Business

Front 1

1.1 (1)Definition:

-Businesses

-Capital

-Division of labour

Back 1

Businesses: organizations that are involved in the production of goods and/or provision of services

Capital: all non-natural resources used in the production process.

Division of labour: specialization of workers in the provision of goods and/or services by breaking a job down into particular roles or components & repeated by same workers.

Front 2

1.1 (2)Definition:

- Entrepreneurs

- Factors of production

- Functional areas

Back 2

Entrepreneurs: people who manage, organize and plan the other 3 factors of production.

Factors of production: inputs (or resources) necessary for the production process: land, labour, capital and enterprise.

Functional areas: refer to different sections of a business. e.g. marketing, production, finance & human resources departments.

Front 3

1.1 (3) Definition:

- Industrialization

- Labour

- Land

Back 3

Industrialization: process experienced by a country that moves away from primary production towards manufacturing as its principal sector national output and employment.

Labour: physical and mental human effort used in the production process.

Land: natural resources found on planet. Renewable and non-renewable natural resources: water, fish, wood and physical land itself.

Front 4

1.1 (4) Definition:

- Opportunity Cost

- Primary Sector

- Private Sector

Back 4

Opportunity Cost: cost measured in terms of next best alternative that is foregone when a choice is being made, e.g. money today can be either spent for immediate benefit or saved for the future.

Primary Sector: businesses involved in cultivation or extraction of natural resources, farming, mining, quarrying, fishing

Private Sector: part of the economy under the control of private individuals and businesses, rather than the government. E.g. Sole traders, partnerships, companies.

Front 5

1.1 (5) Definition:

- Public Sector

- Secondary Sector

- Structural Change

Back 5

Public Sector: part of economy under control of government. E.g. state health & education services, emergency services & national defence.

Secondary Sector: section of economy where business activity is concerned with the construction and manufacturing of physical products.

Structural change: shift in relative share of national output and employment that is attributed to each business sector. i.e. primary, secondary, tertiary.

Front 6

1.1 (6) Definition:

- Tertiary Sector


- Value Added

Back 6

Tertiary Sector: section of the economy where business activity is concerned with provision of services to customers.

Value Added: difference between a product's price and total cost of inputs that went into making it.

Front 7

1.1 Types of products:

-Consumer Goods

-Capital Goods/Producer Goods

-Services

Back 7

Consumer goods: products sold to general public, rather than to other businesses. Split into either consumer durable goods (long time) or non-durable goods (need to be consumed very shortly)

Capital Goods/ Producer Goods: products purchased by other businesses. E.g. Machinery.

Services: intangible products provided by businesses. Service is not tangible, results are. Services: health care, transportation, food, recreation, legal advice, education.

Front 8

1.1 Definition:

-Specialization

Back 8

Specialization: business concentrates on the production of a particular good or service or a small range of similar products.

Front 9

1.1
Advantages & Disadvantages
of Specialization

Back 9

Advantages:
- Increased productivity
- Increased efficiency
- Standardization
- Higher profit margins

Disadvantages:
- Boredom
- Inflexibility
- Lack of autonomy
- Capital Costs

Front 10

5.8 (1) Definition:

- Critical Path

- Critical Path Analysis (CPA)

Back 10

Critical Path: most efficient sequence of activities in a project which minimizes the time needed to compete a project. (double striking '//' critical activities)

Critical Path Analysis: project management tool, serves to improve efficiency in production process by systematically scheduling tasks and resources. Purpose: identify the minimum amount of time needed to complete a project.

Front 11

5.8 (2) Definition:

- Dummy Activity

- Earliest Start Time (EST)

- Float

Back 11

Dummy activity (dummy variable): logical dependency between 2 indirectly linked tasks in a project. Used to prevent illogical path from being followed and shown by dotted line on network diagram

Earliest Start Time (EST): particular activity can begin. Top right hand part of node. EST depend on duration of all previous activities.

Float: spare time (if any) that is available. Gathered by looking at the difference between EST and LFT for each activity.

Front 12

5.8 (3) Definition:

- Latest Finishing Time (LFT)

- Nodes

- Project Management

Back 12

Latest Finishing Time (LFT): deadline for a particular acitvity so that entire project can be completed in minimum time. Shown bottom right-hand part of network node.

Nodes: appear on network diagram and show start and finish times of each activity within a project. Each node if numbered to identify sequence of activities in project.

Project Management: involves planning and coordination of variety of different jobs and tasks in particular project. Important when dealing with large assignments and developments.

Front 13

5.7 (1) Definition:

- Buffer Stock

- Capacity Utilization

Back 13

Buffer Stock: minimum stock level held by a business in case there are any unexpected occurrences, such as late deliveries of raw materials or sudden increase in demand for firm's product.

Capacity Utilization: measures existing level of output of firm as proportion of its total potential output. High Capacity Utilization means that output level is close to firm's maximum limit (productive capacity).

Front 14

5.7 (2) Definition:

- Cost-benefit analysis

- Electronic Point of Sale (EPOS)

Back 14

Cost-benefit analysis: financial decision-making tool. Compares financial costs of a decision with quantitative benefits of that a decision.

Electronic Point of Sale (EPOS): computerized system that automatically keeps running balance of stock levels and re-orders them as and when necessary.

Front 15

5.7 (3) Definition:

- Just-in-case

- Just-in-time

- Lead time

Back 15

Just-in-case: traditional stock management system that recognises the need to maintain large amounts of stock in case there are any emergencies (delayed deliveries) or supply and demand fluctuations.

Just-in-time: stock control system, materials and components scheduled to arrive precisely when they are needed in production process.

Lead time: measures amount of time between placing order and receiving stock. Longer lead time, higher buffer stocks.

Front 16

5.7 (4) Definition:

- Make-or-buy

- Maximum stock level

- Minimum stock level

Back 16

Make-or-buy: situation where a firm has to decide between manufacturing a product and purchasing it from a supplier.

Maximum stock level: upper limit of inventories that a business wishes to hold at any point in time.

Minimum stock level: least amount of inventories that a business wishes to hold. For most businesses, minimum is above zero, precautionary measure.

Front 17

5.7 (5) Definition:

- Offshoring:

- Optimum stock level
(economic order quantity)

- Outsourcing (subcontracting)

Back 17

Offshoring: extension of outsourcing by using an overseas firm in another country as subcontractor

Optimum Stock Level: best inventory level for a firm, ensures that there are sufficient stocks for production to take place without any interruptions, allow firm to incur only minimal costs.

Outsourcing: practice of using external firms to provide goods or services as method of reducing costs. Subcontractors able to carry out outsourced work for less than the business would able to, without compromising quality.

Front 18

5.7 (6) Definition:

- Productive capacity

- Reorder level

- Reorder quantity

Back 18

Productive capacity: maximum output of a firm if all its resourced were fully and efficiently employed.

Reorder level: desired level of stock when new order must be placed. Since time lag between placing order and delivery, reorder level helps prevent production problems arising from lack of stock.

Reorder quantity: amount of new stock ordered. Seen from stock control chart and calculated by difference between maximum and minimum stock levels.

Front 19

5.6 (1) Definition:

- Copyright

- Cost-reducing innovation

- Diffusion of innovation

Back 19

Copyright: provide legal protection, finite period of time, preventing others from using or plagiarizing published work without permission.

Cost-reducing innovation: improved processes that reduce costs of production for business or industry

Diffusion of innovation: Everett Roger's theory shows various points at which individual groups of consumers become involved with technological innovation.

Front 20

5.6 (2) Definition:

- Incremental innovation

- Intellectual property rights (IPR)

- Innovation

Back 20

Incremental innovation: minor improvements to products or work processes.

Intellectual property rights: legal rights to exclusive ownership of certain inventions or pieces of work.E.g patents, copyright, registered trademarks.

Innovation: commercial development, use and exploitation of an invention or creative idea that appeals to customers.

Front 21

5.6 (3) Definition:

- Patents

- Process Innovation

- Product Innovation

Back 21

Patents: provide legal protection, finite period of time, to registered producer or user of a newly invented product or process.

Process Innovation: changes to way production takes place.

Product Innovation: new creations or development and improvement of existing products.

Front 22

4.6 (1) Definition:

- Agents (brokers)

- Channels of distribution:

- Direct Mail

Back 22

Agents: negotiators who helps to sell vendor's products, such as real estate agents selling residential property on behalf of clients.

Channels of distribution: ways that product gets from manufacturer to consumer. E.g wholesalers, agents, retailers, e-commerce and vending machines.

Direct Mail: promotional material sent directly to people's homes or place of work.

Front 23

4.6 (2) Definition:

- Direct Marketing

- Distribution

- Distributors

Back 23

Direct Marketing: any promotional activity involves making direct contact with existing and potential customers, such as door-to-door selling, personal selling and direct mail.

Distribution: process of getting products to customers at right time and place in most cost-effective way.

Distributors: independent businesses act as intermediaries by specializing in trade of products made by certain manufacturers.

Front 24

4.6 (3) Definition:

- Intermediaries

- Supply Chain Management (SCM)

Back 24

Intermediaries: agents or firms that act as a middle person in chain of distribution between the producer and consumers of product. E.g. Retailers, distributors and agents.

Supply Chain Management: art of managing and controlling sequence of activities from production of a good or service to its delivery to end customer, cost-effective way.

Front 25

4.6 (4) Definition:

- Telesales (telemarketing)

- Retailers

- Wholesalers

Back 25

Telesales: use of telephone systems to sell products directly to potential customers.

Retailers: sellers of products to general public (i.e. consumers) operate in outlets.

Wholesalers: businesses that purchase large quantities of products from manufacturer and then separate or 'break' the bulk purchase into smaller units for resale to retailers.

Front 26

4.7 (1) Definition:

- Business Etiquette

- Direct Investment

Back 26

Business Etiquette: manner, social and cultural context in which business is conducted. International etiquette differs from one country to another so it is important for marketers to be aware of different protocols that exist.

Direct Investment: business setting up production and/or distribution facilities in foreign countries.

Front 27

4.7 (2) Definition:

- Exporting

- Global Marketing

- International Marketing

Back 27

Exporting: practice of selling domestically produced goods and/ or services to overseas buyers to gain access to larger international markets.

Global Marketing: marketing of a product by using same marketing strategy in various countries. Businesses are able to do this -gain from marketing economies of scale.

International Marketing: marketing of a firm's products in foreign countries.

Front 28

4.8 (1) Definition:

- B2B (business-to-business)

- B2C (business-to-consumer)

- Click and Mortar ('brick and click')

Back 28

B2B: online trade conducted directly for the business customers rather than the end-user. E.g. Amazon.com supply books to other book retailers

B2C: online business conducted directly for the end-user (consumer). E.g. Amazon.com selling books directly to private individuals

Clicks and mortar: businesses that combine the traditional main-street existence with an online presence.

Front 29

4.8 (1) Definition:

- E-Commerce (electronic commerce)

- E-tailers

Back 29

E-commerce: trading of goods and services via internet.

E-tailers: businesses that operate predominately online, such as Ebay, Amazon and Google. Different to retailers that operate physical stores in shopping mail and physical outlets.

Front 30

4.8 (2) Definition:

- Online presence

- Spam

Back 30

Online presence: business has dedicated website for e-commerce, provide information about business and its products or services. Having large online presence means that business is featured on major search engines and customers can browse and purchase online with need to visit outlet.

Spam: unsolicited and superfluous marketing messages via email. Purpose: advertise firm's products, although this method is seen as unethical.

Front 31

5.3 (1) Definition:

- Break-even chart

- Break-even point

- Break-even quantity (BEQ)

Back 31

Break-even chart: name given to graph that shows a firm's costs, revenues and profits (or losses) at various levels of output.

Break-even point: position on break-even chart where total cost line intersects the total revenue line. i.e. where TC = TR

Break-even quantity: level of output that generates neither any profit nor loss. shown on the x-axis on a break even chart.

Front 32

5.3 (2) Definition:

- Contribution per unit (unit contribution)

- Margin of Safety (Safety margin)

Back 32

Contribution per unit: used to work out break-even quantity. Unit contribution is difference between selling price of a product and its variable costs of production. Surplus goes towards paying fixed costs of production.

Margin of safety: difference between firm's level of demand and its break-even quantity. Positive safety margin means firm can decrease output (sales) by that amount without loss. Negative safety margin means firm is making a loss.

Front 33

5.3 (3) Definition:

- Profit

- Special Order Decision

Back 33

Profit: positive difference between product's revenues and its costs at each level of output. On break-even chart, profit can be seen to the right of the break-even quantity.

Special Order Decision: unique and/or unusual orders for which a customer will pay a price that differs from the norm.

Front 34

5.2 (1) Definition:

- Average Cost

- Average Revenue

Back 34

Average Cost: amount a firm spends on producing one unit of output. Calculated by dividing the total costs of production by the quantity produced, or by adding up the average fixed costs and average variable costs.

Average Revenue: found by dividing a firms total revenue by its level of output. Sam as the price charged since average revenue is amount of money received for each unit sold.

Front 35

5.2 (2) Definition:

- Contribution

- Contribution per unit

- Cost Centres

Back 35

Contribution: difference between sales revenues and total variable costs. Difference is then used to contribute towards payment of fixed costs. One all costs, fixed and variable are covered firm has made profit.

Contribution per unit: found by dividing the contribution of a firm by its sales level (using formula Price - AVC). Works out contribution made by selling a single unit of a product.

Cost Centres: clearly identifiable autonomous parts of an organization for which costs can be attributed.

Front 36

5.2 (3) Definition:

- Direct Costs

- Fixed Costs

- Indirect Costs ( Overheads)

Back 36

Direct Costs: those that are directly linked to production of a specific product.

Fixed Costs: costs that do not vary with the level of output. Exist even if there is no output, cost of rent, management salaries and interest repayments on bank loans.

Indirect Costs: costs which do not directly link to production or sale of specific product. E.g. Rent, management salaries, cleaning staff wages and lighting.

Front 37

5.2 (4) Definition:

- Profit Centres

- Revenue

- Semi-Variable Costs

- Variable Costs

Back 37

Profit Centres: identifiable autonomous divisions of an organization for which both costs and revenues can be worked out.

Revenue: money that a business collects from the sale of its goods and services. Calculated by multiplying the unit price of each product by the quantity sold.

Semi-Variable Costs: those that have elements of both fixed costs and variable costs. E.g. power and electricity.

Variable Costs: those that change in proportion to the level of output, such as raw materials and piece-rate earnings of production workers.