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RO61: Introduction to Business INTERACTIVE GLOSSARY OF KEY TERMS Cambridge National in Business and Enterprise www.time2resources.co.uk Click here to view by alphabet ABC Click here to view by formulae 123 www.time2resources.co.uk Click here to view by learning outcome View by alphabet A B C D E F G H I J K L M www.time2resources.co.uk N O P Q R S T U V W X Y Z 123 View by learning outcome Lo1: Understand business ownership Lo2: Understand business objectives Lo3: Understand key functional areas Lo4: Understand how external factors impact on businesses www.time2resources.co.uk 123 ABC View by learning outcome Lo1: Understand business ownership Lo2: Understand business objectives Lo3: Understand key functional areas Finance Marketing Production and operations Human resource management Lo4: Understand how external factors impact on businesses www.time2resources.co.uk 123 ABC Lo1: Understand business ownership Sole trader Shareholders Partnership Dividends Private limited company (ltd) Incorporation Public limited company (plc) Memorandum of association Unlimited liability Articles of association Limited liability Stock exchange Capital Flotation Asset Debt Deed of partnership Sleeping partners www.time2resources.co.uk 123 ABC Lo2: Understand business objectives Business objectives SMART objectives Profit Social benefit Sales Market share Effective service Survival Growth Ethical Sustainable Business planning www.time2resources.co.uk 123 ABC Lo3: Understand key functional areas Finance Raising finance Bank loan Overdraft Mortgage Interest rate Friends and family Grants Fixed costs Variable costs Total costs Revenues Profit Loss Cash flow Cash in Cash out www.time2resources.co.uk Cash flow statements Opening balance Closing balance Net cash flow Receipts Payments Credit Sales Credit purchases Break even point Break even charts Contribution Contribution per unit 123 ABC Lo3: Understand key functional areas Marketing Marketing Marketing mix Market Segmentation Product Demographic segmentation Price Geographic segmentation Promotion Socio-economic group Place Market mapping Unique selling point Market research Product portfolio Primary market research Demand Secondary market research Price skimming Questionnaires Penetration pricing Focus groups Psychological pricing Survey Loss leader Supplier feedback Promotional mix Customer feedback Wholesaler Internet research Retailer www.time2resources.co.uk 123 ABC Lo3: Understand key functional areas Production and operations Job production Batch production Flow production Factors of production Specialisation Division of labour Quality control Quality Quality assurance Quality standards Total quality management Resource control Logistics www.time2resources.co.uk 123 ABC Lo3: Understand key functional areas Human resource management Human resource management Training Recruitment On the job training Full-time employee Off the job training Part-time employee Induction training Internal recruitment Retention External recruitment Pay Personal recommendation Working conditions Advertising Performance management Interview www.time2resources.co.uk 123 ABC Lo4: Understand how external factors impact on businesses Social factors Legislation Demographics Health and safety Technological factors Minimum wage Environmental factors Copyright Green working practices Patent Green consumerism Trade marks Ethical factors Economic factors Carbon footprint Employment Corporate social responsibility Interest rate Political factors Inflation Exchange rates Recession Recovery www.time2resources.co.uk 123 ABC View by Formula Break even point Closing balance Contribution Contribution per unit Loss Market share Net cash flow Opening balance Profit Revenue Total cost www.time2resources.co.uk ABC A and B Advertising Bank loan Articles of association Batch production Asset Break even charts Break even point Business objectives Business planning www.time2resources.co.uk 123 ABC C and D Capital Carbon footprint Cash flow Cash flow statements Cash in Cash out Closing balance Contribution Debt Deed of partnership Demand Demographic segmentation Demographics Dividends Division of labour Contribution per unit Copyright Corporate social responsibility Credit purchases Credit Sales Customer feedback www.time2resources.co.uk 123 ABC E and F Economic factors Factors of production Effective service Fixed costs Employment Flotation Environmental factors Flow production Ethical Focus groups Ethical factors Friends and family Exchange rates Full-time employee External recruitment www.time2resources.co.uk 123 ABC G and H Geographic segmentation Health and safety Grants Human resource management Green consumerism Green working practices Growth www.time2resources.co.uk 123 ABC I, J and K Incorporation Job production Induction training Inflation Interest rate There are no words beginning with K Internal recruitment Internet research Interview www.time2resources.co.uk 123 ABC L and M Legislation Market mapping Limited liability Market research Logistics Market Segmentation Loss Market share Loss leader Marketing Marketing mix Memorandum of association Minimum wage Mortgage www.time2resources.co.uk 123 ABC N and O Net cash flow Off the job training On the job training Opening balance Overdraft www.time2resources.co.uk 123 ABC P Partnership Private limited company (ltd) Part-time employee Product portfolio Patent Product Pay Price Payments Promotion Penetration pricing Place Performance management Profit Personal recommendation Promotional mix Political factors Psychological pricing Price skimming Public limited company (plc) Primary market research www.time2resources.co.uk 123 ABC Q and R Quality Raising finance Quality assurance Receipts Quality control Recession Quality standards Recovery Questionnaires Recruitment Resource control Retailer Retention Revenues www.time2resources.co.uk 123 ABC S Sales Sole trader Secondary market research Specialisation Shareholders Stock exchange Sleeping partners Supplier feedback SMART objectives Survey Social benefit Survival Social factors Sustainable Socio-economic group www.time2resources.co.uk 123 ABC T and U Technological factors Unique selling point Total costs Unlimited liability Total quality management Trade marks Training www.time2resources.co.uk 123 ABC V, W, X, Y and Z Variable costs Wholesaler Working conditions There are no words with X,Y and Z www.time2resources.co.uk 123 ABC Advertising Within recruitment a method used to attract potential candidates to apply for a vacant position within a business Media used may be wide ranging from local newspapers and specialist magazines to notices in shop windows or on a staff board Within marketing advertising also refers to a promotional method that involves the use of media to communicate with existing and potential consumers Recruitment www.time2resources.co.uk Related words: Personal recommendation 123 Interview ABC Articles of association A formal documentation which outlines the rules and regulations to be followed when a company is formed Outlines: The responsibility of the directors Nature of the business Rights of shareholders Is completed with the memorandum of association to form a company Related words: Memorandum of association Private limited company Public limited company www.time2resources.co.uk 123 ABC Asset Anything that is owned by the business Can be long term assets that will stay in the business for longer than a year e.g. premises, vehicles and machinery Or short term assets that will change on a regular basis e.g. stock, cash and debtors (customers who owe money) A sole trader’s personal assets can be used to pay off the businesses debts Related words: Sole trader Unlimited liability www.time2resources.co.uk 123 Debt ABC Bank loan A set amount of money provided to a business to be repaid, with interest, over a predetermined period of time An external source of finance Raising finance www.time2resources.co.uk Related words: Overdraft Mortgage 123 Interest rate ABC Batch production Identical items are produced in groups (batches), each item passing through the production process at the same time Allows for cheaper and quicker production of individual items More uniform products Variation can be achieved in different batches Requires a mix of capital (machinery) and labour resources Job production www.time2resources.co.uk Related words: Flow production Factors of production 123 ABC Break even charts A visual representation of total costs and total revenues identifying the point at which break even is achieved i.e. where the TC line and the TR line cross Break even point is read in units off the horizontal axis Can be used to read the loss or profit of a business at given levels of output Total costs www.time2resources.co.uk Related words: Revenues Break even point 123 ABC Break even point The level of output at which the business is making neither a profit nor a loss, the point at which TC=TR Selling Price – Variable Cost (per unit) = Contribution (per unit) Fixed Costs / Contribution (per unit) = Break even output Can be read off the horizontal axis on a break even chart Total costs www.time2resources.co.uk Related words: Revenues Break even chart 123 ABC Business objectives A target that a business wants to achieve within a set period of time For new businesses an objective may be one of survival before profit and then growth Other objectives include market share, effective service, sales and social benefit Objectives should be SMART Related words: SMART objectives Survival Profit Growth Social benefit Market share Effective service www.time2resources.co.uk 123 ABC Sales Business planning The steps an entrepreneur goes through before setting up a business, effective planning is important for short term survival and long term success The process of planning will include: Setting objectives Raising finance Cash flow forecast Calculating break even Related words: Business objectives SMART objectives www.time2resources.co.uk 123 Survival ABC Capital The money invested in a business Initially this will be used to cover start-up expenses such as premises and vehicles Can be raised from a number of sources including personal investments and bank loans Related words: Raising finance Asset Shareholders www.time2resources.co.uk 123 ABC Carbon footprint The total amount of negative emissions e.g. greenhouse gases emitted by a business as a result of their operations A business with an objective to be environmentally friendly will take steps to reduce their carbon footprint Actions may include less packaging, sourcing materials locally and energy efficient sources Ethical factors www.time2resources.co.uk Related words: Corporate social responsibility Environmental factors 123 ABC Cash flow The movement of cash into and out of a business over a period of time The relationship between cash inflows and cash outflows Cash flow can be crucial to the survival of a business Cash in www.time2resources.co.uk Cash out Related words: Cash flow statement 123 Net cash flow ABC Cash flow statements A financial document that shows the cash flowing into and out of a business over a period of time Will show the closing balance at the end of each period (e.g. a month) to highlight any concerns such as a negative balance Is included in the accounts to report on the businesses actions and performance to shareholders and other stakeholders Cash in www.time2resources.co.uk Related words: Cash out Cash flow Net cash flow 123 ABC Cash in The receipt of cash into a business Shown on a cash flow statement Examples of cash inflows include: Sale of goods Payment by debtors Loans received Sale of assets Cash flow www.time2resources.co.uk Related words: Cash out Receipts 123 Credit sales ABC Cash out The transfer of cash from a business Shown on a cash flow statement Examples of cash outflows include: Buying materials Paying expenses Repaying loans Buying capital equipment Cash flow www.time2resources.co.uk Related words: Cash in Payments Credit purchases 123 ABC Closing balance The closing balance on a cash flow is the amount of money/cash left at the end of a period Opening balance + cash inflows – cash outflows = closing balance One month’s closing balance becomes the opening balance of the next period Cash flow www.time2resources.co.uk Related words: Cash flow statement Net cash flow 123 Opening balance ABC Contribution (Total) The total amount of money contributed first towards fixed costs and then profit from all goods sold Sales Revenue – Total Variable Costs = Total Contribution Can also be calculated as: Contribution per unit x number of units Related words: Contribution per unit Fixed costs www.time2resources.co.uk Break even point 123 ABC Contribution per unit The amount of money each unit sold contributes towards fixed costs and once breakeven has been achieved then contributes to profit Selling Price – Variable Cost (per unit) = Contribution per unit Contribution can be used to calculate the break even point Contribution www.time2resources.co.uk Related words: Fixed costs Break even point 123 ABC Copyright Copyright is a legal protection for anyone that has produced work in a range of areas, these include: Literature Drama Music Art Recordings Broadcasts It is illegal to use copyrighted work without the permission of the owner Related words: Legislation Patent Trademark www.time2resources.co.uk 123 ABC Corporate social responsibility CSR is a firm’s decision to accept responsibility to its stakeholders for its social, environmental and ethical actions A firm will produce a Corporate Social Report to set targets that will be used to meet its social responsibilities and to assess how far it has met previous targets Ethical factors www.time2resources.co.uk Related words: Carbon footprint Green working practices 123 ABC Credit purchases Purchases made by a business where they pay the supplier at a later date e.g. 30 days credit terms Credit purchases appear in the cash flow not in the month the goods are received but in the month the cash actually flows out of the business Cash out Cash flow www.time2resources.co.uk Related words: Cash flow statement 123 Payments ABC Credit sales Credit sales Sales made by a business where the customer’s payment is after the date of the sale e.g. they buy now but pay later Credit sales appear in the cash flow not in the month the sale is made but in the month when the cash actually flows into the business Cash in Cash flow www.time2resources.co.uk Related words: Cash flow statement Receipts 123 Credit purchases ABC Customer feedback A form of primary market research that involves collecting opinions directly from the customer Methods of collection include: Customer satisfaction survey Comment forms Data collection with registering a product e.g. warranty Market research www.time2resources.co.uk Related words: Primary market research 123 Survey Focus group ABC Debt The total value of money owed by a business Forms of debt include bank loans, overdraft and trade credit (money owed to suppliers) If a business can not cover its debts it may be forced to sell its assets A sole trader may be forced to sell personal assets to cover the businesses debts Related words: Unlimited liability Asset Sole trader www.time2resources.co.uk 123 Capital ABC Deed of partnership A legally binding agreement between two or more people who are in business together It describes how the partnership will be run and the rights and duties of the partners States basic information such as the business name and the names of the partners, the type of business and business address The deed will also set out money invested and how profits will be shared Partnership www.time2resources.co.uk Related words: Sleeping partner Limited liability 123 ABC Demand Demand shows the amount of goods or services that a consumer is willing and able to buy at a given price over a period of time. For a normal good as price falls demand will rise and vice versa Factors affecting demand include price, competitors’ actions, consumer incomes, the success of the firm’s marketing and seasonal factors Related words: Marketing Price Product www.time2resources.co.uk 123 ABC Demographic segmentation Demographic segmentation looks at the social and economic characteristics of customers and subgroups of the population Market researchers will then attempt to create a clear picture of the type of consumer that will make up these segments Examples might include age, sex or income Market segmentation www.time2resources.co.uk Related words: Geographic segmentation Demographics 123 Socio-economic group ABC Demographics Demography is the statistical study of human populations and demographic factors are those that influence these populations Firms will have to take into account population trends. These include: An increase in the global population size An increase in the average age of UK society Falling EU birth rates Social factors www.time2resources.co.uk Related words: Demographic segmentation 123 Socio-economic group ABC Dividends A percentage of profit paid to a share holder as a reward for their investment Ordinary shareholders are only paid a dividend if the business can afford it Higher dividends are paid to ordinary shareholders when the business has performed well Private limited company www.time2resources.co.uk Related words: Public limited company 123 Shareholders ABC Profit Division of labour Work is broken into small tasks and each employee is given responsibility for a single or limited number of tasks The employees become specialised in their task(s) Can be monotonous Often associated with flow production Related words: Factors of production Specialisation www.time2resources.co.uk 123 Flow production ABC Economic factors The economic environment consists of the key economic factors that influence the behaviour of businesses and their customers. These include: Interest Rates Exchange Rates Inflation Unemployment Economic Growth Recession Recovery www.time2resources.co.uk Related words: Employment Interest rate 123 Inflation ABC Exchange rate Effective service Customer service involves meeting or exceeding customer expectations Providing an effective service can be a business objective in its own right It will also help achieve other objectives such as sales and market share as satisfied customers are likely to return and spread positive word of mouth Related words: Business objectives SMART objectives Survival Profit Social benefit Sales Market share www.time2resources.co.uk 123 ABC Growth Employment The number of people who are actively engaged in work Employment creates wealth in the economy If employment is high more people have jobs and therefore money which is good for the demand of goods and services People, of working age, without jobs are classed as unemployed Economic factors www.time2resources.co.uk Related words: Recession Recovery Interest rate Exchange rate 123 ABC Inflation Environmental factors The variety of factors that impact on the environment due to the operations of organisations This will include how they impact on: The natural environment – the natural resources that firms exploit to produce goods and services The built environment – the man-made surroundings that provide the setting for the production of goods and services Issues include sources of energy, waste management, the use of eco-friendly products and organic produce Related words: Green consumerism Green working practices Carbon footprint Corporate social responsibility www.time2resources.co.uk 123 ABC Ethical The moral principles that support the decision making process for an entrepreneur and within the business Being ethical might mean that a business will have to pay more for its supplies and turn down profitable contracts However, it can act as a USP helping to attract customers A business may set an objective of behaving in an ethical way Related words: Business objectives Sustainable www.time2resources.co.uk Ethical factors 123 ABC Ethical factors The variety of factors that impact on the ethical behaviour of organisations Ethical factors are often influenced by the attitudes of society Factors include: Treating stakeholders fairly e.g. Employees, suppliers, customers Respecting the environment Supporting good causes Carbon footprint www.time2resources.co.uk Related words: Corporate social responsibility 123 Ethical ABC Exchange rates The value of a currency in terms of another e.g. £ : $ If a country is experiencing a strong exchange rate e.g. the £ is strong, then imports will be cheap and exports expensive SPICED (strong pound: imports cheaper, exports dearer) If a country is experiencing a weak exchange rate e.g. the £ is weak, then imports will be expensive and exports cheap WPIDEC (weak pound: imports dearer, exports cheaper) Economic factors www.time2resources.co.uk Related words: Recession Recovery Employment Inflation 123 ABC Interest rate External recruitment External recruitment occurs when candidates for a position are recruited from outside of the organisation This increases the talent available and provides new ideas However, it increases recruitment costs and can upset internal candidates Recruitment Related words: Internal recruitment Advertising www.time2resources.co.uk 123 Personal recommendations ABC Factors of production The inputs that go into creating goods and services The four factors of production are: Capital Entrepreneurial skill Land Labour Related words: Job production Batch production www.time2resources.co.uk Flow production 123 ABC Fixed costs Costs to a business that stay the same regardless of output Fixed costs include rent & rates, salaries and interest payments Fixed costs are shown as a horizontal line on a break- even chart Variable costs www.time2resources.co.uk Related words: Total costs Contribution 123 Contribution per unit ABC Flotation The process of becoming a public limited company by issues shares on a stock market Involves selling of a percentage of the business Benefits include access to capital and raising the business’ profile There are also additional responsibilities and costs Incorporation www.time2resources.co.uk Related words: Shareholders Stock exchange 123 Public limited company ABC Flow production A capital intensive production technique in which items flow along a production line in a continuous process Suitable for mass production Large scale Identical items Uses specialist machinery Workers are each responsible for a small step along the process, this involves: Specialisation and Division of Labour Job production www.time2resources.co.uk Related words: Batch production Factors of production 123 ABC Focus groups A method of primary market research in which a group of people are asked about their views, opinions and reactions towards an aspect of a business e.g. a product or service, advertisement, idea or packaging Allows the business to collect detailed feedback Questions are asked in a group environment where participants are able to share opinions Market research www.time2resources.co.uk Related words: Primary market research 123 Customer feedback ABC Friends and family A potential source of finance for small business May be a loan which is to be repaid or investment to help a new business cover start-up costs The money comes from a friend of the entrepreneur or family member Money available is likely to be limited Raising finance www.time2resources.co.uk Related words: Sole trader Capital 123 Unlimited liability ABC Full-time employee A person who is contracted to work over 30 hours per week for a business Full-time employees may be more committed towards their jobs and better able to take advantage of training and promotion opportunities Recruitment www.time2resources.co.uk Related words: Part-time employees 123 Retention ABC Geographic segmentation Defines market categories based on where people live e.g. regions, cities or neighbourhoods People in different geographical areas display different characteristics Many small businesses and business start-ups will target one geographical area at first and, if successful, expand into other areas Market segmentation www.time2resources.co.uk Related words: Demographic segmentation 123 Socio-economic group ABC Grants Financial support offered, normally by the Government, to entrepreneurs to ease the costs associated with start-ups Grants will normally be awarded to help fund a specific project or aspect of start-up Grants often do not need to be repaid and may be more accessible to not-for-profit or social enterprises Related words: Raising finance Sole trader www.time2resources.co.uk 123 Capital ABC Green consumerism Actions taken by customers to consider ethical and environmental factors when making buying decisions Actions can be positive e.g. Favouring organic produce or buying fair trade Or negative e.g. avoiding businesses involved in child labour or with poor environmental records Related words: Green working practices Environmental factors www.time2resources.co.uk 123 Ethical factors ABC Green working practices Actions taken by businesses to behave in an environmental and socially responsible manner Actions may include: Reducing carbon footprint Recycling waste materials Sustainable energy sources Reduced packaging Green consumerism www.time2resources.co.uk Related words: Environmental factors 123 Ethical factors ABC Growth A business objective often set for the medium to long term After a business has achieved survival and profit it may then set an objective of growth Growth can be measured by a number of factors including: Market share Market size Profit Number of employees www.time2resources.co.uk Related words: Business objectives SMART objectives Survival Profit Social benefit Sales Market share Effective service 123 ABC Health and safety Legislation that looks after the well being (Health &Safety) of employees in the workplace There are significant costs associated with H&S e.g. safety inspections and training Accidents in the workplace have been substantially reduced due to H&S Laws Laws include: 1974 Health and Safety at Work Act; 1981 Health and Safety Regulations; 1996 Health and Safety Regulations Legislation www.time2resources.co.uk Related words: Working conditions Minimum wage 123 ABC Human resource management The function within a business that relates to the management and strategies involved in dealing with individuals that make up the workforce HRM must ensure that there are enough employees with the required skills to maintain the running of the business on a day to day basis Recruitment www.time2resources.co.uk Related words: Retention Pay Training Working conditions Performance management 123 ABC Incorporation A business with a separate legal identity from its owners The business can own assets, have liabilities and make legally binding contracts in its own right Incorporated businesses include private and public limited companies Incorporation is the process of becoming incorporated Private limited company www.time2resources.co.uk Related words: Public limited company Shareholders 123 Flotation ABC Limited liability Induction training Introductory training for employees new to an organisation It provides staff with information that helps them to settle in and to understand the culture of a firm However, it will increase initial cost and is often less personal than training from immediate colleagues or supervisors Training www.time2resources.co.uk On the job Related words: Off the job Human resource management 123 ABC Inflation A general rise in prices or a fall in the value of money There are two main types of inflation: o Cost push – an increase in input prices e.g. raw materials and wages o Demand pull – an increase in demand allowing firms to raise prices There are two main measurements: o Retail Price Index (RPI) – a measurement of a ‘basket’ of goods and services representative of what people buy in the UK o Consumer Price Index (CPI) – similar to RPI but it excludes housing costs. The Government has set a target of 2% for CPI Economic factors www.time2resources.co.uk Related words: Recession Recovery Employment Exchange rate 123 ABC Interest rate Interest rate The cost of borrowing or reward for saving money Banks will charge businesses interest on bank loans and overdrafts High interest rates may encourage saving and discourage spending Economic factors www.time2resources.co.uk Related words: Recession Recovery Exchange rate Employment 123 ABC Inflation Internal recruitment Internal recruitment occurs when candidates for a position are recruited from within the organisation This will lower recruitment costs, improve promotion prospects and entail a quicker process However, it reduces talent available and limits the number of applicants available for a position Recruitment Related words: External recruitment Advertising www.time2resources.co.uk 123 Personal recommendations ABC Internet research The use of the world wide web to collect primary or secondary data Secondary sources could include the census for demographic data, company accounts of competitors or market intelligence reports Primary sources could include social network blogs for customer feedback or online surveys Market research www.time2resources.co.uk Related words: Secondary market research 123 Demographics ABC Interview This entails a question (and answer) session with a candidate, normally using the same questions for each candidate It is the most commonly used method of selecting an employee for a job Should be a two way process allowing the candidate to find out about the business and job as well as the employer assessing the suitability of the candidate Recruitment www.time2resources.co.uk Related words: Advertising Human resource management 123 ABC Job production The production of one off items to meet the needs of each individual customer Cheap and easy to set up, but more expensive to produce Often a specialist service and therefore may be able to charge a premium price Time consuming to produce; tend to be labour intensive Meet specific needs ofRelated customers words: Batch production www.time2resources.co.uk Flow production Factors of production 123 ABC Legislation Involves creating and enacting laws in order to protect individuals, firms and society as a whole Laws are passed through UK Acts of Parliament and the UK is also subject to EU law Legislation affecting businesses includes: Health and Safety Employment Law e.g. Minimum wage Copyright, trademarks and patents Health and safety www.time2resources.co.uk Related words: Minimum wage Copyright 123 Patent ABC Trademark Limited liability An investor’s liability/financial commitment is limited to the total amount invested or promised in share capital An investor’s personal belongings (assets) are protected This is one of the advantages of being a company rather than a sole trader Private limited company www.time2resources.co.uk Related words: Public limited company Unlimited liability Asset Incorporation 123 ABC Logistics The process of coordinating resources: Moving materials to the right place at the right time to meet production targets Moving finished goods to the right place at the right time to meet customer demands Important aspect of operational efficiency both during the production process and at the end to distribute goods Related words: Factors of production Resource control www.time2resources.co.uk 123 Effective service ABC Loss The deficit experienced by a business when total costs exceed total revenue A firm making a loss is likely to take action to try and reduce this, including raising prices or reducing costs Loss = Total Revenue – Total Costs (where TR<TC) Revenue www.time2resources.co.uk Related words: Total costs Profit Break even chart 123 ABC Loss leader A pricing tactic that involves selling products at or below the cost of making the product Loss leaders are commonplace in retailing. The idea is to entice the customer into the store in the hope that they will spend on other, full priced products Loss leaders are likely to be heavily advertised so that potential customers are aware of the low price Price Price skimming www.time2resources.co.uk Related words: Penetration pricing 123 Psychological pricing ABC Market mapping Plotting the key variables that differentiate products within the market against each other A variety of market conditions might be represented on the map to identify trends and the relationship between consumers and products e.g. the price of the product versus the quality of the product This can help a business identify problem areas or gaps in the product range that it produces Marketing www.time2resources.co.uk Related words: Market segmentation Product portfolio 123 ABC Market research The collection, collation and analysis of data and information regarding a particular market It can include both primary and secondary research It is very important in order to inform an organisation regarding their marketing mix Related words: Primary market research Secondary market research Questionnaires Focus groups Survey Supplier feedback Customer feedback Internet research www.time2resources.co.uk 123 ABC Market segmentation Market segmentation is the splitting of customers into categories in order to identify different types of consumer e.g. by age, gender, location or income Understanding of market segmentation allows a business to better target its marketing mix to meet the needs of its customers Related words: Geographic segmentation Demographic segmentation Socio-economic group www.time2resources.co.uk 123 ABC Market share The proportion of total market sales that a particular firm has Calculated as: Sales of firm / Total market sales x 100 A business with an objective of growth may take actions to increase market share e.g. increase promotion, change price, improve the product Related words: Business objective SMART objective www.time2resources.co.uk 123 Marketing ABC Marketing The management process that allows a firm to identify, satisfy and revisit the requirements of the customer (normally at a profit) Marketing involves carrying out market research, designing an integrated marketing mix and reviewing the competitiveness of the business Related words: Market segmentation Market research www.time2resources.co.uk 123 Marketing mix ABC Marketing mix The combination of the 4ps of marketing through which a firm achieves its marketing objectives The mix is the integration of: Product Price Place Promotion To be effective a marketing mix must be integrated i.e. each component must complement the others Product www.time2resources.co.uk Related words: Price Place Promotion 123 ABC Memorandum of association A formal document required to form a company and become incorporated Outlines details of the company’s activities and shareholders Is registered at Companies’ House Related words: Articles of association Private limited company Public limited company www.time2resources.co.uk 123 ABC Minimum wage The lowest amount of money a business can legally pay an employee From October 2012 the minimum wage in the UK is: £6.19 - the main rate for workers aged 21 and over £4.98 - the 18-20 rate £3.68 - the 16-17 rate for workers above school leaving age but under 18 £2.65 - the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship Source: http://www.direct.gov.uk Legislation www.time2resources.co.uk Related words: Pay Retention Working conditions 123 ABC Mortgage A long term source of finance where the loan is secured against a specific asset such as a house or building A mortgage is paid back with interest over a set period of time e.g. 25 years Failure to make payments can result in the secured asset being repossessed by the lender Raising finance www.time2resources.co.uk Related words: Bank loan Overdraft Capital 123 Interest rate ABC Net cash flow The balance of one month’s total cash inflows in relation to that month’s total cash outflows Cash Inflows – Cash Outflows = Net Cash Flow Shown on a cash flow forecast and cash flow statement Cash flow www.time2resources.co.uk Cash in Related words: Cash out Opening balance Closing balance 123 ABC Off the job training Any form of education, to improve an employee’s performance at work, that takes place away from the workplace Specialists can deliver a higher quality of training for workers However, this can be expensive Training On the job www.time2resources.co.uk Related words: Induction training Human resource management 123 ABC On the job training Any form of education, to improve an employee’s performance at work, that takes place within the workplace This can be cost effective, often being delivered by people from within the organisation Might not be as good quality as external training but will be specific to the business Training Related words: Induction training Off the job Human resource management www.time2resources.co.uk 123 ABC Opening balance The opening balance on a cash flow is the amount of money/cash left at the end of the previous period Opening Balance + Cash Inflows – Cash Outflows = Closing Balance One month’s closing balance becomes the opening balance of the next period Cash flow www.time2resources.co.uk Related words: Cash flow statement Net cash flow 123 Closing balance ABC Overdraft The facility to borrow money, normally from a bank, in the short term An overdraft can be used to help short term cash flow problems Interest is payable on the amount overdrawn Raising finance www.time2resources.co.uk Related words: Bank loan Capital Closing balance 123 ABC Interest rate Partnership When two or more people join together to set up a business as a partnership Each partner will contribute towards start up costs and be involved in decision making Each partner would normally have unlimited liability Unlimited liability www.time2resources.co.uk Related words: Deed of partnership 123 Sleeping partners ABC Part-time employee A person who is contracted to work less than 30 hours per week for a business Part-time employees can offer greater flexibility to a business and may be a more affordable option for a new business Related words: Human resource management Full-time employees www.time2resources.co.uk 123 Working conditions ABC Patent A patent grants the holder, an individual or business, the sole right to use unique features of a new product or process It gives the holder the right to stop others from making, using, importing or selling the innovation or invention without prior permission Legislation www.time2resources.co.uk Related words: Copyright Trademark Unique selling point 123 ABC Pay The monetary reward given to employees in return for their services Pay can serve to motivate employees Pay can be in the form of a wage or salary and can also include bonuses, performance related pay or commission In the UK there is a minimum rate of pay known as the minimum wage Related words: Human resource management Retention Minimum wage www.time2resources.co.uk 123 Working conditions ABC Payments Any money flowing out of the business to purchase equipment or meet day to day expenses e.g. wages and raw materials Payments are shown as a cash outflow on a cash flow statement Payments may be made in cash i.e. at the time of the transaction or on credit i.e. after the transaction Cash flow www.time2resources.co.uk Related words: Cash flow statements Cash out 123 Credit purchases ABC Penetration pricing Setting a low initial price for a new product in order to get a foothold in the market and gain market share Once the product has been launched and built up a customer base the firm may raise the price May be a suitable pricing strategy for entering into a mass market Price www.time2resources.co.uk Related words: Price skimming Loss leader Psychological pricing 123 ABC Performance management Activities taken by management to measure how effectively employees are carrying out their duties Performance management or appraisal takes place to look at the performance of staff over a period of time Management will review performance against agreed targets Sometimes pay is partly based on performance (Performance Related Pay) Allows the firm to identify problem Related words:areas with staff and take action resource to reduce these problems Human management Working conditions Pay Retention www.time2resources.co.uk 123 ABC Personal recommendation A form of recruitment where an existing employee suggests a personal contact for a vacancy Friends can act as a reference for new employees as they have an insight into the skills or integrity of a potential new recruit A cheap form of recruitment Recruitment www.time2resources.co.uk Related words: Internal recruitment External recruitment 123 ABC Advertising Place The component within the marketing mix that defines both the physical location where a product is available as well as the distribution channel it has travelled through, from manufacturer to consumer Intermediaries (middle men) within the distribution channel include wholesalers and retailers Related words: Marketing mix Wholesaler www.time2resources.co.uk 123 Retailer ABC Political factors The political environment consists of the key political factors that influence the behaviour of businesses and their customers. These include: The provision of products by the Government Government actions Regulation Taxation Subsidies Enlargement of the EU Economic factors www.time2resources.co.uk Related words: Legislation Environmental factors 123 ABC Price The component within the marketing mix that defines the amount of money that is paid for a good or service by the customer A business may try to compete on price by using tactics such as penetration pricing or loss leader Loss leader www.time2resources.co.uk Related words: Price skimming Penetration pricing Marketing mix 123 Psychological pricing ABC Price skimming Setting a high initial price for a new product in order to recoup high development costs When a firm releases a new product it may charge a high price targeting a segment of the market known as ‘early adopters’, once this market has been ‘skimmed off’ the business may lower price Firms may base their initial promotional campaign around this idea, trying to create a ‘must have’ mentality amongst their target market Price Loss leader www.time2resources.co.uk Related words: Penetration pricing 123 Psychological pricing ABC Primary market research Primary market research (field research) involves the collection of first hand data that did not exist before Therefore it is original data It is collected for the specific needs of the business Examples include questionnaires and focus groups Market research www.time2resources.co.uk Related words: Secondary market research Survey Questionnaire 123 ABC Focus group Private limited company (ltd) An incorporated business that is owned by shareholders who tend to be family and friends of the entrepreneur (s) Shareholders in the business have limited liability The company must have Ltd after its name Related words: Limited liability Public limited company Shareholders Memorandum of association Articles of association Dividend www.time2resources.co.uk 123 ABC Product portfolio This looks at the range of products and brands that a firm has under its control A business may analyse its portfolio to help identify where every single one of its products is positioned in the market Helps inform future marketing decisions Marketing www.time2resources.co.uk Related words: Product Unique selling point 123 ABC Product The component of the marketing mix that looks at the goods and services that a firm provides Goods are physical or tangible products, you can touch them e.g. a car or a television. Services are unphysical or intangible, they cannot be touched e.g. financial consultancy or teaching Firms may try to make their products stand out from the competition by having a unique feature (a USP) Marketing mix www.time2resources.co.uk Related words: Product portfolio Unique selling point 123 ABC Profit The surplus money made by a business when total revenue exceeds total costs Calculated as: Total Revenue – Total Cost A firm may attempt to increase profit by: Reducing costs e.g. Find a cheaper supplier Increase revenue e.g. Introduce new promotions or short term pricing tactics Related words: Business objective Revenue Total cost www.time2resources.co.uk 123 Loss ABC Promotion This is that part of the marketing mix that informs and persuades customers about the product in order to sell that product A firm will look at its promotional mix in order to increase the sales of its products Promotion is designed to create Awareness, Interest, Desire and Action (AIDA) Related words: Marketing mix Promotional mix www.time2resources.co.uk 123 Demand ABC Promotional mix The combination of promotional activities that a firm uses in order to create consumer awareness and generate sales The promotional mix includes: Public Relations Branding Sales Promotions e.g. 3 for 2 Direct Selling Advertising Related words: Marketing mix Promotion www.time2resources.co.uk 123 Demand ABC Psychological pricing A pricing tactic designed to make the consumer think that the product is cheaper than it actually is hence enticing the customer into making a purchase A common example of psychological pricing is when a firm charges £9.99 rather than £10.00 Price www.time2resources.co.uk Related words: Price skimming Penetration pricing 123 Loss leader ABC Public limited company (plc) An incorporated business that is able to sell shares on the stock exchange Shareholders in the business have limited liability The business must have a minimum of £50,000 in share capital and ‘plc’ after its name Related words: Limited liability Private limited company Shareholders Memorandum of association Articles of association Dividend www.time2resources.co.uk 123 ABC Quality Quality means the ability of a product or service to meet customers’ expectations Customers’ interpretation of quality may be influenced by a number of factors including: Price Brand Customer’s personal expectations and experiences Nature of product or service Related words: Quality control Quality assurance Quality standards Total quality management www.time2resources.co.uk 123 ABC Quality assurance The checking of a product or service at each stage of its production e.g. as it travels along a production line Aims to avoid mistakes by getting the product right first time It is reliant upon self-checking It can be an expensive process Related words: Quality control Quality Quality standards Total quality management www.time2resources.co.uk 123 ABC Quality control The checking of a good or service before it is delivered to a customer i.e. at the end of the production process It normally relies on an inspection process As the product is only checked at the end it can lead to a high amount of waste Related words: Quality Quality assurance Quality standards Total quality management www.time2resources.co.uk 123 ABC Quality standards A system of accreditation that a firm can use to show that they have procedures in place to achieve a certain level of quality The emphasis of the standards is on the implementation of quality processes and procedures Examples include: ISO9000 Kite marks Quality control www.time2resources.co.uk Related words: Quality assurance Quality Total quality management 123 ABC Questionnaires A form of primary market research that involves a set of predetermined questions to be answered by the respondent May include open and closed questions, but primarily closed i.e. choosing from a number of possible answers rather than writing freely A relatively easy way to collect consumer opinions Market research www.time2resources.co.uk Related words: Primary market research Survey 123 Customer feedback ABC Raising finance The options available to a business when seeking to raise funds to support start-up or future growth Finance may take internal or external forms: Internal sources of finance include: Retained profits that can be ploughed back into the business External sources of finance include: Bank overdrafts and loans, family and friends, shareholders, government grants Bank loan www.time2resources.co.uk Overdraft Related words: Mortgage Friends and family Grants 123 ABC Receipts Any money flowing into the business from the sale of goods or services or from investments Receipts are shown as a cash inflow on a cash flow statement Receipts may be received in cash i.e. at the time of the transaction or on credit i.e. after the transaction Cash flow www.time2resources.co.uk Related words: Cash flow statement Cash in Credit sales 123 ABC Recession • The rate of economic growth starts to fall due to a downturn • The Government state that recession is officially two quarters of negative economic growth • Characterised by: Falling demand o Unemployment begins to rise and some firms will go out of business o Confidence in the economy is low and most firms will reduce investment o Economic factors www.time2resources.co.uk Related words: Recovery Employment Exchange rate 123 Interest rate ABC Inflation Recovery The rate of economic growth starts to rise due to an upturn in economic activity • Characterised by: Rising demand o Unemployment begins to falls o Confidence in the economy is high and some firms will start to invest in expansion plans o Economic factors www.time2resources.co.uk Related words: Recession Employment Exchange rate 123 Interest rate ABC Inflation Recruitment The steps undertaken by a business to identify a vacancy and attract suitable candidates This can be internal or external recruitment Effective recruitment is an important aspect of achieving operational efficiency Related words: Internal recruitment External recruitment Advertising Personal recommendations www.time2resources.co.uk 123 ABC Resource control The process of ensuring all the factors of production are coordinated effectively to meet operational objectives Resources include: Labour Equipment Land Stock Logistics Related words: Assets Human resource management www.time2resources.co.uk 123 Factors of production ABC Retailer An organisation that sells goods or services to the general public or end user Retailers are at the end of the channel of distribution They can act as an intermediary between producers, wholesalers and the consumer Related words: Marketing mix Place Wholesaler www.time2resources.co.uk 123 ABC Retention The ability to keep workers High retention means that there is an established workforce who are staying with the business for a long period of time Because labour turnover is low this saves on recruitment and training costs Related words: Human resource management Recruitment Pay Working conditions Performance management www.time2resources.co.uk 123 ABC Revenues The money coming into a business from the sale of goods or services Calculated as: Selling price x quantity sold For a business to make a profit total revenue must be higher than total costs Total costs www.time2resources.co.uk Profit Related words: Loss Break even point 123 Break even charts ABC Sales The process of selling goods and services to customers in exchange for money Sales generate revenue for a business A business may set an objective to achieve ‘x’ amount of sales within ‘y’ amount of time Individuals within a business may also be set sales targets Related words: Business objectives SMART objectives Survival Profit Social benefit Market share Effective service www.time2resources.co.uk 123 ABC Growth Secondary market research Secondary market research (desk research) is research that has already been undertaken by another organisation and therefore already exists It may not meet the exact needs of the business but is often more comprehensive than small scale primary research Examples include business accounts, market intelligence reports and census figures Market research www.time2resources.co.uk Related words: Primary market research 123 Internet research ABC Shareholders Investors who are part owners of a company Shareholders will receive a dividend, a share of the profit, in return for their investment Shareholders have a voting right proportional to the number of shares held Liability is limited to the sum invested Limited liability www.time2resources.co.uk Related words: Private limited company Dividend Public limited company 123 ABC Sleeping partners A person who has invested in a partnership but is not involved in the day to day running of it May still be involved in major decisions and will enjoy a share of the profits Partnership www.time2resources.co.uk Related words: Deed of partnership 123 Capital ABC SMART objectives An acronym used to frame the goals of a business Smart objectives will be: Specific – clearly set out so employees understand what the objective is Measureable – to know when the objective is achieved Achievable – a belief that objectives are attainable Realistic – employees should be able to carry out tasks to meet the objective Time-based – setting a target date Related words: Business objectives Survival Profit Growth Social benefit Sales Market share Effective service www.time2resources.co.uk 123 ABC Social benefit An objective to provide support for a good cause This may include: Charity Community Research A social enterprise will use all profits for social benefit A profit orientated business may have an objective of supporting a social benefit Related words: Business objectives SMART objectives Survival Profit Sales Market share Effective service www.time2resources.co.uk 123 ABC Growth Social factors Changes to the characteristics and attitudes of society over time A business should be aware of trends in social factors and be able to change the composition of its marketing mix in order to meet the needs of a changing market Possible changes resulting from social trends include: Ethical trading Sourcing of sustainable materials Demographics Reduction/recycling of packaging Online retailing Retailer purchasing power www.time2resources.co.uk Related words: Demographics Demographic segmentation Socio-economic group 123 ABC Socio-economic group A way of dividing the population into groups based on the income of the head of the household. This is used for market research purposes A – Higher managerial e.g. company directors B – Intermediate managerial e.g. bank manager C2 – Supervisory and junior management D – Skilled manual e.g. plumbers, electricians etc. E – Dependent on the state e.g. unemployed, pensioners etc. A way of targeting a market segment based on people’s lifestyle Related words: Market segmentation Demographic segmentation Geographic segmentation www.time2resources.co.uk 123 ABC Sole trader An individual who owns and runs their own business A sole trader has unlimited liability and is therefore responsible for all the debts of the business A sole trader is unincorporated i.e. The sole trader and the business have the same legal identity Unlimited liability www.time2resources.co.uk Related words: Capital Asset Debt 123 Friends and family ABC Specialisation An employee, as a result of division of labour, performs a single or limited number of tasks in which they become experts/specialists Can result in greater efficiency and hence lower the cost of production Often associated with flow production Related words: Factors of production Division of labour www.time2resources.co.uk 123 Flow production ABC Stock exchange The place where shares of companies can be traded, provides a market place for brokers and traders When a business becomes a PLC it floats its shares on the stock exchange Public limited company www.time2resources.co.uk Related words: Incorporation Flotation 123 Shareholders ABC Supplier feedback A form of primary market research that involves gathering data from a supplier of goods and services This may be a retailer, for example, who has dealt directly with the public and can feed back to the manufacturer Related words: Market research Primary market research www.time2resources.co.uk 123 Customer feedback ABC Survey A form of primary market research that involves a set of predetermined questions to be answered by the respondent Normally questions are short and closed Often provides respondents with options to choose from Surveys can be: Postal Telephone Face–to-face On-line www.time2resources.co.uk Related words: Market research Primary market research Questionnaire Customer feedback 123 ABC Survival Business objectives focussed on ensuring that a business maintains operations This is the most important objective for a start-up business In order to survive a business must maintain a positive cash flow In the short term a business can survive if making a loss as long as it has a positive cash flow Related words: Business objectives SMART objectives Profit Growth Social benefit Sales Market share Effective service www.time2resources.co.uk 123 ABC Sustainable A business objective of behaving in an environmentally and socially responsible manner will include an objective of using sustainable resources i.e. those that will be available for a continued period of time Sustainable actions are linked to green working practises, for example, this may include using wind or solar power Business objectives www.time2resources.co.uk Related words: Environmental factors Ethical factors 123 Green consumerism ABC Technological factors The technological environment consists of the key technological factors that influence the behaviour of businesses and their customers Technological change will impact on: Marketing opportunities The culture of the business The processes and systems used within the business Organisations must take into account changes in technology if they are to remain competitive Related words: Social factors Flow production www.time2resources.co.uk 123 Training ABC Total costs All of the costs associated with the provision of a good or service Total Costs = Fixed Costs + Variable Costs In order for a business to achieve a profit total revenue must be higher than total costs Variable costs www.time2resources.co.uk Related words: Fixed costs Contribution Contribution per unit Break even chart Break even point 123 ABC Revenue Total quality management TQM is a quality assurance system in which each employee is a link in the chain and treats the next link as if they were an external customer TQM sees quality as the responsibility of all employees Quality Quality assurance www.time2resources.co.uk Related words: Quality standards Resource control 123 ABC Training Trade marks A trademark protects a feature that distinguishes your business from others. It might include: Words Pictures Logos Colours or shapes It can be used as a marketing tool so that customers can recognise your business and helps build brand loyalty Related words: Legislation Patents Copyright www.time2resources.co.uk 123 ABC Training The process of equipping employees with the skills and knowledge necessary to carry out their job effectively Types of training include induction, off-the-job and on-the-job Induction training www.time2resources.co.uk Related words: On the job Off the job Human resource management 123 ABC Unique selling point A USP is something that distinguishes a firm’s product from those of its competitors Firms try to make their product different to the competition by adapting the actual product in some way or by distinguishing the product through advertising and branding This is known as product differentiation Marketing www.time2resources.co.uk Related words: Product Product portfolio Patent 123 ABC Unlimited liability The owners of a business are responsible for the total amount of debt of the business The owner may lose their personal belongings if the value of these is needed to cover the debts of the business Personal belongings could include car and house Limited liability www.time2resources.co.uk Related words: Sole trader Partnership Asset Debt 123 ABC Variable costs Costs to a business that change in relation to output Variable costs include materials, wages and distribution Variable costs are shown as a diagonal line from the origin on a break even chart Fixed costs www.time2resources.co.uk Related words: Total costs Contribution Contribution per unit 123 ABC Wholesaler Wholesalers buy large quantities of supplies from producers and sell them on in smaller quantities They act as an intermediary (middle man) between manufacturers and retailers and consumers in the distribution channels Related words: Marketing Place Retailer www.time2resources.co.uk 123 ABC Working conditions The characteristics of the environment in which employees work and the way in which they are treated by the employer Conditions will include: physical considerations e.g. facilities monetary rewards e.g. pay management styles training opportunities Pay www.time2resources.co.uk Retention Related words: Training Human resource management 123 ABC