IB Business & Management Glossary
Terms in this set (575)
Above the line promotion
Promotion that is carried out through independent media that enable a firm to reach a wide audience easily. These might include newspapers and television.
A theorist who classified the needs of employees of a firm into a series of levels - a hierarchy of needs: Physiological - Safety - Love/belonging - Esteem - Self-actualization.
Absorption cost pricing
"A good is priced according to the proportion of direct and indirect costs used in the production of the good. The production of the good is costed using absorption costing and then priced accordingly. For example, labour expenses may be split according to the number of people working on the production of each good."
"A method of costing where all the fixed costs (overheads) generated by the production of the good are 'absorbed' into an individual cost centre. For example, labour expenses may be split according to the number of people working on the production of each good."
Acid test ratio
Current assets minus stock divided by current liabilities.
Ratios that measure how efficiently a business is using the resources that it has. The most common are stock turnover and the debtor days ratio.
The difference between the price of the good or service and the total cost of the inputs that went into making it.
"A way of trying to increase the level of demand for a good or service, by making its availability known to consumers. It can be either informative or persuasive and the aim is to shift the demand curve to the right."
The process where workers become dissatisfied with the work they are doing. This is particularly likely where the tasks are monotonous in nature.
The process of writing off the value of an intangible asset in the balance sheet of the firm.
Ancillary firms are firms which provide goods and services for other firms. In other words suppliers to other firms.
Annual General Meeting
The annual meeting for the shareholders to have their say in the running of the company and their opportunity to vote for the Board of Directors.
"A Matrix looking at growth potential of a firms products. It classifies strategies into market penetration, new product development, market development and diversification and measures the degree of risk associated with each strategy."
An increase in the value of an asset.
The final part of the profit and loss account. The section of the profit and loss account that shows how the profit is distributed between the firm and shareholders.
The process of buying a firm with the intention of splitting all the assets up and selling them. It is most likely where the value of the assets is greater than the market value of the firm.
Something which a person or firm owns that is of value. Split into fixed and current.
The process of checking the financial statements of a firm to see that they give a 'true and fair' view of the state of the company's finances.
A form of leadership where the leader makes decisions and sets objectives independently of the others in the firm without involving them in the decision making process.
The amount spent on producing each unit of output. Calculated by dividing the total cost by the level of output.
Average cost pricing
A method of pricing where the firm finds the unit cost of the product and then sets their price by adding a mark-up.
Total earnings divided by those in employment. Usually expressed as an index.
Average rate of return
A technique used for looking at the viability of an investment project. The average annual profit less the capital cost divided by the capital cost expressed as a percentage.
Total revenue divided by the level of output.
A situation when a company merges with or takes over a firm at an earlier stage of the chain of production.
Balance of payments
A record of transactions between a country and their overseas trading partners.
A financial snapshot of the firm's financial situation at a given moment in time (usually the firm's year-end).
"A situation where a firms is unable to meet its liabilities, The process can be started by a creditor who can get a court petition."
Barriers to entry
"Barriers that prevent new firms joining into a market. They may be technical, legal, cost (or investment) barriers or barriers that arise from strong branding of the product."
"A method of production where a limited number of identical goods are produced, often for a specific order."
Below the line promotion
"Promotion over which the firm has direct control. It includes methods like direct mailing, exhibitions and trade fairs and sales promotions."
A technique used by businesses to try to identify the best practice for production being used in the industry so that they can adopt this method as standard practice for themselves within their own firm.
The value of assets on the balance sheet. It is the value of assets (generally fixed assets) that the firm has after any depreciation of those assets has been deducted.
A technique that is used by firms to help them analyse their overall product portfolio and product mix. A grid with market growth and market share on the two axes.
A technique that is used by firms to help them analyse their overall product portfolio and product mix. A grid with market growth and market share on the two axes.
The actual profit or return that a firm makes on the goods and services it produces.
The name given by the firm to its product or service.
The process of strengthening and developing the brand name of the good or service that the firm is producing to boost demand for it.
The impression that consumers have about a particular brand of a good or service.
A situation where consumers stick with the purchase of their favourite brand of a particular good or service through choice as they prefer that particular variety.
The process of developing brand names for a good or service.
"Shows the movement of the economy over time, through periods of boom and slump. The fluctuations in the rate of economic growth that take place."
The level of output where the firm's revenues are equal to their costs. Below this point the firm will be making a loss and above it revenue will be greater than costs and they will be making a profit.
A diagram showing the total revenue and the total cost curves for a business and the level of output where the firm is making neither a profit nor a loss. Below this level of output the firm will be making a loss and above it revenue will be greater than costs and they will be making a profit.
A situation where the firm will make neither a loss nor a profit. The price will be set equal to the unit cost of production of the good or service.
A plan which the firm aims to achieve.
A situation where the level of spending by the government (public expenditure) is greater than the level of revenue they receive from taxation.
A situation where the level of spending by the government (public expenditure) is less than the level of revenue they receive from taxation.
Buying economies of scale
A situation where a firm is able to gain from lower average costs at higher levels of output because of the market power they have. An example would be the buying power that supermarkets have over their suppliers.
A measure of the maximum amount a firm can produce with the inputs they have.
One of the four factors of production (an input into the production process) and refers to man made resources.
The total amount of capital that the firm has and is using to produce their goods and services. It is the total figure on the balance sheet.
"Expenditure by firms on machinery, equipment and buildings. This type of spending is also known as investment."
A production technique is one that uses a high proportion of capital to labour.
"A situation where a group of firms act together to fix price, output or conditions of sale."
"One of the current assets of the firm. When added to stocks and debtors, it gives total current assets."
A term given to a product that produces significant revenue because it has a large share of an existing market which is only expanding slowly. One of the four product types in the Boston Matrix.
Cash flow forecast
A projection of what a company expects its cash inflows (revenue from sales) and cash outflows (payments for wages and other expenses) to be over a period of time.
A form of production where a team of employees take responsibility for a major part of the total production process. They carry out a range of different tasks and this can help to ensure that quality is maintained.
Chain of command
The way in which orders are passed down through the business. In other words it is the way in which the authority in the business is organised.
Chain of distribution
The method used by a firm to get the good or service they have produced to the consumer. It is the route the good or service takes to get to the consumer.
Chain of production
"The different stages of making, distributing and selling a good or service from the initial production of parts, through to the final product through to distribution and sale of the product."
The head of the board of directors of the firm. They chair the meetings of the board and are responsible (along with the other directors) to shareholders for running the business in the interests of the shareholders.
Channels of communication
"The methods or routes used to convey information from one person or area of the firm to others. May be downward to pass information to employees about decisions that have been made, or upwards to pass information up through the chain of command to help decision makers."
Channels of distribution
The routes used by the firm to get the good or service they have produced to the consumer. This may involve physical distribution of the good or service to retailers or perhaps distribution through the Internet.
A situation where anyone employed in a particular firm or plant has to belong to a union.
"A form of business organisation where all the members of the firm have equal voting rights and a say in how it is managed. The members may be the workers, the producers or the customers."
Where firms co-operate to try to influence the outcome in a market for their benefit. e.g. agreements between firms to restrict competition.
"A customs union which allows the free movement of capital, labour and other factors of production between member states e.g. The European Union"
Competition based pricing
A pricing method where the price charged by competitors is the main determinant of an individual firm's own decision on price. They will price to ensure they are competitive against the other firms.
A situation where a firm has lower costs than their competitors and so can sell at a lower price or make a bigger profit at the same price. The firm may have developed a new product or feature for a product that gives the firm an edge over their rivals.
"Markets where there is a high level of competition and therefore where there are few barriers to entry and exit, making it easy for firms to set up and join the market."
"Two goods consumed at the same time e.g. strawberries and cream, or CD and CD players."
Computer aided design
The process where computer hardware and software is used to help with the design process.
"A measure of the proportion of a market accounted for by, say, the five largest firms (in other words the market share of the firms). A measure of the competitive conditions in the market."
A merger between two firms who are in a different line of business. The main motive is likely to be growth through diversification.
Spending by consumers on goods and services.
Goods purchased and used by households.
Attachment by consumers to particular goods and services (also known as brand loyalty).
Expenditure by households on the goods and services they want to satisfy their wants.
Contract of employment
A written legal document setting out the terms and conditions of employment. Agreed between an employee and an employer.
The difference between the price charged and the variable costs of production of the good.
A method of pricing where the price charged is based on the variable costs of production.
"The legal protection of a piece of literary, musical or artistic work."
The values that are central to the ethos of the company. These values form the basis of the decision-making process of the firm.
Business taxation that is generally charged as a percentage of their profits.
Cost based pricing
A method of pricing where the firm adds a percentage mark-up to its costs to determine the price they are going to charge for their products.
"An area or division of a firm to which specific costs can be allocated. They help firms to monitor costs and ensure they are minimised. They may be geographically determined (different factories or plants), or based around individual people or teams."
A curve plotting costs against output.
Cost plus pricing
A method of pricing where the firm adds a percentage mark-up to its costs to determine the price they are going to charge for their products. They set prices by adding the profit margin they want (or feel the market can bear) to average cost.
Costs of production
The total costs that arise from producing a good or service. They are made up of fixed costs and variable costs (or direct and indirect costs) and the sum of these is the total cost.
The process of control over payments coming into and going out of the firm. It is mainly concerned with the firm's creditors (people who the firm owes money to) and the firm's debtors (people who owe money to the firm).
"A document given to a customer when they have returned goods, or reduced the quantity of an order or overpaid for the goods they have received."
The minimum size that a market or industry needs to be in order to be efficient and to minimise the unit cost of production.
Critical path analysis
"A technique used by firms to identify the most efficient method of carrying out production or a part of production. The process involves identifying all the operations required, how long they will take and which operations are dependent on each other."
"Short-term assets that can be converted into cash within a year. The main types shown on a firm's balance sheet are stock, debtors and cash."
Short-term debts of a firm that must be repaid within a year. They will include creditors (people who the firm owe money to) and short-term loans or perhaps overdrafts.
A ratio that shows how easily a business can meet its short-term financial commitments. It is calculated by dividing the level of current assets by the level of current liabilities.
The process of making certain that you aim to discover exactly what it is that your customers want from your products or services and then deliver these. Ensuring that the businesses aims and objectives revolve around the needs of the customer.
Being at the leading edge of innovation in the markets you operate in. Spending on research and development (R&D) may be required to stay in this situation.
"A theorist who argued that there are three basic needs that need to be satisfied and these are based on behaviours that are learned at an early age. The three needs are the need for achievement, affiliation and the need for power."
The process of flattening out an organisational hierarchy. This means reducing the number of layers of management.
A form of long-term finance. They are long term fixed interest loans that will be repaid by the firm at a fixed date in the future and in the meantime will pay interest.
Debt collection period
An activity ratio that measures the number of days that it takes a firm on average to collect their debts.
The process of raising finance by 'selling' some of your debts. The debt is sold to a specialist company who collect the debt and take a proportion as their fee for providing the money.
Debtor days ratio
An activity ratio that measures the number of days that it takes a firm on average to collect their debts.
The current amount of money that the firm is owed by customers who have bought goods and services. It is an asset because it is money that the firm is owed.
A method of analysis that can help firms to make complex decisions. Alternative possible outcomes of a number of decisions with the likely outcomes (or probability of those outcomes) are mapped out for each possible route.
Deed of Partnership
The official agreement drawn up by partners in a partnership. A legal document that sets out the rights and obligations of each partner in the partnership.
To deliberately reduce the level of economic activity. This is needed when there is an excess level of demand that may be leading to demand-pull inflation.
Policies designed to reduce the level of demand in the economy.
"The passing of authority to perform a role or set of tasks to someone lower down in the hierarchy of the company. The responsibility remains with the person passing authority, but the work is carried out by the person further down the chain of command."
Demand based pricing
A method of pricing where an organisation decides the price to charge based as far as possible on what consumers are prepared to pay. This has become more common with the use of such techniques by many low cost airlines for selling fares over the Internet.
"A curve showing the amount of a good or service that consumers are willing and able to buy at each and every price level. The curve is downward sloping because as price increases, demand falls."
Demand pull inflation
Inflation that occurs when the level of demand exceeds the supply available.
A situation where a particular task or job can only be carried out by a particular person.
A situation when a firm divides into two or more firms or sells off some of its subsidiaries.
"A style of leadership where a leader encourages others to be involved in the decision making process. It is felt that this style of leadership will help to motivate employees as they will feel more involved in the decision-making process, though this style does require leaders who are skilled at communication."
The study of population.
The fall in value of an asset. It applies to fixed assets as they are used over and over again as part of the production process and so over time will lose value.
Depreciation of sterling
"A situation when market forces in the foreign exchange market lower the value of one currency against another. Exports will appear cheaper overseas and therefore make us more competitive, but the price of imports will rise and may therefore add to inflation."
The removal of regulations or the removal of controls on a particular market e.g. the removal of certain health and safety regulations.
"A form of secondary market research. It means using data that already exists (secondary data) as part of the market research process. This may include data from government, industry surveys or perhaps data bought from a specialist data provider."
Countries at an advanced stage of economic development with high levels of real GDP per head and a relatively large service sector.
Countries with low levels of real GDP per head and relatively large primary sectors producing predominantly basic commodities.
"Goods or services which are made distinctive from rival products. This may be done through the packaging, the branding of the good / service or perhaps through the features that the good or service has."
"A strategy where products are made distinctive from rival products. This may be done through the packaging, the branding of the good / service or perhaps through the features that the good or service has."
"Costs that can be directly attributed to the production of the firms' good or service. They may include the labour to make the product, the raw materials or the packaging - any costs that can be directly identified as part of the production process."
A form of marketing where promotional material is posted directly to a consumer's home address to try to persuade them to buy the good or service the firm is offering.
"The process of a firm trying to sell a good or service to a consumer directly without any intermediary involved in the selling process. Forms include direct mail, telephone selling, personal selling and catalogues."
Taxation on income and wealth. The main ones in the UK are income tax (on individuals) and corporation tax (tax on corporate profits).
The people elected by the shareholders to manage the running of the business.
Discounted cash flow
An investment appraisal technique that helps firms assess whether a particular investment is worthwhile. Future revenues will have a lower current value and so are 'discounted' using a 'discount rate' to see what they are worth now and therefore whether the investment project is worthwhile.
A process where future revenues are 'discounted' using a 'discount rate' to see what they are worth now and therefore whether the investment project is worthwhile.
"The unequal treatment of individuals, usually on the basis of gender, race, age, religion or disability. There is a wide range of Acts of Parliament aimed at protecting people against discrimination."
Diseconomies of scale
A situation where average costs increase as production increases. This often happens where there are communication problems in larger organisations.
A situation where an employee has been asked to leave their job. It may be fair in a situation where the employee is unable to do the job or where there has been major misconduct or various other reasons but it could also be unfair.
"The amount of income left after such deductions as income tax, pension contributions and national insurance. Often known as 'take home pay' - the actual pay a worker receives."
Distribution of income
The way in which income is shared out between households and income earners.
Where a firm produces new products or services to expand the range of goods and services they offer. The firm may be aiming to reduce risk by being overly exposed in one particular market.
Payment of a share of a firm's profits to the shareholders. The shareholders are the owners of the business and so are entitled to a share of the profits.
A ratio that measures the potential for future capital growth of the firm. It measures how easily the dividend can be paid (or 'covered') out of the current profits of the firm. It is calculated by dividing the profit accruing to shareholders by the level of dividends.
Dividend yield ratio
A ratio that shows the amount an investor in shares receives as a percentage of the market price of the share. The ratio is calculated by dividing the dividend per share by the market price of the share and multiplying it by 100 to get it as a percentage.
Division of labour
"The allocation of tasks or jobs to particular people. For instance, instead of one worker undertaking all aspects of the production of a good, the task is broken down into small, separate operations each performed by just one person."
A type of product in the Boston Matrix. It indicates a product that has a low or declining share of its market in a market that is growing slowly.
A theorist who looked at the reasons why people work and tried to develop applications of the work of theorists like Maslow to a business. He suggested the categories theory X and theory Y to explain the different reasons why people work.
"A management theorist who is credited with introducing the idea of management by objectives (MBO). This groups the role of management into five different operations including the setting of objectives for the organisation, the organisation of the work, the motivation of employees, the measurement of the job being done and the development of people."
A practice in international trade where a firm sells goods in a foreign country at a price below that charged in the home market or even below cost. This is regarded as an unfair trading practice and is generally used to dispose of surpluses of goods where a firm or country have over-produced.
A market structure where the market is dominated by two firms.
Earliest starting time
"This is identified when using critical path analysis (or network path analysis) to see the most efficient way to carry out a series of tasks. It is the earliest time (in hours or days) that a task can be started, and will depend on how many tasks have to be completed before it can be done."
Earnings per share
A shareholders ratio that measures the amount that each share is earning an investor. It is calculated by dividing the profit attributable to shareholders by the number of ordinary shares.
An increase in a country's total output of goods and services. It is measured by changes in real GDP (i.e. the increase in GDP after inflation has been removed).
Economic order quantity
An attempt to calculate the optimum stock order level by comparing the delivery costs compared with the costs of holding stock.
Economies of scale
"A situation where average cost falls as production increases. A larger firm may be able to buy in bulk, it may be able to produce relatively more efficiently, it may be able to raise finance cheaper and it may have access to more efficient marketing methods."
A good that is responsive to a change in price. The percentage change in demand for the good will be greater than the percentage change in price that caused it.
A measure of how much one variable responds to a change in another variable.
Elasticity of demand
The responsiveness of demand to a given change in price or income or the price of other goods.
Elasticity of supply
The responsiveness of supply to a change in price.
"Groups of representatives of firms' owners or managers, either within one industry or across several industries. One example is the Confederation of British Industry (CBI)."
The process of involving employees in the decision-making process by transferring authority to act to those workers actually performing the relevant tasks. It is generally thought to help improve the motivation of workers by involving them more in the company.
Businessmen - people who take risks and invest to produce goods and services in order to make a profit.
The skill of taking risks and organising the factors of production to generate a product and therefore hopefully profit.
A method used to assess the company's corporate responsibility by evaluating the environmental impact of the policies and processes they use to produce and distribute their goods and services.
A state of balance that occurs in a market when supply is equal to demand.
The price at which supply equals demand in a market.
Another word for shares - the ordinary shares of a company.
A set of values and principles that determine behaviour. The values that firms use to decide whether actions are right or wrong.
The single European Currency which was originally adopted by 11 countries in the European Union.
"A common market in Europe in which goods, services, labour and capital can circulate freely."
A situation where consumers want to buy more than producers are prepared to sell. In other words demand is greater than supply.
A situation where producers are prepared to sell more than consumers are willing to buy. In other words supply is greater than demand.
The price of one currency in terms of another currency.
"A form of indirect taxation. Taxes on fuel, tobacco, alcohol and gambling that are levied by HM Customs and Excise."
"Goods, services and capital assets sold abroad. The sale of them results in an inflow of currency."
"Techniques to prolong the product life cycle of a product and delay the decline stage of the product life cycle. It may mean upgrading or updating the product, changing the packaging or presentation, adding new features or new design elements to the basic product and so on."
External diseconomies of scale
A situation where unit costs (average costs) increase as the firm grows larger. They may arise because of a deterioration in communication or because of organisational problems.
When a firm grows by taking over or merging with another firm (integration). Often also known as inorganic growth.
The process of filling vacant posts with applicants from outside the company.
An unexpected change in an economic variable which takes place outside the economy. An example might be an increase in the price of oil having an impact on firm's costs of production.
"The process of raising finance by 'selling' some of your debts. The firm will receive the bulk of the debt immediately, and the specialist firm will then collect the debt and take a proportion as their fee for providing the money."
Factors of production
"The resources that are necessary for production. They are usually classified into 4 different groups: land, labour, capital and enterprise (or entrepreneurship)."
A French management theorist working at the start of the last century. He looked at management from the point of view of the functions (or 'elements') of management. He is very much associated with 'command and control' methods of management.
A type of market research using primary data. This is data that is collected by the researcher and therefore does not exist prior to the research.
Where a product or a marketing approach is tested on a small number of consumers to gauge the effectiveness of the product or the marketing policy and the reactions of consumers to it.
Financial economies of scale
A situation where large firms are able to borrow money on better terms than smaller firms which makes the cost of financing investment and therefore unit costs lower.
"Institutions which provide a range of services including lending, accepting deposits and providing advice for both consumers and businesses."
Changes in the levels of taxation and government expenditure to try to influence the level of economic activity.
"Assets which have a lifespan of more than a year. They include things like plant, equipment, buildings and machinery."
Production costs that do not depend on the level of output.
Fixed exchange rates
A system where the value of the currency against other currencies remains the same and is maintained by governments by intervening in the foreign exchange market using foreign exchange reserves to buy and sell the currency to maintain the rate.
Firms who have fewer levels in their organisational hierarchy. This will usually mean that they have a higher span of control.
The ability of an employee to be able to carry out various tasks or functions.
Floating exchange rates
A system where the exchange rate is determined by demand and supply in the foreign exchange market without any government intervention.
A form of production where all the different operations required for production are carried out in sequence one after the other. Usually used where mass production is required and the product being produced is reasonably standardised.
"Small groups of people who are got together to discuss a product, service or marketing policy. The aim is to provide an insight into consumers behaviours and attitudes."
Industries which do not gain any cost advantage from any particular location and so can be set up in any location.
"An attempt to predict the future performance of a business in terms of sales, cash flow or perhaps costs."
Foreign exchange market
The market that determines the exchange rate. It is where currencies are traded and therefore exchange rates are determined.
Groups that are set up within a business to carry out specific functions. They may be either temporary (to look at a particular problem or issue) or they may be permanent (managing a particular aspect of business activity).
The integration (or merger) of one firm with another firm that is at a later stage in the chain of production. An example could be a brewery taking over a chain of pubs and clubs.
The marketing mix. The four elements of a marketing strategy that a firm must ensure they meet if they are to meet their customer needs.
"A type of business organisation where the owner buys into an existing business idea but they keep control over the business. For the right to use the business name, idea and products they will pay a fee and/or pay a royalty."
A theorist who set out the theory of scientific management in a book published in 1911. He studied the way in which tasks were carried out and applied scientific methods to make them more efficient.
The amount of time that an activity in a process could be delayed without affecting the total amount of time that the process will take. It is calculated by subtracting the earliest starting time (EST) at the start of the task and the duration from the EST at the end of the task.
Free market economy
A type of economic system for allocating resources where markets are used to allocate resources through the price mechanism. Supply and demand set a market price in each market.
"Payments to workers other than wages and salaries. They may include things like subsidised meals, free transport loans, private health insurance and so on."
The maximum that can be produced by an economy with the existing level of resources.
Full cost pricing
A pricing method that businesses use to determine their prices where the fixed costs are allocated between all the products that are sold.
A measure of the percentage of capital employed that is financed by debt and long term finance.
The process whereby trade is now being conducted on ever widening geographical boundaries.
The underlying assumption that any accountant makes when he prepares a set of accounts. The assumption is that the business being looked at will remain in existence for the foreseeable future.
An intangible asset. It is the amount by which the value of the firm exceeds the value of the net assets held by the firm. It can be seen as the value of the firm's reputation and customer base.
"Spending by central government and local authorities on the provision of goods and services, transfer payments and debt repayments."
Measures that the government puts in place to try to improve the workings of the economy. The main types are fiscal policy and monetary policy.
Gross domestic product
A measure of the total level of economic activity in an economy - in other words a measure of national income. The total value of all goods and services produced over a given time period (usually a year).
Gross profit margin
The level of gross profit as a percentage of sales.
Group decision making
The process of making regular business decisions through groups set up within the firm.
"An influential management thinker who argued that any definition of a manager is likely to be too broad to be of any value and so he looked at what is involved in being a manager. He considered managerial dilemmas, the role of a manager in keeping business healthy and the manager as a person."
"An effect that was identified from a series of studies carried out at the Western Electric Company in Chicago between 1927 and 1932. The studies noticed that whatever changes were made in the working conditions over the five years, output always rose."
Health and safety
The process of ensuring that the working environment within a firm is both a healthy and a safe one.
The process of protecting oneself against risk.
"A theorist who argued that a manager in a firm needs to carry out certain roles. He identified three min roles and these are interpersonal roles, information roles and decision-making roles."
A theorist who looked at the factors that affect people's motivation to work. He identified a two-factor theory that suggested that motivation depends on two causes or factors.
The organisational structure of the firm from top to bottom into different levels of management.
A company that owns and therefore controls other companies.
A form of communication that is also known often as lateral communication.
"When two companies in the same industry and at the same stage in the chain of production merge. For example, a merger between two breweries."
"When two companies in the same industry and at the same stage in the chain of production merge. For example, a merger between two breweries."
"The skill, knowledge and expertise of workers."
Human resource management
The process of managing the personnel of the firm.
Factors identified by Frederick Herzberg that can lead to workers being dissatisfied.
"Controls that a government put on to limit the volume of imports entering a country. They may include tariffs, quotas or perhaps even embargos on certain goods. A form of protectionism."
The prices of goods brought into a country.
"Restraints that a government may impose to limit the volume of imports entering a country. They may include tariffs, quotas or perhaps even embargos on certain goods. A form of protectionism."
Goods or services that have been bought from overseas.
Income elasticity of demand
The responsiveness of demand to a change in income.
"A direct, progressive tax."
Numbers used for expressing average changes in a number of different variables.
Taxation on expenditure.
"A programme to help a new employee settle quickly and efficiently into their job. It may include introductions to key personnel, tours around the workplace and information about company systems."
Action that may occur when there is a dispute that cannot be easily resolved between the firm and group of their employees. It may be taken by either employers' or employees.
A situation where a firm remains in its original location even after the initial advantage that led to them locating there has disappeared.
Relations between employers and employees. Generally the relations between a union or other group representing the workers at the firm and the management of the firm.
An independent body which an employee can appeal to if they feel that they have been unfairly dismissed.
A situation where one variable is unresponsive to changes in another.
A rise in the general price level that means that the value of money has fallen.
Groups within a business that are made up of people with similar interests. Not a formal part of the business organisation but arise from people having a similar interest in discussing issues.
Advertising which emphasises facts and factual information about a product.
The basic underlying networks of an economy necessary to support economic activity.
When a firm grows by taking over or merging with another firm (integration). Often also known as external growth.
A situation where a company does not have sufficient assets to meet its liabilities.
"Forms of fixed asset that are not physical assets and so will include assets like goodwill (the value of the firm's reputation and customer base), the value of a firm's brand and investments."
The process of two firms combining. It may be either horizontal or vertical.
A form of intangible asset that includes things like the abilities of individuals and the brands that a company owns.
The reward received for the investment of money.
A ratio that measures how easily the firm can meet the interest payments on any debts that they have. It is calculated by dividing the profit before tax and interest by the amount of interest paid.
The rate received in exchange for money that is lent to a firm or individual.
"Limits that are placed on the behaviour of a firm by their rules, regulations and policies."
A form of growth where a firm gets larger from expanding by using its own resources. Also often known as organic growth.
Internal rate of return
The rate of return of an investment project where the net present value is zero.
The process of recruiting personnel to posts from within the company.
The process of marketing a firm's goods and services in other countries.
The process of exchanging goods and services between countries. It involves the buying and selling of imports and exports.
"The purchase of capital equipment that firms need to enable them to produce. It may include machinery, equipment and vehicles."
"The process of assessing potential investment projects to see which ones are most viable (and profitable) for the firm. There are a range of techniques that they may use including the payback method, the average rate of return and discounted cash flow."
Money flowing into a country to be invested there that has come from other countries.
A paper that is an important part of the recruitment process. It gives details of what the job entails and explains the basic roles and responsibilities of the job.
The process of giving an employee more work of a similar nature to do. It will often mean them carrying out a larger proportion of the production process for the product.
The process of giving a person more responsibility for the work they are carrying out. This will often mean the 'vertical' extension of their role to give them further responsibilities for more areas.
A production method where just one item at a time is made which is usually used where the product is a one-off product or perhaps unique to each customer.
The process of changing the roles or tasks that employees carry out from time to time. This is often done to help avoid dissatisfaction among workers.
A paper that looks at all the skills and knowledge required by an employee to carry out their role. It therefore gives a profile of the sort of person required for a particular post.
"A situation where two companies get together to carry out a business venture. They will share the costs, responsibility and profits but they remain as separate firms."
"A stock control system which operates on the scheduling of stocks in a precise, co-ordinated way, so minimising the quantity needed to be held. Stocks are only ordered a short time period before they are needed for the actual production of the final good."
An approach to production which uses just in time stock control to 'pull' stocks to production when they are required and is based on establishing very close relationships with suppliers.
Known price item
A good whose price is widely known by consumers. They are usually priced very competitively to attract customers.
"All those who are employed or are available for work. It is made up of the employed, the self employed and the unemployed. The term may also be used to refer to all the workers in a particular company."
A form of production that uses a high proportion of labour to capital in the production process.
The market where labour is bought and sold. People supply their labour and it is in turn demanded by firms.
A measure of how many people leave a business over a given period of time. It is usually expressed as a percentage of the total labour force.
A term used to describe an economic system where the government intervene as little as possible and leave the private sector to organise most economic activity through markets.
Laissez faire leadership
A style of leadership where people are left to make decisions and carry out their tasks much more independently than under other leadership styles.
The merger of two firms who sell related goods or services but the firms do not compete directly with each other.
Latest finishing time
The latest time (in hours or days) that a task can be finished without delaying the next task in the process when using critical path analysis.
The time taken between an order and the delivery of the goods.
"Being at the forefront of developments in your profession, job, market etc."
A production technique (originally used in Japanese manufacturing companies) where production methods are streamlined as much as possible.
The process of getting hold of equipment without buying it outright. The equipment is effectively rented for a period of time for a fee.
Items which are potentially owed to someone. They may be either current or long-term.
A method of pricing where a firm sets price just low enough to discourage possible new entrants. This will act as a barrier to entry to new firms.
Firms owned by shareholders who have limited liability.
A firm owned by shareholders who have limited liability.
A situation where any shareholders' loss is limited to the amount of capital they have invested in a company.
A situation where different but related stages of production are combined together to make a product.
Assets which can readily or easily be converted into cash.
The process of winding-up a company when it is insolvent.
The ease with which an asset such as money in the bank or shares can be turned into cash.
"The quality of peoples lives. This will depend on the level of incomes as well as other measures like the number of doctors, nurses, teachers and so on."
Money that a business has borrowed for a lengthy period of time to fund expansion and development of the business. It is shown on the balance sheet as a part of the capital employed.
A situation when organisations try to persuade decision makers (often government) that their view or product or organisation should be supported.
"Where a firm is geographically sited. This may depend on the nature of its business, the nature of the product, the need for raw materials and a wide range of other factors."
"A symbol or other recognisable form that allows others to recognise your company, its products, premises etc."
"The period of time when all factor inputs, including capital, can be changed."
Long run average cost curve
The curve showing the minimum unit cost of producing each level of output. The shape will depend on the existence of economies and diseconomies of scale.
Long term liabilities
"Items owed that are due for repayment in more than a year. They may include loans, debentures and other forms of loan capital."
Long term liquidity ratios
A group of ratios that assess the performance of the capital that has been invested in the company for a longer period of time. They include the Gearing and Interest Cover ratios.
A good that is sold at a low price (often below cost) to attract customers.
"Policies designed to influence the principal economic targets. These include the level of employment, the price level, economic growth and the balance of payments."
"The study of the whole economy or large sectors of the economy. It is therefore concerned with issues like unemployment, inflation and economic growth."
A firm that is one of the largest market-share holders in a particular market. They will have a significant proportion of the market when compared to other firms.
"The process of organising resources. This may involve planning, organising and co-ordinating of all the resources available for a particular task."
The preparation of financial statements and other data for managers to support them in the decision-making process. The data prepared is only for internal use.
A situation when a group of managers in the firm become the firm's owners by buying all the shares in the company from the existing shareholders.
Margin of safety
The difference between the current level of output of the firm and the break-even level of output.
The cost of producing one extra unit. It is the increase in total cost when one more unit is produced.
Marginal cost pricing
A pricing method where price is determined by reference to the additional cost of one more unit.
The amount that is added to the cost of a good or service to get to the price.
Mark up pricing
A pricing method where price is set by adding a percentage onto costs.
A measure of how competitive a market may be. It measures the market share of the largest firms in the industry.
An economy where markets are used to allocate resources through demand and supply and the price mechanism.
A situation where a firm has the largest share of the market. Other companies will watch carefully the actions of the firm and follow them closely to ensure they do not get left behind.
"A firm which focuses closely on the needs of the customer before making decisions regarding the product, pricing strategy and promotion."
"A situation where the business will focus on the needs of the customer before making decisions regarding the product, pricing strategy and promotion."
A pricing strategy where a firm reduces price to a low level to try to sell a large volume of their product and increase their market share.
The process of collecting and analysing data about a market to help inform the firm when they are preparing their marketing strategy.
"A particular group or sub-group of consumers within a market who have similar characteristics. By targeting these groups, the firm is able to make their marketing more effective."
"The process of breaking a market down into particular groups or sub-groups of consumers, each of which reflects different customer preferences."
The proportion of total sales in a market accounted for by a particular brand or firm.
Where a market fails to grow or grows very slowly.
"The number and type of firms in a particular industry. Examples include perfect competition, monopolistic competition, oligopoly and monopoly."
Marketing economies of scale
A situation where larger firms are able to lower the unit cost of advertising and promotion perhaps through access to more effective marketing media.
The balance of marketing techniques required for selling the product. It's components are often known as the four P's.
A form of organisational structure where people are grouped into teams (project teams) each with different areas of responsibility. These groups communicate between each other on the same level.
An upper limit in a market set by a government or other agency above which the price charged is not allowed to rise.
The process of looking at a person's income and wealth to see if they are entitled to something.
Memorandum of association
One of two legal documents that are required when setting up a limited company. It sets out the constitution and various other details about the firm.
A theorist who carried out an extensive study of group roles in a work setting. He argued that each person has a role they prefer to carry out and for a group to function correctly all the roles need to be filled.
When two firms agree to join together to form a new company.
The immediate environment in which an individual or company works.
Policies designed to improve the efficiency of individual markets and therefore get a better allocation of resources. They are also known as supply-side policies.
"The study of the behaviour of individual consumers, firms, markets and industries."
Minimum efficient scale
The smallest size of plant needed to minimise unit cost. It is the lowest output level at which average cost can be minimised.
A price floor set by a government or other agency below which the price charged is not permitted to fall. An example is a minimum wage.
A lower wage limit set by a government below which the wage paid cannot fall.
A formal statement that focuses on the major objectives and values a company holds and what they are aiming to achieve.
A form of economy where some resources are owned by both private individuals and some by the government. It is the most common form of organisation of an economy.
The use of changes in the supply of money and interest rates to achieve economic policy targets.
A firm that dominates the market and has a high degree of market power and therefore the ability to 'set' prices.
Ensuring that individuals are able to undertake a range of tasks. This will require education and training to ensure that the workers are flexible.
A large company owning subsidiaries and producing in a number of countries.
A large company owning subsidiaries and producing in a number of countries.
The total value of goods and services created by a country in one year. GDP and GNP are both measures .
The benefits of a location which occur naturally. These may be a factor that determine the geographical location of a firm.
Inputs that are not man-made. These will include minerals and other naturally occurring raw materials.
The difference between total assets and current liabilities. This figure is shown on the balance sheet and will balance with the capital employed.
Net current assets
The working capital of the business - the difference between current assets and current liabilities.
Net present value
The value today of future incomes less any costs.
Net profit margin
Net profit as a percentage of the sales that generated it. It is calculated by dividing the net profit by the turnover and multiplying by 100 to get the figure as a percentage.
A tool used by business to help with decision making. A network is constructed that shows each of the tasks as a 'node' and the earliest start time and latest finishing time of each task are calculated.
"A specialist area of the market, normally a small segment of a market."
"The process of marketing a good or service in a specialist area of the market, normally a small segment of a market."
"A part of a network that is being used to help decision making. The earliest starting time of the task and the latest finishing time are both shown. Once they have all been identified, the firm can find the critical path."
Nominal rate of interest
The actual current rate of interest expressed as a percentage without taking any account of the rate of inflation.
"Competition between firms using methods other than price reductions. Examples include advertising, free gifts, quality, reliability and so on."
Resources which are finite and cannot be replaced. Examples include minerals and fossil fuels.
"Benefits received from working that are received in a form other than money. Examples may include fringe benefits, free uniform, free travel to work and so on."
Not for profit
Any organisation that does not seek to make a surplus. It usually refers to charities and similar organisations that have aims other than profit making.
A market structure where a market has just a few firms. Each of the firms will account for a large proportion of output.
The profit (or surplus) that the firm has made after overheads (indirect costs) have been deducted from the gross profit.
The cost that results from making a choice. The value of the next best alternative foregone.
A type of share issued in a firm. These shareholders have voting rights in the firm and the dividend they receive depends on the profits made by the firm.
"Growth where the company itself has grown from its own business activity and its own resources, often called internal growth."
The production of goods and services.
Output per worker
The level of total output divided by the number of workers employed. It is a measure of the productivity of labour.
"The costs of the business that are not attributed to any particular part of the production process or any particular product produced. They will include business expenses like rent, administration and other office expenses."
A situation where more people are employed than are needed to produce the current level of output. This will mean higher unit costs for the firm.
A situation where production is above the socially optimum level. This will often occur where the production of a good results in negative externalities.
The purchase of overseas financial and physical assets.
Work done over and above standard working hours. It is generally paid at a higher rate than the standard hours.
A situation where the business expands rapidly without having sufficient working capital. In other words they do not have sufficient funds to pay their day to day business expenses.
The people or organisations to whom the firm belongs.
A tool used by businesses to look at the external environment they face and issues that may arise from the global marketplace they operate in.
A tool used by businesses to look at the external environment they face and issues that may arise from the global marketplace they operate in.
"The way in which a product is presented and delivered to the consumer. Colour, shape, size and different materials will generally be used to help market the product."
The encouragement of those not normally involved in a particular process or decision-making system to be involved. It may be encouraged by empowering employees to take more responsibility for their work and therefore become more involved.
The percentage of the population of working age in the economy.
A firm owned by between 2-20 people who share the profits and usually have unlimited liability for the debts of the firm.
"A form of protection for the inventor or originator of a product, idea or production process to prevent other firms from copying it."
A technique used in investment appraisal to help assess whether an investment project may be worthwhile. It is the amount of time taken for the original investment outlay to be repaid by income from the investment.
A pricing strategy where a firm reduces price to a relatively low level to try to sell a large volume of their product and increase their market share.
"A market structure made up of a large number of small firms, each selling homogeneous (identical) products with a small market share to a large number of buyers."
A group of ratios that consider how well the firm is performing in terms of profitability and turnover. They include the return on capital employed (ROCE) and the gross and net profit margins.
Performance related pay
A situation where incomes are adjusted according to performance. Targets are usually set and exceeding these targets can often result in a bonus.
A document that looks at all the skills and knowledge required by an employee to carry out their role and therefore gives a profile of the sort of person required for a particular post.
Advertising that tries to persuade consumers to purchase a product.
"A payment system where employees are paid according to how much they produce. They are paid an amount per unit produced, the argument being that this will motivate them to work harder."
The P from the marketing mix that refers to the distribution of the product.
Point of sale promotion
Advertising or promotion of the product at the point where the consumer is actually buying the product.
A strategy that is a means of achieving an objective.
Tools used to achieve an objective. Fiscal policy and monetary policy are both examples.
The number of people living in a country.
The output that could be achieved if all resources were to be fully deployed.
A situation where a firm reduces price in the short run to try to force competitors out of the industry.
"A less risky investment than an ordinary share as it carries a fixed rate of return for the investor, though they do not carry the same shareholders' rights as ordinary shares."
The value today of future incomes from an investment.
Groups who come together to present a particular cause and to try to influence policy and behaviour. They will try to lobby government and firms to achieve their objectives.
Pricing where a business is able to set a high price because of the image associated with its product.
The amount of money a good or service is bought for.
The process of firms trying to attract customers through changes (cuts) in price.
A situation where the same product is sold in different markets for different prices.
Price earnings ratio
A ratio that measures the earnings from a share compared to the price of the share. Higher ratios are better as they reflect higher returns.
Price elasticity of demand
A measure of the responsiveness of demand to a change in price. It is calculated by taking the percentage change in demand and dividing by the percentage change in price.
Price elasticity of supply
A Measure of the responsiveness of supply to a given change in price. It is calculated by taking the percentage change in supply and dividing by the percentage change in price.
A figure measuring price changes. It is a statistical measurement of a typical basket of goods purchased by people. A measure of inflation.
Firms who are able to influence price as their output represents a significant share of the market.
Firms whose output does not influence price as they are too small to influence the market price and therefore simply 'take the market price'.
The ways in which firms set prices or aim to influence the prices of goods and services.
Information that doesn't as yet exist. It is data that is collected for the first time by a researcher and is likely to be collected through questionnaires or surveys.
"The sector of the economy concerned with agriculture and the extraction of raw materials (for example, mining, fishing and agriculture)."
The process of putting tasks or activities in order of 'needing to be done'. Required when there are a large number of tasks needing to be carried out with insufficient resources to do this quickly.
The part of the economy privately owned and in the control of individuals and companies.
The process of moving economic activity from the public sector to the private sector.
One of the four types of product identified in the Boston Matrix. It is a product that has a low market share within a fast growing market.
Using new technologies in the production process to make the production process more efficient or to ensure a better quality outcome from the process.
Product life cycle
A curve showing the different stages that a product passes through during its lifetime.
A situation where a firm focuses more on creating the product than responding to the needs of the market.
The range of products offered by a company. Companies will want to ensure that they have a full and balanced range.
The process of making goods and services from the inputs available (the factors of production).
The amount that a firm or plant could produce if all the resources available to it were to be fully employed and working as efficiently as possible.
A measure of efficiency. It can be calculated by taking the total level of output and dividing by the quantity of inputs used.
A situation where a firm receives more revenue from the sale of a product or service than it cost to manufacture the good or service. It is a reward for risk.
Profit and loss account
A record of the firm's trading activities over a period of time.
"Profit as a percentage of turnover (or sales). It is calculated by taking the level of profit, dividing by the level of turnover and multiplying by 100 to get the figure as a percentage."
The main motive for a firm. It is where firms aim to make the largest surplus of revenue over cost.
A group of ratios that measure the profitability of a company. They include the return on capital employed and gross and net profit margins.
A tax that takes an increasing proportion of income as income rises. Income tax is an example.
Promotional efforts by firms that are aimed at encouraging people to purchase a product. Examples may include the giving of free gifts or two for the price of one offers.
Industries owned by the state/government.
"Spending by central government and local authorities on providing goods and services, transfer payments and debt repayments."
The common good or the good of society at large.
Public limited company
A limited liability company owned by shareholders. The shares in the company are available publicly for purchase through the stock exchange.
The sector of the economy under government control.
The financial statements that every limited company has to issue annually.
"The buying of any raw materials, parts or equipment that are needed by the firm for production of theor goods or services."
The gathering of information that is not statistical but that gives an idea about the perceptions or views that customers have of a product or service.
A way for a firm to give their customers greater confidence about the quality of the product they are buying. This may be offered through a group/organisation that offers a quality stamp of some sort.
Small groups of workers who get together to look at all issues relating to the quality of production of the good or service. It may be a part of a Total Quality Management (TQM) approach.
The gathering of statistical data for market research or other purposes.
Another name for the acid test ratio. It is the current ratio with stock and work-in-progress deducted from current assets.
A limit on the quantity of goods that can be imported into a country. They are a form of protectionist policy.
Rate of interest
The price of money. It is the extra percentage that has to be paid when borrowing money or that a saver receives when putting their money aside for the future.
Rate of return
The percentage return earned by an asset. It can be measured as the profit earned by a firm as a percentage of the assets.
A tool for analysing the financial performance of a company by calculating ratios from their published accounts.
The minimum level that the firm will allow their stocks to fall to before they re-order new ones.
The level of national income adjusted for inflation.
Real rate of interest
The rate of interest adjusted for inflation.
When a variable has been adjusted so that the effects of inflation have been taken into account.
The value of income in real terms. It is a measure of what the wage is actually able to buy in terms of goods and services.
The process of winding up a firm following its collapse.
The process of laying off staff where job cuts need to be made. It may be either compulsory where workers are given their notice because there is no longer work for them or voluntary.
A process of boosting the level of economic activity through expansionary economic policies.
policies aimed to boost the level of economic activity. These could be either fiscal or monetary policies.
Taxes that take a smaller proportion of income as income rises. i.e. tax that hits less well-off people harder.
Rules and laws that control the behaviour of consumers and firms.
Organisations that monitor the performance of industries and enforce regulations.
The process of shifting a product or products from one part of the market to another - in other words from one market segment to another.
Research and development
Spending to try to find new products and to improve existing products.
The inputs used to produce goods and services. They are often termed factors of production.
Business practices that are intended to give an advantage by limiting or restricting competition from other firms.
"The annual level of profit that the firm does not distribute to the shareholders as dividend, but retains for re-investment within the firm."
Return on capital employed
A ratio that measures the performance of the firm in relation to the capital that has been invested. It is calculated by dividing the net profit before tax and interest by the level of capital employed and then multiplying by 100 to get the figure as a percentage.
Returns to scale
The way in which changes in the quantity of inputs (factors of production) affect output. Often referred to as economies or diseconomies of scale.
The money received from the sale of output.
Right first time
"A production technique/philosophy that aims for no defects, mistakes or spoilt output. The aim of the approach is to reduce waste and therefore production costs."
Risk-bearing economies of scale
The ability of large firms to spread the costs of uncertainty over a wider range of activities and therefore reduce their unit cost.
A system of allocating responsibility for tasks and activities based on what it is that the individual is actually responsible for carrying out.
A tool used by businesses to help them develop marketing and other strategies. It looks at internal STRENGTHS and WEAKNESSES of the business and the external OPPORTUNITIES and THREATS.
Sale and leaseback
A method for raising finance (or working capital) if firms face a liquidity problem. It involves the sale of fixed assets to a specialist firm who then leases the assets back to the firm.
The amount of goods or services sold by a firm in a given period of time.
"That part of disposable income (income after tax) not spent on goods and services. Income that is not spent, but put aside."
The fundamental economic problem. It arises because there are insufficient resources to meet all consumer wants.
Data that is existing published information that the firm uses for market research.
That part of the economy concerned with the manufacture of goods.
Working for oneself.
A situation where there is an excess demand in the market. Sellers of the good or service are therefore at an advantage.
The money that has been raised from the selling of shares in the firm. This figure is shown as part of the shareholders' funds on the firm's balance sheet.
The process of selling shares in a firm.
The difference between the nominal (or face value) of the share and the value that the share is sold for.
The capital of the business that has been raised or is directly attributable to the shareholders. Includes share capital and retained profit.
The owners of limited companies and public limited companies.
Issued by companies as a way of raising long-term capital for the company. By holding these you become you become an owner of the company.
An unanticipated event that affects the economy and firms or consumers.
The period of time in which at least one factor of production is fixed. Over this time period the firm can only expand production by using more of the variable factor.
Short term liquidity ratios
A group of ratios that includes the current ratio and the acid test ratio and measure how easily the company can meet its short-term financial commitments from the current assets they have.
A situation where countries agree to use the same currency. The Euro is an example.
A pricing policy sometimes used by companies introducing a new product. A high price is set to ensure large profits are made and R&D costs recovered before the competitors are able to produce a similar product.
"A situation that occurs when there is high inflation, high unemployment and negative growth."
Companies which employ a relatively low number of workers.
A check of the way in which a company is meeting their accepted social responsibilities. An assessment of whether the firm is meeting its obligations towards society as a whole.
A form of marketing where you include within your marketing mix an awareness of the social responsibility and impact that your products on society as a whole and the environment in which they operate.
"The most basic form of business ownership where the business is private, has unlimited liability and the owner bears the financial risks of the business on their own."
Span of control
The number of people in an organisation for whom one person is responsible.
A situation where a firm or economy can produce more with existing resources than they are currently producing.
The process of focusing on the production of a single good or service or a particular activity in the production of that good or service.
A negative level of economic growth that last beyond just the short-term.
"All of those individuals or groups who have an interest or stake in a business. These include: employees, suppliers, creditors, customers, shareholders and local communities."
Standards of living
"The quality of peoples lives. It will depend on the level of incomes as well as other measures like the number of doctors, nurses, teachers and so on."
One of the product categories in the Boston Matrix. It is a product that has a high or rising market share within an expanding market.
A market for shares and securities. Traders are linked by computer and trade in shares meaning that their value is determined by supply and demand.
A ratio that measures the number of times in a year a business sells their stocks. It is calculated by dividing the cost of sales by the stock figure. This gives the 'number of times' that a firm has sold their stock in a year.
The process of building up a stock of goods. This may be involuntary which may be caused by overproduction or a slowdown in demand or it may be a matter of policy in preparation for seasonal peaks in demand.
"Also known as inventories. Made up of raw materials, work in progress and unsold consumer goods that are held by the firm ready for production or sale."
Straight line depreciation
Perhaps the simplest method of calculating depreciation. It involves subtracting the residual (or scrap value) of the asset from its cost and then dividing the result by the number of years of useful life that the asset is likely to give.
A firm that is more than 50% owned by another firm.
A payment made to firms or consumers by the government designed to encourage an increase in output.
Goods that can be used for the same purpose and are in competition with each other. They are therefore alternatives to each other.
"The amount of a good which firms are willing and able to sell at a given price. It will be determined by the price of a good, the costs of producing it, the firm's motives and the available technology."
The lines of distribution for the organisation's goods or services. It is vital that these are high quality if the business is to be efficient and profitable.
An upward-sloping curve showing the amount of a good which producers are willing and able to sell at different prices. It shows the relationship between supply and price with all other determinants of supply held constant.
"This is the hoped for result when companies merge or combine together. They hope to see that the value created by the combined business is greater than the sum of the two parts. This may come about through economies of scale, avoidance of duplication or a range of other efficiencies in marketing, planning, distribution and production."
When one company buys sufficient shares in another company to have a controlling interest. It may be hostile which means it is against the wishes of that company's directors.
"Physical assets held by the firm. They would include assets like buildings, machinery, cars and trucks."
A market or market segment that a firm has decided to focus on selling to.
Target rate of profit
A situation where an organisation sets their price to try to achieve a certain level of profit.
Taxes on goods imported into a country. They are a form of protectionism and are often used by governments to try to reduce the level of imports into a country.
Groups of workers who work together to produce goods and services.
Technical economies of scale
The lower unit costs which come about from larger firms being able to use more efficient techniques of production and the fact that a larger plants are often cheaper to run. This is often helped by the principle of increased dimensions.
A direct selling technique (below the line promotion) that involves using the telephone and telesales teams to sell a product.
"A situation where interested firms are asked to put in a bid for how much they think a specific piece of work or contract will cost to carry out and details of how they propose to do the work (including timescales, specifications and so on)."
"The service sector of the economy. For example, leisure and financial services."
"A category proposed by theorist Douglas McGregor who looked at the reasons why people work. He suggested two categories to explain the different reasons why people work. These workers, he argued, are essentially motivated by money, lazy and dislike work and need to be carefully controlled by management."
"A category proposed by theorist Douglas McGregor who looked at the reasons why people work. He suggested two categories to explain the different reasons why people work. These workers, he argued, can enjoy work if well motivated and will show creativity and take responsibility for their work."
The total amount spent by a firm on producing a given level of output. They are made up of the fixed costs and the variable costs of production or the direct and the indirect costs of production.
Total quality management
A philosophy that tries to generate responsibility for quality at every level of the organisation.
The income received by a firm from the sale of their goods and services. It can be calculated by multiplying the price received for each unit by the number of units sold.
"The cyclical fluctuations that occur in economic activity. Economies tend to move, over time, through periods of boom and slump."
A situation where countries retaliate against import restrictions imposed on them by themselves placing import restrictions on goods entering the country. It is a dispute over trade.
A situation where one thing has to be sacrificed in order to obtain something else.
A form of legal protection for a company's brand or product. They generally have to be registered with a national Patent Office to gain the legal protection.
The top section of the profit and loss account that shows the trading performance of the firm. It shows their total sales and the cost of sales - therefore showing their gross profit.
A form of internal pricing where companies set internal prices to charge other branches of the same company. Multinationals may use this as a means to move profits within branches of the company to take advantage of different tax rules in different countries.
The number of workers (of working age) without a job who are willing and able to work.
The percentage of the working population without a job who are willing and able to work.
A situation where an employee is dismissed from their job by a firm without good reason. The employee often has the right to take their case to an industrial tribunal.
Unique selling point
Any aspect of or characteristic of a product that differentiates it from the competition. Firms will often want to stress this in their marketing.
The average cost - cost per unit of output. It is calculated by dividing the total cost by the level of output.
A situation where the owners of a business may have to sell off some or all of their personal possessions to meet the debts of the business because there is no limit to the amount of claims that can be made against them.
The financial worth that a firms adds to the raw materials that they process into the good or service they produce. The difference between the value of the goods and services sold and the cost of buying raw materials and other supplies necessary for production.
The principles that underpin the decisions that firms make and the policies they pursue.
Costs that change with the level of output. Examples include costs like raw materials and labour costs.
Variable pricing is where a firm offers the same goods for sale at different prices in different market segments.
The difference between a planned value for a variable and the actual outcome.
A situation where firms at different stages of the production chain merge together.
A situation where firms at different stages of the production chain merge together.
Voluntary export agreements
An agreement between firms in another country and the government to limit the volume of exports coming into a country.
The difference in wages between workers in different occupations and different regions.
A situation where traditional wage differentials between groups of workers are eroded. This can often be a cause of industrial disputes.
The amount of pay received for working over a period of time. It will usually be expressed as an amount per period of time.
"A situation that occurs when workers demand a pay rise above inflation. This results in an increase in the firm's costs and means that they have to put their prices up further if they are to maintain their profit margin. This in turn, will lead to further inflation ....."
A situation that occurs when a wage increase in one industry sets off a series of wage claims in other industries so as to maintain wage differentials.
The level of pay received for working. It is the income received by labour as a factor of production.
"People's desires for goods and services. Wants result in demand, but to be effective demand the want has to be backed by an ability to pay."
"Industries where the raw materials are relatively small, but these are converted to produce a bulky finished product."
"Weight-losing industries are industries where the raw materials are relatively bulky, but the resulting product is relatively smaller."
An alternative name for a problem child which is one of the four types of product identified in the Boston Matrix. It is a product that has a low market share within a fast growing market.
The process of being employed by a firm or for yourself and using your skills and abilities to be a part of the production of a good or service.
A technique used to analyse a job to identify the various stages and tasks involved and the time taken to complete them. From this information the study aims to suggest more efficient ways of producing the good or service.
"All those who are employed, self employed, claiming benefit or in the armed forces. It is everyone who is available to work and of working age."
The difference between current assets and current liabilities (can also be termed net current assets). The figure shows the funds available for a business to meet their immediate expenditure needs.
Working capital cycle
"Shows the flow of cash in and out of the business. It shows how cash has to flow out of the business to pay for raw materials, to pay wages and to pay for other production costs and produce the goods and services before the product can be sold to generate cash to flow back into the business."
All those who are eligible and willing to work.
The income from an asset as a percentage of its price.
Attention - Interest - Desire - Action - Satisfaction (promotional mix).
Advertising - Personal selling - Public relations - Sales promotion.
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