GCSE Business Studies GLOSSARY

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1 Sir Thomas Boughey High School B GCSE Business Studies GLOSSARY GLOSSARY This booklet will give you the keywords for each unit with an explanation for each one. Use this to help you with your classwork, homework and revision.

2 Business and the environment in which it operates Primary Industry Secondary Industry The Industry which extracts the natural resources of the earth. The industry which manufactures goods using the raw materials provided by primary industry. Tertiary Industry The industry which provides services to consumers and the other sectors of industry. Corporate Objectives Stakeholders The Long term aim of a company. Groups in society who have a direct interest in the performance and activities of business. Public Sector Private Sector Businesses that are owned and controlled by the government. Businesses that are owned and controlled by private individuals. Exchange Rates The price of one currency in terms of another, e.g. 1 = $1.5.

3 Business Structure, Organisation and Control Sole Trader Partnership A business owned and operated by one person, has unlimited liability. A group or association of between 2 and 20 people who agree to own and run a business together. Private Limited Company A company jointly owned by the people who have invested in it, they buy shares and become shareholders, have limited liability; the shares are not available to the general public. Public Limited Company Franchisee Franchiser The largest type of organisation in the private sector, raises finance by selling shares which can be purchased by the general public. A business that pays a Franchise Fee to another company to use their brand name. A business with a product or service that it does not want to sell to consumers directly; it appoints franchisees to sell the product. Joint Venture When two or more companies work together on a business project. Multi National Company Those with factories, production or service operations in more than one country. Also known as transnational businesses. Limited Liability Unlimited Liability Organisation Structure Hierarchy Where the owners of a company cannot be held responsible for the debts of the company they own. When owners responsible for all of a company s debt, no matter how great they are. The levels of management and division of responsibilities within an organisation The management structure of an organisation, often shown as an organisation chart, which shows who is accountable to whom. Span of Control The number of subordinates working directly under a manager. Internal Source of Finance External Source of Finance Dividend The generation of cash from within the company s resources or assets. Obtaining capital from outside the business, examples include bank loans and grants. Payments made to shareholders from the profits of a company after it has paid corporation tax.

4 Marketing Primary Market Research Secondary Market Research Market Segmentation Mass Market Niche Market The collection and collation of original data via direct contact with potential or existing customers. Also called field research. The use of information that has already been collected and is available for use by others. Also called desk research. The market is divided up into groups of consumers who have similar needs. Selling an undifferentiated products without segmenting the market. A small section of a market, Marketing Mix The four factors that managers can vary to influence sales of a product the four Ps: product, price, place, promotion. Product Life Cycle Price Elasticity of Demand Inelastic Demand Elastic Demand Penetration Pricing Price Skimming Competitive Pricing Promotional Pricing Psychological Pricing Cost-Plus Pricing Channel of Distribution Wholesaler The stages a product will pass through from its introduction, through its growth until it is mature and then finally its decline. Responsiveness of demand to a change in price. Percentage change in price is greater than percentage change in demand. Percentage change in price is less than percentage change in demand. A pricing strategy where price is set lower than the competitors prices in order to be able to enter a new market. A pricing strategy where a high price is set for a new product on the market. A pricing strategy where the product is priced in line with, or just below, competitors prices to try to capture more of the market. A pricing strategy where the product is sold at a very low price for a short period of time. Apricing strategy where particular attention is paid to the effect that the price of a product will have upon consumers perceptions of the product. The cost of manufacturing the product plus a profit mark-up. The means by which a product is passed from the place of production to the customer or retailer. A wholesaler buys in bulk (large quantities) from the manufacturer and sells on smaller quantities either to retailers or, occasionally,

5 Finance Break Even Point Margin of Safety Cash Flow Forecast The level of sales at which total costs equal total revenue. Output minus break even point. An estimate of future cash in-flows and out-flows of a business, Profit and Loss Account Cost of Sales Gross Profit Account showing how the net profit of a business and the retained profit of a company are calculated. Another term for direct costs, which appears on the Balance Sheet. Profit made when sales revenue is greater than the cost of goods Expenses Net Profit Balance Sheet Another term for indirect costs, which appears on the Balance Sheet. Profit made by a business after all costs have been deducted from sales revenue; it is calculated by subtracting overhead costs from gross profits. Shows the value of a firm s assets and liabilities at a particular Current Asset The assets such as cash, stocks and debtors which are held for on- Fixed Asset The assets which are likely to be kept by the business for more than one year. Most fixed assets, apart from land, depreciate over time so the value of these will fall on the balance sheet from one Current Liability Long Liability Share Capital Working Capital Gearing A debt owed by the business, which is due to be repaid within one year. A debt owed by the business, which is due to be repaid after one year. Money investment by shareholder, a source of finance. Current Assets minus Current Liabilities. The money used to pay day to day expenses. The percentage of the Total Capital Employed that is provided by long term loans.

6 People Financial methods of motivation Non-Financial Methods of Motivation Autocratic Management Democratic Management Laissez-Faire Management Internal Recruitment External Recruitment On the job training Off the job training Induction Dismissal Redundancy Trade Union Using things like piece rate, commission or profit sharing to motivate employees. Motivating employees by giving them more responsibility. Instructions and strategies are issued from above with little opportunity for contributions to decision-making from less senior employees. Senior employees consult with junior ones in policymaking. Employees are left to make many of the decisions rather than receiving clear instructions from their seniors. The vacancy is filled by someone who is an existing employee of the business. The vacancy is filled by someone who is not an existing employee and will be new to the business. Watching a more experienced worker doing the job and learning skills under their supervision. Being trained away from the workplace, usually by specialist trainers. Training that is given at the start of employment. When an employee loses their job because they are incompetent or dishonest. Also referred to a sacked or fired. When an employee loses their job because they are no longer needed, rather than due to any aspect of their work being unsatisfactory. Also called retrenchment. A group of workers join together to ensure their interests are protected.

7 External Influences Ethical Decision External Cost External Benefit Cost Benefit Analysis GDP Boom Recession Slump A decision taken by a manager or company because of the moral code observed in that firm. The costs paid by the rest of society, rather than the business, as a result of a business decision, also called a negative externality. The gains to society resulting from a business decision, also called a positive externality. The valuation by a government agency of all social and private costs and benefits resulting from a decision. Gross Domestic Product: The total value of output of goods and services in a country in one year. A phase in the Economic Cycle, when GDP increases rapidly. Inflation may become a problem. A decline in a country s GDP which results in falling demand for most products. A lowest point in the Economic Cycle, unemployment will be very high. Recovery A period of raising GDP and falling unemployment. Exchange Rate The price of one currency in terms of another, e.g. 1 : $1.5. Interest Rate The cost of borrowing or the reward for saving. Fiscal Policy The government uses changes in taxation and spending to control the Economics Cycle.

8 Production Job Production Batch Production Flow production Economies of Scale Diseconomies of Scale Lean Production A single product is made at a time, usually to the customer s exact specifications. Products are made in batches of a certain quantity, usually as orders come in. Large quantities of a product are produced in a continuous process. Also called mass production because of the large quantity of a standardised product that is produced. The factors that lead to a reduction in average costs as a business increases in size. The factors that lead to an increase in average costs as a business grows beyond a certain size. Techniques used by business to cut down on any waste and therefore increase efficiency, for example, by reducing the time it takes for the product to be developed and made available for sale.

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