Showing all terms
1.1 Business activity
Added value
The difference between the selling price of a product and the cost of the bought-in materials and components used to make it.
Branding
Creating a unique name, design or image for a product to distinguish it from competitors’ products.
Business
An organisation that produces goods or provides services to satisfy customers’ needs and wants.
Business activity
The process of combining resources to produce goods and services that satisfy people’s needs and wants.
Capital
Human-made resources, such as machinery, equipment and buildings, used in the production of goods and services.
Design
The process of planning the appearance, features and functions of a product.
Division of labour
Breaking down production into separate tasks, with different workers specialising in particular tasks.
Enterprise
The skill of identifying business opportunities and organising resources to take risks in setting up and running a business.
Entrepreneur
A person who organises and manages a business, taking financial risks in the hope of making a profit.
Factors of production
The resources needed to produce goods and services: land, labour, capital and enterprise.
Goods
Physical products that can be touched, such as clothes, furniture and cars.
Labour
The human effort, both physical and mental, used in the production of goods and services.
Land
Natural resources used in the production of goods and services, such as forests, minerals and water.
Needs
Goods and services that are essential for human survival, such as food, water and shelter.
Opportunity cost
The next best alternative given up when making a choice.
Packaging
The material used to protect a product and present it attractively to customers.
Productivity
The amount of output produced per worker or per unit of input over a given period of time.
Quality
The extent to which a product meets customers’ expectations and is fit for its intended purpose.
Resources
The inputs used by businesses to produce goods and services.
Scarcity
The problem that resources are limited but people’s wants are unlimited.
Services
Non-physical products provided to customers, such as banking, education and transport.
Specialisation
When workers, businesses or countries concentrate on producing a particular product or performing a particular task.
Value added
The increase in the value of a product as a result of the production process.
Wants
Goods and services that people would like to have but are not essential for survival.
1.2 Classification of businesses
Deindustrialisation
A decline in the importance of the secondary sector in an economy.
Developed economy
A country with a high level of income, industrial development and living standards.
Developing economy
A country with a relatively low level of income and industrial development, often experiencing economic growth.
Economic development
Improvements in living standards and the economic and social well-being of a country’s population.
Economic sector
A part of the economy in which businesses carry out similar types of economic activity.
Manufacturing
The process of making goods from raw materials or components, usually in factories.
Mixed economy
An economy in which both the private sector and public sector provide goods and services.
Primary sector
The part of the economy involved in extracting and collecting natural resources.
Private sector
The part of the economy made up of businesses owned and controlled by individuals or groups of individuals.
Processing
Changing raw materials into a form that can be used to make finished goods.
Public corporation
A business organisation owned and controlled by the government.
Public sector
The part of the economy owned and controlled by the government.
Privatisation
The sale of public-sector organisations to individuals or businesses in the private sector.
Raw materials
Unprocessed natural resources used in the production of goods.
Secondary sector
The part of the economy involved in manufacturing and construction.
Tertiary sector
The part of the economy involved in providing services to individuals and other businesses.
1.3 Enterprise, business growth and size
Average cost
The total cost of production divided by the number of units produced.
Business environment
The external factors and conditions that affect the operation and performance of a business.
Business failure
When a business is unable to continue operating, often because it cannot meet its financial obligations.
Business growth
An increase in the size or scale of a business, measured in ways such as sales, output or number of employees.
Business idea
A proposed product or service that could be developed into a business opportunity.
Business plan
A document setting out the aims of a business and how it intends to achieve them.
Business size
The scale of a business, which can be measured using indicators such as number of employees, revenue or capital employed.
Business start-up
A newly established business beginning its operations.
Business support
Help provided to businesses, such as advice, finance, training or mentoring.
Business training
Activities that develop the knowledge and skills needed to operate and manage a business.
Capital employed
The total long-term finance invested in a business.
Cash-flow problems
Situations where a business does not have enough cash available to pay its expenses when they are due.
Communication problems
Difficulties in sharing information effectively within a business, often increasing as the business grows.
Conglomerate integration
When two businesses from unrelated industries join together.
Coordination
The organisation of different activities and departments so that they work together effectively.
Diseconomies of scale
Increases in average costs of production as a business grows beyond a certain size.
Economies of scale
Reductions in average costs of production as a business increases its scale of operation.
Expansion
An increase in the size or scale of a business.
External growth
Business growth achieved by joining with or taking over another business.
Grant
Money given by the government or another organisation to support a business, usually without needing to be repaid.
Horizontal integration
When two businesses at the same stage of production in the same industry join together.
Internal growth
Business growth achieved by increasing the scale of the business using its own resources.
Liquidity problems
Difficulties in paying short-term debts when they become due.
Market research
Collecting and analysing information about customers, competitors and market conditions.
Merger
When two businesses agree to join together to form one business.
Number of employees
The total number of people employed by a business, often used to measure business size.
Organic growth
Growth achieved by expanding a business’s own operations rather than merging with or taking over another business.
Profit
The amount left after total costs have been subtracted from total revenue.
Start-up capital
The finance needed to establish a new business and begin its operations.
Takeover
When one business gains control of another business by purchasing a majority of its shares.
Value of output
The total value of goods and services produced by a business over a given period.
Vertical integration
When businesses at different stages of production or distribution in the same industry join together.
Entrepreneurship
The process of identifying opportunities, organising resources and taking risks to establish and run a business.
1.4 Types of business organisation
Business ownership
The legal form under which a business is owned and controlled.
Dividend
A payment made to shareholders from a company’s profits.
Franchise
A business arrangement in which one business allows another to use its name, products and operating methods in return for payment.
Franchisee
The person or business that buys the right to operate a franchise.
Franchise fee
The initial payment made by a franchisee to obtain the right to operate a franchise.
Franchisor
The business that sells the right to operate a franchise.
Incorporated business
A business that has a separate legal identity from its owners.
Joint venture
When two or more businesses agree to work together on a particular project or business activity.
Legal identity
The legal status of a business as a separate entity from its owners.
Liability
The legal responsibility for business debts and financial obligations.
Limited company
A company whose owners have limited liability for business debts.
Limited liability
A legal arrangement in which owners can only lose the amount they have invested in the business.
Partnership
A business owned by two or more people who share responsibility for running it and its profits.
Partnership agreement
A document setting out the responsibilities, contributions and profit-sharing arrangements of partners.
Private limited company
A company whose shares are privately owned and cannot be offered for sale to the general public.
Public corporation
A business organisation owned and controlled by the government.
Public limited company
A company whose shares can be offered for sale to the general public, usually through a stock exchange.
Royalty
A regular payment made by a franchisee to a franchisor, often based on sales revenue.
Share
A unit of ownership in a limited company.
Share capital
Finance raised by a company through the sale of shares.
Shareholder
A person or organisation that owns shares in a company.
Sole trader
A business owned and usually operated by one person.
Unlimited liability
A situation where the owner is personally responsible for all the debts of the business.
Unincorporated business
A business that does not have a separate legal identity from its owner or owners.
Risk
The possibility that a business decision or activity may lead to loss or an unfavourable outcome.
1.5 Business objectives and stakeholder objectives
Business objective
A target or goal that a business aims to achieve.
Customers
People or organisations that buy goods and services from a business.
Conflict of objectives
A situation where achieving one objective makes it more difficult to achieve another.
Employees
People who work for a business in return for payment.
Environmental objective
A target aimed at reducing the negative impact of business activities on the environment.
External stakeholders
Individuals or groups outside a business who are affected by its activities.
Government
The authority responsible for making and enforcing laws and policies that affect businesses and the economy.
Growth
An increase in the size or scale of a business.
Internal stakeholders
Individuals or groups within a business who are affected by its decisions and activities.
Local community
People living in the area where a business operates.
Managers
People responsible for planning, organising and controlling business activities.
Market share
The percentage of total market sales accounted for by one business.
Market share growth
An increase in the proportion of total market sales achieved by a business.
Non-profit organisation
An organisation that operates primarily to achieve social or community objectives rather than to distribute profits to owners.
Owners
The individuals or organisations that have legal ownership of a business.
Pressure group
An organisation that tries to influence business or government decisions on particular issues.
Private-sector objectives
The goals pursued by businesses owned by individuals or private organisations, such as profit or growth.
Profit
The amount left after total costs have been subtracted from total revenue.
Profit maximisation
The objective of making the highest possible profit.
Public-sector objectives
The goals pursued by government-owned organisations, often focused on providing services and meeting public needs.
Public service
A service provided for the benefit of the public, often by the government.
Sales revenue
The income a business receives from selling goods and services, calculated by multiplying price by quantity sold.
Social enterprise
A business that trades to achieve social or environmental objectives while generating revenue.
Social objective
A goal aimed at improving the well-being of individuals or society.
Stakeholder
An individual or group with an interest in or affected by the activities and decisions of a business.
Stakeholder conflict
A situation where the interests or objectives of different stakeholders are in disagreement.
Suppliers
Businesses or individuals that provide goods and services to another business.
Survival
The objective of continuing to operate as a business, particularly important for new businesses.