IB Business Management Vocab

Objectives

Are the relatively shorter term targets of an organisation. They tend to be expressed as SMART objectives

Non-profit organisation

Any organisation that has aims other than making and distributing profit and which is usually governed by a voluntary board

Aims

Are the long-term goals of business. They are a general statement of a firm's purpose or intentions and tend to be qualitative in nature

Limited liability

the only liability, or potential loss, a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder

Capital employed I

(Non-current assets + current assets) - current liabilities

Current liabilities

*Debts* of a business that are generally *paid within one year*

Impact of *changing production methods* from *Batch to Flow*

*Finance*: - cost of equipment needed for flow production - any production delays during the change-over period may impact cash flow *Human Resources*: - risk of low motivation and boredom if traditional line production techniques are used *Marketing*: - mass production requires mass marketing so market research will be essential to identify largest market segments - accurate estimates of future demand to ensure that output matches demand - promotion and pricing decisions will have to be geared towards a mass marketing approach - not niche marketing, so the orientation of the business may have to change

Impact of *changing production methods* from *Job to Batch*

*Finance*: - cost of equipment needed to handle large numbers in each batch - additional working capital needed to finance high levels of stocks and work in progress *Human Resources*: - less emphasis placed on individual's craft skills *Marketing*: - can no longer promote product as being 'customised to each consumer' - may have to promote the benefits of lower prices and consistent quality

Impact of *changing production methods* from *Batch or Flow to Cellular Production*

*Finance*: - expensive CAM methods may be needed to allow cells to switch from one product to another *Human Resources*: - recruitment of flexible, adaptable staff keen to work in teams - staff training will be needed to achieve multi-skilling *Marketing*: - productivity and quality improvements should allow competitive pricing and promotion of the improved quality products

Cost-to-Make

*Fixed costs* + (*average variable cost* x *quantity*)

Gross profit

*Gross profit* = *sales revenue less cost of sales*

Effects of an *increased exchange rate*

*Imported products* become relatively less expensive. *Pros*: cheaper to purchase imported capital goods and resources used in the production process; *Cons*: imported products become more price competitive against domestically produced products. *Exported products* become less competitive in overseas markets or the returns in terms of the home currency are diminished.

Effects of an *decreased exchange rate*

*Imported products* become relatively more expensive. *Cons*: more expensive to purchase imported capital goods and resources used in the production process; *Pros*: domestic products become more price competitive against overseas produced products. *Exported products* become more competitive in overseas markets or the returns in terms of the home currency are increased.

Effect of *demographic change* on *labour supply*: *AGEING POPULATION*

*Opportunities*: - it is often claimed that older staff are more loyal and reliable than younger workers *Constraints*: - older staff may be less flexible and adaptable; e.g., to the introduction of new workplace technologies (caution! this is very stereotypical)

Effect of *demographic change* on *labour supply*: *NATURAL POPULATION GROWTH*

*Opportunities*: - it may be easier to recruit good staff as working population increases *Constraints*: - increased birth rates may take years before they impact on the *working* population

Effect of *demographic change* on *labour supply*: *NET MIGRATION*

*Opportunities*: - it may be easier to recruit good staff at lower rates of pay - highly qualified staff might be recruited from other countries *Constraints*: - 'brain drain' of qualified and experienced staff to other countries will reduce competitiveness - immigrants may need more training; e.g., in language and cultural issues

Cost-to-Buy

*Price* x *Quantity*

Marketing mix

*Product*: making sure that the right products are supplied to meet the needs and wants of consumers. *Price*: Establishing the correct price to balance the needs and wants of consumers with the objectives of the firm (e.g., profit maximisation, maximising market share.) *Place*: Finding the right distribution channels to get products into the hands of customers. *Promotion*: Informing customers and potential customers about the product and persuading them to take action (i.e. buy the product).

"Cats are animals, but animals are not necessarily cats." Apply this same reasoning to *shareholders* and *stakeholders*

*Shareholders are stakeholders, but stakeholders are not necessarily shareholders*.

"Women are people, but people are not necessarily women." Apply this same reasoning to *shareholders* and *stakeholders*

*Shareholders are stakeholders, but stakeholders are not necessarily shareholders*.

Net present value (*NPV*)

*Today's value* of the estimated cash flows resulting from an investment

*Non-financial* methods of motivation:

+ Job enlargement + Job enrichment + Team working + Empowerment

*Main advantages* of *job production*

- Able to undertake specialist projects or jobs, often with high value added - High levels of worker motivation

Benefits of cash flow forecasts:

- By showing periods of *negative cash flow*, plans can be put into place to provide additional finance; e.g. arranging a bank overdraft or preparing to inject owner's capital - If negative cash flow appears to be too great, then plans can be made for reducing these; e.g., by cutting down on purchases of new materials or reducing credit sales - A new business proposal will never progress beyond the initial planning stage unless investors and bankers have access to a cash flow forecast (and the assumptions behind it)

Main *reasons for changes* in employment patterns and practices:

- Focus on competitiveness, driven by competitive pressures from globalisation, by cutting overhead labour costs - Need for greater labour flexibility with the rapid pace of technological change - Greater opportunities for outsourcing, especially in low wage economies - Changing social and demographic patterns; e.g., increasing single parent families that can struggle with full-time employment

*Main limitations* of *batch production*

- High levels of stocks at each production stage - Unit costs likely to be higher than with flow production

*Main limitations* of *job production*

- High unit production costs - Time consuming - Wide range of tools and equipment needed

*Main limitations* of *flow/mass production*

- Inflexible - often very difficult and time consuming to switch from one type of product to another - Expensive to set up flow-line machinery and each section needs to be carefully synchronised

Examples of *cash outflows* include:

- Lease payments for premises - Annual rent payment - Electricity, gas and telephone/internet bills - Labour cost payments - Variable cost payments (e.g., raw materials)

*Main advantages* of *mass/flow production*

- Low unit costs due to the constant working of machines, high labour productivity and economies of scale - JIT stock management easier to apply than with other methods

*Essential requirements* of *mass customisation*

- Many common components - Flexible and multi-skilled workers - Flexible equipment - often CAM to allow for variations in the product

Limitations of cash flow forecasts:

- Mistakes can be made in preparing the revenue and cost forecast (inexperience, seasonal variations, etc) - Unexpected cost increases can lead to major inaccuracies (e.g. fluctuations in oil prices affecting cash flows of airline companies) - Wrong assumptions can be made in estimating the sales of a business (e.g., poor market research)

Extension strategies and the product life cycle

- Price reductions - Redesigning - Repackaging - New markets - Brand extension

Examples of *revenue expenditure*

- Rent - Wages - Utility bills (e.g., water and electricity)

*Main advantages* of *batch production*

- Some economies of scale -Faster production with lower unit costs than job production -Some flexibility in design of product in each batch

*Essential requirements* of *mass/flow production*

- Specialised, often expensive, capital equipment - but can be very efficient - High steady demand for standardised products

*Traditional* employment pattern and practices:

- full-time employment contracts - permanent employment contracts for most workers - regular working hours each week - working at the employer's place of work

*More modern* employment pattern and practices:

- part-time and temporary employment contracts - teleworking from home - flexible contract hours - portfolio working

Examples of physical evidence

-The building itself -Packaging -Internet/web pages. -Paperwork (such as invoices, tickets and dispatch notes). -Brochures. -Furnishings. -Signage (such as those on aircraft and vehicles). -Uniforms and employee dress.

Pink's Drive Theory of motivation

1. *Autonomy* - the desire to direct our own lives. 2. *Mastery* — the urge to get better and better at something that matters. 3. *Purpose* — the yearning to do what we do in the service of something larger than ourselves.

Disadvantages of Just in Case Stock Management:

1. *High opportunity costs* of working capital tied up in stock. 2. High *storage costs*. 3. Risk of *goods being damaged or becoming outdated*. 4. '*Getting it right first time*' - a key component of lean production - matters less than with JIT as other supplies are kept in stock to replace defective items. 5. *Space* used to store stock cannot be used for productive purposes.

3 main types of training:

1. *Induction training* is given to all new recruits 2. *On-the-job training* involves instruction at the place of work 3. *Off-the-job training* entails any course of instruction away from the place of work

Why future cashflows are discounted

1. *Inflation*: The same amount of money in the future will not purchase the same amount of goods and services as it can today 2. *Interest* foregone: Money can be invested for a return. If you invested the money safely now, it will be worth more in the future. 3. Uncertainty: The cash today is certain, but the future cash on offer is always associated with at least a degree of risk and uncertainty

Production methods:

1. *Job* production 2. *Batch* production 3. *Flow* production and *mass* production 4. *Mass customisation* 5. *Cell* production

Costs of not holding enough stocks:

1. *Lost sales*. If a firm is unable to supply customers 'from stock', then sales could be lost to firms that hold higher stock levels. This might lead to future lost orders too. In purchasing contracts between businesses, it is common for there to be a penalty payment clause requiring the supplier to pay compensation if delivery dates cannot be met on time. 2. *Idle production resources*. If stocks of raw materials and components run out, then production will have to stop. This will leave expensive equipment idle and labour with nothing to do. The costs of lost output and wasted resources could be considerable. 3. *Special orders could be expensive*. If an urgent order is given to a supplier to deliver additional stock due to shortages, then extra costs might be incurred in administration of the order and in special delivery charges. 4. *Small order quantities*. Keeping low stock levels may mean only ordering goods and supplies in small quantities. The larger the size of each delivery, the higher will be the average stock level held. By ordering in small quantities, the firm may lose out on an important economy of scale such as discounts for large orders.

Conditions necessary for *Kaizen* to operate:

1. *Management culture* must be directed towards involving staff and giving their views and ideas importance (the experience of workers in their day-to-day jobs is invaluable). 2. *Team working* - suggesting and discussing new ideas to improve quality or productivity is best done in groups. Each Kaizen group should meet regularly. 3. *Empowerment* - by giving each Kaizen group the power to take decisions regarding workplace improvements, this will allow speedier introduction of new ideas and motivate staff to pursue further ideas. 4. *All staff* should be involved.

Three costs associated with stock holding:

1. *Opportunity cost*. Working capital tied up in stocks could be put to another best alternative use. The capital might be used to pay off loans, buy new equipment or pay off suppliers, or could be left in the bank to earn interest. 2. *Storage costs*. Stocks have to be held in secure warehouses. They often require special conditions, such as refrigeration. Staff will be needed to guard and transport the stocks which should be insured against fire or theft. 3. *Risk of wastage and obsolescence*. If stocks are not used or sold as rapidly as expected, then there is an increasing danger of goods deteriorating or becoming outdated. This will lower the value of such stocks. Goods often become damaged while held in storage - they can then only be sold for a much lower price.

Main features of a *Democratic* leadership style:

1. *Participation* encouraged 2. *Two-way communication* used, which allows feedback from staff 3. Workers given information about the business to allow full staff involvement

Reasons why workers join trade unions:

1. *Power through solidarity* has been the basis of union influence and this is best illustrated by their ability to *engage in collective bargaining*. This is when trade unions negotiate on behalf of all of their members in a business. This puts workers in a stronger position than if they negotiated individually to gain higher pay and working conditions. 2. *Individual industrial action* - one worker going on strike, for example, *is not going to be very effective*. Collective industrial action could result in much more influence over employers during industrial disputes. 3. Unions provide *legal support* to employees who claim unfair dismissal or poor conditions of work. 4. Unions pressure employers to *ensure all legal requirements are met*; e.g., health and safety rules regarding machinery

Three stages of effective quality control:

1. *Prevention*: this is the most effective way of improving quality. The design of the product should follow requirements of the customer and allow for accurate production. Quality should be 'designed into' a product. 2. *Inspection*: traditionally this has been the most important stage, but it does have high costs and these could be reduced by 'zero-defect manufacturing (TQM). 3. *Correction and improvement*: this is not just about correcting faulty products but is also concerned with correcting the process that caused the failure in the first place, to improve quality in the future.

Examples of indirect costs:

1. *Production overheads* - factory rent and rates, depreciation of equipment and power. 2. *Selling and distribution overheads* - warehouse, packing and distribution costs and salaries of sales staff. 3. *Administration overheads* - office rent and rates, clerical and executive salaries 4. *Finance overheads* - interest on loans

5 types of economies of scale

1. *Purchasing* economies 2. *Technical* economies 3. *Financial* economies 4. *Marketing* economies 5. *Managerial* economies

Manufacturing businesses will hold stocks in three distinct forms:

1. *Raw materials and components*. These will have been purchased from outside suppliers. They will be held in stock until they are used in the production process. 2. *Work in progress*. At any one time the production process will be converting raw materials and components into finished goods and these are 'work in progress'. For some firms, such as construction businesses, this will be the main form of stocks held. Batch production tends to have high work-in-progress levels. 3. *Finished goods*. Having been through the complete production process goods may then be held in stock until sold and despatched to the customer.

Important conditions for JIT to be successful:

1. *Relationships with suppliers have to be excellent*. 2. *Production staff must be multi-skilled and prepared to change jobs at short notice*. 3. *Equipment and machinery must be flexible*. 4. *Accurate demand forecasts* will make JIT a much more successful policy. 5. The *latest IT equipment* will allow JIT to be more successful. 6. *Excellent employee-employer relationships* are essential for JIT to operate smoothly. 7. *Quality must be everyone's priority*.

*Charles Handy's* five types of organisational culture:

1. *Role* culture 2. *Power* culture 3. *Task* culture 4. *Person* culture 5. *Entrepreneurial* culture

*Maslow*'s Hierarchy of Needs (*ranked high to low*)

1. *Self-actualisation* (top of pyramid) 2. *Esteem* needs 3. *Social* needs 4. *Safety* needs 5. *Physical* needs (bottom of pyramid)

Potential drawbacks to operating at full capacity for a long period of time:

1. *Staff may feel under pressure* due to the workload and this could raise stress levels. Operations managers cannot afford to make any production scheduling mistakes, as there is no slack time to make up for lost output. 2. *Regular customers who wish to increase their orders will have to be turned away or kept waiting for long periods*. This could encourage them to use other suppliers with the danger that they might be lost as long-term clients. 3. *Machinery will be working flat out* and there may be insufficient time for maintenance and preventative repairs and this could lead to increased unreliability in the future.

Factors affecting the level of R&D and innovation by a business:

1. *The nature of the industry*. Rapidly changing technologies - consumer expectations - in pharmaceutical products, defence, computer and software products and motor vehicles lead to the need for substantial investment in R&D by leading firms. Other businesses such as hotels and hairdressing would need to spend far less as the scope for innovation is more limited. 2. *The R&D and innovation spending plans of competitors*. In most markets, it is essential to innovate as much as or more than competitors if market share and technical leadership is to be maintained. However, a monopoly may limit R&D spending if it believes that the risk of a more technically advanced competitor entering the market is limited. On the other hand, profits from a monopoly could be used to finance research and development into innovative products if the risk of competitor entry into an industry is high. 3. *The risk profile or culture of the business*. The attitude of the management to risk and whether shareholders are prepared to invest for the long term will have a significant effect on the sums that businesses can inject into R&D programmes. 4. *Government policy* towards grants to businesses and universities for R&D programmes and the range and scope of tax allowances for such expenditure will influence decisions by businesses. 5. *Finance* is needed for effective R&D. In many firms this many be limited and will restrict the number of new innovations that could be made.

The *three characteristics* of location decisions:

1. *They are strategic in nature* - as they are long-term and have an impact on the whole business. 2. *They are difficult to reverse* if an error of judgment is made - due to the costs of relocation (sunk costs). 3. They are *taken at the highest management levels* and are not delegated to subordinates.

Three *sections* of an *income statement*:

1. *Trading account* 2. *Profit and loss account* 3. *Appropriation account*

*Advantages* of *matrix structure* include:

1. A culture of teamworking and collaboration is created in the organisation. 2. Experts from different parts of the business can be brought together to work as a project team - increasing the chances of successful completion. 3. Good career and personal development opportunities are provided for team members and the project manager. 4. Projects can be spread out amongst various teams - reducing the pressures on senior management. 5. The ability of staff to work on different projects adds interest and variety to the work and increases staff motivation.

*Advantages* of *centralisation*:

1. A fixed set of rules and procedures in all areas of the firm should lead to rapid decision-making. 2. The business has consistent policies throughout the organisation. This prevents any conflicts between the divisions and avoids confusion in the mind of consumers. 3. Senior managers take decisions in the interest of the whole business - not just one division of it. 4. Central buying should allow for greater (purchasing) economies of scale. 5. Senior managers at central office will be experienced decision-makers.

4 stages in calculating ARR

1. Add up all positive cash flows 2. Subtract cost of investment 3. Divide by lifespan 4. Calculate the % return to find the ARR

Disadvantages of Just-in-Time (JIT) Stock management systems:

1. Any failure to receive supplies of materials or components in time caused by, for example, a strike at the supplier's factory, transport problems or IT failure, will lead to expensive production delays. 2. Delivery costs will increase as frequent small deliveries are an essential feature of JIT. 3. Order administration costs may rise because so many small orders need to be processed. 4. There could be a reduction in the bulk discounts offered by suppliers because each order is likely to be very small. 5. The reputation of the business depends significantly on outside factors such as the reliability of supplying firms.

Advantages of *debt finance*:

1. As no shares are sold, the ownership of the company does not change and is not 'diluted' by the issue of additional shares 2. Loans will be repaid eventually, so there is no * permanent* increase in the liabilities of the business 3. Lenders have no voting rights therefore there is no loss of control of the company 4. Interest charges are an expense and are thus tax deductible (reduce the total company tax paid by the business)

How *stakeholders* use business accounts: *Investors, such as shareholders in the company*

1. Assess the value of the business and their investment in it 2. Establish whether the business is becoming more or less profitable 3. Determine the share of the profits investors are receiving 4. Decide whether the business has potential for growth 5. To compare businesses before making an investment and/or purchasing shares in a company 6. To consider whether they should sell all or part of their holding

How *stakeholders* use business accounts: *Customers*

1. Assess whether a business is secure 2. Determine whether they will be assured of future supplies of the good they are purchasing 3. Establish whether there will be security of spare parts and service facilities

How *stakeholders* use business accounts: *Creditors, such as suppliers*

1. Assess whether the business is secure and liquid enough to pay off its debts 2. Assess whether the business is a good credit risk 3. Decide whether to press for early repayment of outstanding debts

Three main features of *Job enrichment*

1. Assign workers complete units of work 2. Provide feedback on performance 3. Give workers a range of tasks

4 Leadership (or Management) styles

1. Autocratic (authoritarian) 2. Democratic 3. Laissez-faire 4. Situational leadership

Marketing *objectives* of *non-profits*:

1. Building membership support and connections with new donor clients 2. Raising the profile of the cause being championed 3. Brand awareness and positive information about activities being engaged in

Possible *applications* of a *Situational* leadership style:

1. By allowing flexibility of leadership style, different leadership approaches can be used in different situations and with different groups of people

How *stakeholders* use business accounts: *Government and tax authorities*

1. Calculate how much tax is due form the business 2. Determine whether the business is likely to expand and create more jobs 3. Assess whether the business is in danger of closing down, creating economic problems 4. Determine whether the business is staying within the law in terms of accounting regulations.

Advantages of Just-in-Time (JIT) Stock management systems:

1. Capital invested in inventory is reduced and the opportunity cost of stock holding is reduced. 2. Costs of storage and stock holding are reduced. 3. Space released from holding of stocks can be used for a more productive purpose. 4. Much less chance of stock becoming outdated or obsolescent. Less stock held also reduces the risk of damage or wastage. 5. The greater flexibility that the system demands leads to quicker response times to changes in consumer demand or tastes. 6. The multi-skilled and adaptable staff required for JIT to work may gain from improved motivation.

Conclusions of *Mayo*'s work:

1. Changes in working conditions and financial rewards have little or no effect on productivity 2. When management consult with workers and take an interest in their work, then motivation is improved 3. Working in teams and developing a team spirit can improve productivity 4. When some control over their own working lives is given to workers, such as deciding when to take breaks, there is a positive motivational effect 5. Groups can establish their own targets or norms and these can be greatly influenced by the informal leaders of the group

*Benefits* of Break-Even Analysis:

1. Charts are relatively easy to construct and interpret. 2. It provides useful guidelines to management on break-even points, safety margins and profit/loss levels at different rates of output. 3. Comparisons can be made between different options by constructing new charts to show changed circumstances. 4. The equation produces a precise break-even result. 5. Break-even analysis can be used to assist managers when taking important decisions, such as location decisions, whether to buy new equipment and which project to invest in.

5 *reasons to become a multinational*

1. Closer to main markets 2. Lower costs of production 3. Avoid import restrictions 4. Access to local natural resources 5. Take advantage of expanding markets in other countries

Reasons for diseconomies of scale

1. Communication problems 2. Alienation of the workforce 3. Poor coordination and decision-making

The importance of R&D to business:

1. Competitive advantage 2. Customer loyalty 3. Premium prices 4. Publicity 5. Lower costs

Common elements in *effective organisational change*:

1. Concentrate on the positive aspects of the business and enlarge these. 2. Obtain the full commitment of people at the top and all key personnel. 3. Establish new objectives and a mission statement that accurately reflect the new values and attitudes. 4. Encourage 'bottom-up' participation of workers when defining existing problems and devising solutions. 5. Train staff in new procedures and ways of working that reflect the changed value system of the business. 6. Change the staff reward system to avoid rewarding success in the 'old ways' and promote success in the 'new ways'.

Main *drawbacks* of a *Democratic* leadership style:

1. Consultation with staff can be time consuming 2. On occasions, quick decision-making will be required 3. Level of involvement: some issues might be too sensitive; e.g., job losses, or too secret, e.g. development of new products

Handy's Shamrock organisation consists of:

1. Core managerial and technical staff 2. Outsourced functions by independent providers 3. Flexible workers on temporary and part-time contracts

*Limitations* of *contingency planning*:

1. Costly and time consuming - not just the planning process but the need to train staff and have practice drills of what to do in the event of fire, IT failure, terrorist attack, accident involving company vehicles and so on. 2. Needs to be constantly updated as the number and range of potential disasters can change over time. 3. Staff training needs to be increased if labour turnover is high. 4. Avoiding disasters is still better than planning for what to do if they occur.

*Constraints* to changing corporate culture

1. Costs 2. Resistance to change 3. Public opinion 4. National cultures

Reasons for a joint venture

1. Costs and risks of a new business venture are shared 2. Different companies may have different strengths and experiences and they, therefore, fit well together 3. They might have their major markets in different countries and they could exploit these with a new product more effectively than if they decided to 'go it alone'

*Disadvantages* of *delayering*

1. Could be one-off costs of making managers redundant; e.g., redundancy payments 2. Increased workload for managers who remain - this could lead to overwork and stress 3. Fear that redundancies might be used to cut costs could reduce the sense of security of the whole workforce (see Maslow: *security needs*)

4 Functions of packaging

1. Customer perceptions 2. Product differentiation 3. Protection 4. Information

*Evaluation* of *reduce credit terms to customers* as a way to *increase cashflow*

1. Customers may purchase products from firms that offer extended credit terms

How *stakeholders* use business accounts: *Banks*

1. Decide whether to lend money to a business 2. Assess whether to allow for an increased overdraft facility 3. Decide whether to renew sources of finance; e.g., overdraft, loans, etc

Possible *applications* of an *Autocratic* leadership style:

1. Defence forces and police where quick decisions are needed and the scope for 'discussion' may be limited. 2. In *times of crisis* when *decisive action* might be needed to limit damage to the business or danger to others

Methods to reduce cashflow

1. Delay payment to suppliers 2. Delay spending on capital equipment 3. Use leasing, not outright purchase of capital equipment 4. Cut overhead spending that does not directly affect output; e.g. promotion costs

*Advantages* of *less hierarchical* organisational structures - *wide span of control*

1. Delegation becomes a relatively important part of managing an organisation - extra responsibilities for subordinates and, therefore, faster career development 2. Communication may be improved (it should be faster) overall since there are fewer layers in the hierarchy 3. It is cheaper to operate a wider span of control because there are fewer levels of management (management functions will be eliminated or delegated) 4. Smaller 'psychological distance' between those at the top and those at the bottom of an organisation - perhaps reducing an 'us and them' culture where workers feel alienated from senior management

Main *drawbacks* of an *Autocratic* leadership style:

1. Demotivates staff who want to contribute and accept responsibility 2. Decisions do not benefit from staff input

Types of financial costs:

1. Direct costs 2. Indirect costs 3. Fixed costs 4. Variable costs 5. Semi-variable costs 6. Overhead costs (overheads)

Advantages of producing quality products and services are:

1. Easier to create customer loyalty 2. Saves on costs associated with customer complaints; e.g. compensation and replacement 3. Defective products and loss of customer goodwill 4. Less advertising may be necessary as the brand will establish a quality image through the performance of its products 5. A higher price - *premium price* - could be charged for such goods and services. Quality can, therefore, be profitable.

How external factors (*future uncertainty*) can influence revenue forecasts:

1. Economic recession could reduce demand 2. Increases in oil prices may increase costs of production 3. Interest rates may decrease (both reducing costs of finance and inflating future returns)

*Benefits to employers of the unionisation* of its workforce

1. Employers would be able to negotiate with one officer from the union rather than with individual unions. 2. The union system could provide an addition, useful channel of communication with workers. Two-way communication in that workers' problems could be raised with management by the union and plans of the employers could be discussed via the union. 3. Unions can impose discipline on members who plan to take hasty industrial action that could disrupt a business - this makes such action less likely. 4. The growth of responsible, partnership unionism has given employers an invaluable forum for discussing issues of common interest and making new workplace agreements.

Advantages of *Piece-rate* payment sytems

1. Encourages greater effort and faster working 2. The labour cost for each unit is determined in advance and helps set a price for the product

Eight stage process of promoting change

1. Establish a sense of urgency 2. Create an effective project team to lead the change 3. Develop a vision and a strategy for change 4. Communicate this change vision 5. Empower people to take action 6.Generate short-term gains from changes that benefit as many people as possible 7. Consolidate these gains and produce even more change 8. Build change into the culture of an organisation so that it becomes a natural process

5 steps in the recruitment and selection process:

1. Establish the exact nature of the job vacancy and draw up a job description 2. Draw up a person specification 3. Prepare a job advertisement reflecting the requirements of the job and the personal qualities looked for 4. Draw up a short list of applicants 5. Conduct interviews

6 *disadvantages* for *host countries* of multinationals *IF NOT SUFFICIENTLY REGULATED AND MONITORED*:

1. Exploitation of local workforce 2. Pollution 3. Competition forcing local firms to close 4. Imposition of Western culture 5. Profits returned to home country 6. Depletion of limited natural resources

*Disadvantages* of *Moving-Average Method* of sales forecasting

1. Fairly complex calculation. 2. Forecasts further into the future become less accurate as the projections made are entirely based on past data 3. Forecasting for the longer term may require the use of more qualitative methods that are less dependent on past results.

Factors causing resistance to change

1. Fear of the unknown 2. Fear of failure 3. Losing something of value 4. False beliefs about the need for change 5. Lack of trust 6. Inertia

*Forecasting the number of staff* required depends on:

1. Forecasting *demand* for the firm's product 2. The *productivity* levels of staff 3. The *objectives* of the business 4. Changes in the *law* regarding workers' rights 5. *Labour turnover* and *absenteeism*

Workforce planning involves two main stages:

1. Forecasting the *number* of staff required 2. Forecasting the *skills* required

*Evaluation* of *cut overhead spending that does not directly affect output* as a way to *reduce cashflow*

1. Future demand may be reduced by failing to support products effectively

Advantages of *Salary* payment sytems

1. Gives security of income 2. Gives status compared to time rate or piece rate payment systems 3. Aids in costing (salaries won't vary for one year) 4. Is suitable for jobs where output isn't measurable 5. Is suitable for management positions where staff are expected to put in extra time to complete tasks and assignments

*Advantages* of *delegation*:

1. Gives senior managers more time to focus on important, strategic roles 2. Shows trust in subordinates which can challenge and motivate them 3. Develops and trains staff for more senior positions 4. Helps staff to achieve fulfilment through their work (*self-actualisation*) 5. Encourages staff to be accountable for their work-based activities

Major *external* causes of change

1. Globalisation 2. Technological advances 3. Macroeconomic changes (e.g. fiscal policy, interest and exchange rates) 4. Legal changes 5. Competitors actions

An optimal location one that will be a balance of:

1. High fixed costs of a site and buildings with convenience for customers and potential sales revenue. 2. The low costs of a remote site with limited supply of suitable qualified labour. 3. Quantitative factors with qualitative ones (see below). 4. The opportunities for receiving government grants in areas of high unemployment with the risks of low sales as average incomes in the area may be low.

Disadvantages to a business of non-optimal location decisions:

1. High fixed site costs; e.g., high break-even level of production 2. High variable costs; e.g., labour 3. Low unemployment rate; e.g., problems with skilled labour recruitment 4. High unemployment rate; e.g., low average consumer incomes 5. Poor transport infrastructure; e.g., raises transport costs for both materials and finished products.

Reasons for relatively *low immobility of labour* in *developed countries*:

1. High levels of home ownership mean that workers are reluctant to pay the cost in time and money of arranging a house sale and purchase in another region. 2. High skill levels in one occupation may mean that workers are not equipped to deal with machines, processes and technologies in other industries and occupations.

Reasons for relatively *high mobility of labour* in *developing countries*:

1. Home ownership is low. 2. Low skill levels may mean that workers can undertake low-skilled jobs in many different industries.

Stages in the *benchmarking* process:

1. Identify the aspects of the business to be benchmarked. 2. Measure performance in these areas. 3. Identify the firms in the industry that are considered to be the best. 4. Use comparative data from the best firms to establish the main weaknesses in the business. 5. Set standards for improvement. 6. Change processes to achieve the standards set. 7. Re-measurement.

*Key steps* in *contingency planning*:

1. Identify the potential disasters that could affect the business (some of these will be common to all businesses, others specific to individual firms or industries). 2. Assess the likelihood of these occurring. 3. Minimise the potential impact of crises. This does not just mean protecting people and fixed assets, but also the company's reputation and goodwill. 4. Plan for continued operations of the business (alternative locations for headquarters, factory premises, supply chains and IT data)

*Limitations* of *delegation*:

1. If the task is not well-defined or if inadequate training is given, then delegation will be unlikely to succeed 2. Delegation will be unsuccessful if insufficient power (authority) is also given to the subordinate who is performing the tasks 3. Managers may only delegate the boring jobs that they do not want to do - this will not be motivating

Examples of *qualitative* factors in investment appraisal

1. Impact on the environment 2. Planning permission (will local governments allow the investment?) 3. Aims and objectives of the business 4. Risk

Disadvantages of *Salary* payment sytems

1. Income is not *directly* related to effort and productivity levels 2. It may lead to complacency of the salary earner 3. Regular appraisal may be needed to assess whether an individual should move up a salary band (can be an advantage if positive appraisal)

Ways to improve cash flow:

1. Increase *cash inflows* 2. Reduce *cash outflows* *(careful! its the cash position of a business, NOT sales revenues or profits)*

3 *key features* of globalisation

1. Increased international trade as barriers to trade are reduced 2. Growth of multinational businesses in all countries as there is greater freedom for capital to be invested from one country to another 3. Freer movement of workers between countries

5 reasons for seeking growth for a business?

1. Increased profits 2. Increased market share 3. Increased economies of scale 4. Increased power and status of the owners and directors 5. Reduce the risk of being a takeover target

Examples of marketing objectives:

1. Increasing market share - perhaps to gain market leadership 2. Increasing brand awareness 3. Increasing total sales levels - either in terms of volume or sales value 4. Development of new markets for existing products to spread risks.

7 *benefits* for *host countries* of multinationals:

1. Inflow of foreign currency (investment + exports) 2. Employment opportunities created 3. Local businesses benefit as suppliers 4. Quality and productivity gains from local firms 5. Tax revenues increased 6. Technology and management expertise gains 7. Output of the economy will increase (GDP)

Information * quantitative* investment appraisal requires:

1. Initial capital costs of the investment 2. Estimated life expectancy 3. The expected residual value (additional net returns from the sale of the asset at the end of its useful life) 4. Forecasted *net* returns or *net* cash flows from the project (*expected returns less running costs*)

*Evaluation* of *overdraft* as a way to *increase cashflow*

1. Interest rates can be high 2. Overdrafts can be withdrawn by the bank and this often causes insolvency

Disadvantages of *Performance-related pay* payment sytems

1. It can fail to motivate if staff are not driven by the need to earn financial rewards 2. Team spirit can be damaged by the rivalry generated 3. Claims of manager favouritism may undermine relationships 4. Less autonomy for workers as they need to conform to the system that generates bonuses

*Advantages* of having a strong corporate culture:

1. It creates a sense of belonging and security for staff because they feel as if they are part of the business. This can help improve team work and to raise and increase motivation. 2. Mistakes and misunderstandings can be minimised since staff are familiar with the processes at work. 3. It promotes team cohesiveness whereby people do things because they simply feel that it is the right thing to do. 4. Problems associated with a culture gap, such as conflict between different groups are minimised.

Weaknesses of inspecting for quality:

1. It is looking for problems and is, therefore, negative in its culture. It can cause resentment among workers (inspectors believe they have been *'successful' when finding faults*). Workers are likely to view the inspectors as management employees who are there just to check on output and find problems with the work. 2. The job of inspection can be tedious, so inspectors become demotivated and may not carry out their tasks efficiently. 3. If checking takes place only at specific points in the production process, then faulty products may pass through several production stages before being identified - extra cost and time wasted. 4. The *main drawback* is that it *takes away from the workers the responsibility for quality* (inspectors now assume this responsibility) which can be demotivating and will result in lower quality output.

*Advantages* of the *reducing balance* method of depreciation:

1. It is more accurate than the straight-line method, especially where assets lose more value in their early years. 2.Many assets are more efficient and profitable when new, so it is more logical to 'match' a higher amount of the cost of the asset against this higher profit.

*Disadvantages* of the *reducing balance* method of depreciation:

1. It is slightly more difficult to calculate than the straight-line method. 2. By calculating a 'precise' rate of depreciation it suggests a level of accuracy for the process of depreciation which is unjustified - the residual value and expected life span are always estimates and this detracts from the achievement of complete accuracy.

Advantages of *quality assurance*:

1. It makes everyone responsible for quality - this can be a form of *job enrichment*. 2. Self-checking and making efforts to improve the quality increases motivation. 3. The system can be used to 'trace back' quality problems to the stage of the production process where a problem might have been occurring. 4. It reduces the need for expensive final inspection and correction or reworking of faulty products.

Importance of *Variance Analysis*:

1. It measures *differences from the the planned performance* of each department. 2. It assists in *analysing the causes of deviations* from budget. 3. An understanding of the the reasons for variations form the original planned levels can be used to *change future budgets* in order to make them more accurate. 4. The *performance of each individual budget-holding* section may be appraised in an accurate and objective way.

Advantages of *equity finance*:

1. It never has to be repaid 2. Dividends do not have to be paid every year. In contrast, interest must be paid when demanded by the lender 3. Much larger amounts of finance can possibly be raised than through debt financing

*Disadvantages* of *straight line depreciation*:

1. It requires estimates to be made regarding both the life expectancy and residual value. Mistakes at this stage will lead to inaccurate depreciation charges being calculated. 2. In addition, cars, trucks and computers are examples of assets that tend to depreciate much more quickly in the first and second years than in subsequent years. This is not reflected in the straight-line method of calculation - all annual depreciation charges are the same. The reducing balance method of depreciation depreciates assets by a greater amount in the first few years of life than in later years. 3. There is no recognition of the very rapid pace at which advances in modern technology tend to make existing assets redundant.

Disadvantages of *Piece-rate* payment sytems

1. It requires output to be measured and standardised (which is difficult if each product is different) 2. It may lead to falling quality and safety levels as workers rush to complete units 3. Workers may settle for a certain pay level and won't be motivated to produce more than a certain level 4. It provides little security over pay level

Limitations of budgets

1. Lack of flexibility. 2. Focused on the short-term. 3. Result in unnecessary spending. 4. Training needs must be met 5. Setting budgets for new projects.

Causes of cash flow problems:

1. Lack of planning 2. Poor credit control 3. Allowing too much credit 4. Expanding too rapidly 5. Unexpected events

Limitations of international location:

1. Language and communication barriers 2. Cultural differences 3. Level of service concerns 4. Supply chain concerns 5. Ethical consideration

Main features of an *Autocratic* leadership style:

1. Leader takes all decisions 2.Gives little information to staff 3. Supervises workers closely 4. Only *one-way communication* 5. Workers only given limited information about the business

Advantages of *intuitive decision making*

1. Less time consuming 2. Less costly than the scientific approach 3. Produces innovative or non-standard solution

*Advantages* of operating *cost and profit centres*:

1. Managers and staff will have targets to work towards which should be motivating 2. Targets can be compared with actual performance to identify high and low performing aspects of the business 3. Individual performances of divisions and their managers can be assessed and compared 4. Different aspects of the business can be monitored (e.g., individual prices) and decisions made about the future

*Disadvantages* of operating *cost and profit centres*:

1. Managers and workers may consider their part of the business to be more important than the whole organisation 2. Some costs - indirect costs - can be impossible to allocate between cost and profit centres accurately 3. Reasons for poor performance of a profit centre may be due to external factors outside of its control

Main features of a *Laissez-Faire* leadership style:

1. Managers delegate virtually all authority and decision-making powers. 2. Very *broad criteria or limits* might be established for the staff to work within.

Characteristics of markets:

1. Market size 2. Customer base 3. Barriers to entry 4. Competition 5. Market growth rate 6. Demographics

Uses of *Profit and Loss Accounts*:

1. Measure and compare the performance of a business over time or with other firms 2. The actual profit data can be compared with the expected profit levels 3. Bankers and creditors will need the information to help decide whether to lend money to the firm 4. Potential investors may assess the value of the business from the profits being made

How *stakeholders* use business accounts: *Business managers*

1. Measure the performance of a business against targets, previous time periods and competitors 2. Help them with decisions; e.g., new investments, branch closures, launching new products 3. Control and monitor the operation of each department, branch and division 4. Set targets for the future and review against actual performance

*Influences* on organisational culture:

1. Mission and vision statements 2. The appointment of senior staff 3. The organisation's *ethical code of conduct* 4. Strategies on social and environmental issues 5. The example the organisation sets (treatment of subordinates, decision-making, etc.)

*Disadvantages* of *centralisation*:

1. More local decisions can be made which reflect different conditions - the managers who take decisions will have local knowledge and are likely to have closer contact with consumers. 2. More junior managers can develop skills and this prepares them for more challenging roles. 3. Delegation and empowerment are made easier and these will have positive effects on motivation. 4. Decision-making in response to changes; e.g., local market conditions, should be quicker and more flexible as head office will not have to be involved every time.

Possible *applications* of a *Democratic* leadership style:

1. Most likely to be used in businesses that expect workers to contribute fully to the production and decision-making processes, thereby satisfying their higher-order needs 2. An experienced and flexible workforce will be likely to benefit most from this style 3. In situations that demand a new way of thinking or a new solution, the staff input can be very valuable

Union/employee power will be strong when:

1. Most workers belong to a union 2. All workers decide to take the industrial action decided on 3. The business is very busy, operating close to full capacity, does not want to disappoint customers and profits are high 4. There is public support for the union case; e.g., for low-paid, hard-working, public-service jobs (nurses, fire fighters, teachers, etc) 5. Inflation is high so a high wage increase would seem 'reasonable' to maintain living standards 6. Labour costs are a low proportion of total costs

3 stages in *calculating NPV*

1. Multiply discount factors by the cash flows (cashflows in year 0 are never discounted) 2. Add the discounted cashflows 3. Subtract the capital cost to give the NPV

Action taken by employees and employers - *UNIONS*:

1. Negotiations 2. Go slow 3. Work to rule 4. Overtime bans 5. Strike action

Action taken by employees and employers - *EMPLOYERS*:

1. Negotiations 2. Public relations 3. Threats of redundancies 4. Changes of contract 5. Closure 6. Lock outs

*Limitations* of *Maslow*'s approach

1. Not everyone has the same needs as is assumed by the hierarchy 2. In practice it can be very difficult to identify the degree to which each need has been met and which level a worker is 'on' 3. Money is necessary to satisfy physical needs, yet it might also play a role in satisfying other levels of needs such as status and esteem 4. Self-actualisation is never permanently achieved - as some observers of the hierarchy have suggested. Jobs must continually offer challenges and opportunities for fulfilment, otherwise regression will occur.

Disadvantages of *teamworking*

1. Not everyone is a team player. Some individuals are more effective when working alone. Training may need to be offered to members who are not used to working collaboratively in groups. 2. Teams can develop a set of values and attitudes which may contrast or conflict with those of the organisation itself, particularly if their is a dominant personality in the group. Teams will need clear goals and assessment procedures to ensure that they are working towards the objectives of the organisation at all times. 3. The introduction of teamworking will involve training costs and there may be some disruption top production as the teams establish themselves.

Benefits of *benchmarking*:

1. Offers a faster and cheaper way of solving problems than firms attempting to solve production or quality problems without external comparisons. 2. Areas of greatest significance for customers are identified and action can be directed to improving these. 3. A process that can assist the firm to increase international competitiveness. 4. Comparisons between firms in different industries, such as customer service departments in a retailer compared to a bank, can encourage a useful cross-over of ideas. 5. If the workforce is involved in the comparison exercise, then their participation can lead to better ideas for improvement and increased motivation.

*Evaluation* of *debt factoring* as a way to *increase cashflow*

1. Only about 90-95% of the debt will n ow be paid by the debt factoring company - this reduces profit 2. The customer has the debt collected by the finance company - this could suggest (give the perception) that the business is in trouble

*Factors* influencing management and leadership *styles*:

1. Organisational *culture* 2. *Attitudes* of senior managers 3. *Traits* of managers 4. *Subordinates* - how many? temperament? experience? 5. The *task* itself 6. *Time* constraints

Major *internal* causes of change

1. Organisational changes (e.g. delayering) 2. Relocation 3. Cost cutting to improve competitiveness

Methods to increase cash flow:

1. Overdraft 2. Short-term loan 3. Sale of assets 4. Sale and leaseback 5. Reduce credit terms to customers 6. Debt factoring

*5 factors* to consider when recommending an appropriate *scale of operation*

1. Owners objectives 2. Capital available 3. Size of the market the firm operates in 4. Number of competitors 5. Scope for scale economies

Methods of *quantitative* investment appraisal

1. Payback period 2. Average rate of return 3. Net present value using discounted cash flows

The different processes involved in services marketing include:

1. Payment methods 2. Wait times (queuing) 3. Customer services 4. Delivery 5. After sales care and servicing

Purposes of *setting budgets* and establishing *financial plans for the future*:

1. Planning 2. Effective allocation of resources 3. Setting targets to be achieved 4. Coordination 5. Monitoring and controlling 6. Modifying 7. Assessing performance

Advantages of successful branding

1. Price advantages 2. Recognition and loyalty 3. Distribution advantages

4 Ps of the marketing mix

1. Product 2. Price 3. Place 4. Promotion

7 Ps of the extended marketing mix

1. Product 2. Price 3. Place 4. Promotion 5.People 6. Processes 7. Physical evidence

The *two* main business accounts:

1. Profit and Loss Account (*income statement*) 2. Balance sheet

*Quantitative* techniques to assist in location decision-making:

1. Profit estimates - coming from costs and revenues 2. Investment appraisal - payback, average rate of return, etc 3. Break-even analysis - fixed costs, variable costs, pricing, level of demand

How *quality assurance* is *different* from *quality control*:

1. Puts much more emphasis on prevention of poor quality by designing products for easy fault-free manufacture, rather than inspecting for poor-quality products - "getting it right first time". 2. Stresses the need for workers to get it right the first time and reduces the chances of faulty products occurring or expensive reworking of faulty goods. 3. Establishes quality standards and targets for each stage of the production process. 4. Checks components, materials and services bought into the business at the point of arrival or delivery - not at the end of the production process by which stage much time and many resources may have been wasted.

An evaluation of quality issues:

1. Quality is not an option. It is a fundamental aspect of all successful businesses. 2. Quality is an issue for all firms, in all sectors of industry. It is essential for business to put quality of products and customer service at the top of their priorities to survive in competitive markets. Improving quality has obvious cost advantages if the rate of defective products is reduced. 3. Satisfying customers will give clear marketing advantages when seeking further sales. 4. Involving all staff in quality improvement programmes can lead to a more motivated workforce.

R&D limitations:

1. R&D does not always lead to innovation 2. R&D is expensive and has an opportunity cost 3. Inventions do not always lead to successful innovative products 4. Competing R&D spending may result in even more successful products 5. Ethical issues can sometime outweigh the potential commercial benefits

*Benefits* of *contingency planning*:

1. Reassures staff, customers and local residents that concerns for safety are a priority. 2. Minimises negative impact on customers and suppliers in the event of a major disaster. 3. Public relations response is much more likely to be speedy and appropriate with senior managers being used to promote what the company intends to do, by when and how.

*Advantages* of *delayering*:

1. Reduces business costs 2. Shortens the chain of command and should improve communication through the organisation 3. Increases the span of control and opportunities for delegation 4. May increase workforce motivation due to less remoteness from top management and greater chance of having more responsible work to perform

*Qualitative* factors influencing location decisions:

1. Safety 2. Room for further expansion 3. Managers' preferences 4. Labour supply 5. Ethical considerations 6. Environmental concerns 7. Infrastructure

The *benefits* of being the *market leader* with highest market share include:

1. Sales are higher than those of any competing business 2. Retailers will be keen to stock and promote the bestselling brands 3. Can be used in advertising and other promotional material 4. Consumers are often keen to buy the most popular brands

*Taylor*: How to improve worker productivity

1. Select workers to perform a task 2. Observe them performing the task and note the key elements of it 3. Record the time taken to do each part of the task 4. Identify the quickest method recorded 5. Train all workers in the quickest method and do not allow them to make any changes to it 6. Supervise workers to ensure that this 'best way' is being carried out and time them to check that the set time is not being exceeded 7. Pay workers on the basis of results

Evaluation of *sale of assets*

1. Selling assets quickly can result in a low price 2. The assets may be required at a later date for expansion 3. The assets could have been used as *collateral* for future loans

7 Stages in the *decision-making framework*

1. Set objectives 2. Assess the problem or the situation 3. Gather data to analyse both the extent of the 'problem' and the information needed to assess the options available 4. Consider all the options available 5. Decide between the alternative ideas or options using *decision-making tools* 6. Plan and implement the decision 7. Control and review

Benefits of intellectual property:

1. Sets a business apart from its competitors and encourages increased sales as a result of this distinctiveness. 2. Be sold or licensed to provide an important revenue stream. 3. Form a key part of the branding process and assist in the marketing of the firm's products. 4. Can be given a financial value on a firm's balance sheet which increases net assets.

*Peter Drucker's* five tasks of management:

1. Sets objectives 2. Organises 3. Motivates and communicates 4. Measures 5. Develops people

Key *functions of management*:

1. Setting objectives and planning 2. Organising resources to meet objectives 3. Directing and motivating staff 4. Coordinating activities 5. Controlling and measuring performance against targets

*Disadvantages* of *matrix structure* include:

1. Since team members have two line managers, there may be a conflict of interest, such as loyalty and prioritisation of workloads (e.g., the project may come first and departmental work second). 2. There is potential for team members to not get along with each other, and because teams are formed on a temporary basis, there is less of an obligation to ensure good team dynamics. 3. Project managers may have difficulty controlling team members who have conflicting interests, priorities and personal difference with team members.

*Quantitative* factors influencing location decisions:

1. Site and other capital costs such as building or shop-fitting costs 2. Labour costs 3. Transport costs 4. Sales revenue potential 5. Government grants

Factors influencing choice of production method:

1. Size of the market 2. The amount of capital available 3. The availability of other resources 4. Market demand for products adapted to customer requirments

Limitations of Kaizen

1. Some changes cannot be introduced gradually and may need a radical and expensive solution. 2. There may be real resistance from senior managements due to their existing culture (especially authoritarian managers). 3. At least in the short-term there may be tangible costs to the business of such a scheme, such as staff training to organise meetings and lost output as a result of meeting time. 4. The most important advances tend to be made early on during the Kaizen programme, with later changes showing diminishing returns.

Advantages of *Performance-related pay* payment sytems

1. Staff are motivated to improve performance if they are seeking to increase financial rewards 2. Target setting can help to give purpose and direction to the work of an individual 3. Annual appraisal offers the opportunity for feedback on the performance of an individual

*Advantages* of *flexible* employment contracts for firms:

1. Staff can be required to work at particularly busy periods of the day, but not during the slow periods. 2. Most staff are available to be called upon should there be sickness or other causes of absenteeism. 3. The efficiency of staff can be measured before they are offered a full-time contract. 4. Savings on overheads costs can be made by using teleworking; e.g., smaller office premises = cheaper rent.

To obtain *ISO 9000* accreditation a firm must demonstrate that it has:

1. Staff training and appraisal methods 2. Methods for checking on suppliers 3. Quality standards for all areas of the business 4. Procedures for dealing with defective products and quality failures 5. After-sales service

Advantages of Just in Case Stock Management:

1. Stocks of raw materials can be used to allow the firm to meet increases in demand by increasing the rate of production quickly. 2. Raw-material supply hold-ups will not lead to production stopping. 3. Economies of scale from bulk discounts will reduce average costs. 4. Stocks of finished goods can be displayed to customers and increase the chances of sales. 5. Stocks of finished goods used to meet sudden, unpredicted increases in demand - customers can be satisfied without delay. 6. Firms can stockpile completed goods to meet anticipated increases in demand as with seasonal goods or products, such as toys at festival times.

Main features of a *Situational* leadership style:

1. Style of leadership used will depend on the nature of the task and the work group's skills and willingness to accept responsibility.

*Evaluation* of *delay payments to suppliers (creditors)* as a way to *reduce cashflow*

1. Suppliers may reduce any discount offered witht he purchase 2. Suppliers can either demand cash on delivery or refuse to supply at all if they believe the risk of not getting paid is too great

*Forecasting the skills* required depends on:

1. The *pace of technological change* in an industry 2. The need for *flexible* or *multi-skilled* staff

Factors in assessing an ARR percentage value

1. The ARR on other projects (the opportunity costs) 2. The minimum expected return set by the business (the * criterion rate*) 3. The annual interest rate on loans (ARR needs to be greater than the interest costs of borrowing; even if the firm doesn't need to borrow there's always an opportunity cost of interest foregone by keeping the money in the bank)

*Evaluation* of *use leasing, not outright purchase of capital equipment* as a way to *reduce cashflow*

1. The asset is not owned by the business 2. Leasing charges include an interest cost and add to annual overheads

*Limitations* of Break-Even Analysis:

1. The assumption that all costs and revenues are represented by straight lines in unrealistic. 2. Not all costs can be conveniently classified into fixed and variable costs. The introduction of semi-variable costs will make the technique more complicated. 3. There is no allowance made for stock levels on the break-even chart. It is assumed that all units produced are sold. This is unlikely to always be the case in practice. 4. It is also unlikely that fixed costs will remain unchanged at different output levels up to a maximum capacity.

*Evaluation* of *delay spending on capital equipment* as a way to *reduce cashflow*

1. The business may become less efficient if outdated and inefficient equipment is not replaced 2. Expansion becomes very difficult

The *present value* of a *future* sum of money depends on two factors:

1. The higher the *interest rate*, the less value future cash in today's money 2. The *longer into the future cash is received*, the less value it has today

*Evaluation* of *short-term loan* as a way to *increase cashflow*

1. The interest costs have to be paid 2. The loan must be repaid at the due date

*Evaluation* of *sale and leaseback* as a way to *increase cashflow*

1. The leasing costs add to the annual overheads 2. There could be loss of potential profit if the asset rises in price 3. The assets could have been used as *collateral* for future loans

Limitations of *benchmarking*:

1. The process depends on obtaining relevant and up-tto-date information from other firms in the industry. If this is difficult to obtain, then the benchmarking exercise will be limited. 2. Merely copying the ideas and practices of other firms may discourage innovation and original ideas. 3. The costs of the comparison exercise may not be recovered by the improvements obtained from benchmarking.

Other locational issues:

1. The pull of the market 2. Planning restrictions 3. External economies of scale 4. Multi-site locations

Factors influencing organisational structure:

1. The size of the business and the number of employees 2. The style of leadership and the culture of management (e.g., autocratic vs. democratic leadership styles) 3. Overhead costs - delayering will reduce management overheads 4. Corporate objectives; e.g., overseas expansion will necessarily mean some decentralisation 5. New technologies, especially IT can facilitate the flow of information making some roles of middle management less important

The *importance of organisational culture*:

1. The values of a business establish the norms of behaviour of staff. 2. Culture determines the way in which company managers and workers treat each other. 3. A distinctive organisational culture can support a business's brand image and relationships with customers. 4. Culture determines not just how decisions are made but also the type of strategic decisions that are taken. 5. Organisational culture has been clearly linked to the economic performance and long-term success of organisations.

*Advantages* of *hierarchical* organisational structures - *narrow span of control*

1. There is quicker communication between smaller teams 2. Feedback from subordinates should be more effective 3. Clearer (but longer) lines of communication between the different layers of management 4. Smaller teams are easier to control and manage 5. Greater specialisation and division of labour can help increase efficiency and productivity 6. There are greater opportunities to earn promotion - more levels exist in the hierarchy

Reasons why JIT may not be suitable for all firms at all times:

1. There may be limits to the application of JIT if the costs resulting from production being halted when supplies do not arrive far exceed the costs of holding buffer stocks of key components. 2. Small firms could argue that the expensive IT systems needed to operate JIT effectively cannot be justified by the potential cost savings. 3. Rising global inflation makes holding stocks of raw materials more beneficial as it may be cheaper to buy a large quantity now than smaller quantities in the future when prices have risen. 4. Higher oil prices will make frequent and small deliveries of materials and components more expensive.

*Disadvantages* of *flexible* employment contracts for firms:

1. There will be more staff to 'manage' than if they were all full time. 2. Effective communication will become that more difficult - more staff and associated difficulties in scheduling meetings where all staff can be present. 3. Motivation levels may be adversely affected as part-time staff may feel less involved. 4. Some managers fear the teleworking lowers productivity as workers can no longer be effectively supervised.

Key *differences* between *management* and *leadership*

1. Time and devotion 2. Roles and responsibilities 3. Influence on others 4. Risk-taking 5. Vision

Why it is important to establish quality assurance systems:

1. To involve all staff and this can *promote team work and a sense of belonging which aids motivation*. 2. To set quality standards for all stages of production so that all materials and all production phases are checked *before it is 'too late' and the whole product has been completed*. 3. To *reduce costs of final inspection* as this should become less necessary as all stages and sub-sections of the process have been judged against quality standards. 4. To *reduce total quality costs* by instilling in the whole organisation a culture of quality, it is possible for quality assurance to lead to reduced costs of wastage and faulty products. 5. To *gain accreditation for quality awards*, e.g, *ISO 9000*.

Benefits of an international location:

1. To reduce costs 2. To access global markets 3. To avoid protectionist trade barriers + government financial support to relocate business + good educational standards + highly qualified staff + avoidance of problems associated with exchange rate fluctuations

Employer power will be strong when:

1. Unemployment is high - there are few alternative jobs for workers to take 2. The employer takes action; e.g., a lock-out has a very quick impact on workers wages 3. There is public support for the employer; e.g., when a union asks for a pay rise much higher than other workers receive 4. Profits are low and threats of closure are taken seriously 5. Threats of relocation to low-cost countries are taken seriously; e.g., the business has already closed other plants and relocated them

*Advantages* of *Moving-Average Method* of sales forecasting

1. Useful for identifying and applying the seasonal variation to predictions. 2. Reasonably accurate for short-term forecasts in reasonably stable economic conditions. 3. Planning for each quarter in future.

Possible *applications* of a *Laissez-Faire* leadership style:

1. When managers are too busy to intervene 2. May be appropriate in research institutions where experts are more likely to arrive at solutions when not constrained by narrow rules or management controls

The organisational chart shows:

1. Who has *overall responsibility* for decision-making 2. The *formal relationships* between people and departments 3. The *chain of command* 4. The *span of control* 5. Formal *channels of communication* 6. Identity of the supervisor or manager to who each worker is answerable and should report to

Advantages of *teamworking*

1. Workers are likely to be better motivated as social and esteem needs (c.f. Maslow) are more likely to be met 2. Better motivated staff should increase productivity and reduce labour turnover - both will help reduce business costs 3. Teamworking makes fuller use of the talents of the workforce. Better solutions to problems will be found as those most closely connected with the work participate in suggesting answers 4. Teamworking can reduce management costs as it is often associated with delayering an organisation - fewer middle managers will be required 5. Complete units of work can be given to teams - a key feature of job enrichment

Main *drawbacks* of a *Laissez-fair* leadership style:

1. Workers may not appreciate the lack of structure and direction in their work - this could lead to loss of security 2. Lack of feedback - as managers will not be closely monitoring progress - may be demotivating

Advantages of *scientific decision making*

1. based on a formal structure so less likely important points will be missed 2. Based on analysis of data so the final decision has a higher chance of success 3. When risks are high and/or costs substantial it would be irresponsible to base a decision on gut instinct

Why just in case production methods requires buffer stocks:

1. failure of supplying firm to deliver on time 2. production problems halting output 3. increased consumer demand.

Geert Hofstede's five dimensions of culture:

1.* Power distance* 2. *Individualism* versus *collectivism* 3. *Masculinity* versus *femininity* 4. *Uncertainty avoidance* 5. *Long-term* versus *short-term orientation*

360 degree appraisal

360 degree appraisal involves feedback of the manager, supervisor, team members and any direct reports. In this method of appraisal, employees complete profile has to be collected and assessed. In addition to evaluating the employees work performance and technical skill set, an appraiser collects an in-depth feedback of the employee. However, such appraisals can often be based on opinions rather than factual evidence so care must be taken.

Profit-related pay

A bonus for staff based on the profits of the business - usually paid as a proportion of basic salary

Performance-related pay

A bonus scheme to reward staff for above-average work performance

Product

A broad term that refers to any physical or non physical item that is purchased by either commercial or private customers.

Franchising

A business allowing others to trade under its name in return for a fee and a share of the profits

Public corporation

A business enterprise owned and controlled by the state - also known as a nationalised industry or a state owned enterprise

Online Presence

A business has a dedicated website for e-commerce. This could be limited to providing information about the business and its products,and may extend to selling products online.

Optimal location

A business location that that gives the best combination of *qualitative* and *quantitative* factors.

Direct Investment

A business setting up a production and/or distribution facilities in foreign countries

Multinational

A business with operations or production bases in more than one country

Workforce audit

A check on the skills and qualifications of all existing employees

Lock outs

A company tool to fight union demands by refusing to allow employees to enter its facilities to work

Straight line depreciation

A constant amount of depreciation is subtracted from the value of the asset each year

Budget

A detailed financial plan of the future

Job description

A detailed list of the key points about the job to be filled, stating the key tasks and responsibilities of it

Person specification

A detailed list of the qualities, skills and qualifications that a successful applicant will need to have

Decision tree

A diagram that sets out the options connected with a decision and the outcomes and economic returns that may result

Variance

A difference between budgeted figures and actual figures

Trademark

A distinctive name, symbol, motto or design that identifies a business or its products - can be legally registered and cannot be copied

Code of conduct (ethical code)

A document detailing a company's rules and guidelines on staff behaviour that must be followed by all employees

Liabilities

A financial obligation of a business that it is required to repay in the future

Profit and Loss Account

A financial statement showing a company's net profit or loss in a given period.

Competition-Based Pricing

A firm will base its price upon the price set by its competitors

Job rotation

A form of *job enlargement* that involves giving workers a number of different tasks at the same level of complexity in a prescribed order. It helps reduce the problems of repetition and boredom in a job.

Above-the-Line Promotion

A form of promotion that is undertaken by a business by paying for communication with consumers; e.g. advertising

Personal Selling

A form of promotional technique that relies on keen and knowledgeable sales staff directly helping and persuading customers to make a purchase

Quality product

A good or service that meets customers' expectations and is therefore 'fit for purpose'

Work to rule

A job action in which workers cause a slowdown by doing only the minimum amount required by the rules of the workplace

Make-or-buy decision

A judgment made by management whether to make a component internally or buy it from the market.

Contingency Theory

A leadership model that suggests the 'best' leadership style depends on a *range of interconnected factors*. No single style suits all firms and all employees all of the time.

Laissez-faire leadership

A leadership style that leaves much of the business decision-making to the workforce - a 'hands off' approach and the reverse of the autocratic style

Joint and several liability

A legal concept that makes each partner in a partnership legally liable for all the debts of the partnership.

Contract of employment

A legal document that sets out the terms and conditions governing a worker's job

Indirect tax

A levy placed on the purchase of goods and services (e.g. sales tax, GST, VAT, excise tax)

Acid test ratio

A liquidity ratio that measures a firm's ability top meet its short-term debts. This ratio ignores stocks when calculating because some stocks (e.g. Ferrari cars or Airbus jets) cannot be quickly and easily turned into cash.

Secured loan

A loan backed by an asset of value, such as property or vehicles

Marketing strategy

A long term plan established for meeting marketing objectives.

Gearing

A long-term liquidity ratio that measures the percentage of a firm's capital employed that comes from long-term liabilities, such as debentures and mortgages. Firms that have at least 50% gearing are said to be highly geared.

Market

A market is a place or a process where suppliers and customers can buy and sell goods and services .

Product Orientation

A marketing approach adopted by businesses that are INWARD looking. They focus on selling products they can make, rather than making products they can sell.

Marketing plan

A marketing plan is often a formal written document which outlines in detail how the business unit intends to achieve the marketing objectives derived from the corporate objectives.

Guerrilla marketing

A marketing tactic in which a company uses surprise and/or unconventional interactions in order to promote a product or service. Guerrilla marketing is different than traditional marketing in that it often relies on personal interaction and has a smaller budget, and it focuses on smaller groups of promoters that are responsible for getting the word out in a particular location rather than on wide-spread media campaigns.

Labour turnover

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

Kanban

A method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers.

Advertising

A method of informative and/or persuasive promotion that has to be paid for. The ultimate aim of advertising is to raise the level of demand for a firm's products.

*Maslow*'s Hierarchy of Needs

A motivation theory that outlines the five levels of needs, from the requirement to satisfy basic physiological needs through to self-actualisation. Maslow argued that until a lower order need is met, people cannot progress onto the next level of needs.

Overdraft

A negative balance in a business's bank account

Empowerment

A non-financial motivator which involves a line manager giving her subordinates some autonomy in their job and the authority to make various decisions

Quotas

A numeric limit on the quantity of a product that can be imported into a country

Commission

A payment to a sales person for each sale made

Piece rate

A payment to a worker fro each uniot produced

Quota

A physical limit placed on the imports of certain products (e.g., 2000 tonnes of apples)

Price Discrimination

A pricing strategy that involves charging different prices to different groups of customers for the same product (e.g. child and adult fares at the cinema and on flights)

Gross profit margin

A profitability ratio that shows the percentage of sales revenue that turns into gross profit.

Sponsorship

A promotional technique which involves a business funding, supporting or donating resources for an event or business venture in return for prominent publicity

Consumer profile

A quantified picture of consumers of a firm's products, showing proportions of age groups, income levels, location, gender and social class.

Sales forecasting

A quantitative technique that attempts to estimate the level of sales a business expects to achieve, over a given time period.

Revenue streams

A revenue stream is a form of revenue. Revenue streams refer specifically to the individual methods by which money comes into an organisation (e.g., Product A and Product B will both produce revenues for the firm).

Marketing Audit

A review of the firm's current marketing mix, in terms of its strengths, weaknesses, opportunities and threats.

Random sample

A sampling method that gives every person in the population an equal chance of being selected.

Quota sample

A sampling method that involves segmenting the population and then selecting a certain number (the quota) in each market segment.

Cost centre

A section of a business, such as a department, to which costs can be allocated or charged, such as the restaurant in a hotel

Profit centre

A section of the business to which both costs and revenues can be allocated, such as each branch of a chain of shops

Self-actualisation

A sense of fulfilment reached by feeling enriched and developed by what one has learned and achieved

Services

A service is an intangible (unable to be touched; not having physical presence) product supplied by an organisation; examples include: haircuts, photography, banking, insurance, transport, repairs and maintenance.

Sales Promotion

A short-term incentive designed to stimulate sales of a product; e.g. discount coupons, prize draws, trade fairs and free product samples

Current ratio

A short-term liquidity ratio that calculates the ability of a firm to meet its debts within the next 12 months.

Operations management

A specialised area in management that converts or transforms resources (including human resources) into goods and services.

Level of hierarchy

A stage of the organisation structure at which the personnel on it have equal status and authority

Gantt Charts

A standard format for displaying project schedule information by listing project activities and their corresponding start and finish dates in a calendar format.

Just in time (JIT)

A stock control method that aims to avoid holding stocks by requiring supplies to arrive just as they are needed in production and completed products are produced to order.

Repositioning

A strategy that involves changing the market's perception of a product or brand relative to those offered by rival firms.

Autocratic leadership

A style of leadership that keeps all decision-making at the centre of the organisation

Market segment

A sub-group of a whole market in which consumers have similar characteristics.

Grants

A sum of money given by a government or other organisation for a particular purpose.

Subsidies

A sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low (e.g., farm subsidies).

Search Engine Optimization

A systematic process of ensuring that a firm comes up at or near the top of lists of typical search phrases related to that business

Tariffs

A tax on foreign imports

*Adams* and Equity Theory

A theory that states that people will be motivated when they perceive that they are being treated fairly; the idea that employees try to maintain equity between inputs and outputs compared to others in similar positions

Pressure groups

A type of special interest group which consist of individuals with a common concern who seek to place demands on organisations to act in a particular way or to influence change in their behaviour (e.g. Greenpeace and PETA)

Position map

A visual aid that shows customers' perception of a product or brand in relation to others in the market.

Fishbone diagram

A visual identification of many potential causes of a problem

Broker

A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation

Restraining forces

Act *against* a proposal for change

Adaptive creativity

Adapting something that exists

Global Localisation

Adapting the marketing mix, including differentiated products, to meet national and regional tastes and cultures

Cost-Plus Pricing

Adding a fixed mark-up for profit to the unit price of a product

Global marketing

Adopting a standardised product across the globe as if the whole world were a single market - selling the same good in the same way everywhere

Pan-Global Marketing

Adopting a standardised product across the globe as if the whole world were a single market - selling the same good in the same way everywhere

Market segmentation by *demographics* (examples):

Age Gender Race Location Employment status

Intermediaries

Agents or firms that act as a middle person in the chain of distribution between the producers and consumers of a product

Strategic alliances

Agreements among two or more independent firms to cooperate for the purpose of achieving common goals such as a competitive advantage or customer value creation. They will remain competitors in other aspects.

Job enrichment

Aims to use the full capabilities of workers by giving them the opportunity to do more challenging and fulfilling work

Profit

All costs of operating the business during a time period have to be subtracted from total revenue to obtain a profit figure

Product range

All product lines of a firm's product mix; i.e. all the products sold by the business.

*Off-the-job* training

All training undertaken away from the business; e.g., work-related college or university courses

Trade creditors

Amounts due to suppliers for credit purchases (e.g., the purchase of raw materials or contract services such as machinery maintenance).

Trade debtors

Amounts that are owed to a business from its customers

Overdraft facility

An ability to have a negative balance up to an agreed limit in a business's bank account

Balance sheets

An accounting statement that records the values of a business's *assets*, *liabilities* and *shareholders' equity* at one point in time

Business angels

An affluent individual (or group) who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Merger

An agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors with shareholders in both businesses owning shares in the newly merged business

Overdraft

An agreement with a bank for a business to borrow up to an agreed limit as and when required

What is a *P.E.S.T.* analysis?

An analytical framework for specific *external environmental factors* (social, technological, economic, environmental, political, legal and ethical) affecting business objectives and strategies

Force-Field Analysis

An analytical process used to map the opposing forces within an organisation where change is taking place

Total quality management (*TQM*)

An approach to quality that aims to involve all employees in the quality improvement process

Collateral

An asset that is the subject of a *secured loan*, and can be sold by the lender to recover the amount owed

Return on capital employed

An efficiency ratio (reveals a firm's *profitability*) that measures the profit of a business in relation to its size. The higher the ROCE figure, the better it is for business as it shows more profit being generated from the amount of money invested in the firm.

Debtor days ratio

An efficiency ratio that measures the average number of days it takes for a business to collect the money owed from its debtors.

Creditor days ratio

An efficiency ratio that measures the number of days it takes, on average, for a business to pay its creditors. The higher the ratio is, the better it tends to be for business.

Stock turnover ratio

An efficiency ratio that measures the number of times a firm sells its stocks within a year.

Single union agreement

An employer recognises just one single union for the purposes of collective bargaining

Flexi-time employment contract

An employment contract that allows staff that allows staff to be called in at times most convenient to employers and employees; e.g., at busy times of the day

Part-time employment contract

An employment contract that is for less than the normal full working week of, say, 40 hours; e.g. 10 hours per week

Brand

An exclusive name, symbol or design used to identify a specific product or business.

Excise tax

An extra sales tax placed on demerit goods (such as alcohol and tobacco) to increase the price and decrease the consumption

Debtor

An individual or an organisation who has bought on credit (or received a loan) from the business and *owes the business money*

Creditor

An individual or organisation to whom money *is owed by* the business

Intellectual property

An intangible asset that has been developed from human ideas and knowledge

Special interest group

An organisation of people who have a common interest, such as the protection of the global environment, and collectively act to achieve that interest by swaying public opinion and support, lobbying government policy and influencing business behaviour

Trade unions

An organisation of working people with the objective of improving pay and working conditions of the members by providing them with support and legal services

Project-based organisations - Matrix structure

An organisational structure that creates project teams that cut across traditional functional departments.

*Flat* (*less hierarchical*) organisational structure

An organisational structure that has few levels of hierarchy and a *wider span of control* where managers will be responsible for many subordinates and many management functions will be delegated

*Hierarchical* (*bureaucratic*) organisational structure

An organisational structure where there are fewer and fewer people on each higher level

Bureaucracy

An organisational system with standardised procedures and rules

Workforce Planning

Analysing and forecasting the number of workers and the skills of those workers that will be required by the organisation to achieve its objectives (*Human Resource Planning*)

Human Resource Planning

Analysing and forecasting the number of workers and the skills of those workers that will be required by the organisation to achieve its objectives (*Workforce Planning*)

Salary

Annual income that is usually paid on a monthly basis

Social Marketing

Any activity that seeks to influence social behaviour to benefit the target audience and society as a whole. It DOES NOT mean SOCIAL MEDIA (e.g. Facebook).

Unique Selling Point (USP)

Any aspect of a product that makes it stand out from those offered by rival businesses.

Current Liability

Any debt owed that is due to be repaid within one year

Fringe benefits

Any financial extras beyond the regular pay cheque, such as health insurance, life insurance, paid vacation and/or retirement

Protectionism

Any measure taken by governments to safeguard domestic industries and firms from foreign competition (e.g. tariffs and quotas)

Marketing Strategy

Any medium-to long-term plan for achieving the marketing objectives of a business.

Direct marketing

Any promotional activity that involves making direct contact with existing or potential customers, such as door-to-door selling, personal selling and direct mail

E-tailers

Are businesses that operate predominately online (e.g. Zappos.com). They are different to retailers that operate physical stores in shopping malls and other physical outlets

*Quantifiable* risks

Are definite and financially measurable threats to a business, such as fire damage to an organisation (*insurable risks*)

Market Leaders

Are firms that dominate the market share in a particular market. The business that has the largest market share in an industry, as measured by value or volume of sales, is called the market leader.

Distributors

Are independent businesses that act as intermediaries by specialising in the trade of products made by certain manufacturers

Consumer goods

Are items bought by the final user for their own personal consumption. Examples include CONSUMER DURABLES (such as furniture, computers and cars) and PERISHABLES (such as flowers and food)

Flexible structures

Are not based on the traditional hierarchical organisation of human resources. Instead, such structures enable a business to adapt its human resources when there is a need to respond to rapid change.

Stars

Are products in the BCG Matrix that have high or rising market share in a high growth market.

Planning tools (+ examples)

Are the various methods that businesses use to aid their decision-making. examples include: *Gantt Charts*, *Force-Field Analysis*, *Fishbone Diagrams* and *Decision trees*

*Unquantifiable* risks

Are threats to business that are impossible or prohibitively expensive to examine and measure (*uninsurable risks*)

Generic brands

Are trademarks that have become synonymous with the name of the product itself. Examples include Coke, Rollerblade, Tipp-Ex and Frisbee.

Goodwill

Arises when a business is valued at or sold for more than the balance sheet value of its assets

Qualitative investment appraisal

Assessing *non-numeric* information in examining an investment choice

Current Asset

Asset whose value is directly affected by normal daily transactions

Fixed Asset

Asset whose value is not directly affected by daily transactions and is more long term

Sale and leaseback

Assets can be sold (e.g. to a finance company), but the asset can be leased back from the new owner

Job enlargement

Attempting to increase the scope of a job by broadening or deepening the tasks undertaken

Sources of SHORT TERM *external* finance:

Bank overdraft Bank loan Creditors Trade credit Debt Factoring

Current Liability example

Bank overdraft, Creditors

*Task* culture

Based on cooperation and team work

Behavioural training

Behavioural training targets functional issues that can lead to increased worker performance by changing certain behaviours. For behavioural training to be effective, a desirable change in staff behaviour, both personal and professional, needs to eventuate.

Sustainability

Being able to meet the needs of the present without compromising the ability of future generations to meet their own needs. Promotes inter-generational equity.

Dismissal

Being removed or 'sacked' from a job due to incompetence or breach of discipline

Long-term bonds

Bonds issued by companies to raise debt finance, often with a fixed rate of interest (*debentures*)

Debentures

Bonds issued by companies to raise debt finance, often with a fixed rate of interest (*long-term bonds*)

*Brand extension* - PLC extension strategy

Building on a brand's success to launch a new or existing version of a pproduct

External growth

Business expansion achieved by means of merging with or taking over another business, from either the same or a different industry

Non-operating income

Business income that is not received from sales of products; for example: - the sale of fixed assets - rent from factory or office space received from another business - dividends on shares held in another business - interest on deposits held in a bank

Multinational companies

Business organisations that have their headquarters in one country, but with operating branches, factories and assembly plants in other countries

Agent

Business with authority to act on behalf of another firm; e.g. to market its products

Wholesalers

Businesses that purchase large quantities of products from a manufacturer and then separate or 'break' the bulk purchases into smaller units for resale to retailers

Reducing balance method

Calculates depreciation by subtracting a fixed percentage from the previous year's net book value

Start-up capital

Capital needed by an entrepreneur to set up a business

Current assets

Cash and other assets expected to be exchanged for cash or consumed within a year; e.g., inventories, accounts payable (debtors) and cash/bank balance

Closing cash balance

Cash held at the end of the month becomes next month's opening balance

Opening cash balance

Cash held by the business at the start of the month

Current asset example

Cash, debtors, closing stock

Demand-pull inflation

Caused by excess demand in an economy; e.g. an economic boom, allowing businesses to raise prices

Cost-push inflation

Caused by rising costs forcing businesses to increase prices

Fiscal policy

Changes in government spending and tax rates

Monetary policy

Changes in the level of interest rates which make loan capital more expensive

Demographic change

Changes in the size, structure and distribution of populations over time and place

Cognitive training

Cognitive training is designed to train and develop the mental skills of employees to improve their performance.

Extrinsic motivation

Comes from external rewards associated with working on a task, for example pay and other benefits

Intrinsic motivation

Comes from the satisfaction derived from working on and completing a task

Benchmarking

Comparing the performance - including quality - of a business with performance standards throughout the industry

CAM

Computer Aided Manufacturing

*Power* culture

Concentrating power among a few people

Informal groups

Consist of people at work who have formed their own associations based on friendship and/or common interest.

Corporate image

Consumer perception of a company behind a brand.

*Product* in the marketing mix

Consumers require the right product. This might be an existing product, an adaptation of an existing product or a newly developed one.

Delegated budgets

Control over budgets is given to less senior management

Handy's Shamrock organisation: Core workers

Core managerial and technical staff must be offered full-time, permanent contracts with competitive salaries and benefits. These workers are central to the survival and growth of the organisation. In return for high rewards they are expected to work long hours when needed. As core workers are expensive, their numbers are being reduced in most organisations.

Indirect costs

Costs that cannot be identified with a unit of production or allocated accurately to a cost centre - also known as *overhead costs*

Variable costs

Costs that vary with output, such as purchases of flour at a bakery

Innovative creativity

Creating something new

Working Capital

Current Assets - Current Liabilities

Liquid assets

Current assets - stocks

Decentralisation

Decision-making powers are passed down the organisation to empower subordinates and regional/product managers

Predatory Pricing

Deliberately undercutting competitors' prices in order to try and force them out of the market

Product line

Describes the varieties of of a particular product that serves the same purpose in a particular market. For example there are many different varieties of the BMW Mini, ranging from the basic model to the top of the range Mini Cooper S.

Product mix

Describes the variety of different product lines that a business produces.

Differentiation

Differentiation is the process of distinguishing a product or business from competitors in the market or industry.

How easy is it to reverse or change strategic/corporate objectives?

Difficult to reverse or change once established

Conflict

Disagreements that result from differences in attitudes, beliefs, values or needs of people.

Stratified sampling

Draws a sample from a specified sub-group or segment of the population and uses random sampling to select an appropriate number from each stratum.

Targeting

Each distinctive market segment will have its own marketing mix. Different markets can also be targeted, depending on whether they operate in niche, differentiated or mass markets.

*Role* culture

Each member of staff has a clearly defined job title and role

Economies of scope

Economies of scope occur when producing two or more products jointly by one firm is less than the cost of producing them separately.

Situational leadership

Effective leadership varies with the *task* in hand and situational leaders adapt their leadership style to each situation

Employee share ownership schemes

Employee benefit scheme intended to motivate employees by giving them a stake in the firm's success through equity participation.

Self-Appraisal

Employee self-appraisal, within a performance management or annual performance review system involves asking the employee to self-evaluate his or her job performance. Typically, prior to meeting with an employee, the manager will ask the employee to complete an evaluation form on his or her own, to be used as a basis for discussion during the annual performance review meeting. Then at the meeting, the manager and employee discuss the self-appraisal results, and negotiate final evaluations based on both the manager's perceptions and those of the employee.

Temporary employment contract

Employment contract that lasts for a fixed time period; e.g., six months

*Entrepreneurial* culture

Encourages management and workers to take risks, to come up with new ideas and test out new business ventures

Unfair dismissal

Ending a worker's employment contract for a reason that the law regards as being unfair

*New Markets* - PLC extension strategy

Entering a new market with an existing market can extend the life of a product. This could involve a new export market or even just having the product being stocked with a new retailer.

Sampling error

Errors in research caused by using a sample for data collection rather than the whole target population.

Cash flow forecast

Estimate of the firm's future cash inflows and outflows

Net monthly cash flow

Estimated difference between monthly cash inflows and outflows

*Ethical* factors affecting organisational objectives

Ethics are the moral principles that are, or should be, considered in business decision-making

Investment appraisal

Evaluating the profitability or desirability of an investment project

Rights issue

Existing shareholders are given the right to buy additional shares at a discounted price

Excess capacity

Exists when the current levels of demand are less than the full capacity output of a business - also known as spare capacity.

Favourable variance

Exists when the difference between the budgeted and actual figure leads to a higher than expected profit.

Adverse variance

Exists when the difference between the budgeted and actual figure leads to a lower than expected profit

Internal growth

Expansion of a business by means of opening new branches, shops or factories (also known as *organic growth*)

*Content theories* of motivation

Explain the *actual factors that motivate people*; i.e. *what* motivates workers. Herzberg, for example, looked at hygiene factors and motivators, whilst McClelland studied the need for achievement, affiliation and power.

*Competitors*. External or internal stakeholder?

External

*Customers*. External or internal stakeholder?

External

*Government*. External or internal stakeholder?

External

*Local community*. External or internal stakeholder?

External

*Special interest groups*. External or internal stakeholder?

External

*Suppliers*. External or internal stakeholder?

External

Economies of scale

Factors that cause a producer's average cost per unit to fall as output rises

Diseconomies of scale

Factors that cause the *average costs of production to rise* when the *scale of operations is increased*

*Motivators* (*Herzberg*)

Factors that increase job satisfaction and motivation levels, such as praise, recognition and responsibility

Long-term liabilities

Financial obligations that will take the business *more than one year to repay*.

Search Engines

Find web pages related to your request; e.g. Google, Bing and Yahoo!

Price War

Firms compete by a series of intensive price cuts

Price advantages

Firms that's sell undifferentiated products that have a variety of substitutes tend to compete on price and find it difficult to charge higher prices than their rivals.

Net Assets

Fixed Assets + Working Capital

Handy's Shamrock organisation: Flexible workers

Flexible workers on temporary and part-time contracts, who are called on when the situation demands their labour. As the organisation demonstrates little concern or loyalty towards these workers, they often respond in kind. These workers are most likely to to lose their job in an economic downturn.

Quantitative research

Focusses on the collection and interpretation of statistical and numerical data for market research purposes.

Qualitative research

Focusses on the comments, suggestions and opinions of respondents. Qualitative research data are not statistical but can generate in-depth findings.

Maslow - *Physical needs*

Food, shelter, water, rest. Income from employment high enough to meet essential needs.

*Mayo*'s Hawthorne Effect

Found that workers are most motivated and productive when they are able to have some social interaction with their fellow workers and management takes an interest in their well-being.

Absenteeism

Frequent absence from work or another place without a good explanation

Infrastructure

Fundamental facilities and systems serving a country, city, or area, as transportation and communication systems, power plants, and schools

Quota sampling

Gathering data from a group chosen out of a specific sub-group; e.g. a researcher may ask 100 individuals between the ages of 20 and 30 years.

*Legal* factors affecting organisational objectives

Governments will impose laws and regulations to limit the adverse affects of business activity on the general public. Legislation can also be passed to protect businesses.

*Main feature* of *batch production*

Group of identical products pass through each stage together

Recognition and loyalty

Having a recognisable brand increases a firm's competitive advantage as there is a greater chance of the product being sold - brand loyalty or perceived trustworthiness.

*Essential requirements* of *job production*

Highly skilled workforce

Just in case (JIC)

Holding high stock levels 'just in case' there is a production problem or an unexpected upsurge in demand.

Productivity

How well a firm is using its resources in the process of producing its goods or services is measured by its productivity rates.

Market segmentation

Identifying different segments within a market and targeting different products or services to them.

Direct tax

Income tax or company tax

Economic growth

Increases in the level of a country's Gross Domestic Output (*GDP*)

Incremental budgeting

Incremental budgeting uses last year's budget as a basis and an adjustment is made for the following year

Budget holder

Individual responsible for the initial setting and achieving of the budget.

Creditors

Individuals or organisations that the business owes money to that needs to be settled within the next twelve months

*Environmental* factors affecting organisational objectives

Individuals, organisations and governments are increasingly concerned about the impact of business activity on the environment.

Go slow

Industrial action that involves employees working at the minimum pace allowable under their employment contract.

Paradigm innovation

Innovation that defines or redefines the dominant paradigms of an organisation or entire sector.

Positioning innovation

Innovation that involves re-positioning the perception of an established product or process in a specific context. Position-based innovations refer to changes in how a specific product or process is perceived symbolically and how they are used.

*On-the-job* training

Instruction at the place of work on how a job should be carried out

Forward vertical integration

Integration with a business in the same industry but a customer of the existing business (e.g., shoe manufacturer acquiring a shoe retailer)

Backward vertical integration

Integration with a business in the same industry but a supplier of the existing business (e.g., shoe manufacturer being taken over by a shoe retailer)

Vertical integration

Integration with a firm in the same industry but at a different stage of production (i.e., primary, secondary or tertiary)

Horizontal integration

Integration with firm in the same industry and the same stage of production (e.g., two shoe retail chains merging)

*Directors*. External or internal stakeholder?

Internal

*Employees*. External or internal stakeholder?

Internal

*Managers*. External or internal stakeholder?

Internal

*Shareholders*. External or internal stakeholder?

Internal

Free international trade

International trade that is allowed to take place without restrictions such a s'protectionist' tariffs and quotas

ISO 9000

Internationally recognised certificate that acknowledges the existence of a quality procedure that meets certain conditions.

*Induction* training

Introductory training programme to familiarise new recruits with the key people and systems used in the business and the layout of the business site

Primary research

Involves data being collected by the researcher since the dtaa does not currently exist.

Job redesign

Involves the restructuring of a job - usually with employees' involvement and agreement - to make work more interesting, satisfying and challenging

Offshoring

Is a form of *outsourcing* that involves relocating business functions and processes to another country.

Brand development

Is a long-term product strategy that involves strengthening the name and image of a brand in order to boost its sales.

Balance sheet

Is a statement of a firms financial position i.e. its assets, liabilities and share capital

Cash cow

Is a term used by the BCG Matrix to refer to any product that generates significant sales revenue due to its large market share in a slowly expanding or mature market.

Boston Matrix

Is a tool for analysing the product portfolio of a business. It measures whether products have a high or low MARKET SHARE and operate in HIGH or LOW GROWTH industries.

Market Orientation

Is an approach adopted by businesses that are OUTWARD looking. They focus on making products that they can sell, rather than selling products they can make.

Extension strategy

Is an attempt by marketers to lengthen the product life cycle of a particular product. Such strategies are typically used during the maturity or early decline stages of a product's life cycle.

Liability

Is anything the business owes

Asset

Is anything the business owns

Re-shoring:

Is off-shoring reversed. It is when a company brings production and operation facilities back to the home country.

Outsourcing

Is the act of finding external people or businesses to carry out non-core functions of business, such as IT, payroll and transport.

Value added

Is the difference between a product's price and the total cost of the inputs that went into making it. It is the extra worth created in the production process.

Product life cycle

Is the typical process that products go through from their initial design and launch to their decline and withdrawal from the market.

*Advantages* of *straight line depreciation*:

It is easy to calculate and understand. It is widely used by limited companies.

Assets

Items of monetary value that are owned by the business

Kaizen

Japanese term meaning *continuous improvement*

Centralisation

Keeping all of the important decision-making powers within head office or the centre of the organisation

Coordinated marketing mix

Key market decisions complement each other and work together to give customers a consistent message about the product.

*Essential requirements* of *batch production*

Labour and machines must be flexible to switch to making batches of other designs

The relationship between *investment*, *profit* and *cash flow*.

Large investments such as the purchase of an expensive item of capital equipment are examples of *capital expenditure* and do not factor into a firms profit or loss. Investments can take considerable time and expense before they start generating cash. With any investment the initial cash flow is negative, before (hopefully) becoming positive. For example, building a new factory to produce Product A will require considerable cash outlays in terms of production costs, and considerable time before the factory is finished, Product A is being made, stocked in stores and sold to customers - when eventually cash will start to flow into the business from the investment. It is only when Product A starts selling to customers that a profit can be booked.

Radical innovation

Large, disruptive innovations that are high risk

Sources of MEDIUM TERM *external* finance:

Leasing Hire purchase Medium-term loan

Intellectual property rights

Legal property rights over the possession and use of intellectual property

Patent

Legal righ of an invention for a certain period of timet to be the sole producer and seller

Copyright

Legal right to protect and be the sole beneficiary from artistic and literary works

Long-term loans

Loans that do not have to repaid for at least one year

Intangible assets

Long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value

Marketing strategy

Long-term plan established for achieving marketing objectives.

*Process* Theories of motivation

Look at why people behave in a certain manner and how motivation can be maintained or stimulated. These theories look at what people think about when deciding whether or not to put in the effort to complete a task.

*Herzberg*'s Two Factor Theory.

Looked at the factors that motivate employees, namely *motivators* and maintenance (*hygiene*) factors

*Price reductions* - PLC extension strategy

Lowering prices increase the demand for a product. Discounting can help a firm get rid of excess stocks of those products in danger of becoming obsolete.

Fixed asset example

Machinery, motor vehicles

Management By Objectives (MBO)

Managers and workers set objectives and have autonomy in how they plan to achieve these. There are 5 steps: 1. *Review* 2. *Set* 3. *Monitor* 4. *Evaluate* 5. *Reward*

Delegation

Managers passing on tasks or responsibilities to their subordinates. This can motivate workers who wish to increase their responsibility and be recognised for their abilities

Test marketing

Marketing a new product in a geographical region before the full scale launch.

Business Functions

Marketing, Finance, Human Resource Management and Operations Management

Industrial Markets

Markets for goods and services bought by businesses to be used in the production process of other products.

Consumer Markets

Markets for goods and services bought by the final user of them.

Mass marketing

Mass marketing is an attempt to appeal to an entire market with one basic marketing strategy using mass distribution and mass media.

*Main feature* of *flow/mass production*

Mass production of standardised products

Stock (inventory)

Materials and goods required to allow for the production of and supply of products to the customer.

Random variations

May occur at any time and will cause unusual and unpredictable sales figures; e.g. exceptionally poor weather, or negative public image following a high-profile product failure.

Industrial action

Measures taken by the workforce or trade union to put pressure on management to settle an industrial dispute in favour of employees.

Average rate of return *ARR*

Measures the *annual profitability* of an investment as a percentage of the initial investment

Liquidity ratios

Measures the ability of a firm to meet its short-term debts (e.g., current ratio & acid test ratio)

Stock turnover ratio (days)

Measures the average number of days that money is tied up in stocks.

Brand awareness

Measures the extent to which a particular brand is recognised amongst potential customers or the general public. It is usually measured as a percentage; e.g., if 999 out of 1000 people surveyed recognise the brand Coke®, then Coke's brand awareness is 99.9 per cent.

*Masculinity* versus *femininity* dimension of culture:

Measures the extent to which an organisational culture conforms to traditional gender roles and values. Masculinity:competitive, ambitious, materialistic. Femininity: relationships, family quality of life.

*Individualism* versus *collectivism* dimension of culture:

Measures the extent to which people feel they should care for themselves (individualism) or be supported by colleagues in an organisation.

*Uncertainty avoidance* dimension of culture:

Measures the extent to which people in an organisation prefer structured routines (predictability) over flexible structures (uncertainty). High uncertainty avoidance cultures have strong customs and habits, and as such, tend to favour formal structures, rules and regulations, and tend to remain loyal to employers.

* Power distance* dimension of culture:

Measures the extent to which subordinates expect and accept *unequal distribution of power* with a business. High-power = centralised decision-making; low power = delegation and empowerment of subordinates.

Brand development

Measures the infiltration of a product's sales, usually per thousand population. If 100 people in 1000 buy a product, it has a brand development of 10.

Productivity

Measures the level of labour and/or capital efficiency of a business by comparing its level of inputs with the level of its output

Productivity

Measures the level of output per worker. It is a measure of motivation because employees tend to be more productive with increased levels of motivation

Market Share

Measures the value of a firm's sales revenue as a percentage of the industry's total; e.g. a business with 35% market share means that for every $100 sold in the industry, the firm earns $35 of the sales revenue.

Labour productivity

Measuring the output per worker. A good indicator of the current skills and motivation within the workforce.

Incremental innovation

Minor improvements to products or processes

External finance

Money raised from sources outside the business (e.g. share issue, leasing, bank loan)

Internal finance

Money raised from the business's own assets or from profits left in the business (retained profits)

Loan capital

Money received by an organisation in return for the agreement to pay interest during the period of the loan and to repay the loan within an agreed time.

Credit control

Monitoring of debts to ensure that credit periods are not exceeded

Ethics

Moral values and judgements (what is right and just) that society believes organisations should consider in their decision-making

Net profit

Net profit = *gross profit - overhead expenses* (net profit)

Process innovation

New methods of manufacturing or service provision that offers important benefits

Product innovation

New, marketable products such as the Apple iPad

Niche marketing

Niche marketing targets specific and well-defined market segments (i.e., niche markets). Concentrating all marketing efforts on a small but specific and well defined segment of the population

Capital employed II

Non-current liabilities + shareholders equity

Outsourcing

Not employing staff directly, but using an outside agency or organisation to carry out some business functions

Leasing

Obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. this avoids the need for the business to raise long-term capital to buy the asset. Ownership remains with the leasing company.

Non-sampling errors

Occur during the course of the survey activities, rather than from the survey itself. Such as response bias, data entry error, undercoverage etc.

Economic sustainability

Occurs when business development meets the needs of the present population without endangering the ability of future generations to meet their needs.

Social sustainability

Occurs when social interactions and structures necessary for social development meets the needs of the present population without endangering the ability of future generations to meet their needs.

Ecological sustainability

Occurs when the capacity of the natural environment meets the needs of the present population without endangering the ability of future generations to meet their needs.

Culture clash

Occurs when there is conflict between two or more cultures within an organisation. This may exist when there is a merger or acquisition and two firms are required to integrate, each with their own unique corporate culture.

What resources are committed to strategic/corporate objectives?

Often high-risk objectives involving many resources

Viral marketing

On the Internet, viral marketing is any marketing technique that induces websites or users to pass on a marketing message to other sites or users, creating a potentially exponential growth in the message's visibility and effect.

Price Leadership

One dominant firm in a market sets a price and other firms simply charge a price based upon that set by the market leader.

Low-quality profit

One-off profit that cannot easily be repeated or sustained

Operating profit

Operating profit = *gross profit - overhead expenses* (net profit)

Overhead costs

Organisational costs that are not directly linked to a specific project or product. These costs cover general expenses such as senior management, legal, rent, insurance, market promotion, and accounting (*indirect costs*).

Handy's Shamrock organisation: Outsourced work

Outsourced functions by independent providers, who may once have been employed by the company. Also known as the 'contractual fringe', these workers provide specific services that do not have to be kept within the core. These may include payroll services, transport, catering and IT.

Outsourcing

Outsourcing (or Subcontracting): using another business (a 'third party') to undertake a part of the production process rather than doing it within the business using the firm's own employees.

Packaging

Packaging in marketing concerns itself with the presentation of a product to a consumer.

Process

Part of the extended marketing mix which refers to the methods and procedures used to give clients the best possible customer experience.

*Hygiene* factors (*Herzberg*)

Parts of a job that do not increase job satisfaction but help to remove dissatisfaction, such as reasonable wages and working conditions

Delegation

Passing *authority* down the organisational hierarchy

Hourly wage rate

Payment made to a worker for each hour worked

Cash outflows

Payments in cash made by a business, such as those to suppliers or workers

Cash inflows

Payments in cash received by a business, such as those from customers (*debtors*) or from the bank; e.g. receiving a loan

People

People are the organisation's employees who interact with actual and potential customers.

Internal customers

People within the organisation who depend upon the quality of work being done by others

Equity finance

Permanent finance raised by companies through the sale of shares

Market segmentation by *psychographics* (examples):

Personality Values Attitudes Interests Lifestyles

*Physical evidence* in the marketing mix

Physical evidence means allowing customers to see for themselves the quality of the service being provided. This will reduce the element of risk in buying a service as opposed to a tangible product. For example, a clean and well-presented reception area in a hotel would raise appropriate expectations in the mind of the customer.

*Place* in the marketing mix

Place refers to how the product is distributed to the consumer. If it is not available at the right time in the right place, then even the best product in the world will not be bought in the quantities expected.

P.E.S.T

Political Economic Social Technological

Contingency planning

Preparing the *immediate steps* to be taken by an organisation in the event of a crisis or emergency

Unit contribution calculation

Price - AVC

Batch production

Producing a limited number of identical products - each item in the batch passes through one stage of production before passing onto the next stage

Job production

Producing a one-off item specially designed for the customer

Standardisation

Producing an identical or homogeneous product in large quantities, such as printing a particular magazine, book or newspaper

Lean production

Producing goods and services with the minimum of wasted resources while maintaining high quality

Flow production

Producing items in a continually moving process - also known as *line production*

Mass production

Producing large quantities of a standardised product

Product differentiation

Product differentiation is the marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products. Successful product differentiation creates a competitive advantage for the seller, as customers view these products as unique or superior.

Loss Leader

Product sold at a very low price to encourage consumers to buy other products

Team working

Production is organised so that groups of workers undertake complete units of work

Labour intensive

Production processes involving a high level on labour input compared with capital equipment

Capital intensive

Production processes that use a high ratio of capital to labor inputs

*Stars* in the BCG matrix

Products with high market share in a high growth market. As the market grows, develops and matures, a 'star' product could become the next 'cash cow' for a business.

*Question marks (problem children)* in the BCG matrix

Products with low market share in a high growth market. Considerable investment in these products may be needed to capture more market share from competitors and turn them into 'stars'.

*Dogs* in the BCG matrix

Products with low market share in a low growth market. Firms need to use a product extension strategy or dispose of these products altogether.

High-quality profit

Profit that can be repeated and sustained

*Promotion* in the marketing mix

Promotion must be effective - telling consumers about the product's availability and convincing them that 'your brand' is the one to choose. Packaging is often used to reinforce this image.

Below-the-Line Promotion

Promotion that is not a directly paid-for means of communication but based on short-term incentives to purchase

Direct mail

Promotional material sent directly to people's homes or place of work

Maslow - *Safety needs*

Protection from threats, job security, health and safety at work. A contract of employment with some job security - a structured organisation that gives clear lines of authority to reduce uncertainty. Ensuring health and safety conditions are met.

Driving forces

Push *for* a proposal for change

Maslow - *Self-actualisation*

Reaching one's full potential; e.g. challenging work that stretches the individual - this will give a sense of achievement. opportunities to develop and apply new skills will increase potential.

Economies of scale

Reductions in a firm's *unit (average) costs* of production that result in an *increase in the scale of operations*

Economies of Scale

Reductions in a firm's unit (average) costs of production that result in an increase in the scale of operations; i.e. by producing more

Liquid assets

Refer to the assets of a business that can be turned into cash quickly, without losing their value; i.e., cash, stock and debtors.

Liquidity cirisis

Refers to a situation where a firm is unable to pay its short-term debts; i.e., current liabilities exceed current assets and, therefore, the acid test ratio is less than 1:1.

Differentiation

Refers to any strategy used to make a product appear to be dissimilar from others. Examples include quality, branding and packaging.

Product differentiation

Refers to any strategy used to make a product appear to be dissimilar from others. Examples include quality, branding and packaging.

Clicks and Mortar

Refers to businesses that combine the traditional main-street existence with an online presence. By contrast, other businesses may have just an online presence (e.g. Zappos.com)

Intellectual property

Refers to creations of the mind such as inventions, literary and artistic works and symbols, names, images and designs used in business

Pull Promotion

Refers to promotional methods, such as pester power marketing or television advertising, that lure customers into buying a product

Span of control

Refers to the number of subordinates that are controlled by a manager; i.e., the number of people who are *directly* accountable to the manager

Marketing myopia

Refers to the short-sightedness and complacency of marketers in adapting to changes in the market place. This may be especially true of product orientated businesses.

Branding

Refers to the use of an exclusive name, symbol or design to identify a specific product or business. It is used to differentiate itself from similar products used by rival firms.

Brand extension

Refers to the use of an existing brand name that is successful to launch a new or modified product.

Customer Relations Management (CRM)

Refers to the use of people in the marketing mix. CRM focusses on what can be gained during the lifetime of a positive relationship with customers.

Strategy

Refers to the various methods that businesses can use in an attempt to achieve their mission or vision. Strategies then form long-term plans for the whole organisation

Push Promotion

Refers to using intermediaries, such as real estate agencies, bloggers or financial consultants, to help sell products

Seasonal variations.

Regular and repeated variations that occur in sales data within a period of 12 months or less.

Fixed costs

Remain unchanged (fixed) no matter what the level of output, such as *rent of premises*

Six stages of the product life cycle

Research. Launch. Growth. Maturity. Saturation. Decline.

Arbitration

Resolving an industrial dispute by using an independent third party to judge and recommend an appropriate solution

Maslow - *Esteem needs*

Respect from others, status and recognition of achievement. Give employees recognition for work done well - status, advancement and responsibility will gain the respect of others.

Manager

Responsible for setting *objectives*, organising *resources* and *motivating* staff so that the *organisation's aims are met*.

Sources of *internal* finance:

Retained profits Sales of assets Reduction in working capital

Venture capital

Risk capital invested in business start-ups or expanding small businesses, that have good profit potential, but do not find it easy to obtain finances from other sources

S.M.A.R.T. business objectives

S-Specific M-Measurable A-Achievable R-Realistic and Relevant T-Time specific

A ________ ___________ would identify the external constraints

STEEPLE analysis

Gross profit

Sales revenue - cost of goods sold

SEO

Search Engine Optimisation

Factoring (debt factoring)

Selling of claims over debtors (individuals or organisations who owe the business money) to a *debt factor* in exchange for immediate liquidity - only a proportion of the value of the debts will be received as cash

Contribution per unit

Selling price of a product less variable costs per unit

International Marketing

Selling products in markets other than the original domestic market

*People* in the marketing mix

Selling services successfully requires people who can interact positively with customers and create the correct impression to encourage them to return. This is particularly relevant in the hotel and restaurant industry.

Skimming

Setting a high price for a new product when a firm has a UNIQUE or HIGHLY DIFFERENTIATED product with low price elasticity of demand (Market Skimming)

Market Skimming

Setting a high price for a new product when a firm has a UNIQUE or HIGHLY DIFFERENTIATED product with low price elasticity of demand (Skimming)

Penetration Pricing

Setting a relatively low price often supported by a strong promotion in order to achieve a high volume of sales

Zero budgeting

Setting budgets to zero each year and budget holders have to argue their case to receive any finance

Cost-Based Pricing

Setting prices based on the COSTS OF PRODUCTION rather than the level of demand or the prices set by competitors

Psychological Pricing

Setting prices that take account of customers' perception of value of the product

Sources of LONG TERM *external* finance:

Share issue Debentures Long-term loan Grants

Distinguish between *shareholders* and *stakeholders*

Shareholders are the part owners of a private or public company. They have a direct interest in the activities and performance of a business and are, therefore, stakeholders of an organisation. However, there are other stakeholders of an organisation that do not necessarily own shares in the business; e.g. employees, the local community, suppliers, competitors. So, *shareholders are stakeholders, but stakeholders are not necessarily shareholders*.

Shareholders' equity

Shareholders' equity: *Total value of assets - total value of liabilities*

Debt factoring

Short term liquidity problem, sell debt to a factoring agency, instant inflow of cash but the cost is a fee payable to the agency that lowers the profit on the original business

Trade credit

Short-term financing that allows an entrepreneur credit from vendors within the business's industry or trade.

Operational (tactical) objectives

Short-term or medium-term goals or targets which must be achieved for an organisation to attain its corporate objectives

*Main feature* of *job production*

Single one-off items

Recession

Six months (two quarters) of falling GDP (i.e. negative growth)

Social marketing

Social marketing seeks to develop and integrate marketing concepts with other approaches to influence behaviours that benefit individuals and communities for the greater social good.

Social media marketing

Social media marketing (SMM) is a form of Internet marketing that uses social networking websites (such as Twitter and Facebook) as a marketing tool. The goal of SMM is to produce content that users will share with their social network to help a company increase brand exposure and broaden customer reach.

*Social* factors affecting organisational objectives

Social, cultural and demographic change

Long term Liabilities

Something that a firm owes and takes longer than a year to pay back

Promotional Pricing

Special low prices to gain market share or sell off excess stock - includes 'buy one get one free'

Scientific management (*Taylor*)

Specialisation and division of labour lead to greater levels of productivity. Taylor introduced a piece-rate payment system to link pay with productivity levels.

Capital expenditure

Spending by businesses on *fixed assets* such as the purchase of land, buildings and machinery (*investment expenditure*).

Revenue expenditure

Spending on the day-to-day running of a business (e.g. rent, wages and utility bills)

Cell production

Splitting flow production into self-contained groups that are responsible for whole work units

Teleworking

Staff working from home but keeping in contact with the office by means of modern IT communications

B2B

Stands for business-to-business and refers to online trade conducted directly for the BUSINESS CUSTOMER rather than the end-user; an example would be Amazon.com supplying books to other book retailers

B2C

Stands for business-to-consumer and refers to online business conducted directly for consumers;p an example would be Amazon.com selling books directly to private individuals

Crisis management

Steps taken by an organisation to limit the damage from a crisis by handling, retaining and resolving it

*Trait* theory

Suggests that leadership and management styles depend on *personal characteristics* (traits) of the individuals.

Fixed assets

Tangible assets (e.g. not brands) that have a physical existence and are expected to be retained and used by a business for more than 12 months; e.g., land, buildings, vehicles and machinery

Fixed assets

Tangible assets as the have a physical existence (so *not* a *brand*, for example) and are expected to be retained and used by the business for *more than 12 months* (e.g. land, buildings, vehicles and machinery)

Tariff

Tax imposed on an imported product

Break even point of production

The *level of output* at which *total costs equal total revenue*

Liquidity

The ability of a firm to pay its short-term debts

Issued share capital

The actual number of shares the business has sold

Zero defects

The aim of achieving perfect products every time

Margin of safety

The amount be which sales level exceeds the break-even level of output

Net profit

The amount left after operating expenses are subtracted from the gross profit

Demand

The amount of products that customers are willing and able to buy at each price. For the vast majority of products, as the price increases, demand will tend to fall

Break even revenue

The amount of revenue needed to cover both fixed and variable costs so that the business breaks even (*Break-even quantity x Price*)

*Repackaging* - PLC extension strategy

The appearance of a product can significantly affect demand. Changing the appearance of the product's packaging - more attractive materials and colours - can increase demand.

Leadership

The art of motivating a group of people towards achieving a common objective

Distribution advantages

The best brands are more likely to be stocked in retail outlets, given better store locations, and shelf positions. A good brand will enable the product to 'fly off the shelf'!

E-Commerce

The buying and selling of goods and services on the internet

Working capital

The capital needed to pay for raw materials, day-to-day running costs and credit offered to customers.

Channel of distribution

The chain of intermediaries a product passes through from producer to consumer

Promotion Mix

The combination of promotional techniques that a firm uses to communicate the benefits of its products to customers

The difference between *profit* and *cash flow*.

The concept of *profit* is somewhat narrow, and only looks at income and expenses at a certain point in time. *Cash flow*, on the other hand, is more dynamic. It is concerned with the movement of money in and out of a business. More importantly, it is concerned with the time at which the movement of the money takes place. A firm can 'book' a profit on a sale even if they have not received the money yet. If that money is slow to be received it cannot be used to pay expenses and a firm may face a cash flow or liquidity crisis.

Conflict resolution

The course of action taken to resolve conflicts and differences in oppinion

Net book value

The current balance sheet value of a non-current asset. Net book value = *original cost - accumulated depreciation*

Depreciation

The decline in the estimated value of a non-current asset over time

Organisational chart

The diagrammatic representation of a firm's formal organisation structure.

Culture gap

The difference between the existing culture of an organisation and its desired culture. Management will use different strategies to reduce this gap.

Specialisation

The division of a large task or project into smaller tasks that allow individuals to concentrate on one or two areas of expertise. Specialisation is an essential part of mass production.

Marketing Plan

The document outlining a firm's marketing objectives and strategies for a specified time period.

Price Transparency

The ease with which consumers can find out the variety of prices in a market

Measuring the effectiveness of *people*

The effectiveness of an organisation's people in delivering or marketing a service can be measured in four ways: 1. Appearance (including body language) 2. Attitudes and aptitudes (capabilities) 3. Customer feedback 4. Efficiency

Packaging

The eighth 'P' in the marketing mix which focuses on the ways in which a product is presented to the consumer.

Population

The entire set of items from which a sample is drawn; i.e. all potential customers of a particular market,

Market value

The estimated total value of a company if it were taken over

Quality standards

The expectations of customers expressed in terms of the minimum acceptable production or service standards

The extended marketing mix (the seven Ps model)

The extended marketing mix - the seven Ps model - is made up of seven interrelated decisions − the 7Ps. The four key ones are *product*, *price*, *promotion* (including advertising and packaging) and *place* (where and how a product will be sold to consumers). The other 3Ps largely relate to marketing services - *people*, *process* and *physical evidence*.

*Long-term* versus *short-term orientation* dimension of culture:

The extent to which an organisation and its employees values making sacrifices today for benefits to be gained in the future. Cultures with long-term orientation will invest for the future, have a high degree of perseverance and are patient with the results.

Occupational mobility of labour

The extent to which workers are willing and able to move to different jobs requiring different skills

Geographical mobility of labour

The extent to which workers are willing to move to a new geographical region to take up new jobs

Brand loyalty

The faithfulness of consumers to a particular brand as shown by their repeat purchases irrespective of the marketing pressure from competing brands.

*Technological* factors affecting organisational objectives

The fast-changing technological environment presents constant threats and opportunities for a business. technology affects all aspects of business functions.

Invention

The formulation or discovery of new ideas for products or processes

Marketing mix

The four main elements of marketing strategies: PRODUCT, PRICE, PROMOTION and PLACE. (The 4Ps)

Marketing objectives

The goals set for the marketing department to help the business achieve its overall objectives.

Globalisation

The growing trend towards worldwide markets in products, capital and labour, unrestricted by barriers

Physical evidence

The image portrayed by a business (or perceived by customers) regarding its observable and tangible features such as the cleanliness and physical size of a business or the presentation of its staff.

Revenue

The income received from the sale of a product

Organisational structure

The internal, formal framework of a business that shows the way in which management is organised and linked together and how authority is passed through he organisation

Motivation

The intrinsic and extrinsic factors that stimulate people to take actions that lead to achieving a goal

Coordinated marketing mix

The key marketing decisions complement each other and work together to give customers a consistent message about the product.

Payback period

The length of time it takes for *net cash inflows* to pay back the original capital costs of the investment

Target profit output

The level of output needed to be produced and sold at a particular price to make the particular amount of profit a firm is seeking.

Re-order stock level

The level of stocks that will trigger a new order to be sent to the supplier.

Andon

The light signal for help. When equipment shuts down, flags or lights, usually with accompanying music or an alarm, are used to signal that help is needed to solve a quality problem.

Depreciation

The loss of value of an asset due to wear and tear

Marketing Mix

The main elements of a firm's marketing strategy: PRODUCT, PRICE, PROMOTION & PLACE.

Finance

The management of money and credit and banking and investments

Marketing

The management task that links the business to the customer by identifying and meeting the needs of customers profitably - it does this by promoting the right product at the right price at the right place to the right customers.

Marketing

The management task that links the business to the customer by identifying and meeting the needs of customers profitably. It does this by getting the right PRODUCT at the right PRICE at the right PLACE with the right PROMOTION.

Business etiquette

The manner, social and cultural context in which business is conducted. International etiquette differs from one country to another so it is important for marketers to be aware of the different protocols that exist

Capital intensive

The manufacturing or provision of a product relies heavily on machinery and equipment, such as automated production systems. Hence, the cost of capital accounts for a higher proportion of a firm's overall production costs.

Target market

The market segment that a particular product is aimed at.

The Marketing Mix

The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. It is a planned mix of the controllable elements of a product's marketing plan and is commonly termed as the 4Ps: product, price, place, and promotion.

Authorised share capital

The max amount of shares the business can sell

Scale of Operation

The maximum output that can be achieved with the available inputs (resources) - this scale can only be increased in the long term by employing more of all inputs

Production process

The method of of turning inputs into outputs by adding value in a cost-effective way

Production process

The method of of turning inputs into outputs by adding value in a cost-effective way.

Processes

The methods of delivering or providing the service

Criterion rate or level

The minimum level (maximum for payback period) set by management for investment appraisal results for a project to be accepted

Buffer stocks

The minimum stocks that should be held to ensure that production could still take place should a delay in delivery occur or production rates increase.

Ethical marketing

The moral aspects of a firm's marketing strategies. It can be encouraged by the use of moral codes of practice.

Collective bargaining

The negotiations between employees' representatives (trade unions) and employers and their representatives on issues of common interest such as pay and conditions of work

Lead time

The normal time taken between ordering new stocks and their delivery.

Re-order quantity

The number of units ordered each time.

Unemployment

The numbers of people in an economy willing and able to work who cannot find employment

Accountability

The obligation of an individual to account for his or her activities and to disclose results ion a transparent way

Economic order quantity (EOQ)

The optimum or least-cost quantity of stock to re-order taking into account delivery costs and stock-holding costs

Strike action

The organised withdrawal of labour from a firm by a union

Master budget

The overall or consolidated budget, comprised of all the separate budgets within an organisation. The Chief Financial Officer (CFO) will have general control and management of the master budget.

Remuneration

The overall package of pay and benefits offered to an employee

Managers

The people responsible for the day-to-day running of the organisation, or a department within the organisation. They are accountable to directors and responsible for their staff teams

Shareholders

The people who own shares in a private or public limited company; i.e. they are the part owners of a company

Market Growth

The percentage change in the total size of a market (volume or value) over a period of time.

Working capital cycle

The period of time between spending cash on the production process and receiving cash payments from customers

Labour

The physical and mental human effort used in the production process

Aspects of physical evidence:

The physical environment Ambiance Spatial Layout Corporate branding

*Political* factors affecting organisational objectives

The political stability of a country and government policies will provide opportunities and threats for a business.

Innovation

The practical application of new inventions into marketable products

Sampling

The practice of selecting a representative group (known as the sample) of a population for primary research purposes.

Exporting

The practice of selling domestically produced goods and /or services to overseas buyers to gain access to international markets

Brand value

The premium that accrues to a brand from customers who are willing to pay extra for it.

Going-Rate Pricing

The price charged is based upon a study of the conditions that prevail in a certain market and the prices charged by major competitors

Target price

The price required at a particular level of output for a firm to break even. *Price* x Level of output = Total Costs (Total fixed costs + Total variable costs)

Appraisal

The process of assessing the effectiveness of an employee judged against pre-set objectives.

Segmentation

The process of categorising customers into distinct groups of people with similar characteristics (such as age or gender), and similar wants or needs for research and targeting purposes.

Decision-making

The process of choosing between the alternative options available to a business

Marketing planning

The process of formulating appropriate strategies and preparing marketing activities to meet marketing objectives.

Distribution

The process of getting products to customers at the right time and in the most cost-effective way; it is the PLACE in the marketing mix

Recruitment

The process of identifying the need for a new employee, defining the job to be filled and the type of person needed to fill it, attracting suitable candidates for the job and selecting the best one.

Variance Analysis

The process of investigating any differences between budgeted figures and actual figures

Supply chain management

The process of managing the network of businesses that are involved in the provision of products to the final consumer

Publicity

The process of promoting a business and its products by getting media coverage without directly paying for it

*Processes* in the marketing mix

The processes that a business has in place to satisfy customers' wants reliably and consistently form an important part of marketing services. For example, banks replacing an out-of-date debit card without the customer having to ask for one.

Retained profit

The profit left after all deductions, including dividends, have been made. This is 'ploughed back' into the company as a source of finance

Capacity utilisation

The proportion of maximum output capacity currently being achieved.

Examples of *capital expenditure*

The purchase of any *fixed asset*: - land - buildings - machinery

Share price

The quoted price of one share on the stock exchange.

Market research

The range of marketing activities designed to discover the opinions, beliefs and feelings of potential and existing customers to identify and anticipate the needs and wants of customers.

Product portfolio

The range of products or strategic business units owned and developed by an organisation.

Inflation

The rate of change in the *average level of prices*

Inventory (stocks)

The raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale.

Offshoring

The relocation of a business process done in one country to the same or another company in the other country

Free trade

The removal of barriers to the exchange of products and capital between countries (e.g. tariffs and quotas)

Deregulation

The removal of government rules and laws which constrain an industry, thereby increasing its efficiency and enhancing competition

Delayering

The removal of one or more of the levels of hierarchy from an organisational structure

*Price* in the marketing mix

The right price is important too. If set too low, then consumers may lose confidence in the product's quality; if too high, then many will be unable to afford it.

Nationalisation

The sale of private sector businesses to the government. The sale may be voluntary, forced, coerced or the assets simply expropriated

Privatisation

The sale of public sector organisations to the private sector

Research and development

The scientific research and technical development of new products and processes

Retailers

The sellers of products to the general public (i.e. consumers) that operate in outlets

Directors

The senior members of staff who have been elected by shareholders of a company to run the company on their behalf

Dividends

The share of profits paid to shareholders as a return for investing in a company

Dividends

The share of the profits paid to shareholders as a return for investing in the company.

Moving-Average Method

The simplest method of time-series forecasting; assumes that the time series has only a level component plus a random component.

Word of Mouth (WOM)

The spreading of good or bad messages about a firm, its products or its customer service. Many people argue that this is the most cost-effective form of promotion

Human Resource Management (HRM)

The strategic approach to the effective management of an organisation's workers so that they help the business gain a competitive advantage

Cash flow

The sum of cash payments to a business (*inflows*) less the sum of cash payments made by it (*outflows*)

Physical evidence

The tangible features of a service, buildings, signage, etc.

Market Size

The total level of sales of all producers within a market.

Gross Domestic Output (*GDP*)

The total value of all goods and services produced in a country in a given year. An indicator of economic activity.

Share capital

The total value of capital raised from shareholders by the issue of shares

Share capital

The total value of capital raised from shareholders by the issue of shares.

Sales turnover

The total value of sales made during the trading period = *selling price x quantity sold* (sales revenue) Sales revenue

Sales revenue

The total value of sales made during the trading period = *selling price x quantity sold* (sales turnover)

Mediation

The use of a third party in industrial disputes to encourage both employer and union to discuss an acceptable compromise solution (conciliation)

Conciliation

The use of a third party in industrial disputes to encourage both employer and union to discuss an acceptable compromise solution (mediation)

Promotion

The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations to inform consumers and persuade consumers to buy

Information technology

The use of electronic technology to gather, store, process and communicate information

Mass customisation

The use of flexible computer-aided production systems to produce items that meet individual customer requirements at mass production cost levels

Creativity

The use of imagination or original ideas to create something; inventiveness.

Viral Marketing

The use of social networking sites or SMS text messages to increase brand awareness or sell products

Telemarketing

The use of telephone systems (calls and messaging) to sell products directly to consumers (also called telesales)

Exchange rate

The value of one currency in terms of another

Organisational culture

The values, attitudes and beliefs of the people working in an organisation that control the way they interact with each other and with external stakeholder groups

Stakeholder concept

The view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders

Portfolio working

The working pattern of following several simultaneous employments at any one time

What is the *'best'* or *'most appropriate'* leadership style?

There isn't one! This will depend on the *nature of the task* being performed, the *importance* of it and the *skills and experiences* of the workers being led.

*Economic* factors affecting organisational objectives

These are factors such as interest rates, economic growth, employment, international trade and state of infrastructure.

Quantitative factors

These are measurable in *financial terms* and will have a direct impact on either the *costs* of a site or the *revenues* from it and its *profitability*.

Business continuity plans

These are used as part of crisis management in order to minimise the disruptions and damages caused by a catastrophe in order for the firm to retain its core operations

Direct costs

These costs can be clearly identified with each unit of production and can be allocated to a cost centre

Semi-variable costs

These include both a fixed and a variable cost element, such as a salesperson's fixed basic salary plus a commission that varies with sales

Internal stakeholders

These stakeholders are members of the organisation; i.e. the employees, the shareholders (who own the business), managers and directors of a business

Workforce plan

Thinking ahead and establishing the number and skills of the workforce required by the business to meet its objectives

Quality assurance

This is a system of agreeing and meeting quality standards at each stage of production to ensure customer satisfaction

Quality control

This is based on the *inspection* of the product or a sample of products

Cost of sales

This is the *direct cost* of purchasing the goods that were sold during the financial year (cost of goods sold)

Cost of goods sold

This is the *direct cost* of purchasing the goods that were sold during the financial year (cost of sales)

Chain of command

This is the route through which authority is passed down through an organisation - from the chief executive and the board of directors

Acquisitions

This is when another business buys out another by purchasing a majority stake in the target company

Takeovers

This is when another business buys out another by purchasing a majority stake in the target company

*Redesigning* - PLC extension strategy

This may involving the introduction of special features, or releasing limited editions of a product. All of which may add value in a customer's perception of a product.

How a *matrix structure* functions:

This method is task- or project-orientated. Instead of highlighting the role or status of individuals it gathers a team of specialists with the object of completing a task or project successfully. Emphasis is placed on an individual's ability to contribute to the team rather than their position in the hierarchy.

Formative appraisal

This type of appraisal is both a planned and continuous process where appraisal evidence is used to inform employees about ways they can improve their workplace practices. Its main purpose is to enable managers and employees to have conversations about workplace performance, encouraging staff to think constructively about their own contributions to the organisation within their job roles. This, in turn, assists the appraisee to change practices and improve their overall levels of attainment.

Summative appraisal

This type of appraisal is usually a written description of a staff member's annual achievements and personal performance. A summative appraisal is likely to have recommendations and new targets and there is a degree of employee accountability inherent in the final document. The goal is to evaluate the relative contribution and performance of employees by using a predetermined set of standards or benchmarks. Areas of competency will be identified as will areas that may need development and improvement.

Microfinance providers

Those organisations who extend credit, usually in the form of small loans with no collateral, to nontraditional borrowers such as the poor in rural or undeveloped areas.

Total revenue

Total income from the sale of all units of the product (*Revenue = Quantity x Price*)

Productivity Rate

Total output/Total input x 100

E-Commerce

Trading via the internet

*Paternalistic* managers and leaders

Treat their employees as if they were family members by guiding them through a consultation process and acting in the best interest of their subordinates.

Maslow - *Social needs*

Trust, acceptance, friendship, belonging to the group and social facilities. Working in teams or groups and ensuring good communication to make workers feel involved.

Mergers

Two businesses (occasionally more) agree to integrate as a single organisation.

Joint venture

Two or more business agree to work closely together on a particular project and create a separate business division to do so

Trend

Underlying movement of the data in a time series.

External shocks

Unforeseeable and unexpected changes in the business environment that tend to affect all businesses in an economy (e.g. the great financial crisis, oil shocks)

No-strike agreement

Unions agree to sign an agreement with employers not to strike in exchange for greater involvement in decisions that affect the workforce

Bad debt

Unpaid customers' bills that are now very unlikely to ever be paid

Spam

Unwanted e-mail (usually of a commercial nature sent out in bulk)

Off-shoring

Using another business (a 'third party') to undertake a part of the production process in *another country*.

Computer Aided Manufacturing

Using computers to operate and control machines and processes to manufacture a product

Secondary research

Using data and information that has already been collected by another party; i.e. the data or information already exists.

Snowball sampling

Using existing members of a sample study group to recruit further participants through their acquaintances.

Cluster sampling

Using one or a number of specific groups to draw samples from and not selecting the whole population; e.g. using one region or town.

Cyclical variations

Variations in sales occurring over periods of time of much more than a year.

Full capacity

When a business produces at maximum output.

Takeover

When a company buys *over 50%* of the shares of another company and becomes the controlling owner (often referred to as an *acquisition*)

Acquisition

When a company buys *over 50%* of the shares of another company and becomes the controlling owner (often referred to as an *takeover*)

Insolvent

When a firm cannot meet its short-term debts

Liquidation

When a firm ceases trading and its assets are sold for cash. Turning assets into cash may be insisted on by courts if suppliers have not been paid.

Redundancy

When a job is no longer required so that the employee doing this job becomes redundant through no fault of her own

Trade union recognition

When an employer formally agrees to conduct negotiations on pay and working conditions with a trade union rather than bargaining individually with each worker

*Person* culture

When individuals are given the freedom to express themselves and make decisions

Capacity shortage

When the demand for a business's products exceeds production capacity.

Strategic Alliances

When two or more businesses pool their human, capital and financial resources in a SHARED PROJECT. They DO NOT form a new business with a separate legal identity

Joint Ventures

When two or more companies invest in a shared business project, pooling their resources to form a SEPARATE BUSINESS. The companies retain their separate legal identities but share the risks and returns from the joint venture

Training

Work-related education to increase workforce skills and efficiency

Working capital (accounting terms)

Working capital = *current assets - current liabilities*

Working capital

Working capital = current assets - current liabilities

Working capital (in *accounting terms*)

Working capital = current assets - current liabilities

Long term liability example

long term loan

Private Sector

Comprises businesses owned and controlled by individuals or groups of individuals

Public Sector

Comprises organisations accountable to and controlled by central or local government (the state)

Opportunity Cost

Cost measured in terms of the next best alternative forgone when a choice is being made

Mixed economy

Economic resources are owned and controlled by both private and public sectors

Free-market economy

Economic resources are owned largely by the private sector with very little state intervention

Command economy

Economic resources are owned, planned and controlled by the state

Sole trader

A business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits

Partnership

A business which is formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities

Social enterprise

A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners

Mission statement

A statement of the business's core aims, phrased in a way to motivate employees and to stimulate interest by outside groups

Vision statement

A statement of what the organisation would like to achieve or accomplish in the long term

Quaternary Sector

A subset of the tertiary sector and involves service jobs concerned with research and development, management and administration, and processing and disseminating information.

Share

A certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights

Ethical code (code of conduct)

A document detailing a company's rules and guidelines on staff behaviour that must be followed by all employees

SWOT analysis

A form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence the future direction and success of a business.

Cooperatives

A jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit.

Non-governmental organisation (NGO)

A legally constituted body with no participation or representation of any government

Public limited company (PLC)

A limited company, often a large business, with the legal right tom sell shares to the general public. Its share price is quoted on the national stock exchange

Microfinance

A means of extending credit, usually in the form of small loans with no collateral, to nontraditional borrowers such as the poor in rural or undeveloped areas.

Ansoff's Matrix

A model used to show the degree of risk associated with the four strategies of *market penetration*, *market development*, *product development* and *diversification*

Shareholder

A person or institution owning shares in a limited company

Structural Change

A shift in the relative share of national output and employment that is attributed to each business sector; i.e. primary, secondary and tertiary sectors

Private limited company

A small to medium-sized business that is owned by shareholders who are often members of the same family. The company cannot sell shares to the general public

Social audit

An independent report on the impact a business has on society. This can cover pollution levels, health and safety record, sources of supplies, customer satisfaction and contribution to the community

Intrapreneur

An individual who behaves like an entrepreneur while working within a large organisation which enables them to create new products, services, systems, etc.

Silent partner

An investor of a partnership who is not directly involved in the daily running of the business

Environmental audit

Assess the impact of a business on the environment (independent audit best)

*Internal* or *external* factors?: *Opportunities*

External

*Internal* or *external* factors?: *Threats*

External

Primary Sector Business Activity

Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms

Secondary Sector Business Activity

Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothing and construction

Tertiary Sector Business Activity

Firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications

Intrapreneurship

The act of behaving like an entrepreneur while working within a large organisation where freedom and financial support is given to create new products, services, systems, etc.

Human Resource Management

The process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organisational objectives

Corporate objectives (strategic objectives)

Important, broadly defined targets that a business much reach to achieve its overall aim

Strategic objectives (corporate objectives)

Important, broadly defined targets that a business much reach to achieve its overall aim

IPO

Initial public offering, a corporation's first offer to sell shares to the public

*Internal* or *external* factors?: *Strengths*

Internal

*Internal* or *external* factors?: *Weaknesses*

Internal

What resources are committed to tactical/divisional objectives?

Involve fewer resources than strategic objectives

Public-private partnership (PPP)

Involvement of the private sector, in the form of management expertise and/or financial investment, in public sector projects aimed at benefiting the public

Value Added

Is the difference between a product's price and the total cost of the inputs that went into making it. It is the extra worth created in the production process

Stock exchange

Is the market place for trading shares of public limited companies; e.g. the New York Stock Exchange (NYSE)

The Factors of Production

Land, Labour, Capital and Enterprise

External constraints

Limiting factors in decision-making that are beyond the organisation's control.

Internal constraints

Limiting factors in decision-making that can be controlled by the organisation

What is the time for strategic/corporate objectives?

Longer term goals for the whole organisation (next few years)

Ethics

Moral guidelines that determine decision making

Land

Natural resources that can be found on the planet. This includes renewable and non-renewable natural resources such as water, wood, fish and physical land itself

Consumer Services

Non-tangible products that are sold to the general public and include hotel accommodation, insurance services and train journeys

How easy is it to reverse or change tactical/divisional objectives?

Often easier to change or reverse

Diversification

The process of selling *different, unrelated* goods or services in *new markets*

Businesses

Organisations that are involved in the production of goods and/or the provision of services

Stakeholders

People or groups of people who can be affected by, and therefore have an interest in, any action by an organisation

Entrepreneurs

People who manage, organise and plan the other three factors of production. They are risk takers who exploit business opportunities in return for profit

Capital Goods

Physical goods that are used by an industry to aid in the production of other goods and services, such as machines and commercial vehicles

Common objectives

Profit maximisation Profit satisficing Growth Increasing market share Survival

Tactics

Refer to the short-term methods that firms can use to achieve their objectives

Division of Labour

The specialisation of workers in the provision of goods and/or services by breaking a job down into particular roles or components that are repeated by the same workers

Market development

The strategy of selling *existing products* in *new markets*

Factors of Production

Resources needed by businesses to produce goods or services

Enterprise

Risk taking individuals who combine the other factors of production into a unit that is capable of producing goods and services. It provides a managing, decision-making and coordinating role

Who sets strategic/corporate objectives?

Set by board of directors or very senior managers

Who sets tactical/divisional objectives?

Set by senior managers for each department or division

Tactical (operational) objectives

Short-term or medium-term goals or targets which must be achieved for an organisation to attain its corporate objectives

What is the time for tactical/divisional objectives?

Shorter-term goals (6-12 months)

Entrepreneur

Someone who takes the financial risk of starting and managing a new venture

Market penetration

The *objective* of achieving *higher market shares* in *existing markets* with *existing products*

Marketing

The commercial processes involved in creating and designing, promoting and selling and distributing a product or service

Product development

The development and sale of *new products* or* new developments of existing products* in *existing markets*

Capital

The finance needed to set up a business and pay for its continued operations or expansion. Also includes the man-made goods used in the production process (capital goods)

Targets

The level of performance or rate of improvement needed in the performance measure (e.g. each salesperson has been set a target of three new customers a month, each department is required to find savings equal to ten per cent of its annual budget)

Operations Management

The management of processes used to design, supply, produce, and deliver goods and services to customers

Unlimited liability

The owner(s) is personally and fully responsible for all losses and debts of the business

Public Sector

The part of the economy that is under control of the government. examples may include state health and education services, the emergency services and roading infrastructure

Private Sector

The part of the economy under the control of private individuals and businesses, rather than the government. Examples may include sole traders, partnerships and companies

Consumer Goods

The physical and tangible goods sold to the general public. They include cars and washing machines, which are referred to as durable consumer goods. Non-durable consumer goods include food, drinks and sweets that can only be used once

Industrialisation

The process experienced by a country that moves away from primary production towards manufacturing as its principal sector for national output and employment

External stakeholders

These stakeholders do NOT form part of the organisation but have a direct interest or involvement in the actions of the organisation. Examples include customers, suppliers and the government

Corporate social responsibility (CSR)

This concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment