all a-level business key terms
Brand
A "promise of an experience" and conveys to consumers a certain assurance as to the nature of the product or service they will receive
Employee welfare
A broad term covering a wide range of facilities that are essential for the well-being of a business's employees
Company
A business organisation that has its own legal identity and that has limited liability
Sole trader
A business that is owned and managed by one person, but it may employ other people
Industrial dispute
A disagreement between an employer and its employees, usually represented by a trade union, over some aspect of the terms and conditions of employment
Variable pay
A flexible form of pay that offers employees a highly individual pay system related to their performance at work
Works council
A forum within a business where workers and management meet to discuss issues such as working conditions, pay and training
Product
A general term which includes goods and services
Sample
A group of people or items selected to represent the target population
Viral marketing
A marketing technique that uses social media and networks to raise brand awareness and boost sales by getting users to recommend the promotional campaign to others
Profit for the year
A measure of a business' profits that takes into account a wider range of expenditures and incomes including taxation
Profitability
A measure of financial performance that compares a business' profits to some other factors such as revenue
Commission
A method of payment in which the amount paid is related to the value of goods or services that an employee sells
Conciliation
A method of resolving individual or collective disputes in which a neutral third party encourages the continuation of negotiations
Decision tree
A model that represents the likely outcomes for a business of a number of courses of action on a diagram showing the financial consequences of each
Market conditions
A number of features of a market, such as the level of sales, the rate at which they are changing and the number and strength of competitors
Good
A physical product such as a house or a designer suit
Arbitration
A procedure for the settling of a dispute, under which the parties agree to be bound by the decision of a third party
Stakeholder engagement
A process by which managers involve individuals and groups who may be affected by their decisions in those decisions
Consultation
A process by which one group discovers the views of another one
Organisational design
A process to ensure that the organisation is appropriately designed to deliver organisational objectives in the short and long term
Training
A process whereby an employee gains job related skills and knowledge
Profit margin
A ratio that expresses a business' profit as a percentage of its revenues over some trading period
Empowerment
A series of actions designed to give employees greater control over their working lives
Dividends
A share in the profits of a company that are distributed to the holders of certain types of company shares
Trade mark
A sign which can distinguish the goods and services of a business from those of its competitors
Uncertainty
A situation in which there is a lack of knowledge and events, outcomes or consequences are unpredictable
Fair trade
A social movement that exists to promote improved trading terms and living conditions for producers of products in less developed countries
Internal source of finance
A source of finance that exists within the business
Piece rate
A system whereby employees are paid according to the quantity of a product they produce
Marketing objective
A target set for the marketing function, for example to increase sales by 10% within
Demand
A term used by economists to indicate the amount of a particular good or service that consumers or organisations want, and can afford, to buy at given prices
Big data
A term used to describe a massive volume of both organised and non-organised information that is very large
Target population
All the items or people that are relevant to the market research being undertaken
Mass market
An approach that aims to provide products that meet some of the needs of the a large proportion of the market
Relationship marketing
An approach to marketing in which a company seeks to build long term relationships with its customers by providing consistent satisfaction
Balanced portfolio
An appropriate mix of products in terms of their market shares and market growth
External source of finance
An injection of funds into the business from individuals, other businesses or financial institutions
Service
An intangible item such as insurance or decorating
Shareholder
An investor in and one of the owners of a company
Trade union
An organisation of workers established to protect and improve economic position and working conditions of its members
Boston Matrix
Analyses all of the firm's products in terms of their market share and the growth of the market
Market mapping
Analyses market conditions to identify the position of one product or brand relative to others in the market in terms of given criteria
Total costs
Are made up of fixed costs and variable costs
Unit costs
Are the cost per unit, that is total cost/number of units
Human resource plan
Assesses the current and future capacity of a business's workforce and sets out actions necessary to meet the business's future human resource needs
Scientific decision making
Based on data and uses logical, rational approach to decision making
The external environment
Comprises those external forces (such as changes in competition or consumers' incomes) that can influence a business's activities
Variable costs
Costs that alter directly with the business's level of output, for example, fuel costs
Fixed costs
Costs that do not alter when a business alters its level of output. Examples include rent and rates.
Operations management
Describes the activities, decisions and responsibilities of the managing production and delivery of products and services
Employee engagement
Describes the connection between a business's employees and its mission, goals and objectives
Big data
Describes the enormous quantity of structured and unstructured data that is difficult to process using traditional techniques such as databases
Motivation
Describes the factors that arouse, maintain and channel behaviour towards a goal
Kotter and Schlesinger's six ways of overcoming resistance to change
Education and communication; participation and involvement; facilitation and support; negotiation and agreement; manipulation and co-optation; explicit and implicit coercion
Collective bargaining
Entails negotiations between management and employee's representatives, often trade unions, over pay and other conditions of employment
Product portfolio analysis
Examines the market position of all of the products of a business, for example in terms of market share or market growth
Employee involvement
Exists in a business in which people are able to have an impact on decisions and actions that affect their working lives
Overdraft
Exists when a business is allowed to spend more than it holds in its current bank account up to an agreed limit
Direct costs
Expenditure that can clearly be allocated to a particular product or area of the business e.g. raw materials and components
Indirect costs
Expenditure that relates to all aspects of a business' activities, such as maintenance costs for buildings or senior managers' salaries
Programmed decisions
Familiar and routine decisions
Share capital
Finance invested into a company as a result of the sale of shares in the business
Short term finance
Finance needed for a limited period of time, normally less than one year
Budgets
Financial plans that forecast revenue from sales and expected costs over a time period
Total costs
Fixed and variable costs added together
Niche marketing
Focuses on a particular segment of the market
Venture capital
Funds advanced to businesses thought to be relatively high risk in the form of share and loan capital
Primary market research
Gathers data for the first time for a specific purpose
Financial objective
Goal or target pursued by the finance department (or function) within an organisation
Consumer products
Goods bought for consumption by the general public
Industrial products
Goods bought for use in business processes
Stakeholders
Groups or individuals who have an interest in a business
Positioning
Identifies the benefit and price combination of a product relative to competitors
Leadership
Includes the functions of ruling, guiding and inspiring other people within an organisation in pursuit of agreed objectives
Gross profit
Income received from sales minus the cost of goods and services sold
Real incomes
Incomes that are adjusted for the rate of inflation (or increase in prices) to show changes in purchasing power
Stakeholders
Individuals or groups (such as employees, customers and local residents) who have an interest in the business
Marketing research
Involves gathering and analysing data relevant to the marketing process
Primary market research
Involves gathering data for the first time
Operations objective
Is a target set for the operations function such as to improve the proportion of deliveries on time by 5% within two years.
Competitive advantage
Is a way in which a business offers superior value to its competitors
Quality
Is measured by the extent to which an operation meets its customer requirements
Efficiency
Is measured by the inputs used to generate output
Labour productivity
Is the amount of output per employee
Vertical integration
Is the combination of two or more stages of production normally operated by separate companies
Inventory
Is the goods or stock it holds
Quality assurance
Is the maintenance of target quality by attention to detail at every stage of the process
Capacity
Is the maximum output of a business at a moment in time given its resources
Supply chain
Is the series of activities involved in taking the initial resources to providing the final product
Quality control
Is the system of maintaining standards by testing or inspecting the output against standards
Mass customisation
Is the term for producing on a large scale while still enabling individual customer preferences to be met
Outsourcing
Is when a business uses an outside supplier
Non-current assets
Items that a business owns and which it expects to retain for one year or longer
Non programmed decisions
Less structured decisions that require unique solutions
Debentures
Loans with fixed interest rates that are long term and may not even have a repayment date
Mortgages
Long term loans, repaid over periods of up to 50 years, and used to purchase property
Aims
Long term plans of the business from which its corporate objectives are derived
Labour intensive
Means a relatively high proportion of labour in the production used compared to capital equipment, for example hairdressing
Multichannel distribution
Means that customers can buy the product in several ways, for example in store, online or 'click and collect'
Limited liability
Means that in an event of financial difficulties, the personal belongings of shareholders are safe
Unit labour costs
Measure the labour cost per unit of output produced
Time-and-motion study
Measures and analyses the ways in which jobs are completed, with a view to improving these methods
Income elasticity of demand (YED)
Measures how responsive demand is to changes in the income, all other factors constant
Price elasticity of demand (PED)
Measures how responsive demand is to changes in the price, all other factors constant
Margin of safety
Measures the amount by which a business' current level of output exceeds break-even output
Capacity utilisation
Measures the existing output over a given period as a percentage of the maximum output
Competitiveness
Measures the extent to which a business offers good value for money relative to competitors
Profit
Measures the extent to which revenues from selling a product exceed the costs incurred in producing it over time
Profit
Measures the extent to which revenues from selling a product over some time period exceed the costs incurred in producing it
Sales value
Measures the level of sales in a given period in pounds sterling (in the UK)
Sales volume
Measures the level of sales in a given period in terms of units sold
Labour productivity
Measures the output of a firm in relation to its number of employees
Market share
Measures the sales of one brand or business as a percentage of total market sales in a given period
Gross Domestic Product (GDP)
Measures the value of a country's total output of goods and services over a period of time, normally one year
Objectives
Medium to long term goals established to coordinate the business
Ethics
Moral principles, which should underpin business decisions and actions
Market conditions
Number of features of a market such as the level of sales, the rate at which they are changing and the number and strength of competitors
Targeting
Occurs when a business decides which segments it wants to operate in
Redeployment
Occurs when an employee is offered suitable alternative employment within the same business
Unlimited liability
Occurs when an individual or group of individuals is personally responsible for all the actions of their business
Job enrichment
Occurs when employee's jobs are redesigned to provide them with more challenging and complex tasks
Lean production
Occurs when managers reduce waste and therefore operations become more efficient
Takeover
Occurs when one company acquires control of another company by buying more than 50% of its share capital
Segmentation
Occurs when similar customer needs and wants are grouped within a market
Sustainable production
Occurs when the supply of a product does not impose costs on future generations by, for example, depleting non-renewable resources
Trade credit
Offered when purchasers are allowed a period of time (frequently 30,60 or 90 days) to pay for products they have bought
Delegation
Passing authority down the organisational hierarchy
Decentralisation
Passing authority from the centre of the organisation to those working elsewhere in the business
Management
Planning, organising, directing and controlling all or part of a business enterprise
Crowdfunding
Practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet
Patent
Protects new inventions and covers how things work, what they do, how they do it, what they are made of and how they are made
Empowerment
Provides subordinates with the means to exercise power or control over their working lives
Diversity
Recognising the differences between individual employees and also the differences that may exist between different groups of employees
Income statement
Records a business' sales revenue over a trading period and all relevant costs incurred as well as the business' profit or loss
Levels of hierarchy
Refer to the number of layers of authority within an organisation i.e. how many levels exist between the CEO and the shop floor employee
Business ethics
Refer to whether a business decision is perceived as morally right or wrong
Supply chain
Refers to all of the providers of resources (such as money, people, finance, machinery, equipment) at different stages of the operations process
Big data
Refers to large and complex data sets
Corporate social responsibility
Refers to the extent to which a business takes into account its stakeholder views and accepts its obligations to society over and above the legal requirements
Social media
Refers to the social interaction among people where they create, share or exchange information and ideas in virtual communities
Capital structure
Refers to the way in which a business has raised the capital required to purchase its assets
Mission statement
Sets out a business's overall purpose to direct and stimulate the entire organisation
Product life cycle model
Shows the sales of a product over its life
Performance related pay
Some part of an employee's pay is linked to the achievement of targets at work
Long term finance
Sources of finance that are needed over a longer period of time, usually over a year
Capital expenditure
Spending undertaken by businesses to purchase non-current assets such as vehicles and property (it is another form of investment)
Cash flow forecasts
State the inflows and outflows of cash that the managers of a business expect over some future period
Redundancy
Takes place when an employee is dismissed because a job no longer exists
Dismissal
Takes place when an employer terminates an employee's contract of employment and leads to employees exiting the human resource flow
Break even output
That level of output or production at which total costs exactly equal revenue from sales
Cash flow
The amount of money moving into and out of a business over a time period
Bank loan
The amount of money provided by a business for a stated purpose in return for a payment in a the form of interest charges
Division of labour
The breaking down of production into a series of small tasks carried out repetitively by relatively unskilled labour
Employer brand
The business's reputation as an employer
E-commerce
The buying and selling of products through an electronic medium such as the internet
Probability
The chance of a particular event occurring
Risk
The chance of incurring misfortune or loss
Marketing mix
The combination of marketing choices that can be used by a business to influence consumers to buy products
Talent development
The development and guidance of outstanding or star employees who have the potential to make major contributions to an organisation's performance and success
Contribution
The difference between revenue and variable costs
Social responsibility
The duties a business has towards stakeholder groups such as employees, customers and the government
Revenue
The earnings or income generated by a firm as a result of its trading activities (also called turnover or sales revenue)
Communication
The exchange of information or ideas between two or more parties
Net gains
The expected values of a course of action minus the costs associated with it
Labour retention
The extent to which a business holds onto its employees
Quality
The extent to which a product meets the customers needs
Expected values
The financial outcomes from a specific course of action adjusted to allow for the probability of it occurring
Operating profit
The financial surplus arising from a business' normal trading activities and before taxation
Market segments
The groups of similar needs and wants within a market
Globalisation
The increasing trade between countries and the growing internationalisation of businesses
Chain of command
The line of communication and authority existing within a business i.e. a shop floor worker reports to a supervisor, who is responsible to a departmental manager and so on
Cash flow
The movement of cash into and out of a business over time
Human resource flow
The movement of employees through an organisation, starting with recruitment
Opportunity cost
The next best alternative foregone
Opportunity cost
The next best alternative that is foregone
Span of control
The number of subordinates directly responsible to a manager
Delegation
The passing down of authority (but not responsibility) down the organisational structure
Sales growth
The percentage change in sales volume or value over a given period
Market growth
The percentage change in the total sales in the market over a given period
Trade union wage premium
The percentage difference in average gross hourly earnings of union members compared with non-members
Labour turnover
The percentage of a business's employees who leave the business over some period of time (normally a year)
Trade credit
The period of time given by suppliers before customers have to pay for goods and services
Confidence interval
The possible range of outcomes for a given confidence level
Authority
The power or ability to carry through an action
Authority
The power to give orders, make decisions and to control events and people
Interest rates
The price of borrowed money
Confidence level
The probability that the research findings are correct
Appraisal
The process of considering and evaluating the performance of an individual employee
Incorporation
The process of establishing a business as a separate legal entity that allows it to benefit from limited liability
Recruitment and selection
The process of filling an organisation's job vacancies by appointing new staff
Job design
The process of grouping together or dividing up tasks and responsibilities to create complete jobs
Variance analysis
The process of investigating any differences between forecast data and actual figures
Privatisation
The process under which the state sells businesses that it has previously owned and managed to private individuals and businesses
Investment
The purchase of assets such as property, vehicles and machinery that will be used for a considerable time by the business
Profit
The surplus of total revenue over total costs for a business over a trading period
Human resource objectives
The targets pursued by the HR function or department of the business
Market capitalisation
The total value of the issued shares of a public limited company
Communication
The transfer of information between people
Organisational structure
The way a business is arranged to carry out its activities
Average costs
Total costs of production divided by the level of production or output to give the cost of producing a single unit of output
Capital intensive
Uses a relatively high proportion of capital equipment relative to labour, for example a bottling process
Secondary market research
Uses data that already exists
Teamworking
When an organisation breaks down its production processes into large units instead of relying upon the use of the division of labour
Temporary staff
Work for a limited period of time, for example for the summer only
Part time staff
Work less than a full working week, for example 20 hours per week
Competitive advantage
a benefit (or benefits) that a firm has in comparison to its rivals, allowing it to achieve greater sales and profits and retain more customers than its competitors
Licensing
a business arrangement whereby one company gives another company permission to0 manufacture its goods, offers its servi9ces, and use its technology, brand or expertise for a specified fee or royalty
Multinational
a business that operates in several countries but is managed from one (home) country; examples include Nike, Coca-Cola, Wal-Mart, Toshiba, Honda; the term is often abbreviated to MNC (multinational company/cooperation)
Enterprise resource planning (ERP)
a business's use of its information's systems so that it can automate and integrate its cores business processes
Person culture
a culture where the organisation exists as a vehicle for people to develop their own careers and expertise; the individual is the central point; if there is a structure, it exists only to serve the needs of the individuals within it
Balance sheet
a document describing the financial position of a company at a particular point in time. It compares the value of items owned by the company (its assets) with the amounts that it owes (its liabilities)
Balance sheet
a financial statement that summarizes are companies assets, liabilities, and shareholders' equity at a particular point in time
Solvency
a measure of a firm's ability to pay its debts on time. A firm that can meet its financial commitments is described as 'solvent'; a firm that cannot meet its financial commitments is described as 'insolvent'
Gross domestic product (GDP)
a measure of economic activity ; the total value of a country's output over a given period of time , usually provided as quarterly or annual figures.
Ratio analysis
a method of assessing a firm's financial situation by comparing two sets of linked data
Network analysis
a method of planning business operations in order to identify the most efficient way of completing an integrated task or project.
Greiners model of growth
a model describing different phases of company growth, each of which includes calm periods of evolutionary development and growth that ends with a period of crisis and revolution.
Porter's five forces (or competitive forces)
a model developed by Michael Porter to analyse the competitive environment in which a business operates; the five forces are: the threat of entry, buyer power, supplier power, competitive rivalry and substitute threat.
Hofstede's national cultures
a model of cultural dimensions that distinguishes one country's culture from another; the model measures and compares the cultural dimensions of different countries and demonstrates that there are national and regional cultural groupings that affect the behaviour of organisations
Porter's Generic Strategies
a model which identifies marketing strategies ie cost leadership, differentiation or focussed cost leadership/ focussed differentiation based on whether the target market is mainstream or niche and whether the strategic advantage comes from low cost production or high perceived value
Kaizen (or continuous improvement)
a policy of implementing small, incremental changes In order to achieve innovation, better quality and/ or greater efficiency. These changes are invariably suggested by employees and emanate from a corporate culture that encourages employees to identify potential improvements
Carroll's CSR pyramid
a pyramid illustrating four tiers; economic responsibilities (to be profitable), legal responsibilities (to obey laws), ethical responsibilities (to be ethical and do what is fair and just) and philanthropic responsibilities (to be good corporate citizens and support the quality of life in the community).
Purchasing economies of scale
a reduction in unit costs as a result of buying in large quantities; these are sometimes called buying economies of scale
The business cycle
a regular pattern of ups and downs in demand and output within an economy over a period of time. (boom / recession-downturn / slump / recovery-upturn)
Investment appraisal
a scientific approach to investment decision making, which investigates the expected financial consequences of an investment, in order to assist the company in its choices
Corporate governance
a set of relationships between a company's management, its board, its shareholders and other stakeholders; a system for protecting the interests of the owners (shareholders) of a company
Strategic drift
a situation where a company responds too slowly to changes in its external and competitive environments; a company continues with a strategy that may have served it very well in the past but it no longer suited to the current circumstances
Ansoff's matrix
a strategic or marketing planning model that can be used to help a business decide its strategic direction in terms of its product portfolio and target markets
Kaplan and Norton's balanced scorecard
a strategic planning and management system used to ensure that a business's activities are linked to its vision statement. Uses 4 different perpectives - financial, customer, internal business processes, learning and growth
SWOT analysis
a technique that allows an organisation to assess its overall position, or the position of one of its divisions, products or activities. It uses an internal audit to assess its strengths and weaknesses, and an external audit to assess its opportunities and threats
Sensitivity analysis
a technique used to examine the impact of possible changes in certain variables on the outcome of a project or investment
Short-termism
a tendency for businesses to prioritise current performance rather that the long-term sustainability of the business
Intrapreneurship
acting like an entrepreneur within a large organisation
Technological change
adapting new applications of practical or mechanical sciences to industry and commerce; it includes information and communication technology (ICT), which is the creation, storing and communication of information using microelectronics, computers and telecommunications
Alliances
agreements between two or more companies to combine their strengths and expertise in order to undertake a mutually beneficial project - in this context , involving entry to an international market; alliances can include strategic alliances and joint ventures
Enterprise
almost any business or organisation can be called an enterprise, but the term usually refers to the process by which new businesses are formed and new goods and services created and brought to the market. Enterprises are usually led by an entrepreneur. Increasingly the term 'enterprise' is sued when discussing the development of skills relevant to becoming a successful entrepreneur and establishing a successful business enterprise, including the importance of risk taking.
Income statement
an account showing the income and expenditure (and thus the profit or loss) of a company over a period of time
Inflation
an increase in the general level of prices within an economy. Inflation also means that there is a fall in the purchasing power of money. In contrast, deflation is a decrease in the general level of prices within an economy or a rise in the purchasing power of money
Patent
an official document granting the holder the right to be the only user or producer of a newly invented product or process for a specified product.
Flexible organisation
an organisation that can respond quickly to changes taking place in the external environment; includes a flexible workforce structure that allows capacity to be increased or reduced quickly and easily in response to external pressures.
Mission
an organisations aims or long-terms intentions, its ultimate purpose; a business mission is sometimes the same as its corporate aims
Intellectual property
any intangible assets that arise from human knowledge and ideas
Social change
any significant change over time in behaviour patterns and cultural values and norms
Non-current liabilities
are debts due for re-payment after more than one year
Current liabilities
are debts scheduled for repayment within one year
Strategic decision making
concerns the general direction and overall policy of an organisation. Strategic decisions have significant long-term effects on an organisation and therefore require detailed consideration and approval at the senior management level. They can be high risk because the outcomes are unknown and will remain so for some time
Monetary policy
controlling the money supply and the rate of interest in order to influence the level of spending and demand in the economy
Economies of scope
cost advantages that result from firms providing a variety of products rather than specialising in the production or delivery of a single product
Liabilities
debts owed by an organisation to suppliers, shareholders, investors or customers who have paid in advance
Elkington's The triple bottom line
describes a means of assessing business performance that considers three different factors; financial returns (profit) social responsibility (people) and environmental values (planet)
Emerging economies (emerging markets)
developing countries that have potential to grow and develop in the terms of productive capacity and market opportunities ; from an investment point of view they are seen as developing countries , in which investment would be expected to achieve higher returns but be accompanied by greater risk
Digital technology
electronic technology which uses binary numbers (1 or 0) to store, generate and process data
Organic structures
features include flat organisational structures; horizontal communication and interactions; low levels of specialisation because knowledge resides wherever it is most useful; decentralisation involving a great deal of formal and informal participation in decision making
Mechanistic structures
features include hierarchical and bureaucratic organisational structures; highly centralised authority; formalised procedures and practices; highly specialised functions
Bartlett and Ghoshal's global strategy
focuses on increasing profitability by benefiting from costs reductions that come from economies of scale, experience curve effects and location economies; it is most appropriate when there is high pressure for cost reduction and low pressure for local responsiveness; the strategy is sometimes known as global standardisation strategy.
Bartlett and Ghoshal's multi-domestic strategy
focuses on increasing profitability by customising a firms products so that they provide a good match to tastes and preferences in different international markets ; most appropriate when there is a high pressure for local responsiveness and low pressure for cost reduction; this is sometimes known as a localisation strategy
Total equity or total shareholders' equity (capital)
funds provided by shareholders to set up the business, fund expansion and purchase fixed assets
International markets
geographically, markets outside the international border of a company's home country; the opposite of an international market is a domestic markets, which is the geographic region within the national boundary of a company's home country.
Corporate objectives
goals of the whole organisation rather than of different elements of the organisation. They are set in order to co-ordinate the activities of, give a sense of direction to , and guide the actions of the whole organisation. They are dictated by the mission or corporate aims of an organisation
Export
goods or services produced in one country are sold in another country
The experience curve
indicates that the higher the cumulative volume of production, the lower the direct cost per new unit produced; essentially, the more experienced a firm gets at making a product, the better, faster and cheaper it is likely to be making it at
Bartlett and Ghoshal's international strategy
involves taking products first produced for the domestic market and then selling them internationally with only minimal local customisation; it is most appropriate when pressures for cost reduction and for local responsiveness are low.
Assets
items that are owned by a business
Big data
large pools of data that can be captured, communicated, aggregated, stored and analysed
Managerial economies of scale
larger firms have greater scope to benefit from the specialisation of labour at supervisory and manager level in each of the functional areas of the firm
Copyright
legal protection against copying for authors, composers and artists
Performance metrics
measure a business's activities and performance. These measures should be suited to the needs of stakeholders as a whole, rather than focus on the needs of shareholders and managers
Profitability (or performance) ratios
measure the efficiency with which a business makes profit, in relation to its size
Current ratio
measures liquidity by expressing current assets as a ratio to current liabilities
Liquidity ratio
measures the ability of a business to stay solvent (pay its liabilities) in the short term
Return on capital employed
measures the profitability of a business by calculating its operating profit as percentage of the capital that a business has at its disposal - that is, its capital employed.
Kotter and Schlesinger's four reasons for resistance to change
parochial self-interest; misunderstanding and lack of trust; different assessments; and low tolerance for change
Contingency planning
planning for unexpected and, usually, unwelcome events that are, however, reasonably predictable and quantifiable; the objective is to reduce the risks and costs of such events on an organisation
Power culture
power is concentrated in a small group or central figure, who determines the dominant culture
Task culture
power is derived from the expertise required to complete a task or project; it is usually associated with a small team approach or small organisations co-operating to deliver a project; the emphasis is on results and getting things done
Role culture
power is hierarchical and clearly defined in a company's job descriptions; a person's power derives from their place or role within a highly structures organisation; detailed rules indicate how people and departments interact with each other, customers and suppliers
Non-current assets
resources that can be used repeatedly in the production process, although they do wear out (depreciate) or lose value over time. These are often known as fixed assets. Examples are land, buildings, machinery and vehicles
Gross profit
revenue minus cost of sales. The gross profit shows how efficiently a business is converting its raw materials or stock into finished products.
Divorce of ownership control
separation of the two functions of ownership and control in public limited companies; ownership entails providing finance and therefore taking risks; control involves managing the organisation and making decisions
Current assets
short-term items that circulate in a business on a daily basis and can be expected to be turned into cash within one year
Trademark
signs, logos, symbols or words displayed on a company's products or on its advertising, including sound or music, which distinguish its brands from those of its competitors
Incremental change
small adjustments made, usually over a long period of time, towards a desired end result; it usually does not alter current working practices in any significant way
Overtrading
takes place when a business grows too quickly without organising sufficient long-term funds to support the expansion. This puts a strain on working capital.
Functional decision making
tends to short to medium term and is concerned with a specific functional area rather than overall policy. Functional decisions are usually taken to support the implementation of strategic decisions and are usually made by middle management.
Infrastructure
the 'economic arteries and veins ; roads , ports , railways , airports , power lines , pipes and wires that enable people goods , commodities , water , energy and information to move about efficiently'. Also defined as 'the physical assets underpinning the UK's network for transports, energy, generation and distribution, electronic communication, solid waste management, water distribution and waste water treatment.
Lewin's force field analysis
the 'force field' consists of two opposing forces - one set of forces, the driving forces, are working for change, and the other set, the restraining forces, are working against change occurs when driving forces are stronger than the restraining forces
Competitiveness
the ability of businesses to sell their products successfully in the market in which they are based
E-commerce
the buying and selling of goods and services and/or transmission of funds or data, using an electronic network, such as the internet
Vertical integration
the coming together of firms in the same industry but at different stages of the production process; vertical integration can be backwards or forwards. Forwards - a manufacturer integrating with the retailer selling its product. Backwards - a manufacturer integrating with the supplier of raw materials
Horizontal integration
the coming together of firms operating at the same stage of production and in the same market
Conglomerate integration
the coming together of firms operating in unrelated markets
Integration
the coming together of two or more businesses via a merger or a takeover
Product innovation
the creation and launch of a good or service that is new, or a significant change to an earlier good or service
Process innovation
the creation of a new way of making, providing or delivering a particular or service
Management accounting
the creation of financial information for use by internal users in a business , to predict , to plan , to review and control the financial performance of the business.
Retrenchment
the cutting back of an organisation's scale of operations
Product differentiation
the degree to which consumers see a particular brand as being different from other brands , for example because of a unique selling point/proposition (USP). A USP is a feature of a product or service that allows it to be differentiated from other products
Corporate social responsibility (CSR)
the duties of an organisation towards employees, customers, society and the environment ; companies that accept their corporate social responsibility usually do so by integrating social and environmental concerns into their business operations and their interactions with stakeholders
Protectionism
the extent to which a government uses controls to restrict the amount of imports entering the country
Share capital
the funds provided by shareholders through the purchase of shares
Internationalisation
the growing tendency of companies to operate across national boundaries; all activities that a company undertakes with regards to its relations with foreign markets, whether buying supplies from abroad ,exporting, licensing products abroad , entering into alliances or directly investing in operations abroad.
Urbanisation
the increase in the proportion of people living in towns and cities
Globalisation
the increased integration and independence of national economies; it involves increased international trade, increased inward investment and an increased role for global multinational companies.
Payback period
the length of time that it takes for an investment to pay for itself from net returns provided by that particular investment
Technical economies of scale
the lower unit costs that arise because larger firms are able to use more efficient techniques of production and to benefit from the law or principle of increased dimensions
Tactics
the means by which a strategy is carried out; a range of different tactics may be used as a part of the single strategy
Strategy
the medium to long term plan through which an organisation aims to attain its objectives
Net present value NPV
the net return on an investment when all revenues and costs have been converted to their current worth
Total float for an activity
the number of days that an activity can be delayed without delaying the project (LFT - EST - duration of the activity)
Migration
the permanent movement of people from one region to another. Migration can be internal, that is within a country and for which urbanisation is an example or international, that is between countries
Knowledge and information management (KIM)
the practice of organising, storing and sharing vital knowledge and information, so that everyone in an organisation can benefit from its use
Exchange rates
the price of one's country currency in terms of other currencies.
Risk and uncertainty
the probability of unforeseen circumstances that may harm the success of a business decision
Investment decisions
the process of deciding whether or not to undertake capital investment (the purchase of non-current assets) or major business projects
Strategic planning
the process of determining an organisation's long-term goals and then devising a plan (strategy) to achieve them
Critical path analysis (CPA)
the process of planning the sequence of activities in a project in order to discover the most efficient and quickest way of completing it
Benchmarking
the process of setting competitive standards, based on the achievements of other firms, against which a firm will monitor its progress. The benchmarking firm tends to focus on the companies that are the best in its industry ('best in class') but for specific functions a company may compare itself with firms in other industries
Data mining
the process whereby a business transforms raw data into useful information, to support the various activities of the business
Financial accounting
the provision of financial information to show external users the financial performance of the business. It concentrates on historical data
Delayering
the removal of one or more layers of hierarchy from the management structure of an organisation; it leads to a flatter hierarchical structure with a wider span of control
Operating profit
the revenue earned from everyday trading activities minus the costs involved in carrying out those activities. It is also gross profit minus expenses.
Re-shoring
the reverse of off-shoring; the transfer of business operations back to the country of origin; also knows as on-shoring
Research and development (R&D)
the scientific investigation necessary to discover new products or manufacturing processes , and the procedures necessary to ensure that these new products and processes are suited to the needs of the market.
Critical path
the sequence of activities in a project that must be completed within a designated time in order to prevent any delay in overall completion of the project
Strategic implementation
the stage when a strategic plan is put into effect in order to achieve the objectives for which it has been designed; the stage where strategies are translated into policies, rules, procedures and operational targets within the different functional areas
Innovation
the successful exploitation of new ideas. Innovation enables businesses to compete effectively in an increasingly competitive global environment
Direct investment
the taking of a controlling ownership in a company in one country by a company based in another country; this can be via organic growth or by the takeover of a foreign business; sometimes known as foreign direct investment.
Ventures
the term used for a range of different arrangements between two or more firms ; most usually involve companies in the early stage of development with high growth potential ; venture capitalists or larger companies invest in these companies knowing that the risk is high but the rewards are equally high.
Core competences (often known as core competencies)
the unique ability or abilities of a business that enable it to achieve a competitive advantage
Organisational culture
the unwritten code that affects the attitudes and behaviour of staff, approaches to decision making and the leadership style of management; the shared values of an organisation, including the beliefs and norms that affect every aspect of work life, from how people greet each other to hoe major policy decisions are made
Fiscal policy
the use of taxation and government expenditure to influence the economy
Strategic positioning
the view people take of a business that results from the business's strategic decision making
Investment criteria
the ways in which a business will judge whether an investment should be undertaken
Synergy
the whole is greater than the sum of parts; synergy is sometimes summarised as '1+1=3'
Reserves and retained earnings
those items that arise from increases in the value of the company, which are not distributed to shareholders as dividends, but are retained by the business for future use
Average rate of return ARR
total net returns divided by the expected lifetime of the investment (usually a number of years), expressed as a percentage of the initial cost of the investment.
Bartlett and Ghoshal's transnational strategy
tries simultaneously to achieve lower costs through location economies, economies of scale and experience curve effects and to differentiate products across different international markets; most appropriate when there are high pressures for cost reduction and for local responsiveness.
Emergent strategy
unplanned strategy that emerges in response to unexpected opportunities and challenges; a response to internal and external changes that were not envisaged at the time of the original planned strategy
Franchise
when a business (the franchisor) gives another business (the franchisee) the right to supply its product or service
External growth
when a firm expands by integrating with another firm as a result of either a merger or a takeover
Organic (internal) growth
when a firm expands its existing capacity or range of activities by extending its premises or building new factories from its own resources, rather than integration with another firm
Off-shoring
when companies outsource or subcontract business activities overseas, largely because labour and other production costs are much cheaper there; also knowns as outsourcing off-shore
Takeover (also known acquisition)
where one firm buys the majority shareholding in another firm and therefore assumes full management control.
Planned strategy
where the main elements of the strategy have been planned in advance and implementation involves putting the precise plan into effect in order to achieve the previously agreed objectives; also known as intended strategy
Merger
where two or more firms agree to come together under one board of directors
Flexible employment contracts
working arrangements that give some degree of flexibility about how long, where, when and at what times employees work; the flexibility can be in terms of working time, working location or the pattern of working
