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    BUSS 1 Key Terms and Calculations
    Enterprise: refers to the process by which new businesses are formed and new products and services are brought to the market
    Enterprise Skills: skills that allow an individual or organisation to respond effectively to changing market situations, including problem solving, thinking and acting innovatively and creatively, and understanding the importance of risk and uncertainty.
    Entrepreneurs: individuals who have an idea that they develop by setting up a new business and encourage it to grow. They take the risk and subsequent profit and success or the losses that come with failure.
    Characteristics of an entrepreneur:
    - Determination and persistence
    - Passion
    - the ability to spot and take advantages of opportunities
    - Relevant skills and expertise
    - Vision, creativity and innovation
    - Motivation to succeed and not be daunted by failure
    - Willingness to take risks
    Opportunity Cost: the real cost of taking a particular action or the next best alternative forgone (sacrificed).

    Generating and Protecting Business Ideas
    Franchise: when a business (the franchisor) gives another business (the franchisee) the right to supply its product or service
    Copyright: legal protection against copying for authors, composers and artists
    Patent: an official document granting the holder the right to be the only user or producer of a newly invented product or service for a specified period.
    Trademark: signs, logos, symbols or words displayed on company’s’ products or on its advertising, including sounds or music, which distinguish its brands from those of its competitors

    Transforming Resources into Goods and Services
    Resources (inputs): the elements that go into producing goods and services
    Factors of Production: the four elements – land, labour, capital and enterprise – used in the production of goods and services
    Production: the process whereby resources (factors of production) are converted into a form that is intended into a form that is intended to satisfy the requirements of potential customers
    Output: the finished products resulting from the transformation process
    Primary Sector: those organisations involved in extracting raw materials
    Secondary (manufacturing) Sector: those organisations involved in processing or refining the raw materials from the primary sector into finished or semi-finished products
    Tertiary Sector: those organisations involved in providing services to customers and to other businesses, in either the public or private sector
    Quaternary Sector: The portion of an economy that is based on knowledge applicable to some business activity that usually involves the provision of services. For example, the quaternary sector might include: information gathering, distribution and technology; research and development; vocational education; business consulting; and strategic financial services.
    Adding Value: the process of increasing the worth of resources by modifying them
    Added Value: sales revenue minus the cost of bought-in materials, components and services
    USP: a feature of a product or service that allows it to be differentiated from other products

    Developing a business plan
    Business plan: a report describing the marketing strategy, operational issues and financial implications of a business start-up.

    Conducting start-up market research
    Marketing: the anticipation and satisfying of customers’ wants in a way that delights consumers and meets the needs of the organisation.
    Market research: the systematic and objective collection, analysis and evaluation of information that is intended to assist the market process
    Primary Market Research: the collection of information first-hand for a specific purpose
    Secondary Market Research: the use of information that has already been collected for a different purpose
    Qualitative market research: the collection of information about the market based subjective factors such as opinions and reasons
    Quantitative market research: the collection information about the market based on numerical data
    Sample: a group of respondents or factors hose views or behaviour should be representative of the target markets as a whole
    Random Sample: a group of respondents in which each member of the target population has an equal chance of being chosen
    Quota sample: a group of respondents comprising several different segments, each sharing a common features (age, gender). The number of interviewees in each classification is fixed to reflect their percentage in the total target population, but the interviewees are selected non-randomly by the interviewer.
    Stratified Sampling: a group of respondents selected according to particular features (age, gender) unlike quota sampling, where the final selection is left to an interviewer, in stratified sampling the sub-groups and their sizes are chosen specifically.

    Understanding Markets
    Market: a place where buyers and sellers come together
    Demand: The amount of a product or service that consumers are willing and able to buy at any given price over a period of time
    Market Segmentation: the classification of customers or potential customers into groups or sub groups (market segment), each of which responds differently to different products or market approaches
    Segmentation analysis: where a firm uses quantitative and qualitative data or information to try to discover the types of consumer who buy its products and why.
    Market size: the volume of sales of a product or the value of sales of a product.
    Market growth: the percentage change in sales over a period of time
    Market share: the percentage or proportion of the total sales of a product or service achieved by a firm or specific brand of a product.

    Choosing the right legal structure for the business
    Unincorporated business: there is no distinction in law between the individual owner and the business itself. The identity of the business and the owner is the same. Such businesses tend to be sole traders of partnerships.
    Incorporated Business: this has a legal identity that is separate from the individual owners. As a result, these organisation can own assets, owe money and enter contracts into their own right. Such businesses include private limited companies and public limited companies.
    Unlimited Liability: a situation where the owners of a business are liable for all the debts that the business may incur.
    Limited Liability: a situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital.
    Sole trader: a business owned by one person. The owner may operate on his or her own or my employ other people.
    Partnership: a form of business in which two or more people operate for the common goal of making a profit.
    Private Limited Company: a small to medium- sized business that is usually run by the family or the small group of people who own it.
    Public Limited Company: a business with limited liability; a share capital of over £50,000 at least two shareholders, two directors, a qualified company secretary; and, usually, a wide spread of shareholders. It has ‘plc’ after the company name.
    Ownership: providing finance and therefore taking risks
    Control: managing the organisation and making decisions.
    Stakeholders: any group of individuals with an interest in a business. This includes employees, customers, shareholders and the local community

    Raising Finance
    Ordinary Share Capital: money given to a company by shareholders in return for a share certificate that gives them a part of the ownership of the company and entitles them to a share of profits
    Loan Capital: money received by an organisation in return for the organisation’s agreement to pay interest during the period of the loan and repay the loan within an agreed time
    Bank Loan: a sum of money provided to a firm or an individual by a bank for a specific, agreed purpose
    Bank Overdraft: when a bank allows an individual or organisation to overspend its current account in the bank up to an agreed limit for a stated period of time.
    Venture Capital: Finance that is provided to small or medium-sized firms that seek growth but which may be considered as risky by typical share buyers or other lenders
    Personal Sources of Finance: money that is provided by the owner(s) of the business from their own savings or personal wealth.

    Locating the Business
    Teleworking: working in a location that is separate from a central workplace, using telecommunication technologies
    Least cost site: the business location that allows a firm to minimise its costs
    Infrastructure: the network of utilities such as transport links, sewerage, telecommunications systems, health services and educational facilities.
    Qualitative factors: based on the opinions and wishes of individuals. These factors can influence business decisions because an entrepreneur will want to include his or her own wishes and preferences in decisions taken.

    Calculating costs, revenues and profit
    Price: the amount paid by a consumer to purchase one unit of a product
    Total Revenue: the income received from an organisation’s activities.
    Total Revenue= price x quantity
    Profit: the difference between the income of a business and its total costs
    Profit= total revenue – total costs
    Fixed Costs: costs that do not vary directly with output in the short run
    Variable Costs: costs that do vary directly with output in the short run
    Total costs: the sum of fixed costs and variable costs

    Using breakeven analysis to make decisions
    Contribution per unit: selling price per unit – variable cost per unit
    Total Contribution: the difference between total revenue and total variable costs
    Contribution per unit x number of units sold
    Breakeven analysis: study of the relationship between total costs and total revenue to identify the output at which a business breaks even
    Breakeven output: the level of output at which total sales revenue is equal to total costs of production
    Breakeven output = fixed costs/ contribution per unit
    Target profit output = fixed costs + target profit/ contribution per unit

    Using Cash flow forecasting
    Cash flow: the amounts of money flowing into and out of a business over a period of time
    Cash Inflows: receipts of cash, typically arising from the sales of goods and services
    Cash Outflows: payments of cash, typically arising from costs
    Net cash flow: the sum of cash inflows to an organisation minus the cash outflows over a period of time
    Cash-flow cycle: the regular pattern of inflows and outflows of cash within a business
    Cash- flow forecasting: the process of estimating the expected cash inflows and cash outflows over a period of time.
    Cash-flow statement: a description of how cash flowed into and out of a business during a particular period of time
    Liquidity: the ability to convert an asset into cash without loss or delay

    Setting Budgets
    Budget: an agreed plan establishing, in numerical or financial terms, the policy to be pursued and the anticipated outcomes of that policy
    Income budget: sows the agreed planned income of a business over a period of time.
    Expenditure budget: shows the agreed, planned expenditure of a business over a period of time
    Profit budget: shows the agreed, planned profit of a business over a period of time.
    Management accounting: the production and use of financial and accounting information for internal purposes of planning, review and control.

    Measuring and increasing profit
    Profit: the difference between the income of the business and its total costs. Profit = revenue – total costs
    Profitability: the ability of a business to generate profit or the efficiency of a business in generating profit
    Net profit margin: this measures net profit as a percentage of sales. Net profit margin % = net profit before tax/ sales x 100
    Return on capital: ratio showing net profit as a percentage of capital invested. Return on capital % = net profit before tax / capital invested x 100
    Capital invested: all of the money provided to the business by owners

    BUSS 2 Key Terms and Calculations
    Using Budgets
    Budget: an agreed plan establishing, in numerical or financial terms, the policy to be pursued and the anticipated outcomes of that policy
    Variance analysis: the process by which the outcomes of budgets are examined and then compared with the budget figures. The reasons for any differences are then found
    Favourable Variance: when costs are lower than expected or revenue is higher than expected
    Adverse Variance: when costs are higher than expected or revenue is lower than expected

    Improving Cash Flow
    Bank Overdraft: when a bank allows an individual or organisation to overspend its current account in the bank up to an agreed limit for a stated period of time.
    Short-term Loan: a sum of money provided to a firm or an individual for a specific, agreed purpose. Repayment of the loan will happen in less than 2 years
    Factoring: when a factoring company buys the right to collect the money the credit sales of an organisation
    Sale of assets: when a business transfers ownership of an item that it owns to another business or individual, usually in return for cash
    Sale and leaseback of assets: when assets that are owned by a firm are sold to raise cash and then rented back so that the company can still use them for an agreed period of time
    Working Capital: the day-to-day finance used in a business, consisting of assets (cash, stock) minus liabilities (creditors, overdrafts)
    Liquidity: the ability to convert an asset into cash without loss or delay

    Improving Organisational structures
    Organisational Structures: the relationship between different people and functions in an organisation
    Organisational chart: a diagram showing the lines of authority and layers of hierarchy in an organisation
    Organisational hierarchy: the vertical division of authority and accountability in an organisation
    Levels of Hierarchy: the number of different supervisory and management levels between the shop floor and the chief executive of an organisation
    Span of Control: the number of subordinates whom a manager is required to supervise directly.
    Delegation: the process of passing authority down the hierarchy from a manager to a subordinate
    Responsibility: being accountable for one’s actions.
    Authority: the ability or power to carry out a task
    Accountability: the extent to which a named individual is held responsible for the success or failure of a particular policy, project or piece of work
    Communication: the process for exchanging information or ideas between two or more individual groups
    Internal Communication: the exchange of information that takes place within an organisation
    External Communication: the exchange of information that takes place with individuals, groups and organisations outside the business.
    One-way Communication: Communication without any feedback
    Two-way Communication: Communication with feedback
    Communication channel: the route through which communication occurs
    Open channels of communication: any staff member is welcome to see, read or hear the discussions and conclusions
    Closed channels of communication: access to the information is restricted to a named few.
    Formal channels of communication: communication channels established and approved by senior management, within which any form of communication is regarded as formal
    Informal channels of communication: means of passing information outside the official channels, often developed by employees themselves
    Vertical communication: when information is passed up and down the chain of command.
    Lateral communication: when people at the same level within an organisation pass information to each other.

    Measuring the effectiveness of the workforce
    Labour productivity: a measure of the output per worker in a given time period. Labour productivity = output per period / number of employees per period
    Labour turnover: the proportion of employees leaving a business over a period. Rate of labour turnover = number leaving business / average no. employed x 100
    Absenteeism: The proportion of employees not at work on a given day. Rate of absenteeism = no. of staff absent on 1 day / total no. staff x 100 Annual rate of absenteeism = total no. of days lost per year / total no. of days that could be worked x no. of employees x 100 Rate of absenteeism due to health+ safety = no. of working day lost per year due to health+ safety / total no. of possible working days per year x 100

    Developing an effective workforce: recruitment, selection and training
    Internal recruitment: filling a job vacancy by selecting a person who is already employed in the organisation
    External recruitment: filling a job vacancy by advertising outside the organisation
    Training: the provision of work- related education, either on-the-job of off-the-job, involving employees being taught new skills or improving skills they already have
    Induction training: education for new employees, which usually involves learning about the way the business works rather than about the particular job that the individual will do
    On-the-job training: where an employee learns a job by seeing how it is carried out by an experienced employee
    Off-the-job training: all forms of employee education apart from that in the immediate work place

    Developing and retaining an effective workforce: motivating employees
    Motivation: the causes of people’s action
    Motivation theory: the study of factors that influence the behaviour of people in the workplace
    Scientific management: Business decision making based on data that are researched and tested quantitatively in order to improve the efficiency of an organisation
    Piecework: payment based on the number of items each worker produces
    Performance- related pay: a bonus or increase in salary usually awarded for above-average employee performance
    Profit sharing: a financial incentive in which a proportion of a firm’s profit is divided among its employees in the form of a bonus paid in addition to an employee’s salary
    Share ownership: in this context, a financial incentive whereby companies give shares to their employees or sell them at favourable rates below the market price
    Share options: a financial incentive in which chief executives and senior management are given the choice of buying a fixed number of shares at a fixed price, by a given date
    Fringe benefits: benefits received by employees in addition to their wages or salary
    Job enrichment: a means of giving employees greater responsibility and offering them challenges that allow them to utilise their skills fully
    Job enlargement: increasing the scope of a job, either by job enrichment or job rotation
    Empowerment: giving employees the means by which they can exercise power over their working lives
    Team working: a system where production is organised into large units of work and a group of employees work together in order to meet shared objectives

    Making operational decisions
    Operations management: the process that uses the resources of an organisation to provide the right goods or services for the customer
    Operations targets: the goals or aims of the operations function of the business
    Unit cost: the cost of producing 1 unit of output unit cost = total cost/ units of output
    Capacity: the maximum total level of output or production that a business can produce in a given time period
    Capacity utilisation: the percentage of a firm’s total possible production level that is being reached
    Under- utilisation of capacity: when a firm’s output is below the maximum possible
    Capacity shortage: when a firm’s capacity is not large enough to deal with the level of demand for its products
    Rationalisation: a process by which a firm improves its efficiency by cutting the scale of its operations
    Subcontracting: when an organisation asks another business to make all or part of its product
    Stock control: the management of levels of raw materials, work in progress and finished goods in order reduce storage costs while still meeting the demands of the customer
    Non-standard orders: a business decision relating to a one-off contract

    Developing effective operations: quality
    Quality: those features of a product or service that allow it to satisfy customers
    Quality system: the approach used by an organisation to achieve quality
    Quality control: a system that uses inspection as a way of finding any faults in the good or service being provided
    Quality assurance: a system that aims to achieve or improve quality by organising every process to get the product ‘right first time’ and prevent mistakes ever happening
    Total quality management: a culture of quality that involves all employees of a firm
    Kaizen: a policy of implementing small, incremental changes in order to achieve better quality and/ or greater efficiency
    Quality standard: a set of criteria for quality established by an organisation

    Developing effective operations: customer service
    Customer service: identifying and satisfying customer needs and delivering a level of service that meets or exceeds customer expectations
    Customer expectations: what people think should happen and how they think they should be treated when asking for or receiving customer service
    Customer satisfaction: the feeling that the buyer gets when he or she is happy with the level of customer service that has been provided and the degree to which customer expectations have been met by the provider of the service.

    Working with suppliers
    Supplier: an organisation that provides a business with the materials it needs in order to carry out its business activities
    Payment terms: the arrangements made about the timing of payment and any other conditions agreed between buyer and seller
    Just-in-time: a system where items of stock arrive just in time for production or sale

    Using technology in operations
    Technology: the application of practical, mechanical, electrical and related sciences to industry and commerce
    Automation: the use of machinery to replace human resources
    Computer-aided manufacturing: the use of computers to undertake activities such as planning, operating and controlling production
    Information and Communication Technology: the acquisition, processing, storage and dissemination of vocal, pictorial, textural, and numerical information by a microelectronics based combination of computing and telecommunication
    Computer-Aided Design: the use of computers to improve the design of products
    CADCAM: An approach that combines CAD and computer aided manufacture, using IT to aid both the design and manufacture of an item

    Effective Marketing
    Marketing: The anticipating and satisfying of customers’ wants in a way that delights the consumer and meets the needs of the organisation
    Marketing objectives: the goals of the marketing function in an organisation
    Business-to-consumer marketing: where a firm targets individual consumers with its products
    Business-to-business marketing: where a firm sells its product to another business
    Niche marketing: Targeting a product of service at a small segment of a larger market
    Mass marketing: aiming a product at all of the market
    Product differentiation: the degree to which consumers see a particular as being different form other brands

    Designing an effective marketing mix
    Marketing mix: those elements of a business’s approach to marketing to marketing that enable it to satisfy and delight its customers

    Using the marketing mix: product
    Product: the good or service provided by a business
    Product design: deciding on the make-up of a product so that it works well, looks good and can be produced economically
    Product development: when a firm creates a new or improved good or service, for release into the existing market
    USP: A feature of a product or service that allows it to be differentiated from other products
    Product portfolio: the range of products or brands provided by a business
    Product portfolio analysis: the study of the range of products with a view to deciding whether new products should be added to the portfolio and whether any existing products should no longer be provided
    Boston Matrix: a tool of product portfolio analysis that classifies products according to the market share of the product and the rate of growth of the market in which the product is sold
    Product life cycle: the stages that a product passes through during its lifetime – development, introduction, growth, maturity and decline
    Extension Strategies: methods used to lengthen the life cycle of a product by preventing or delaying it from reaching the decline stage of the product life cycle

    Using the marketing mix: promotion
    Promotion: the process of communicating with customers or potential customers
    Promotional mix: the coordination of the various methods of promotion in order to achieve overall marketing targets
    Public relations: gaining favourable publicity through the media
    Branding: the process of differentiating a product or service from its competitors through the name, sign, symbol, design or slogan linked to that product or service
    Merchandising: attempts to persuade customers to take action at the point of sale
    Sales promotions: short-term incentives used to persuade consumers to buy a particular product
    Direct selling: the process of communicating to the individual consumer through an appropriate form of communication
    Advertising: the process of communicating with customers or potential customers through specific media
    Cost per thousand: an indicator used commonly in the advertising industry to assess and compare the expense of different forms of promotion

    Using the marketing mix: Pricing
    Pricing strategies: approaches adopted in order to achieve marketing objectives
    Price skimming: a strategy in which a high price is set to yield a high profit margin
    Penetration pricing: a strategy in which low prices are set to break into a market or to achieve a sudden spurt in market share
    Price leadership: a strategy in which a large company sets a market price that smaller firms will tend to follow
    Price taking: a strategy in which a small firm follows the price set by a price leader
    Predator pricing: a strategy in which a firm sets very low prices in order to drive other firms out the market
    Pricing tactics: pricing approach or techniques used in the short term to achieve specific objectives
    Loss leadership: a tactic in which a firm sets a low price for its products in order to encourage consumers to buy other products that provide profit for the firm
    Psychological pricing: a tactic intended to give the impression of value
    Price elasticity of demand: the responsiveness of a change in the quantity demanded of a good or service to a change in price

    Using the marketing mix: Location
    Distribution channels: channels or routes through which a product passes in moving from the manufacturer to the consumer

    Marketing and competiveness
    Market: a place where buyers and sellers come together
    Monopoly: in theory, a single producer in a market, but in practice a firm with a market share of 25%or more
    Oligopoly: a market dominated by a small number of large businesses, known as oligopolists
    Cartel: a group of firms that come together to agree price and output levels in an industry
    Cartel: a group of firms that come together to agree price and output levels in an industry
    Monopolistic competition: where a large number of firms are competing in a market, each having enough product differentiation to achieve a degree of monopoly power and therefore some control over the price they charge
    Perfect competition: where there is a large number of sellers and buyers, all of which are too small to influence the price of the product
    Competitiveness: the ability of businesses to sell their products successfully in the market in which they are based
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    Sorry you've not had any responses about this. Are you sure you’ve posted in the right place? Posting in the specific Study Help forum should help get responses.

    I'm going to quote in Puddles the Monkey now so she can move your thread to the right place if it's needed. :yy:

    (Original post by Puddles the Monkey)
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Updated: April 12, 2015

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