All Definitions

NeedA good or service essential for living
WantA good or service which people would like to have but which is not essential for living. These are unlimited
Economic ProblemResults from their being unlimited wants but limited resources to provide the goods and services to satisfy these wants. This creates scarcity
Factors of ProductionThe resources need to produce goods or services. There are four and are in limited supply
ScarcityThe lack of sufficient products to satisfy the total wants of the population
Opportunity CostThe next best alternative given up by choosing another item
Division of Labor


When the production process is split up into different tasks and each worker performs one of these tasks
BusinessesCombine factors of production to make products which satisfy the people’s wants
Business ObjectivesThe aims or targets that a business works towards
Value AddedThe difference between the selling price of a product or service and the cost of bought in materials and components
StakeholderAny person or group with direct interest in the performance and activities of a business
Primary SectorExtracts and uses the natural resources of the Earth
Secondary SectorManufactures goods using the raw materials provided by the primary sector
Tertiary SectorProvides services to consumers and the other sectors of industry
De-industrializationWhen there is a decline in the importance of the secondary sector industry in a country
Free Market EconomyNo government control over factors of production
MonopolyBusiness which controls all of the market for a product
Command EconomyDoes not have a private sector as all resources are owned by the state
Mixed EconomyHas both a public and a private sector
CapitalThe money invested into a business by the owners
ProfitThe surplus after total costs have been subtracted from the sales revenue
Internal GrowthWhen a business expands its existing operations
External GrowthWhen a business takes over or merges with another business
MergerWhen owners of two companies agree to join together their firms to make one business
TakeoverWhen one business buys out the owners of another business which then becomes part of the predator business
Horizontal IntegrationWhen one firm merges with or takes over another one in the same industry at the same stage of production
Vertical IntegrationWhen one firm merges with or takes over another one in the same industry but at different stages of production
Conglomerate IntegrationWhen one firm merges with or takes a firm in a completely different industry
Limited LiabilityThe owners of a company cannot be held responsible for the debts of the company they own and their liability is only limited to the investment they made in buying the shares
Partnership AgreementWritten and legal agreement between business partners
Unincorporated BusinessOne that does not have a separate legal identity
ShareholdersThe owners of a company who buy shares which represent part ownership of the company
ProspectusA detailed document issued by the directors of a company when they are converting it to a PLC status. It is an invitation to the general public to buy shares in the newly formed PLC.
Annual General MeetingA legal requirement for all companies in which it is voted on who should be on the Board of Directors for the upcoming year
DividendsPayments made to shareholders from the profits of a company after it has paid corporation tax. They are the return to the shareholders for investing in the business
FranchiseA business based upon the use of the brand names, promotional logos and trading methods of an existing successful business
InflationThe increase in the average price level of goods and services over time
UnemploymentWhen people who are willing and able to work cannot find a job
Economic GrowthWhen a country’s GDP increases
Balance of PaymentsRecords the difference between a country’s exports and imports
Real IncomeThe value of income and falls when the prices rise faster than money income
Gross Domestic ProductThe total value of output of goods and services in a country in one year
ExportsThe goods and services sod from one country to another country
ImportsGoods and services bought in by one country from another country
Exchange RateThe price of one currency in terms of another
E.R. DepreciationThe fall in the value of currency compared with other currencies- it buys less of another currency than before
E.R. AppreciationThe rise in the value of currency compared with other currencies- it buys more of another currency than before
Fiscal PolicyAny change by the government in tax rates or public sector spending
Direct TaxesPaid directly from incomes
Indirect TaxesAdded to the prices of goods and the taxpayers pay the tax as they purchase the goods
Disposable IncomeThe level of income a taxpayer has after paying income tax
Import TariffA tax on an imported product
Import QuotaA physical limit to the quantity of a product that can be imported
Monetary PolicyA change in the interest rates by the government or central bank
Supply Side PolicyUsed by the government to improve the efficient supply of the goods and services in their country
Ethical DecisionDecision taken by a manager because of the moral code observed in that firm
Industrial TribunalLegal meeting which considers workers’ complaints of unfair dismissal or discrimination at work
Contract of EmploymentLegal agreement between employer and employee listing the rights and responsibilities of the workers
Planning PermissionGiven by a government body to allow a business to build a factory in a particular location
Development AreaA region of a country where businesses will receive financial support to establish there due to the high unemployment in that area
ConstraintSomething that limits or controls the actions and decisions of a company
External ConstraintConstraints over which a business has no direct control
Social ResponsibilityWhen a business takes decisions that may benefit stakeholders other than shareholders
Pressure GroupsFormed by people who share a common interest and who will take action to try and change the government policy or business decisions
Cost-Benefit AnalysisValuation by a government agency of all the external and private costs and benefits resulting from a business decision
External CostsThe costs paid by the rest of the society other than the business as a result of a business decision
External BenefitsThe gains to the rest of the society other than the business resulting from a business decision
Private CostThe costs of a business decision actually paid for by the business
Private BenefitThe financial gains made by a business as a result of a business decision
Social CostAddition of the private and external costs of a business decision
Social BenefitAddition of the private and external benefits of a business decision
Fixed Costs

(Overhead Costs)

Costs which do not vary with the number of items sold or produced in the short term. They have to be paid whether or not the business is making any sales
Variable Costs

(Direct Costs)

Costs which vary with the number of items sold or produced. They can be directly related to or identified with a particular product
Total CostFixed and variable costs combined
Break-even ChartsGraphs which show how the costs and revenues of a business change with sales. They show the level of sales a business must make in order to break even
RevenueThe income during a period of time from the sale of goods and services
Total RevenuePrice multiplied by quantity sold
Break-even PointThe level of sales at which total costs equal total revenue
ContributionThe selling price less variable cost
Marginal CostsThe extra costs that a business will incur by producing one more unit of output
Average Cost per UnitTotal cost of production divided by total output
Economies of ScaleFactors that lead to a reduction in average costs as a business increases in size
ForecastsPredictions of the future
TrendUnderlying movement or direction of data over time
Line of Best FitLine drawn through a series of points which best show the trend of that data
BudgetsPlans for the future containing financial or numerical targets
AccountsFinancial records of a firm’s transactions
Final AccountsProduced at the end of the financial year and give details of the profit or loss made over the year and the worth of the business
Trading AccountShows how the gross profit of a business is calculated
Cost of Goods SoldCost of producing or buying in the goods actually sold by a business during a time period
Sales RevenueIncome to a business during a period of time from the sale of goods and services
Gross ProfitMade when sales revenue is greater than the cost of goods sold
Net ProfitProfit made by a business after all the costs have been deducted form sales revenue
Profit and Loss AccountShows the net profit and retained profit of a business
DepreciationThe fall in the value of a fixed asset over time
Appropriation AccountThat part of the profit and loss account which shows how the profit will be distributed after tax- either given as dividends or kept in as retained profits
Retained ProfitThe net profit reinvested back into a company after deducting tax and payments to owners such as dividends
Balance SheetShows the value of a business’s assets and liabilities at a particular time
AssetsThose items of value which are owned by the business
LiabilitiesItems owed by the business
Return on Capital EmployedShows how much profit is made as a proportion of the capital that has been invested in the business
LiquidityAbility of a business to pay back its short-term debts
Cash-FlowThe cash inflows and outflows of a business over a period of time
Cash Flow CycleThe stages between paying out cash for labor, materials etc. and receiving cash from the sale of goods
Cash Flow ForecastAn estimate of future cash inflows and outflows of a business, usually on a month by month basis. This will then show the expected cash balance at the end of each month
Opening Cash BalanceThe amount of cash held by the business at the start of the month
Net Cash FlowThe difference between inflow and outflow of cash
Closing Cash BalanceAmount of cash held by the business at the end of each month. This becomes the next month’s opening cash balance
Start-up CapitalThe finance needed by a new business to pay for essential fixed and current assets before it can start trading
Capital ExpenditureMoney spent on fixed assets which will last longer than a year
Revenue ExpenditureMoney spent on day-to-day expenses which do not involve the purchase of a long-term asset
Organizational StructureRefers to the levels of management and division of responsibilities within an organization
Job DescriptionOutlines the responsibilities and duties to be carried out by someone employed to do a specific job
DelegationGiving authority to a subordinate to perform particular tasks. The final responsibility, however, remains in the hands of the manager
Chain of CommandThe structure in an organization which allows instructions to be passed down from senior management to lower levels of management
Span of ControlNumber of subordinates working directly under a manager
Line ManagersHave direct authority over subordinates in their department. They are able to take decisions in their departmental area
Staff ManagersSpecialist advisers who provide support to line managers and to the Board of Directors
Decentralized Management StructureMany decisions are not taken at the center of the business but instead are delegated to a lower level of management
Centralized Management StructureMost decisions are taken at the center or higher levels of management
Strategic DecisionsVery important decisions which can affect the overall success of the business
Tactical DecisionsTactical decisions are medium term, less complex decisions made by middle managers
Operational DecisionsDay-to-day decisions which will be taken by a lower level of management
CommunicationThe transferring of a message from the sender to the receiver who understands the message
Medium of CommunicationThe method used to send a message
FeedbackThe reply from the receiver which shows whether the message has arrived, been understood and, if necessary, been acted upon
One-way CommunicationInvolves a message which does not call for or require a response
Two-way CommunicationWhen the receiver gives a response to the message and there is discussion about it
Internal CommunicationWhen messages are sent between people working in the same organization
External CommunicationWhen messages are sent between one organization and another organization or an outside individual
Communication NetsThe ways in which members of a group communicate with one another
MotivationThe reason why employees want to work hard and effectively for the business
WageA payment for work, usually paid weekly
SalaryPayment for work, usually paid monthly
CommissionPayment relating to the number of sales made
Profit-SharingA system whereby a proportion of the company’s profits is paid out to the employees
BonusAn additional amount of payment above basic pay as a reward for good work
Performance-Related PayPay which is related to the effectiveness of the employee
AppraisalA method of assessing the effectiveness of an employee
Fringe BenefitsNon-financial rewards given to employees
Job SatisfactionEnjoyment derived from feeling that you have done a good job
Job RotationInvolves workers swapping round and doing each specific task for only a limited time and then changing round again
Job EnlargementExtra tasks of a similar level of work are added to a worker’s job description
Job EnrichmentInvolves looking at jobs and adding tasks that require more skill and/or responsibility
Leadership StylesDifferent approaches to dealing with people in a position of authority
Autocratic LeadershipWhen the manager expects to be in charge of the business and have their orders followed- there is little/no opportunity for workers to comment on anything
Democratic LeadershipInvolves a team guided by a leader where all individuals are involved in the decision-making process to determine what needs to be done and how it should be done.
Leave-to-do LeadershipLaissez-faire leaders allow followers to have complete freedom to make decisions concerning the completion of their work. It allows followers a high degree of autonomy and self-rule, while at the same time offering guidance and support when requested
Formal GroupA group designated to carry out specific tasks within a business
Informal GroupGroup of people who form independently of any official groups set up within a business and who have similar interests or something else in common
Job AnalysisIdentifies and records the responsibilities and tasks related to a job
Job SpecificationDocument which outlines the requirements, qualifications, expertise, physical characteristics etc. for a specified job
Internal RecruitmentWhen a vacancy is filled by someone who is an existing employee of a business
External RecruitmentWhen a vacancy is filled by someone who is not an existing employee and will be new to the business
Inundation TrainingIntroduction given to a new employee, explaining the firm’s activities, customs and procedures and introducing them to fellow workers
On-the-job TrainingWatching a more experienced worker doing the job
Off-the-job TrainingInvolves being away from the workplace, usually by specialist trainers
Workforce PlanningEstablishing the workforce needed by the business for the foreseeable future in terms of the number and skills of the employees required
RedundancyWhen an employee is no longer needed and so loses their job- not due to any aspect of their work being unsatisfactory
Trade UnionGroup of workers who have joined together to ensure their interests are protected
Craft UnionTrade union which represents a particular type of skilled worker
General UnionTrade union which represents workers from a variety of trades and industry- they are often unskilled or semi-skilled
Industrial UnionTrade union which represents all types of workers in a particular industry
White-Collar UnionTrade union which represents non-manual workers
Closed ShopAll employees must be a member of the same trade union
Single-Union AgreementA firm will deal with only one trade union and no others
Employer AssociationsGroups of employers who join together to give benefits to their members
NegotiationJoint decision making involving bargaining between representatives of the management and of the workforce within a firm in hopes to arrive at a mutually acceptable agreement
Collective BargainingNegotiations between one or more trade unions and one or more employers on pay and conditions of employment
Productivity AgreementWorkers and management agree on an increase in benefits, in return for an increase in productivity
Industrial ActionAction taken by the trade unions to decrease or halt production
StrikeWhen employees refuse to work
PicketingWhen employees who are taking industrial action stand outside their workplace to prevent or protest at the delivery of goods, arrival and departure of other employees etc.
Work-to-RuleRules are strictly obeyed so that work is slowed down
Go SlowEmployees do their normal tasks but slower than usual
Non-cooperationEmployees refuse to comply with the new working practices
Overtime BanEmployees refuse to work longer than their normal working hours
No-Strike AgreementWhen trade unions and management agree to have pay disputes settled by an independent arbitrator instead of taking strike action
ArbitratorListens to both sides in the industrial dispute and then gives a ruling on what they think is fair to both sides
Lock-OutEmployees are locked out of their workplace by the employers
Worker ParticipationWhen employees contribute to decision-making in the business
Works CouncilsCommittees of workers who are consulted or informed on matters that affect employees
MarketWhere buyers and sellers come together to exchange products for money
Product-OrientedA business whose main focus of activity is the product itself
Market-OrientedA business which carries out market research to find out consumer wants before a product is developed and produced
Marketing BudgetFinancial plan for the marketing of a product or product range for some specified period of time
MarketingManagement process which identifies customer wants, anticipates future wants and then goes about satisfying them profitably
Market ShareThe percentage of total market sales held by one brand or business
Market SegmentationMarket is divided up into groups of consumers who have similar needs
Mass MarketA very large number of sales for a product
Niche MarketSmall, specialized segment of a much larger market
Primary Research

(Field Research)

Collection and collation of original data via direct contact with potential or existing customers
Secondary Research

(Desk Research)

Information which has already been collected and is available for use by others
QuestionnaireSet of questions to be answered as a means of collecting data for market research
Consumer PanelsGroups of people who agree to provide information about a specific product or general spending patterns over a period of time
Random SampleWhen people are selected at random as a source of information for market research
Quota SampleWhen people are selected on the basis of certain characteristics as a source of information for market research
Brand NameUnique name of a product that distinguishes it from other brands
Brand LoyaltyWhen consumers keep buying the same brand again and again instead of choosing a competitor’s brand
Brand ImageImage or identity given to a product which gives it a personality of its own and distinguishes it from its competitors brands
PackagingThe physical container or wrapping for a product- also used for promotion and selling appeal
Product Life CycleDescribes the stages a product will pass through from its introduction, through its growth until it is mature and then finally its decline
Trade CycleA cycle or series of cycles of economic expansion and contraction
Cost-Plus PricingCost of manufacturing the product plus a profit mark-up
Penetration PricingWhen prices are set lower than the competitors’ prices in order to be able to enter a new market
Price SkimmingHigh price set for a new product on the market due to its novelty factor
Competitive PricingProduct is priced in line with or just below competitors’ prices to try to capture more of the market
Promotional PricingWhen a product is sold at a very low price for a short period of time
Psychological PricingWhen particular attention is paid to the effect that the price of a product will have upon the consumers’ perceptions of the product
Informative AdvertisingThe emphasis of advertising or sales promotion is to give full information about the product
Persuasive AdvertisingAdvertising or promotion which is trying to persuade the consumer that they really need the product and should buy it
Target AudienceRefers to the people who are potential buyers of a product or service
AIDA ModelSimple way of planning an advert’s design. It stands for attention, interest, desire and action
Channel of DistributionThe means by which a product is passed from the place of production to the customer or retailer
AgentAn independent person or business that is appointed to deal with the sales and distribution of a product or range of products. The agent will either put an additional amount on the price to cover their expenses or will receive a commission on sales
ProductivityOutput measured against the inputs used to create it
Job ProductionA single product is made at a time
Batch ProductionA quantity of one product is made, then a quantity of another item will be produced depending on the orders which come in
Flow Production

(Mass Production)

Large quantities of a product are produced in a continuous process
Lead TimeMargin of time between the date when stock is obtained and the date when it is sold
Lean ProductionTechniques used by businesses to cut down on waste and therefore increase efficiency
KaizenA process of continuous improvement through the elimination of waste
Just-in-TimeProduction method that involves reducing or virtually eliminating the need to hold stocks of raw materials or unsold stocks of the finished products. Supplies arrive just at the time they are needed
Quality ControlA system of maintaining standards in manufactured products by testing a sample of the output against the specification.
Quality AssuranceThe maintenance of a desired level of quality in a service or product, especially by means of attention to every stage of the process of delivery or production.
Total Quality ManagementContinuous improvement of products and processes by focusing on quality at each stage of production
Common CurrencyResult of an agreement between countries to use the same currency for all business and other transactions- e.g. euro in EU
GlobalizationThe process by which businesses or other organizations develop international influence or start operating on an international scale
Multinational (Transnational) BusinessesA business with factories, production or service operations in more than one country

Leave a comment