Unit 1 Definitions
Enterprise; the ability to handle uncertainty and deal effectively with change.
Entrepreneur; someone who starts and runs a business and has responsibility for the risks involved. The entrepreneur must be able to organise the four factors of production; land ,labour, capital, profit.
Opportunity Cost; the cost of an activity expressed in terms of the next best alternative forgone whenever a choice is made.
Government grants; sums of money given to a business for a specific purpose of project. They often contribute to the costs of the project rather than pay for the whole thing.
Franchise; where a successful business sells to another entrepreneur the right to use their business name, image and logo, in return a fee and or a percentage of future profits. The franchisor pays for all advertising, materials and supplies and the operations manual for operating the business. The franchisee cannot deviate from the model provided.
Copyright; the protection given to books, plays, films and music.
Patent; an exclusive right to use a process or produce a product, usually for a fixed period of time, up to 20 years.
Trade mark; a word, image, sound or smell that enables a business to differentiate itself from its competitors.
Input; something that contributes to the production of a product or service.
Output; Something that occurs as a result of the transformation of business inputs.
Added value; the difference in value between the price of the finished product and the cost of materials.
Primary market research; original data collected by the entrepreneur or paid to be collected, which does not already exist.
Secondary market research; data already in existence that has not been collected specifically for the purposes of the entrepreneur.
Random sample; one in which each potential member of a population has an equal chance of being in the sample.
Quota sample; this is not random, as not everyone has an equal chance of being in it, and the results cannot be used to predict the behaviour of everyone.
Quantitative data; data in numerical form usually collected from large scale research in order to generate statistically more reliable results.
Qualitative data; data about opinions, feelings, attitudes and emotions. It is usually expressed as why people behave as they do.
Local market; customers are only a short distance away.
National market; a market where customers are spread through out the country, over a geographically large area.
Electronic market; the market has a virtual presence via the internet.
Market segmentation; the technique of dividing the a market into smaller parts each with similar characteristics.
Market share; the proportion of a total market held by one firm or product.
Market growth; the measurement of the change in market size, usually expressed as a percentage of its original size.
Market size; the measurement of the size of total sales for a whole market expressed either as the VALUE of sales (in currency) or the VOLUME of sales (in units).
Unlimited liability; a feature of unincorporated businesses where the owners are personally liable for all debts incurred by the business. All sole traders and most partnerships have unlimited liability.
Limited liability; a feature of incorporated businesses such as private and public limited companies which means that the owners liability for the business debts are limited to only the amount they have invested in the business.
Divorce of ownership and control; a situation where the owners (shareholders) are not the same people as those controlling (managers) the business on a day-to-day basis.
Overdraft; a temporary arrangement which allows the business to draw out more money than is in its account, up to an agreed limit.
Loan; a good source of finance for assets such as machinery and equipment and other start-up costs.
Incorporated; the process of forming a limited company. The process involves creating a separate legal identity for the business, and the creation of shares, or equity.
Venture capitalist; usually a professional investor, often another company, interested in high growth who will invest in a business in return for equity (shares) and an expectation of a high return. Venture capitalists are interested in amount over £250,000 .
Business angel; a wealthy entrepreneurial individual willing to invest in a small high risk business with high growth potential in return for an expected high return.
Stakeholder; an individual or group with an interest in a business. Stakeholders include employees, managers, shareholders, customers, suppliers and competitors.
Temporary employee; one who is employed for a fixed period of time, often seasonal workers and may work full of part time. They rarely have the same benefits as permanent staff.
Consultants; businesses or individuals who provide professional advice or services for a fee.
Profit; What is left after costs have been deducted from revenue.
Profit = total revenue – total costs.
Costs; these are expenditures made by a business as part of its trading operations.
Revenue; the value of sales made during a trading period.
Total revenue = selling price X number sold.
Fixed costs; costs that do not change with the level of output. Often called indirect or overhead costs.
Variable costs; costs that change directly with the level of output.
Total costs; fixed costs + variable costs.
Contribution; the difference between the sales revenue and the variable costs of production.
Contribution per unit; the difference between the selling price per unit and the variable cost per unit.contribution X no. of units sold.
Break-even level of output; the level of output that earns enough revenue to cover the total costs of production.
Margin of safety; the amount by which the existing level of output is greater than the break-even point.
Cash flow; the total cash payments into a business minus the total out flow.
Liquidation; turning assets into cash. This may be forced on the business by the courts if suppliers have not been paid.
Insolvent; when a business cannot meet its short-term debts.
Cash inflows; Payments in cash received by a business such as those from customers or from the bank via a loan.
Cash-outflows; payments in cash made by a business such as those to suppliers.
Debtors; customer who have bought goods on credit and will pay cash at an agreed date in the future.
Credit sales; the value of goods sold to customers who do not pay cash immediately.
Cash-flow forecast; an estimate of the firms future cash inflows and outflows.
Net monthly cash flow; the estimated difference between the monthly cash inflows and outflows.
Opening Balance; cash held by the business at the start of the month.
Closing Balance; cash held by the business at the end of the month- (becomes next months opening balance).
Budgets; financial targets for the future covering revenue and expenditure over a certain time period.
Expenditure budget; a fixed sum of money to be spent in a given time period.
Budget holder; a person who is accountable for seeing that a budget is kept to.
Income budget; the sales revenue target for a department or the whole business.
Delegated budget; given some control in the setting and spending of budgets to departments or individuals.
Profit budget; the target profit for the business over a given period of time.
Monitoring budgets; keeping a check on progress towards achieving targets during the budget period.
Business Objectives; clearly defined targets for a business to achieve over a certain period.
Unit 2 Definitions
Finance;
- Variance The difference between the budgeted figure and the actual figure achieved.
- Variance analysis; The comparison by a business of its actual performance against its budgeted performance over a certain time period.
- Favourable variance; the change from the budgeted figure that leads to higher than expected profits.
- Adverse variance; the change from the budgeted figure that leads to a lower than expected profits.
- Creditors; suppliers owed money by the business- purchases that have been made on credit.
- Credit control; the monitoring of debts to ensure that the credit periods are not exceeded.
- Bad debts; unpaid customer bills that are likely to be never paid.
- Overtrading; expanding a business too rapidly without obtaining all the necessary finance so that a cash flow shortage develops.
- Profit margin; the profit made as a proportion of the sales revenue.
- Gross profit; sales revenue minus variable costs.
- Net profit; Sales revenue minus total costs.
- Return on Capital; the proportion that net profit is of the capital invested in a business or project.
People;
Organisational structures; the way the jobs, responsibilities and power within a business are organised.
Organisational chart; a diagram showing the job titles, lines of communication and responsibility within a business.
Levels of Hierarchy; the number of layers of management and supervision existing within a business.
Chain of Command; the lines of authority within a business.
Lines of Communication; how information is passed up or down and across an organisation.
Span of Control; the number of subordinates, one job/ post holder is responsible for.
Work load; how much work one employee, department or team have to complete in a given period of time.
Job Role; The jobs involved in a particular job.
Delegation; passing the authority to make specific decisions to somebody further down the organisational hierarchy.
Communication flows; how information is passed around an organisation informally.
Workforce Role; The tasks involved in a particular level or grade of job within an organisation.
Workforce performance; methods of measuring the effectiveness of employee including labour productivity, staff turnover and absenteeism.
Labour Turnover; percentage of the total workforce who leave in any given time period.
Labour productivity; output per worker per hour
Absenteeism; the number of working days lost as a result of an employees deliberate or habitual absence from work.
Recruitment and Selection Process; how a business chooses the best candidate for a vacancy it has identified.
Job Description; a summary of the main duties and responsibilities associated with a job.
Person Specification; identifies the skills, knowledge and experience a successful applicant is likely to have.
Internal Recruitment; candidates from inside the business.
External recruitment; candidates from outside the organisation.
Training; giving employees the knowledge, skills and techniques necessary to fulfil the requirements of a job.
Induction Training; is given as an initial preparation upon taking up a post.
Off-the-job Training; away from the place of work. eg at a training college.
On-job-training; learning by doing the job under the guidance of an experienced member of staff.
Motivation; the factors that inspire an employee to complete a task at work.
Empowerment; giving employees the power to do their jobs by giving them trust and authority to make decisions.
Job rotation; varying an employee’s job on a regular basis.
Job enlargement; expanding the number of tasks completed by an employee.
Job Enrichment; increasing the level of responsibility within a job to make it more challenging and rewarding.
Operations Management
Operational targets; these are specific and usually measurable objectives set for each operations activity of a business.
Capacity; The maximum output that a firm can produce with the existing resources.
Capacity Utilisation; the proportion of maximum output that is currently being used expressed as a percentage.
Unit Cost; the average cost per unit.
Excess capacity; when a business has greater production capacity than is required in the foreseeable future.
Overtime; staff working beyond their contracted hours (usually 8 hrs per day) in exchange for a higher hourly wage.
Temporary staff; workers employed for a fixed time period after which the employment contract may not be renewed.
Part-time staff; workers employed on a less than full weekly hours contract (40hrs), say 15 hrs per week.
Sub-Contracting; using a supplier to manufacture part or all of a firm’s product or service.
Stocks; materials or finished goods held by a firm as needed to supply customers demand.
Rationalisation; reorganising resources to cut costs- often leading to a cut back in capacity by selling off surplus.
Quality;
Quality product; a product or service that meets the customer’s expectations.
Quality standards; the expectations of customers expressed in terms of the minimum acceptable production or service standards.
Quality Control; this system assumes faults will occur and then inspects goods produced, or a sample of goods to identify faults.
Quality Assurance; This is a system based on prevention where each worker inspects their own production so that no faults develop.
ISO 9000; an internationally recognised certificate that acknowledges the existence of quality procedures within a business that meet specific conditions or standards.
Total Quality Management; (TQM) an approach to quality that aims to involve all employees in the quality improvement process.
Customer Service; The provision of service to customers before, during and after purchase to the standard that meets customer expectations.
Supplier relationships; these are links with the firms that supply a business with goods and services.
Information Technology; the use of electronic technology to gather, store, process and communicate information.
Robot; computer controlled machine able to perform a physical task.
Supply Chain; all the stages in the production process from obtaining raw materials to selling to the consumer.
Sustainability; Production systems that prevent waste by using the minimum of non-renewable resources so that present levels of production can be maintained in the future.
Marketing;
Marketing; identifying and meeting customer needs.
Niche-marketing; meeting the needs of a relatively small number of potential customers.
Market; anyone with the financial ability to buy a product or service.
Mass marketing; meeting the needs of a very large number of potential customers.
Business Marketing; serving the needs of a business to business.
Consumer marketing; creating and delivering products to solve consumer’s needs.
Marketing Mix; the integration of product, place, price and promotion designed to achieve the marketing objectives of the business.
Product development; Changing elements of the goods or service to meet the changing needs of existing customers or to target a different market.
Product mix; The range of products provided by a business. Also known as the product portfolio
Unique selling point; (USP), A feature or function in the design of a product or service which differentiates it from its competitors.
Product differentiation; creating a perceived difference for a product in a competitive market.
Product Portfolio analysis; analysing the existing product mix to help develop a range of goods an services.
Boston matrix; a method of analysing the performance of a firm’s products based on relative market share and market growth.
Product life Cycle; the path of a product from its introduction to its removal from the market expressed in terms of sales revenue against time.
Promotion; bringing a product to the attention of existing or new customers.
Sales Promotion; Offers designed to increase sales.
Direct selling; A way of selling directly to the final consumer without an intermediary.
Merchandising; the visual presentation of a product to the consumer at the point of sale.
Advertising; the use of media to communicate with customers.
Public relations; communicating with the media and other interested parties to improve the image of the business and its’ products.
Branding; Creating an identity for a business and it’s products to differentiate it from competitors.
Pricing Strategies; long-term pricing plans which take into account the objectives of the business and the value associated with the product.
Price Skimming; entering a market with a high price to attract early buyers and recoup high development costs.
Penetration pricing; below market pricing to gain entry to an established market.
Price Leader; a product that has significant market share and therefore can influence the market price.
Price Taker; a firm which sets it’s prices at the same level as those of the dominant firm in the industry.
Pricing Tactics; the manipulation of price to achieve short term targets.
Loss Leaders; products sold at less than cost to attract customers to the product range.
Psychological pricing; the use of odd number pricing to increase the value-for-money appeal of a product. Eg £4.99.
Price Elasticity of demand; the responsiveness of the quantity demanded to a change in price.
Price inelastic demand; when the % change in the quantity demanded is less than the % change in price.
Price elastic demand. When the % change in quantity demanded is greater than the % change in price.
Distribution channel; method by which the product is sold.
Direct sale; where no intermediates are used in the selling process.
Intermediaries; businesses involved in the distribution of goods and services on behalf of other businesses.
Business -to -Business markets; firms meeting the needs of other firms.
Business to consumer markets; where the firm meets the needs of final consumers.
Degree of competition; the number and size of competitors existing in a given market, be it local, national or international.
Market Conditions; the nature of
the product, the needs of consumers, the number of competitors and the ease of entry into the market.
Competitiveness; characteristics that permit a firm to compete effectively with other businesses.
Competitive advantage; discovering and using the methods of competing which are distinct and offer consumers greater perceived value than those of competitors.
Government grants; sums of money given to a business for a specific purpose of project. They often contribute to the costs of the project rather than pay for the whole thing.
Franchise; where a successful business sells to another entrepreneur the right to use their business name, image and logo, in return a fee and or a percentage of future profits. The franchisor pays for all advertising, materials and supplies and the operations manual for operating the business. The franchisee cannot deviate from the model provided.
Copyright; the protection given to books, plays, films and music.
Patent; an exclusive right to use a process or produce a product, usually for a fixed period of time, up to 20 years.
Trade mark; a word, image, sound or smell that enables a business to differentiate itself from its competitors.
Input; something that contributes to the production of a product or service.
Output; Something that occurs as a result of the transformation of business inputs.
Added value; the difference in value between the price of the finished product and the cost of materials.
Primary market research; original data collected by the entrepreneur or paid to be collected, which does not already exist.
Secondary market research; data already in existence that has not been collected specifically for the purposes of the entrepreneur.
Random sample; one in which each potential member of a population has an equal chance of being in the sample.
Quota sample; this is not random, as not everyone has an equal chance of being in it, and the results cannot be used to predict the behaviour of everyone.
Quantitative data; data in numerical form usually collected from large scale research in order to generate statistically more reliable results.
Qualitative data; data about opinions, feelings, attitudes and emotions. It is usually expressed as why people behave as they do.
Local market; customers are only a short distance away.
National market; a market where customers are spread through out the country, over a geographically large area.
Electronic market; the market has a virtual presence via the internet.
Market segmentation; the technique of dividing the a market into smaller parts each with similar characteristics.
Market share; the proportion of a total market held by one firm or product.
Market growth; the measurement of the change in market size, usually expressed as a percentage of its original size.
Market size; the measurement of the size of total sales for a whole market expressed either as the VALUE of sales (in currency) or the VOLUME of sales (in units).
Unlimited liability; a feature of unincorporated businesses where the owners are personally liable for all debts incurred by the business. All sole traders and most partnerships have unlimited liability.
Limited liability; a feature of incorporated businesses such as private and public limited companies which means that the owners liability for the business debts are limited to only the amount they have invested in the business.
Divorce of ownership and control; a situation where the owners (shareholders) are not the same people as those controlling (managers) the business on a day-to-day basis.
Overdraft; a temporary arrangement which allows the business to draw out more money than is in its account, up to an agreed limit.
Loan; a good source of finance for assets such as machinery and equipment and other start-up costs.
Incorporated; the process of forming a limited company. The process involves creating a separate legal identity for the business, and the creation of shares, or equity.
Venture capitalist; usually a professional investor, often another company, interested in high growth who will invest in a business in return for equity (shares) and an expectation of a high return. Venture capitalists are interested in amount over £250,000 .
Business angel; a wealthy entrepreneurial individual willing to invest in a small high risk business with high growth potential in return for an expected high return.
Stakeholder; an individual or group with an interest in a business. Stakeholders include employees, managers, shareholders, customers, suppliers and competitors.
Temporary employee; one who is employed for a fixed period of time, often seasonal workers and may work full of part time. They rarely have the same benefits as permanent staff.
Consultants; businesses or individuals who provide professional advice or services for a fee.
Profit; What is left after costs have been deducted from revenue.
Profit = total revenue – total costs.
Costs; these are expenditures made by a business as part of its trading operations.
Revenue; the value of sales made during a trading period.
Total revenue = selling price X number sold.
Fixed costs; costs that do not change with the level of output. Often called indirect or overhead costs.
Variable costs; costs that change directly with the level of output.
Total costs; fixed costs + variable costs.
Contribution; the difference between the sales revenue and the variable costs of production.
Contribution per unit; the difference between the selling price per unit and the variable cost per unit.contribution X no. of units sold.
Break-even level of output; the level of output that earns enough revenue to cover the total costs of production.
Margin of safety; the amount by which the existing level of output is greater than the break-even point.
Cash flow; the total cash payments into a business minus the total out flow.
Liquidation; turning assets into cash. This may be forced on the business by the courts if suppliers have not been paid.
Insolvent; when a business cannot meet its short-term debts.
Cash inflows; Payments in cash received by a business such as those from customers or from the bank via a loan.
Cash-outflows; payments in cash made by a business such as those to suppliers.
Debtors; customer who have bought goods on credit and will pay cash at an agreed date in the future.
Credit sales; the value of goods sold to customers who do not pay cash immediately.
Cash-flow forecast; an estimate of the firms future cash inflows and outflows.
Net monthly cash flow; the estimated difference between the monthly cash inflows and outflows.
Opening Balance; cash held by the business at the start of the month.
Closing Balance; cash held by the business at the end of the month- (becomes next months opening balance).
Budgets; financial targets for the future covering revenue and expenditure over a certain time period.
Expenditure budget; a fixed sum of money to be spent in a given time period.
Budget holder; a person who is accountable for seeing that a budget is kept to.
Income budget; the sales revenue target for a department or the whole business.
Delegated budget; given some control in the setting and spending of budgets to departments or individuals.
Profit budget; the target profit for the business over a given period of time.
Monitoring budgets; keeping a check on progress towards achieving targets during the budget period.
Business Objectives; clearly defined targets for a business to achieve over a certain period.