Unit 2 - Formulas and Glossary

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Pricing Strategies
The overall strategic approach to pricing over the medium-to-long term, often based on the market positioning of a product.
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Paid for communication, aimed at informing or persuading.
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Adverse Variance
The difference between actual and budgeted amounts which is bad news, higher than budgeted costs.
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Price Skimming
Pricing strategy where a higher price is charged for new product to take advantage of customers prepared to pay for innovation.
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Pricing Tactics
The short-term pricing decisions and approaches taken.
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Pricing Decisions
The decisions taken about how to price a product.
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Price Taker
A business that has no option but to change the ruling market price.
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Product Life Cycle
A theory which predicts the stages a product goes through from introduction to withdrawal from a market.
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Product Portfolio
The collection of products and brands owned and operated by a firm.
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Payment Terms
The period of time that a supplier allows for an invoice to be settled.
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Staff who work for more than a standard week or day.
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Price Leader
A market leader business whose price changes are followed by rivals.
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Price Elasticity of Demand
The responsiveness of demand to a change of price of a product.
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Person Specification
A description which identifies the skills and experience that are likely to be held by a successful applicant.
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Penetration Pricing
Pricing strategy that involves the setting of prices in order to achieve a large market share.
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The finished products that result from the production process.
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Organisational Structure
The way that the roles and responsibilities within an organisation are structured.
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Training that takes place at the workplace.
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Training that takes place away from the workplace.
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Net Profit Margin
Net profit margin is calculated as net profit divided by sales revenue, shown as a %.
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Net Profit
Profit that remains after all operating costs are taken away from sales revenue.
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Promotion of a product at the point-of-sale, usually in a retail environment.
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Mass Market
Describes the largest group of customers with specific needs and wants in an industry
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Marketing Mix
The set of marketing tools that a firm uses to pursue its marketing objectives. Commonly taken to comprise product, price, promotion and place.
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Loss Leader
Where a price is set deliberately below the cost of production in order to attract customers who will buy other, more profitable products.
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Labour Productivity
The output produced per employee over a given time period.
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Job Enrichment
Making a job more interesting or varied so that it is more rewarding.
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Job Enlargement
Giving employees more tasks of a similar level of complexity. Job enlargement expands the number of tasks completed by an employee.
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Job Design
The way in which tasks are combined to form a job.
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Work Load
The amount of work assigned to a particular worker, normally in a specified time period.
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Workforce Role
The tasks involved in a particular level or grade of job.
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A cost of production - sub-standard completed output or raw materials which are not retained int he production process.
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Boston Matrix
A model which analyses the product portfolio of a business into four categories (stars, cash cows, problem children and dogs).
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The use of a trade name, symbol, logo or other device to differentiate a product or a service.
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Business to Business
Abbreviated to B2B, involves the selling of products and services by one business directly to another.
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Capacity Utilisation
The proportion of total capacity that is used (%).
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The process of exchanging information or ideas between individuals or groups.
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The businesses that compete for a share of a market.
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Job Description
A summary of the main duties and responsibilities of a job.
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Part of the recruitment process where a candidate is met face-to-face.
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Internal Recruitment
Where candidates for a job vacancy come from within the organisation.
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Induction Training
Training aimed at introducing new employees to a business and its procedures.
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The structure and number of layers of management and supervision in an organisation.
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Flexible Working
Where a business uses a number of different working practices in order to suit the job on hand and the needs of employees.
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Favourable Variance
A difference between actual and budgeted results which is good news, higher than budgeted revenue.
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A source of finance where a business receives a proportion of the amount owned by trade debtors from a specialist finance provider.
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External Recruitment
Where candidates for a job vacancy come from outside the organisation.
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Delegating power to employees so that they can make their own decisions.
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Distribution Channel
How a business gets its products to the end consumer.
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Direct Selling
A method of distribution which involves a business transacting with a customer without the use of intermediaries.
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Where responsibility for carrying out a task or role is passed onto someone else in the business.
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Customer Service
The ways in which a business meets the needs and wants of its customers.
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Customer Expectations
What customers expect to receive as a result of buying a good or service, influenced by perceptions of factors such as quality and price.
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Cost Reduction
Actions taken by a business aimed at reducing total costs, or lowering average unity costs.
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The ability of a business to offer a better product or service than competitors (as measured by customers).
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Market Research
The process of planning, collecting and analysing data relevant to help make marketing decisions.
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Formula for Gross Profit
Gross Profit = Revenue - Variable Costs
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Unique Selling Point - A feature of a product or service that makes it stand out compared with the competition.
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Formula for Market Share
Market Share = The Product's Sales / Total Market Sales x 100
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Formula for Market Growth
Market Growth = Change in Size / Original Market Size x 100
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Formula for Margin of Safety
Margin of Safety = Output Produced - Break Even Output
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Niche Market
A smaller part of a larger market in which customers have more specific needs and wants.
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A business that provides goods and services to other firms.
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Formula for Total Costs
Total Cost = Fixed Costs + Variable Costs
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Formula for Profit
Profit = Total Revenue - Total Costs
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Formula for Total Contribution
Total Contribution = Contribution Per Unit x Number of Units Produced or Sold
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Formula for Variance
Variance = Actual Figure - Budget Figure
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Formula for Contribution Per Unit
Contribution Per Unit = Selling Price Per Unit - Variable Costs Per Unit
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Formula for Market Size (Volume)
Market Size (Volume) = Firms' Total Sales / Firms' Market share x 100
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Formula for Percentage Change in Profit
Percentage Change in Profit = Current Year's Profit - Previous Year's Profit / Previous Year's Profit x 100
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Formula for Break Even Output
Break Even Output = Fixed Costs / Contribution Per Unit
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Formula for Net Profit
Net Profit = Revenue - Fixed and Variable Costs
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Permanent Employee
An employee who is employed on a formal employment contract and remains with the firm for an open-ended period until the contract is ended.
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A detailed plan of income and expenses expected over a certain period of time.
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Formula for Net Cash Flow
Net Cash Flow = Cash Inflows - Cash Outflows
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Formula for Revenue
Revenue = Quantity Sold x Selling Price
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Formula for Profit Budget
Profit Budget = Sales Income Budget - Expenditure Budget
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The difference between the budgeted amount and what actually happens, can be favourable or adverse.
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Formula for Absenteeism (2)
Absenteeism (2) = Number of Days Taken Off for Unauthorised Absence / Total Days Worked by Workforce over a Period x 100
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Formula for Capacity Utilisation
Capacity Utilisation = Current Output / Maximum Possible Output x 100
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Formula for Absenteeism (1)
Absenteeism (1) = Number of Staff Absent Over a Period / Number Employees During Period x 100
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Formula for Labour Turnover
Labour Turnover = Number of Employees Leaving / Average Number Employed x 100
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Formula for Labour Productivity
Labour Productivity = Output Per Period / Number of Employees
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Formula for Return on Capital Employed
ROCE = Net Profit x 100 / Capital Invested
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Formula for Net Profit Margin
Net Profit Margin = Net Profit x 100 / Sales Turnover
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Unit Cost
The average production cost per unit.
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The provision of work-related education or skills development.
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Total Quality Management
TQM - an attitude to quality where the business aims for zero defects and total customer satisfaction.
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Delegation by one firm of a portion of its production process, under contract, to another firm, including in another country.
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Raw materials, work-in-progress and finished goods held for resale. Stocks are sometimes referred to as "inventories".
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Stock Control
The processes and controls used by a business to ensure that it has sufficient stock for its purposes.
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Spare Capacity
When a business is able to produce more with existing resources.
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Span of Control
The number of employees who are directly supervised by a manager.
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The process of deciding which applicant for a job a business should accept.
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Sales Promotion
Tactical, point of sale material or other incentives designed to stimulate purchases.
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Sale and Leaseback
A method of raising finance. Sale and leaseback involves a business selling a major asset and then leasing the same asset back from the new owner.
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The science and technology of robots, and their design, manufacture, and application.
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Return on Capital
A measure of the return made by investing in a business or business project. Return on capital is shown as a percentage.
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Reorganising production in order to increase productivity and efficiency.
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Quality Control
The inspection of products as part of a sampling process to ensure that the right production standards have been achieved.
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Quality Assurance
Organising every process to get the product 'right first time' and prevent mistakes ever happening.
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Where a products meets customer's requirements.
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Public Relations
The promotion of a business through news stories, sponsorship and similar activities.
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Psychological Pricing
Using price as a way of influencing a consumer's behaviour or perceptions, for example, using high prices to reinforce a quality image.
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Promotional Mix
The mix of activities and approaches taken to promoting a product, including advertising direct selling etc.
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The ability of a business to generate profits from its activities. Profitability is often measured in terms of the return on sales or return on investment.
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Measures of output per worker over a given time period.
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Assessment Centres
When a recruitment firm runs a series of extended selection procedures, each lasting one or two days or sometimes longer.
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The replacement of workers with machines to perform tasks in production.
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Card 2


Paid for communication, aimed at informing or persuading.



Card 3


The difference between actual and budgeted amounts which is bad news, higher than budgeted costs.


Preview of the back of card 3

Card 4


Pricing strategy where a higher price is charged for new product to take advantage of customers prepared to pay for innovation.


Preview of the back of card 4

Card 5


The short-term pricing decisions and approaches taken.


Preview of the back of card 5
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