Business component 1
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Business component 1 - Marcador
Business component 1 - Detalles
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| Job enlargement | An increase in the number, as opposed to level, of responsibilities that an employee has in order to increase motivation |
| Enterprise | A business who's purpose is to produce and sell goods and services- involves risk taking by an entrepeneur |
| SME | Stands for small and medium sized enterprise as measured by number of workers, turnover or value of the business |
| Needs | Human requirements which must be satisfied for survival |
| Wants | Human desires which are unlimited |
| Entrepeneur | A person who has an idea for a business, develops the idea and orgaises the recourses to see the idea through, they create and build business enterprises |
| Primary sector | First stage of production that involves the extraction of raw materials |
| Secondary sector | Second stage of production that involves the manufacture and assembly of goods. Raw materials are converted into finished goods |
| Tertiary sector | Third stage of production that involves the commercial services that support the production and distribution process eg-insurance, transport,advertising |
| Stakeholder | Anyone with interest in a business and affected by the activity of a business |
| Business plans | A written document that describes a business-covers objectives and strategies sales and financial forecast |
| Market | Where buyers and sellers are able to interact and bring about an exchange |
| Competition | Where businesses strive against one another to capture a alrger market and increase their market share. This may involve price or non price competition. |
| Local market | Products or services exchanged by groups within a limited geographical area such as a town or county |
| Global market | Products/ services are exchanged by groups internationally |
| Mass market | A product appeals to an entire market and the business uses with one basic marketing strategy utilising mass distribution and mass media |
| Niche market | Products that sell to a very small market, often specialised goods that require specific marketing strategies to attract the target market |
| Trade market | Business to business selling of goods or services |
| Consumer market | Business to consumer selling of goods or services |
| Product market | The selling of tangible items that are sold to consumers/other businesses |
| Service market | The selling of non tangible items that are sold to consumers and other business such as cleaning |
| Seasonal market | The selling of goods or services at partuclar times of the year due to high demand |
| Market size | Often measured in terms of sales value (revenue) or sales volume |
| Makret share | The percenatge of all sales within the makret that are held by business product or brand |
| Market trends | The overall patterns of data that are revealed when considering sales or growth within a market |
| Market segmentation | The process of breaking down the market into sub groups with similar characteristics |
| Monopoly | A pure monopoly exists when one firm has full control over a market so one seller exists. A legal monopoly is where one firm controls 25% or more of the market share. |
| Oligopoly | A few main firms dominate the market e.g 4-5 firms may have 80% of the market share between them. They have differentiated products with strogn brand image. they are price makers as they have a degree of market power, barriers to entry are high |
| Monopolistic competition | A large number of reltively small business in competition with each other. there is some product differentiation, low barriers to entry |
| Perfect competition | A large number of small firms in the market selling homogenous goods. There are no barriers to entry or exit, firms are price takers |
| Consumer protection | A group of laws and organisations designed to ensure the rights of consumers as well as fair trade, competition, and accurate information in the marketplace |
| Demand | The amount of a commodity that consumers are willing and able to purchase at any price. |
| Supply | The amount of a commodity that producers are willing and able to sell at any price. |
| Equilibrium | Where demand and supply curves intersect, at this point there is no excess demand or excess supply in the market and the market price is found. |
| Price elasticity of demand | Measures the responsiveness of demand to a change in price. If demand is inelastic: demand responds less than proportionately to a change in price e.g. bread. If demand is elastic: demand responds more than proportionately to a change in price e.g. new cars |
| Income elasticity of demand (YED) | Measures the responsiveness of demand to a change in income. If demand is inelastic: demand responds less than proportionately to a change in income e.g. soap. If demand is elastic: demand responds more than proportionately to a change in income e.g. foreign holidays. |
| Inferior goods | Consumers demand less of these goods as incomes rise as they trade up to better products e.g. value baked beans, public transport. |
| Normal goods | Consumers demand more of these goods as incomes rise e.g. DVDs, books, cinema tickets. |
| Luxury goods | Consumers demand proportionately more of these goods as income rise. These goods are luxuries such as designer accessories, restaurant meals |
| Market research | The systematic collection, collation and analysis of data relating to the marketing and consumption of goods and services. This can include both primary and secondary methods of market research. |
| Primary research | The gathering of ‘new’ data which has not been collected before, questions are set by the business so that all questions are relevant to their products. Primary research is therefore collected first-hand e.g. questionnaires, interviews, focus groups |
| Secondary research | The collection of data that already exists and has been collected for another purpose. It can be internal data such as sales data or external data such as government publications, research reports, newspaper articles |
| Qualitative data | The collection of data that uses pre-set questions to question a large sample size to provide statistically valid data. Usually derived from questions asking closed questions where a box can be ticked for the answer. Examples include questionnaires and surveys |
| Quantitative data | In-depth investigations into the motivations behind consumer behaviour or attitudes. Often conducted by highly trained staff among small groups such as focus groups or one-to-one interviews. |
| Sampling | Researching a selection of part of the population as it is too costly and time consuming to research the whole population. Usually the larger the sample size the more representative it will be of the population and therefore the more valid the results |
| Random sampling | Each person has an equal chance of being selected. E.g. a business may use a computer program to generate a random list from the electoral roll |
| Quota sampling | The population is segmented into a number of groups which share specific characteristics. For example, a researcher might ask for a sample of 100 females, or 100 individuals between the ages of 20-30 |
| Private sector | Any business activity that is owned and controlled by a private individual or group of individuals, including shareholders. These are usually for-profit organisations. |
| Public sector | Any business activity that is owned and controlled by the central or local government e.g. fire service, NHS, state schools, local libraries. These are usually not-for-profit organisations that focus on providing a service. |
| Aims | What a business intends to achieve in the long-term – its purpose. Ultimately it is what the business is striving to achieve such as profit maximisation, shareholder value, survival, growth. |
| Sole trader | A business owned and controlled by one person. In reality many sole traders, although small businesses, employ others to help them so they are not entirely one-man businesses, for instance they may employ sales staff e.g. plumbers, electricians, window cleaners, mobile hairdressers |
| Partnerships | More than one owner, where there is shared ownership and shared controlled. Unless a sleeping partner who invests money but takes no role in running business. They generally tend to have specialist, highly skilled workers e.g. include doctors, accountants, vets, solicitors, architects |
| Deed of partnerships | A legal document that records who partners are and money invested. States procedures for profit distribution, decision making, how partners can leave/join Its purpose is to help prevent disagreements and ensure that the business runs smoothly |
| Private limited company | Companies owned by shareholders and run by managers/directors. Private limited cos have ltd at the end of their name and they sell their shares to known investors i.e. family of the original founders, managers, workers e.g. Cheltenham Cheese Company Ltd, Fairview Design Ltd |
| Public limited company | Companies owned by shareholders and run by managers/directors. Public limited cos have plc at the end of their name. Plcs sell their shares to the general public and their shares are traded on the stock exchange e.g. M & S plc, Tesco plc, BP plc. |
| Unlimited liability | Owner is liable for all of the businesses debts. Should the business go bankrupt they may have to sell their personal assets if business assets are insufficient to meet these debts |
| Unincorporated | Means a firm has not applied to the Register of Companies for incorporation as a joint-stock company. This signifies that the business has unlimited liability and the business and the owner do not have separate legal status |
| Limited liability | The liability of the owners of the business, the shareholders, to pay off business debts is limited to the amount of money that they have invested in the business when buying shares. Should the business become insolvent (unable to pay debts), the owners personal assets will be protected. |
| Incorporation | The process of becoming a corporate body that is establishing a business as a separate legal entity. This ensures limited liability i.e. the owners are not personally liable for the debts of the business. |
| Social enterprise | A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners. |
| Charities | Organisations with very specialised aims. They exist to raise money for good causes and draw attention to the needs of disadvantaged groups in society. E.g. Oxfam raises money to support people living in poverty. Charities rely on donations for their revenue and often run fund-raising events and run charity shops to raise more money. |
| Consumer cooperative | A business owned and controlled by its members. Members can purchase shares which entitles them to a vote at the AGM. The members elect a board of directors to make overall business decisions and appoint managers to run the business day-to-day. Any surplus made by the co-operative is distributed to members as a dividend according to levels of spending. |
| Worker cooperative | A business owned and controlled by those who work in it. Workers will share in the decision-making process, share the profits and provide some capital when buying shares in the business. |
| Societies | Societies are a business that don't have shareholders or other owners. They exist only to serve their "members". |
| Location factors | Any factors that influence where a business may decide to locate or relocate to. Factors may include: labour supply, cost of land rental, nearness to suppliers and/or market |
| Revenue | The amount of money a business raises from its sale of goods/services. It can also be known as turnover |
| Profit | The excess of revenue once all costs have been deducted. Profit = Total Revenue – Total Costs |
| Fixed cost | Costs that do not vary with output e.g. rent, insurance, admin expenses |
| Variable cost | Costs that do vary directly with output e.g. cost of raw materials and packaging |
| Semi-variable cost | Where an element of the cost is fixed but there is also a variable component |
| Direct cost | Costs that arise specifically from the production of a product or the provision of a service. |
| Indirect/overhead cost | Costs that do not directly related to production or service provision. |
| Total cost | Total costs combine all the costs in running a business. Total costs = Fixed costs + variable costs |
| Contribution | Contribution per unit = P – VC Total contribution = (Contribution per unit x Output) Total contribution is the excess of revenue once variable costs have been deducted. This is the amount of money that contributes to fixed costs and hopefully profits. |
| Breakeven | The output level where no profit is made but no loss is incurred either. Break-even output is found where Total Revenue = Total Costs Break-even output = Fixed Costs Contribution |
| Margin of safety | The difference between actual (or budgeted) sales and break-even output. The higher the result, the safer the business is as they are unlikely to fail even if sales drop |
| Marketing | The management process responsible for identifying, anticipating and satisfying customer requirements profitably |
| Market orientation | An approach where a business reacts to what customers want. The decisions taken are based around information about customers' needs and wants, rather than what the business thinks is right for the customer |
| Product orientation | A product orientated approach means the business focuses on the product and the production process. The business believes consumers will want the product and that is will sell in the market |
| Asset-led marketing | An asset-led strategy uses the strengths of the business to satisfy consumer needs and expand the business. Business strengths can be many and include aspects such as reputation, brand image, and global distribution |
| Marketing mix | The combination of elements within a business’s marketing strategy that are designed to meet the needs and wants of customers in order to generate sales |
| Product | Any good or service offered for sale to customers |
| Product portfolio | A range of products that a business is marketing and selling. These products are likely to be at different stages of the product life cycle |
| Brand | A brand is a name, term, sign, symbol or design which identifies a seller’s products and differentiates them from competitors’ products. Usually a brand is a product consumers rely on, for quality, value and service |
| USP | Where the product or service has a feature or features that can be used to separate it from the competition. This could be the result of a technological advantage |
| Differentiation | The process of distinguishing a product to make it more attractive to a particular target market. This involves differentiating it from competitors’ products as well as a firm’s own product offerings |
| Product life cycle | Shows the different stages that the sales of a product go though over time. The main stages are: development, introduction, growth, maturity, saturation and decline |
| Extension strategy | Techniques used by businesses to lengthen the life of a product to prevent sales going into decline. The objective is to maintain and hopefully increase sales and profits of the product e.g. new product features, new packaging |
| Boston matrix | The classification of products based on market share and market growth. There are four product classifications: star, cash cow, problem child and dog |
| Penetration pricing | Setting a low price for a new product to encourage high sales quickly. Once the product is established in the market, the price will be increased to raise profits |
| Skimming price | Setting a high price for a new product that is unique to the market in some way (has a USP). Once sales have been maximised at that price, the price is lowered to attract the next market segment (skimming process) and so on until the market has been saturated |
| Cost plus pricing | This involves adding a mark-up to the average cost of the product to determine the price. This should ensure a profit if sales targets are reached. |
| Competitive pricing | Setting a price at the same level as existing competitors (going rate pricing) to ensure customers are not deterred by pricing too high in the market. |
| Psychological pricing | Setting a price just below a round figure to make the product look slightly cheaper such as £9.99 rather than £10. This helps to attract customers and increases sales. |
| Contribution pricing | Setting a price that is greater than the variable costs involved in making the product so that a contribution is made to fixed costs and thereafter to profit |
| Promotion | An attempt to draw attention to a business or product to retain existing customers and attract new customers. Examples include advertising, sponsorship, sales promotions (BOGOF) and merchandising |
| Above the line promotion | Promotion through independent media that allow a business to reach a wide audience easily. This is paid for communication and, though it can be targeted, it can also be seen by anyone outside the target audience. It is considered impersonal to customers |
| Below the line promotion | Promotional methods where the business has direct control over the methods used. They are short-term incentives, largely aimed at the target market and is far more personal. It does not involve mass advertising techniques |
| Place | Involves business decision making to ensure that products are available where and when customers want to go and buy products |
| Distribution channel | The methods by which a finished product can reach the consumer such as selling directly or selling via an intermediary |