Theme 3 Edexcel Business ALevel
Terms in this set (93)
A goal set by a business, usually in the medium to long term.
Measurable, clearly defined targets for how to achieve business aims. Effective objectives should be specific, measurable, achievable, realistic and time specific: SMART.
Sets out the business vision and values that enable employees, managers, customers and possibly suppliers to understand the conduct of the business.
The goal or purpose of the business for the future, to inspire a range of stakeholders, including employees and customers,
Set targets for individual departments such as marketing, so that staff can ensure that corporate objective are achieved.
The ideas and plans a company has for its future business activities.
A marketing planning tool that aids the business in deciding it product and market growth strategy.
A plan of action that is designed to fulfil an objective. It is formed when objectives have been defined.
Market Penetration (Ansoff's)
Selling more of the same products to the same customers. This is the least risky strategy as the business understands both the product and the market. The business might try and increase brand loyalty, or encourage customers to buy the product more often. They tend to focus on market share.
Product Development (Ansoff's)
Selling a new product tot existing, well-known customers. The risk is higher as the products are new but the customers are familiar. This helps differentiate the product from those of competitors.
Market Development (Ansoff's)
Selling the same products but to new customers. The risk occurs because the business is not familiar with the new markets. But they do know how their products sells in existing markets.
The most risky strategy as new products are being cold to new customers. The business is entering new and unfamiliar territory in terms of both products and customers.
When an individual business increases its sales revenue by expanding its facilities and producing and selling more. This type of expansion from within is likely to be quite slow but steady and secure.
Porter's Strategic Matrix
A method of following four businesses strategies focusing on differentiation and cost for a business to gain a competitive advantage.
Cost Leadership (Porter's)
Where a business aims to become the lowest cost producer. This may be achieved by a few methods e.g. economies of scale, better technology, increased productivity and more skilled workers etc.
A business aims to produce something that is sufficiently different or even unique compared to the competition. This attracts consumers and a competitive advantage is gained, enabling the business to change higher price and achieve higher profit margins.
Cost Focus and Differentiation Focus
The business targets a particular segment of segments within the market and focuses its strategy on satisfying their needs.
The whole range of products and brands that a business sells.
The appraisal of the products portfolio to determine the relative worth of each item in the range and its contribution to the business. For example market growth rate and relative market share.
Any feature of a business that enables it to compete effectively. It may be based on pice, quality, service, reputation or innovation.
The ideas, resources and capabilities that a business possesses that are better than those of its competitions and cannot be easily copied.
Decisions made in order to meet the objectives of the business. They are usually long term in nature.
The shorter term steps taken to help achieve the strategy.
A study done by a business to identify internal strengths and weaknesses and external opportunities and threats.
A method for businesses to analyse the political, economic, social, technological, legal and environmental factors that can influence the way the business operates.
The ways the government can adjust spending and taxation to influence the national economy.
The ways the government, via the Bank of England, can alter how much money is circulating in the economy and the level of interest rates to create stable prices and set inflation targets.
Porter's Five Forces
A tool to analyses five competitive forces that affect a market and the intensity of competition.
Rivalry Amongst Existing Competitors
The more competition there are the more competitive a market is and the less influence each business has over its rivals. Markets that have only a few competing firms are much more less competitive and each individual business has much more control.
The Threat Of New Entrants
If it is easy for new businesses to enter the market then competition is likely to be greater.
The Threat Of Substitute Products
Similar products are likely to face more competition because in the mind of the consume version there is little to choose between them. This restricts the power of the individual business to raise price and so it had less influence over the market.
The Bargaining Power Of Suppliers
If there are many suppliers, the business has more choice as to which one to use. This gives the business more power. If there are a limited number of suppliers then the power lies with the supplier.
The Bargaining Power Of Buyers
If there are only a few buyers they have much greate power and control over the proces they are prepared to pay.
Barriers To Entry
The obstacles that a business has to face when it is considering competing in an existing market.
Internal Economies Of Scale
Involves a reduction in Average Cost (AC) brought about by an increase in the size of the business.
The most efficient and specialised machinery / equipment that would be too costly for a smaller business.
The ability to buy in bulk reduces average costs.
Risk Spreading EOS
By expanding and diversifying, the impact of falling demand for an one product, or in any specific market, is reduced. The risk is shared.
External Economies Of Scale
Involves a reduction in Average Costs (AC) brought about by an increase in the size of the whole industry.
The speller can have some control over the price charged. This starts with product differentiation; as the business grows it becomes better known and brand recognition enhances its market power. It can also mean that big businesses can control the prices they must pay when buying from small supplier businesses that compete with each other.
Diseconomies Of Scale
When a business or subsidiary encounters cost increases that make larger scale production less efficient.
Combine two business by mutual agreement, then operate under a unified management structure.
When one business succeeds in buying more than half the shares of another business. This may happen by agreement or may follow a long battle while the building company tries to buy at least 51% of the shares.
Two businesses in the same industry have joined together e.g. Morrisons bought Safeway.
Two businesses in the same industry, but at different stages of the production processs or supply chain, have joiner together .
When two businesses that have nothing in common join together.
The extent to which a company's long-term finance is dependent on debt. If debt are more than 50% of the firms long-term capital, the business is said to be highly geared and therefore at risk.
Taking over or merging with another company in order to increase output and sales.
Quantitative Sales Forecasting
Using statistical techniques to analyse existing data in order to make decisions for the future.
Time Serise Analysis
Looks at existing short and long term data over a period of time in order to provide information on likely current and future trends.
Line Of Best Fit
Drawn through the middle of the points on a scatter graph. The closer the pointer are to the line, the stronger the correlation.
Future trends are predicted by analysing past data and making assumptions about its continuing behaviour.
A range of analytical techniques designed to aid decision making. They help businesses decide on the relative merits of different investment projects.
Measures the length of time it takes to get the costs of the investment back from the net cash flow that it generates.
Average Rate of Return (ARR)
A method of comparing the average annual level of profit with the original cost of the investment.
Discounted Cash Flow (DCF)
Takes into account the future or time value of money. Discounting is the process of adjusting the value of money received in the future to its present value.
Net Present Value
The sales revenue generated by the investment, less the other costs of production, all discounted from the year they are received, to give their present value today.
Mathematical models that use probability as a way of determining the best outcome.
The average value of the range of possible outcomes; each financial outcome is multiplied by its probability.
Critical Path Analysis (CPA)
A technique that identifies the activities that are necessary to complete a tasl, including the shortest possible time to completion.
Earliest Start Time (EST)
Top right box gives the earliest day of the project that the task can be started on.
Latest Finish Time (LFT)
Bottom right box that gives the latest time that a task can be completed without holding up the next task.
The spare time available between the time an activity takes and the time it must be completed by.
The amount of time that an activity can be delayed without affecting the EST of the next activity.
The total ice by which an activity can be delayed without delaying the scheduled end date of the project.
The set of important assumptions that are shared by people working in a particular business and influence the ways in which decisions are taken there.
Usually a strong culture in a business that comes from the centre and concentrates power among a small number of people. Decisions can be taken quickly though leadership can become very toxic.
A buisiness where power depends on the person's status or role within the businesses with a high level of detailed rules on how people should interact.
When a business creates teams to resolve specific issues or projects and the power then shifts to the team members.
A business which is not there to support and help individuals who work for it and have power over it; often consists of independent professionals such as doctors or lawyers.
An owner of shares in a company, usually with some form of voting rights over how the company operates.
A person or group that has an interest or concern regarding a business.
Statement Of Comprehensive Income
A statement of all the income and expenses of a business over a specific period.
The principles and standards that determine socially acceptable conduct in business.
The obligation a business has to maximise its positive impact and minimise its negative impact on employees, customers, society and the environment.
Ethical Decision Making
Following codes of practice that embody moral values. The objective is to do the right thing, acting with honesty and integrity and taking into consideration the interests of everyone affected by the decisions.
Corporate Social Responsibility (CSR)
Taking decisions in a way that takes into account all stakeholders interests. Treating employees, customers and suppliers family, avoiding polluting activities and contributing positively to lives in the local community might all be part of this.
The level of a business's debts compared to the finances provided by shareholders.
Debts payable by a business after 12 months such as mortagages or bank loan.
All the long-term finance of the business, including share capital , retained profit and non-current liabilities.
The amount og output per worker or group of workers over a specific period of time.
The proportion of the business's workforce that leaves within a year.
The ability of an organisation to keep its employees in a given period of time. Higher retention is normally related to an ability to maintain a working environment that supports current staff to remain with the business.
The voluntary non-attendance of employees at work, including sickness or withdrawal of labour due to a dispute over pay or conditions.
Reducing the size of a company by eliminating workers and/or functions within the company.
A leader identifies the necessary change, creates a visions to guide the change through inspiration, and executes the change with the commitment of the members off the group.
The process through which a business manages various uncertainties and risks that may affect future success. This can include the analysis and strategies put in place for future events in society, the industry or the economy with the aim of reducing negative impacts and taking advantage of any potential new areas of operation.
A systematic process of evaluating the potential risks that may be involved in a future situation.
A general term for a key document based on financial information generated by the business.
Statement Of Financial Position
Shows the assests, liabilities and net worth of a business on a given date.
Refers to the ease and speed with which assets can be turned into cash. The more easily an asset can be sold, the more liquid the business is. The most liquid asset is cash.
Uses information from the financial statements to relate one measure of performance to another.
A financial ration taken from the statement of comprehensive income, showing what percentage of business turnover is actually profit. It is the ratio of profit to turnover expressed as a percentage.
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