lower the cost of production

Often associated with flow production

ABC123

Related words:Factors of production Division of labour Flow production

Stock exchange


The place where shares of companies can be traded, provides a market place for brokers and traders

When a business becomes a PLC it floats its shares on the stock exchange

ABC123

Related words:Public limited company Incorporation Flotation Shareholders

Supplier feedback


A form of primary market research that involves gathering data from a supplier of goods and services

This may be a retailer, for example, who has dealt directly with the public and can feed back to the manufacturer

ABC123

Related words:Market research Primary market research Customer feedback

Survey


A form of primary market research that involves a set of predetermined questions to be answered by the respondent

Normally questions are short and closedOften provides respondents with options to

choose fromSurveys can be:

Postal Telephone Face–to-face On-line

ABC123

Related words:Market research

Primary market research Questionnaire

Customer feedback

Survival


Business objectives focussed on ensuring that a business maintains operations

This is the most important objective for a start-up business

In order to survive a business must maintain a positive cash flow

In the short term a business can survive if making a loss as long as it has a positive cash flow

ABC123

Related words:Business objectives SMART objectives Profit Growth

Social benefit Sales Market share Effective service

Sustainable


A business objective of behaving in an environmentally and socially responsible manner will include an objective of using sustainable resources i.e. those that will be available for a continued period of time

Sustainable actions are linked to green working practises, for example, this may include using wind or solar power

ABC123

Related words:Business objectives Environmental factors Green consumerism

Ethical factors

Technological factors


The technological environment consists of the key technological factors that influence the behaviour of businesses and their customers

Technological change will impact on: Marketing opportunities The culture of the business The processes and systems used within the business

Organisations must take into account changes in technology if they are to remain competitive

ABC123

Related words:Social factors Flow production Training

Total costs


All of the costs associated with the provision of a good or service

Total Costs = Fixed Costs + Variable Costs

In order for a business to achieve a profit total revenue must be higher than total costs

ABC123

Related words:Variable costs Fixed costs Contribution Contribution per unit

Revenue Break even chart Break even point



TQM is a quality assurance system in which each employee is a link in the chain and treats the next link as if they were an external customer

TQM sees quality as the responsibility of all employees

ABC123

Related words:Quality Quality assurance Quality standards Resource control

Training

Trade marks


A trademark protects a feature that distinguishes your business from others. It might include: Words Pictures Logos Colours or shapes

It can be used as a marketing tool so that customers can recognise your business and helps build brand loyalty

ABC123

Related words:Legislation Patents Copyright

Training


The process of equipping employees with the skills and knowledge necessary to carry out their job effectively

Types of training include induction, off-the-job and on-the-job

ABC123

Related words:Induction training On the job Off the job


Unique selling point


A USP is something that distinguishes a firm’s product from those of its competitors

Firms try to make their product different to the competition by adapting the actual product in some way or by distinguishing the product through advertising and branding

This is known as product differentiation

ABC123

Related words:Marketing Product Product portfolio Patent

Unlimited liability


The owners of a business are responsible for the total amount of debt of the business

The owner may lose their personal belongings if the value of these is needed to cover the debts of the business

Personal belongings could include car and house

ABC123

Related words:Limited liability Sole trader Partnership Asset Debt

Variable costs


Costs to a business that change in relation to output

Variable costs include materials, wages and distribution

Variable costs are shown as a diagonal line from the origin on a break even chart

ABC123

Related words:Fixed costs Total costs Contribution Contribution per unit

Wholesaler


Wholesalers buy large quantities of supplies from producers and sell them on in smaller quantities

They act as an intermediary (middle man) between manufacturers and retailers and consumers in the distribution channels

ABC123

Related words:Marketing Place Retailer

Working conditions


The characteristics of the environment in which employees work and the way in which they are treated by the employer

Conditions will include: physical considerations e.g. facilities monetary rewards e.g. pay management styles training opportunities

ABC123

Related words:Pay Retention Training Human resource management

interactive glossary of key terms ro61: introduction to business cambridge national in business and...

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