IB BM Unit 1 Vocabulary
Terms in this set (86)
The difference between a product's price and the total cost the inputs that went into making it. It is the extra worth created in the production process.
Organizations involved in the production of goods and/or the provision of services.
All non-natural resources used in the production process. An example is money, but the term also includes resources such as machinery, tools, equipment, and factories.
Division of Labor
The specialization of workers in the provision of goods and/or services by breaking a job down into particular roles or tasks that are repeated by the same workers.
People who manage, organize, and plan the other three factors of production. They are risk takers who exploit business opportunities in return for profits.
Factors of production
The inputs (or resources) necessary for the production process: land, labor, capital, and enterprise.
Refers to the different sections of a business. These are usually named as the marketing, production, finance, and human resources departments.
The process experienced by a country that moves away from primary production towards manufacturing as its principal sector for national output and employment.
The physical and mental human effort used in the production process.
The natural resources that can be found on the planet. This includes renewable and non-renewable natural resources such as water, fish, wood, and physical land.
Cost measured in terms of the best alternative that is foregone when a choice is made.
Businesses involved in the cultivation or extraction of natural resources, such as farming, mining, quarrying, fishing, oil exploration and forestry.
The section of the economy where business activity is concerned with the construction and manufacturing of products.
A shift in the relative share of national output and employment that is attributed to each business sector.
The section of the economy where business activity is concerned with the provision of services to customers.
Articles of Association
The document that sets out the internal organization and rules of a limited company. Details might include the powers for each director and voting rules.
Certificate of Incorporation
The name of the document issued to a limited company to show that it has been legally formed and is therefore a separate legal entity from its owners.
Not-for-profit organizations established to support good causes, from society's point of view.
A business that is owned by shareholders. It has been issued a certificate of incorporation, giving it a separate legal identity from its owners.
Deed of Partnership
The legal contract signed by the owners of a partnership. The formal document will specify the name and responsibilities of each partner and their share of any profits or losses.
When there is a legal difference between the owners of a company the business itself. This ensures that the owners are protected by limited liability.
A restriction on the amount of money that owners can lose if the business goes into bankruptcy, i.e. they cannot lose more than they invested in the business.
Memorandum of Association
The legal document that specifies the basic information of a company, such as the name and address of the firm, its objectives and the share capital.
Private sector organizations that operate for the benefit of others rather than aiming to make a profit, e.g. Oxfam and Friends of the Earth.
A form of private sector business owned by 2-20 people (known as partners). They share the responsibilities and burdens of running and owning the business.
Private Limited Company
A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public.
The part of the economy under the control of private individuals and businesses, rather than the government. Examples include sole traders, partnerships and limited companies.
Public Limited Company
An incorporated business organization that allows the general public to buy and sell shares in the company via a stock exchange.
Public Corporations (or state-owned enterprises)
Organizations wholly owned by the government but run as commercial establishments, e.g. the BBC
When the government creates commercial partnerships with the private sector to provide certain goods or services
The part of the economy controlled by the government. Examples include state health and education services, the emergency services and national defense.
The market place for trading stocks and shares of public limited companies. Examples include the London Stock Exchange and the New York Stock Exchange.
Silent Partner/Sleeping Partner
An investor of a partnership who is not directly involved in the daily running of the business.
A self-employed person. He or she runs the business on their own and has sole responsibility for its success (profits) or failure (unlimited liability).
A feature of sole traders and ordinary partners who are legally liable for all monies owed to their creditors, even if this means that they have to sell their personal possession to pay for this.
he difference between a product's price and the total cost of the inputs that wnt into making it. It is the extra worth created in the production process.
The long-term goals of a business, often expressed in the firm's mission statement. They are a general statement of a firm's purpose or intentions and tend to be qualitative in nature.
Corporate Social Responsibility
The consideration of ethical and environmental issues relating to business activity. A business that adopts this wil act morally towards its various stakeholder groups.
The moral values that determine and affect business behavior and decision-making such as taking actions that are in the best interest of the world's scarce resources.
The declaration of an organization's overall purpose. It forms the foundation for setting the objectives of a business.
The relatively shorter term targets of an organization. They tend to be expressed as SMART objectives.
Means that well-set objectives ought to be specific, measurable, agreed, realistic, and timed.
A business being conscientiously concerned about the well-being of the general public as a whole. Hence these kinds of organizations are likely to act in an ethical manner and consider the needs of all their stakeholder.
The various methods that businesses can use in an attempt to achieve their mission or vision. These methods then form the long-term plans for the whole organization.
The shot-term methods that firms can use to achieve their objectives.
An organization's long-term aspirations, i.e. where it ultimately wants to be.
Situations where people have disagreements on certain matters due to differences in their opinions. Conflict can often lead to arguments and tension between various stakeholder groups.
The senior members of staff who have been elected by shareholders of a company to run the business on their behalf.
These people or groups do not form part of the organization but have a direct interest or involvement in the actions of the organization. Examples include customers, suppliers, and the government.
Members of the organization, i.e. the employees, shareholders (who own the business), managers and directors of the business.
The people responsible for the day to day running of a business or a department within a business. They are accountable to directors and responsible for their staff teams.
A type of special interest group which consists of individuals with a common concern who seek to place demands on organizations to act in a particular way or to influence a change in their behavior. Examples include Greenpeace and People for the Ethical Treatment of Animals (PETA).
The people who own shares in a private or public limited company, i.e. they are the part-owners of a company.
An analytical tool which places different stakeholder groups into quadrants depending on their relative levels of power and interest in an organization.
Individuals or organizations that have a direct interest (known as stake) in the activities and performance of a business. Examples of stakeholder groups include shareholders, employees, trade unions, customers, financial investors, suppliers, managers and the government.
Measure s the change in the Gross Domestic Product of a nation over time. It is said to occur if there is an increase in GDP for two consecutive quarters.
The value of a country's currency in terms of another currency.
Gross Domestic Product
The total value of anation's annual output. It is used as an indicator of the level of economic activity in a country.
Occurs when the general price level in an economy continuously rises. It is calculated by measuring changes in the cost of a representative basket of goods and services purchased by the average household over a period of time.
A method of protectionism whereby the domestic government taxes foreign imports thereby giving domestic producers a relative price advantage.
The number of people in the workforce who are willing and able to work but cannot find employment.
The name given to a report detailing how a business sets out to achieve its aims and objectives. It requires managers to plan their marketing, financial and human resources.
The process of choosing between the alternative options available to a business.
The phrase used to describe a systematic process of dealing with business problems, concerns or issues in order to make the best decision.
A type of quantitative decision-making tool that allows firms ot calculate the probable values of different options if they are pursued. They can therefore help to minimize the risks involved in decision-making.
A decision-making framework based on identifying the root causes of a problem or issues. It is also known as the cause-and-effect model.
The various methods that businesses use to aid their decision-making. Examples include Business Plans, SWOT analysis, the 5 Why's model and Decision Trees.
A popular analytical tool used to assess the internal strengths and weaknesses and the external opportunities and threats of an organization for a decision.
An analytical tool that helps managers to devise their product and market growth strategies, depending on whether they want to market new or existing products in either new or existing markets.
Backward vertical integration
A form of amalgamation that takes place when a business acquires or merges with a firm operating in an earlier stage of the chain of production, e.g. a car manufacturer buying out a supplier of tires or other companies.
Businesses that provide a diversified range of products and operate in an array of different industries. They are likely to have resulted from external growth strategies.
Diseconomies of scale
The cost disadvantages of growth. Unit costs are likely to eventually rise as a firm grows in size due to internal factors (lack of control, coordination and communication) and external factors (saturated markets which create a need for cost cutting).
A growth strategy of large businesses by spreading risk over a variety of products and markets. Conglomerates, for example, provide a whole range of goods and services to clients all around the globe.
Economies of scale
The lower average costs of production as a firm operates on a larger scale. Benefits include easier and cheaper access to finance, marketing economies, division of labor and technological economies.
External diseconomies of scale
An increase in the average costs of production as a firm grows due to factors beyond its control. This is often caused by problems associated with too many firms being in the industry.
When a business grows by collaborating with, buying up or merging with another firm. It is a more expensive but quicker method of growth than organic growth. It is also known as inorganic growth or amalgamation.
Forward vertical integration
A growth strategy that occurs with the acquisition or merger of a firm operating at a later stage in the chain of production, e.g. a book publishing company merging with a book retailer.
An agreement between a franchiser selling its rights to other businesses (franchisees) to allow them to sell products under its name. in return, the franchisee pays a fee and a royalty to the franchiser.
An external growth strategy that occurs when a business acquires or merges with a firm operating in the same stage of the chain of production, e.g. two commercial banks decide to merge.
A strategy that combines the contributions and responsibilities of two different organizations to a shared project by forming a separate enterprise. Unlike a merger or takeover, both businesses retain their original identity.
When a business grows internally, using its own resources to increase the scale of its operations and sales revenue. Also known as internal growth, it occurs through a firm's efforts to sell more of tis own products by using its own resources.
The method of external growth whereby two or more firms agree to form a new organization, losing their original identities.
A form of external growth whereby one business buys up another. This is done by purchasing a controlling interest in that company, often against the wishes to their directors.
When countries trade without any international trade barrier such as tariffs, quotas, and bureaucratic procedures.
The integration of economic, social, technical and cultural issues of the world' economies. This has taken place largely due to the expansion of multinational corporations and governments advocating freer international trade.
Companies that operate production or service facilities outside their home country.
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