Business
An organisation that organises and combines resources to produce goods and services to satisfy the needs and wants of consumers while making a profit
Production
Organising and combining resources to produce goods and services
Scarcity OR Economic problem
Limited resources in relation to the unlimited wants.
Needs
Basic necessities that are crucial for survival and day to day life such as food, clothing, and shelter.
Wants
Desires of the consumers which are not basic necessities. Wants can be luxuries.
Opportunity cost
Next best alternative forgone
Resources / Factors of Production
Inputs used to make goods and services. For example, Capital, Enterprise, Land, & Labour.
Capital / Capital Goods
Amount invested in human made resources such as Equipment, Buildings and Machinery etc.
Enterprise
Risk Taking ability, or skills and knowledge.
Entrepreneur
A person with risk taking ability. A person who is willing to take risk and take business decisions.
Land
All natural resources such as Vegetables, Fruits, Cattle, Minerals etc.
Labour
Human effort or human resources, such as workers.
Added value
Difference between the selling price of a product and the cost of producing that product.
Adding value
Process of increasing the difference between the selling price of a product and the cost of producing that product. Trying to increase the Added Value.
Mark-Up
Extra amount added to the cost of the product in order to calculate the selling price.
Specialisation
When people and businesses concentrate on what they are best at.
Business specialisation
It is when a business focuses on producing a specific range of goods and services.
Labour specialisation OR Division of labour
The way in which work is divided so each worker concentrates on a specific task to become expert at it.
Revenue OR Sales Revenue
Amounts earned by selling goods and services. = Selling Price per unit x Quantity Sold
Expenses OR Costs
Amounts spent to run day to day operations of the business, and amount spent to produce goods and services.
Profit
It is when revenues exceed the costs
Loss
It is when costs exceed the revenues
Primary sector
Firms whose business activity involves the extraction of raw materials
Secondary sector
Firms that process and manufacture goods from natural resources
Tertiary sector
Businesses which provide services to consumers and other businesses.
Private sector
A business that is owned and controlled by normal individuals and not by the government.
Public sector OR Public corporation
A business that is owned and controlled by the government.
Industrialisation
It is when more factories are opened in the country. Increase in the secondary sector in an economy.
De-industrialisation
It is when factories are closed down in a country. Decrease in the secondary sector in an economy.
Less-Developed Economy OR Less Economically Developed Country (LEDC)
It is when a country is highly dependent on its primary sector firms, and its most GDP comes from the primary sector. It has low income and lower living standards.
Developing Country OR Developing Economy
It is when a country is highly dependent on its secondary sector firms, and its most GDP comes from the secondary sector. It has a middle income and moderate living standards.
Developed Economy OR More Economically Developed Country (MEDC)
It is when a country is highly dependent on its tertiary sector firms, and its most GDP comes from the tertiary sector. It has high income and high living standards.
Command economy OR Planned economy
An economy in which the Government has full control over the factors of production.
Market economy OR Free Market Economy
An economy in which the Government has no control over the factors of production.
Mixed economy
An economy that has both a private and public sector.
Business objective
A statement of a specific target that a business works towards
Business plan
A document that states aims and objectives and shows how business plans to achieve them.
Financial benefit OR Profit
It refers to a benefit that a business gets financially, in a period.
Growth (Business Growth)
It is when a business increases in size. It can be through more output, employees, capital or market share.
Market share
Percentage of the total market sales held by one brand or business. = Business sales / Total market sales × 100
Market leader
A Business with the largest market share for a product in a market.
Survival
It is when a business tries to make enough sales in order to survive in the market and to cover their expenses. e.g. Reaching the breakeven point of sales
Social enterprise
Business with both social objectives and environmental objectives along with aiming to make a profit.
Profit Satisficing
Satisfying the shareholders with enough profit, and then focusing on other objectives such as environmental, and social objectives.
Corporate Social Responsibility (CSR) OR Social Objectives
It is when a profitable business contributes to the society by helping the people and environment. Giving back to society.
Environmental Objectives
It is when a profitable business uses renewable resources to protect the environment and reduces the carbon dioxide emissions and other wastes.
Merger
It is when two or more businesses combine their resources to become one larger business.
Takeover OR Acquisition
It is when one business takes over another business. This is done by buying the ownership of another business.
Internal Growth
It is when a business grows by reinvesting its profits. It is also known as organic growth.
External Growth
It is when a business grows by merger with another business or takeover of another business.
Horizontal Integration
It is when a business merges or takes over another business within a similar industry and same stage of production.
Vertical Integration
It is when a business merges or takes over another business within a similar industry but a different stage of production.
Forward-Vertical Integration
It is when a business merges or takes over another business within a similar industry but a stage of production that is ahead of its current stage. e.g. A cocoa farm buys a chocolate factory.
Backward-Vertical Integration
It is when a business merges or takes over another business within a similar industry but a stage of production that is before its current stage. e.g. A chocolate shop buys a chocolate factory.
Conglomerate Integration OR Lateral Integration
It is when a business merges or takes over another business of a different industry.
Limited liability
Liability of shareholders in a company is only limited to the amount they invested. Owners are not personally liable for the company's loans.
Unlimited liability
Owners of the business are personally liable to pay the company's debts if the company fails. Owners personal belongings are taken away to settle the business' debts.
Unincorporated Business
A business that doesn't have a separate legal entity, and has an unlimited liability for its owners.
Incorporated Business
A business that has a separate legal entity, and has a limited liability for its owners.
Sole trader
An unincorporated business owned and controlled by one person
Partnership
An unincorporated business that has more than one owner. More than one person join together to start and run the business.
Limited company
A business which has a limited liability and a separate legal identity from its owners.
Private limited company
A type of limited company owned by shareholders, but it can only sell shares to friends or family.
Public limited company
A type of limited company that sells its shares to the general public through a stock exchange.
Dividends
Portion of profit for the year paid to the shareholders as a reward for their investment in the company
Retained Profits OR Retained Earnings
Portion of profit kept in the business for future reinvestment. It is an internal source of finance.
Franchise OR Franchise Agreement
A business agreement and system where entrepreneurs buy the right to use the name, logo and product of an existing business.
Franchisor
Owner of a brand that is used in a franchise agreement. Franchisor gives the right to use the brand name to the franchisee.
Franchisee
The business that is taking the rights to use a brand in a franchise agreement. Franchisees buy the right to use the brand name from the franchisor.
Royalty (Royalty payment)
Portion of sales or profit paid to the franchisor by the franchisee on a regular basis in return of using the brand name.
Licensing
Allowing other businesses usually in other countries to produce the goods and services under a brand name in exchange of license fees.
Shareholders
Shareholders are the owners of a limited company.
Stock exchange OR Stock Market
An organisation where new and existing shares of public limited companies are bought and sold.
Annual General Meeting
It is a compulsory annual meeting held by a limited company where shareholders decide and vote for major decisions of the business
Flotation OR Initial Public Offering (IPO)
It is when a private limited company start selling its shares to the public for the first time to become a public limited company
Partners
Owners of a partnership business. Each partner has a role in the partnership and may share profit or loss in the business.
Partnership agreement
An agreement between partners in a partnership that show the terms of the partnership such as profit sharing ratio, and responsibilities of the partners.
E-commerce
Process of buying and selling goods and services over the Internet.
Joint venture
When two or more businesses agree to start a (new) project together, hence sharing risks, capital, profits or resources.
Ethical business
An organisation that takes decisions by doing the right thing which is beneficial for the overall society.
Unethical business
An organisation that doesn't take decisions based on a moral code and doesn't care about the environmental and societal consequences of their business activity.
Stakeholder group OR Stakeholders
Any individual or group which has an interest in a business because they are affected by its activities.
Internal stakeholders
Stakeholders that either own the business or work for the business. E.g. Owners, Managers, and employees.
External stakeholders
Stakeholders that do not own the business or work for the business but have an interest in the business. e.g. Banks, Suppliers, Government, General Public and society.