Business Definitions
Unit 1: Business Organization
Consumer Goods: The physical and tangible goods sold to the general public
Consumer Services: Non-tangible products that are sold to the general public
Capital Goods: Physical goods that are used by industry to aid in the production of other goods
and services
Primary Sector: Firms engaged in farming, fishing, oil extraction etc
Secondary Sector: Firms that manufacture and process products from natural resources
Tertiary Sector: Firms that provide services to consumers and other businesses
Quaternary Sector: It is focused on IT and serve as information providers
Entrepreneur: Someone who takes the financial risk of starting and managing a new venture
Intrapreneur: Someone within a large corporation who takes direct responsibility for turning an
idea into a product
Business Plan: A written document that describes a business, its objectives and strategies
Public Sector: Comprises organizations accountable to and controlled by central or local
government
Private Sector: Comprises businesses owned and controlled by individuals
Mixed Economy: Economic resources are owned and controlled by both 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
Privatization: The sale of public sector organisations to the private sector
Public Corporation: A business enterprise owned 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
Partnership: A business formed by two or more people to carry on a business together
Limited Liability: The only liability a shareholder has if the company fails
Shareholders: Individuals or institutions that buy/own shares in a limited company
Private Limited Company: A small to medium-sized business that is owned by shareholders
who are often members of the same family
Public Limited Company: A limited company with the legal right to sell shares to the general
public
Social Enterprises: A business with mainly social objectives that reinvests most of its profits
into benefiting society
Triple Bottom Line: The three objectives of social enterprises: economic, social and
environmental
Cooperative: A group of people acting together to meet the common needs and aspirations of its
members
Microfinance: The provision of very small loans by specialist finance businesses
(PPP) Public-Private Partnership: Involvement of the private sector, in the form of
management exercises or financial investment aimed at benefitting in the public
Private Finance Initiative: Investment by private sector organizations in public sector
organizations
(NGO) Non-governmental organizations: A legally constituted body with no participation or
representation of any government which has a specific aim
Charities: An organization set up to raise money to help people in need or to support causes that
require funding
Mission Statement: A statement of the business’s core aims, to stimulate interest outside the
group
Vision Statement: A statement of what the organization would like to achieve or accomplish in
the long term
Strategy: A long-term plan of action for the whole organization, designed to achieve a particular
goal
Tactic: Short-term policy or decision aimed at resolving a particular problem
Stakeholders: People or groups of people who can be affected by and therefore have an interest
in an organization
Corporate Social Responsibility: 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
Social Audit: An independent report on the impact a business has on society
Ansoff Matrix: A model used to show the degree of risk associated with the four growth
strategies: market penetration, market development, product development and diversification
Market Penetration: Achieving higher market shares in existing markets with existing products
Product Development: The development and sale of new products or new developments of
existing products
Market Development: The strategy of selling existing products in new markets
Diversification: The process of selling different, unrelated goods in new markets
STEEPLE Analysis: An acronym standing for social, technological, Economic, Environmental,
Political, Legal and Ethical external factors that impact a business
Fiscal Policy: Changes in government spending levels and tax levels
Inflation: The rate of change in the average level of prices
Cost-push inflation: Caused by rising costs forcing businesses to increase prices
Scale of Operations: The maximum output that can be achieved using the available inputs – can
only be increased in the long term
Economies of Scale: Reductions in a firm’s unit costs of production that result from an increase
in the scale of operations
Diseconomies of scale: Factors that cause average costs of production to rise when the scale of
operations is increased
Internal Growth: Expansion of a business by means of opening new branches, shops or
factories
External Growth: Business expansion achieved by means of merging with or taking over
another business
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
Takeover: When a company buys over 50% of the shares of another company and becomes the
controlling owner
Horizontal Integration: Integration with a firm in the same industry and at the same stage of
production
Forward Vertical Integration: Integration with a business in the same industry but a customer
of the existing business
Backward Vertical Integration: Integration with a business in the same industry but a supplier
of the existing business
Conglomerate Integration: Merger with or takeover of a business in a separate industry
Joint Merger: Two or more businesses agree to work closely together on a particular project
Strategic Alliances: Agreements between firms in which each agrees to commit resources to
achieve an agreed set of objectives
Franchise: A business that uses the name, logo and trading systems of an existing successful
business
Multinational Company: Business organization that has its headquarters in one country, but
with operating branches in foreign countries
Unit 2: Human Resource Management
(HRM) Human Resource Management: The strategic approach to the effective management
of an organizations workers
Workforce Audit: A check on the skills and qualifications of all existing employees
Labour Turnover: Measures the rate at which employees are leaving an organization
Occupational Mobility of Labour: Extent to which workers are willing and able to move to
different jobs requiring different skills
Geographical Mobility of Labour: Extent to which workers are willing and able to move
geographical region to take up new jobs
Recruitment: The process of identifying the need for a new employee, defining the job to be
filled and the type of person needed
On-the-job Training: Instruction at the place of work on how a job should be carried out
Off-the-job Training: All training undertaken away from the business
Induction Training: Introductory training programme to familiarize new recruits with the
systems used in the business
Cognitive Training: Exercises designed to improve a person’s ability to understand and learn
information
Behavioral Skills Training: Is designed to improve an individual’s ability to communicate and
interact with others both inside and external to the organization.
Employee Appraisal: The process of assessing the effectiveness of an employee judged against
preset objectives
Dismissal: Being removed or sacked from a job due to incompetence or breach of discipline
Redundancy: When a job is no longer needed so the employee doing the job is not needed
Flexi-Time Contract: Employment contract that allows staff to be called in at times most
convenient to employers and employees
Hard HRM: An approach to managing staff that focuses on cutting costs
Soft HRM: An approach to managing staff that focuses on developing staff so they reach self-
fulfillment
Organizational Structure: The internal, formal framework of a business that shows the way in
which management is organized and linked together
Level of Hierarchy: A stage of organizational structure at which the personnel on it have equal
status and authority
Tall Structure: One with many levels of hierarchy and usually narrow span of control
Flat Structure: One with few levels of hierarchy and wide spans of control
Span of Control: The number of subordinates reporting directly to a manager
Chain of Command: This is the route through which authority is passed down an organization
Delegation: Passing authority down the organizational hierarchy
Accountability: The obligation of an individual to account for his or her activities and to
disclose results in a transparent way
Delayering: Removal of one or more levels from the hierarchy
Bureaucracy: An organizational system with standardized procedures and rules
Centralization: Keeping all of the important decision making powers within head office
Decentralization: Decision-making powers are passed down the organization to empower
subordinates
Hierarchical Structure: A structure in which power and responsibility are clearly specified and
allocated to individuals according to their standing or position in the hierarchy
Matrix Structure: An organizational structure that creates project teams that cut across
traditional functional departments
Manager: Responsible for setting objectives, organizing resources and motivating staff so that
organizations aims are met
Leadership: The art of motivating a group of people towards achieving a common objective
Autocratic Leadership: A style of leadership that keeps all decision making to the center of the
organization
Paternalistic Leadership: A type of fatherly style typically used by dominant males where their
power is used to control and protect sub-ordinate employees
Democratic Leadership: A leadership style that promotes the active participation of workers in
taking decisions
Laissez-faire Leadership: A leadership style that leaves much of the business decision making
to the workforce
Situational Leadership: Effective leadership varies depending on the task at hand
Extrinsic Motivation: Comes from external rewards associated with working on a task
Intrinsic Motivation: Comes from satisfaction derived from working on a completing a task
Self-Actualization: A sense of self-fulfillment reached by feeling enriched and developed by
what one has learned and achieved
Motivators: Aspects of a job that provide satisfaction
Hygiene Factors: Aspects of a job that provide dissatisfaction
Job Enrichment: Aims to use the full capabilities of workers by giving them the opportunity to
do more
Salary: The annual income that is usually paid on a monthly basis
Hourly Wage Rate: Payment to a worker made for each hour worked
Piece Rate: Payment to a worker for each unit produced
Commission: A payment to a sales person for each sale made
Performance Related Pay: A bonus scheme to reward staff for above average work
performance
Profit-Related Pay: A bonus for staff based on the profits of the business
Job Enlargement: Attempting to increase the scope of a job by broadening or deepening the
tasks undertaken
Job Enrichment: Attempting to motivate employees by giving them opportunities to use the full
range of their abilities
Cell Production: A lean method of producing similar products using cells or groups of teams
Job Redesign: Involves the restructuring of a job
Unit 4: Marketing
Marketing: The management task that links the business to the customer by identifying and
meeting the needs of customer’s probability
Market Size: The total level of sales of all producers within a market
Market Growth: The percentage change in the total size of a market over a period of time
Ease of Entry: The lack of barriers for the establishment of new competitors in a market
Homogeneous Products: Goods that are physically identical or viewed as identical by
consumers
Segmentation: Dividing a market into distinct groups of consumers who share common tastes
and requirements
Target Marketing: Focusing marketing activity of particular segments of the market
Mass Marketing: Selling to the whole marketing using a standardized product and the same
marketing activities
Consumer Goods: Tangible physical product marketed to end users
Consumer Service: Intangible provision of an activity to end users
Market Orientation: An outward- looking approach basing product decisions on consumer
demand
Product Orientation: An inward-looking approach that focuses on making products that can be
made and have been being made for a long time
Social Marketing: This approach considers not only the demands of consumers but also the
effects on all members of public
Market Share: The percentage sales in the total market sold by one business
Market Leadership: When a business has the highest market share of all firms
Market Planning: The process of formulating appropriate strategies and preparing marketing
activities
Marketing Mix: The key decisions that must be taken in the effective marketing of a product
Market Segment: A sub-group of a market made up of consumers with similar characteristics
Target Market: The market segment that a particular product is aimed at
Market Segmentation: Identifying different segments within a market and targeting different
products or services to them
Consumer Profile: A quantified picture of consumers of a firm’s products
Niche Market: A small and specific part of a large market
Niche Marketing: Identifying and exploiting a small segment of the market
Mass Market: A market for products that are often standardized
Mass Marketing: Selling the same products to the whole market with no segmentation
USP: A factor that differentiates a product from its competitors
Market Research: Process of collecting, recording and analyzing data about customers
Primary Research: The collection of first-hand data that are directly related to a firms need
Secondary Research: The collection of data from secondary sources
Qualitative Research: Research into the in-depth motivations behind consumer behavior
Quantitative Research: Research that leads to numerical results that can be presented and
analyzed
Survey: Detailed study of a market or geographical area to gather data on attitudes
Focus Groups: A group of people who are asked about their attitude towards a product
Test Marketing: Marketing a new product in a geographical region before a full-scale launch
Sample: Group of people taking part in a market research survey selected to be representative of
the target market overall
Quota Sampling: Gathering data from a group chosen out of a sub-group
Random Sampling: Every member of the target population has a chance of getting selected
Stratified Sampling: This draws a sample from a specified sub-group or segment of the
population
Cluster Sampling: Using one or a number of specific groups to draw samples from and not
selecting from
Snowball Sampling: Using existing members of a sample study group to recruit further
Convenience Sampling: Drawing representative selection of people because of their ease of
volunteering
Product Life Cycle: The pattern of sales recorded by a product from launch to withdrawal from
the market
BCG Matrix: A method of analyzing the product portfolio of a business in terms of market
share and market growth
Brand: An identifying symbol, name, image or trademark
Brand Awareness: Extent to which a brand is recognized by potential customers
Brand Loyalty: The faithfulness of consumers to a particular brand as shown by their repeat
purchases
Brand Development: Measures the infiltration of a products sales, usually per thousand
population
Brand Value: The premium that a brand has because customers are willing to pay more for it
than they would
Family Branding: A marketing strategy that involves selling several related products under one
brand name
Product Branding: Each individual product in a portfolio is given its own unique identity and
brand image
Corporate Branding: The company name is applied to products
Own-label Branding: Retailers create their own brand name and identity for a range of products
Manufacturers Brands: Producers establish the brand image of a product of a family of
products
Cost-plus Pricing: Adding a fixed mark-up for profit to the unit price of a product
Penetration Pricing: Setting a relatively low price often supported by strong promotion in order
to achieve a lot of sales
Marketing Skimming: Setting a high price for a new product when a firm has a unique product
with low demand
Psychological Pricing: Setting prices that take account of customer’s perception of value of the
product
Loss Leader: Product sold at a very low price to encourage consumers to buy other products
Price Discrimination: Occurs when a business sells the same product to different consumers at
different prices
Promotional Pricing: Special low prices to gain market share to sell off excess stock
Price Leadership: Exists when one business sets a price for its products and other firms in the
market
Predatory Pricing: Deliberately undercutting competitor’s prices in order to force them out of
the market
Promotion: The use of advertising, sales promotion and other methods to persuade consumers to
buy
Above-the-line Promotion: A form of promotion that is undertaken by a business by paying for
communication
Below-the-line Promotion: Promotion that is not a directly paid for means of communication
but based on short term incentives
Promotional Mix: The combination of promotional techniques that a firm uses to communicate
the benefits of its products
Viral Marketing: The use of social media sites or text messages to increase brand awareness
Guerilla Marketing: An unconventional way of performing marketing activities on a very low
budget
E-Commerce: The buying and selling of goods and services on the internet
Business to Business: Transactions conducted directly between a supplying business and a
purchasing business
Business to Consumer: Transactions conducted directly between a company and consumers
who are the end-users of its products or services
Consumer to Consumer: A business model based on e-commerce that creates a facility to allow
consumers to trade with each other
Unit 5: Operations Management
Ecological Sustainability: A capacity of ecosystems to maintain their essential functions and
processes
Social Sustainability: The ability of a community to develop processes and structures which not
only meet the needs of its current members but also support the ability of future generations to
maintain a healthy community
Economic Sustainability: Within a business context, economic sustainability involves using the
assets of the company efficiently to allow it to continue functioning profitability
Job Production: Producing a one-off item specially designed for each customer
Batch Production: Producing a limited number of identical products
Flow Production: Producing items in a continually moving production line
Mass Production: Producing large quantities of a standardized product
Process Production: Producing standardized goods, typically in bulk quantities
Mass Customization: The use of flexible computer aided production systems to produce items
to meet individual customer’s requirement
Cell Manufacturing: A lean method of producing similar products using cells
