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A
Adding value
The process of increasing the worth of a product so the selling price is higher than the cost of materials. Businesses add value through branding, quality, design, convenience, and unique features.
Unit 1
Assets
Items of value owned by a business. Current assets (cash, stock, debtors) can be converted to cash within a year. Non current assets (buildings, vehicles, equipment) are held for longer term use.
Unit 5
Automation
The use of machines and technology to carry out tasks previously done by humans. Automation can reduce costs, improve consistency, and increase productivity, but may reduce the need for manual labour in production.
Unit 4
B
Batch production
A method of production where a group of identical products is made together at each stage before moving to the next stage. Examples include bakeries producing batches of bread or clothing in different sizes.
Unit 4
Boston Matrix
A portfolio analysis tool used to categorise products based on market growth rate and relative market share. It identifies products as stars, cash cows, problem children, or dogs to guide investment decisions.
Unit 3
Brand
A name, symbol, design, or combination that identifies a business's products and distinguishes them from competitors. A strong brand builds customer loyalty and can allow premium pricing.
Unit 3
Break even
The point at which a business's total revenue equals its total costs, meaning it is making neither a profit nor a loss. Any sales above break even generate profit.
Unit 4
Buffer stock
The minimum amount of stock a business keeps in reserve to ensure it does not run out if there is an unexpected increase in demand or a delay in deliveries.
Unit 4
Business cycle
The pattern of economic growth and decline that an economy goes through over time. The four stages are boom (high growth), recession (declining growth), slump (low point), and recovery (growth returning).
Unit 6
Business objectives
The specific, measurable targets a business sets to achieve its aims. Common objectives include survival, profit, growth, market share, and customer satisfaction.
Unit 1
Business plan
A formal document that outlines a business idea, market analysis, financial projections, marketing strategy, and operational plans. It is used to secure funding and provide a roadmap for the business.
Unit 1
C
Cash flow forecast
A prediction of the expected cash inflows and outflows over a future period, usually month by month. It helps businesses plan ahead and identify potential cash shortages.
Unit 5
Centralisation
When decision making is kept at the top of the organisation by senior managers. This gives greater control but can slow down decisions.
Unit 2
Chain of command
The line of authority within a business, showing who reports to whom. It runs from the most senior person at the top to the newest employee at the bottom.
Unit 2
Collective bargaining
The process where trade union representatives negotiate with employers on behalf of a group of workers, rather than each worker negotiating individually.
Unit 2
Communication barriers
Factors that prevent effective communication in a business, such as jargon, noise, language differences, too many layers of hierarchy, and information overload.
Unit 2
Competition
Rivalry between businesses selling similar products or services. Competition can drive innovation, lower prices, and improve quality, but can also increase costs for businesses trying to remain competitive.
Unit 6
Competitive pricing
A pricing strategy where a business sets prices based on competitor prices rather than costs or demand. The business aims to be priced similarly to competitors to remain competitive in the market.
Unit 3
Consumer law
Legislation that protects consumers from unfair or unsafe business practices. It includes rules about product safety, labelling, returns, and protection against false advertising.
Unit 6
Corporate Social Responsibility (CSR)
The idea that a business should consider the interests of society and the environment, not just its own profits. CSR includes ethical behaviour, environmental protection, and community support.
Unit 6
Cost
The amount of money spent on producing goods or services. Costs include raw materials, labour, rent, and utilities, and are subtracted from revenue to calculate profit or loss.
Unit 1
Crowdfunding
Raising finance by collecting small amounts of money from a large number of people, usually through an online platform. Backers may receive rewards, equity, or simply the satisfaction of supporting the project.
Unit 5
Current ratio
A liquidity ratio that measures whether a business can pay its short term debts. Current ratio = Current assets / Current liabilities. A ratio of 1.5 to 2 is generally healthy.
Unit 5
Customer service
The support provided to customers before, during, and after purchase. Good customer service aims to meet customer needs, solve problems quickly, and build long-term customer loyalty.
Unit 4
D
Decentralisation
When decision making is spread out to lower levels and branches of the organisation. This can speed up decisions and motivate staff but may reduce consistency.
Unit 2
Delegation
The process of assigning tasks and responsibility to team members. Effective delegation allows managers to focus on important decisions while developing employee skills and motivation.
Unit 2
Demand
The quantity of a product or service that consumers are willing and able to buy at a given price. Demand changes based on factors such as price, income, tastes, and availability of substitutes.
Unit 1
Diseconomies of scale
The disadvantages that cause average costs to rise as a business grows too large. Problems include poor communication, slow decision making, low staff motivation, and coordination difficulties.
Unit 1
Distribution
The process of making products available to consumers through various channels such as retail stores, online platforms, and wholesalers. Also known as the Place element of the marketing mix.
Unit 3
E
E-commerce
The buying and selling of goods and services over the internet. E-commerce includes online shopping, digital payments, and electronic transactions conducted through websites or mobile applications.
Unit 3
Economic growth
An increase in the total output of goods and services in an economy over time, usually measured by Gross Domestic Product (GDP). Growth creates more jobs and higher incomes.
Unit 6
Economies of scale
The cost advantages a business gains as it grows larger. Average costs per unit fall because fixed costs are spread over more units, and the business can negotiate bulk buying discounts.
Unit 1
Efficiency
The ability to produce maximum output with minimum input of resources such as labour, materials, and time. Efficient operations reduce costs and increase profitability.
Unit 4
Employment law
Legislation that protects the rights of workers and sets minimum standards for working conditions, pay, discrimination, dismissal, and health and safety in the workplace.
Unit 6
Enterprise
The activity of setting up and running a business, taking on financial risks in the hope of making a profit. It involves identifying a business opportunity, organising resources, and taking action to start a new venture.
Unit 1
Entrepreneur
An individual who creates and runs their own business, taking on financial and personal risk. Entrepreneurs identify market opportunities, innovate, and drive business growth through their ideas and effort.
Unit 1
Environmental considerations
Factors that businesses must consider to minimise their environmental impact, including waste management, carbon emissions, energy use, and sustainable sourcing of materials.
Unit 6
Ethical trading
Business practices that ensure fair wages, safe working conditions, and environmental responsibility throughout the supply chain. Ethical trading aims to improve the wellbeing of workers and protect the environment.
Unit 6
Ethics
Moral principles concerning what is right and wrong in business conduct. Ethical businesses consider the impact of their decisions on stakeholders, society, and the environment.
Unit 6
Exchange rate
The value of one currency in relation to another. Exchange rates affect the cost of imports and exports, and can impact business profitability when trading internationally.
Unit 6
Extension strategy
Marketing tactics used to extend the sales of a product in its mature stage of the product life cycle. Strategies include new packaging, new uses, or new target markets to revive sales.
Unit 3
F
Factors of production
The four resources needed to produce goods and services: land (natural resources), labour (workers), capital (equipment and money), and enterprise (the entrepreneur who takes the risk).
Unit 1
Fixed costs
Costs that stay the same regardless of how much a business produces, such as rent, insurance, and salaries. They must be paid even if the business produces nothing.
Unit 4
Flow production
A method of production where items move continuously along a production line, with each stage of production happening one after another without stopping. Used for mass produced items like cars and soft drinks.
Unit 4
Franchise
A business arrangement where a franchisee pays a franchisor for the right to operate a business using the franchisor's name, systems, and support. Franchises offer a way to expand without directly owning all outlets.
Unit 1
Franchisee
An individual or business that purchases the rights to operate a franchise. The franchisee pays fees and royalties to the franchisor in exchange for using their brand, systems, and support.
Unit 1
Franchisor
The company or individual that owns the franchise business model and grants rights to franchisees. The franchisor provides the brand, systems, training, and ongoing support.
Unit 1
Fringe benefits
Non cash rewards given to employees in addition to their salary, such as company cars, health insurance, gym memberships, or extra holiday days.
Unit 2
G
Globalisation
The increasing integration of economies, cultures, and societies across borders. Globalisation enables businesses to access new markets, but also increases competition and may create social and environmental challenges.
Unit 6
Goods and services
Goods are physical, tangible products (such as phones or clothing). Services are non physical activities performed for customers (such as haircuts or banking).
Unit 1
Government legislation
Laws created by government bodies that regulate business activity. Legislation covers areas such as employment, consumer protection, health and safety, and environmental protection.
Unit 6
Gross profit
The profit made after deducting the cost of sales (direct costs of making the product) from revenue. Gross profit = Revenue minus Cost of sales.
Unit 5
Gross profit margin
A ratio showing gross profit as a percentage of revenue. It measures how efficiently a business turns sales into profit before expenses. Gross profit margin = (Gross profit / Revenue) x 100.
Unit 5
H
Health and safety legislation
Laws that protect the wellbeing of employees and the public. This includes regulations about workplace hazards, accident prevention, and emergency procedures.
Unit 6
Herzberg's Two Factor Theory
A motivation theory that identifies hygiene factors (preventing dissatisfaction) and motivators (creating satisfaction). Herzberg argues that good working conditions are necessary but are not enough to truly motivate employees.
Unit 2
Hierarchy
The levels of authority within a business, arranged from the most senior at the top to the most junior at the bottom. A tall hierarchy has many levels; a flat hierarchy has few.
Unit 2
I
Income statement
A financial document showing a business's revenue, costs, and profit over a period of time (usually a year). Also known as a profit and loss account.
Unit 5
Induction training
Training provided to new employees to familiarise them with the organisation, its policies, safety procedures, and their role. Effective induction helps employees settle in and become productive quickly.
Unit 2
Inflation
A sustained increase in the general price level of goods and services in an economy over time. Inflation reduces the purchasing power of money and affects business costs and pricing strategies.
Unit 6
Interest rate
The percentage charged by lenders for borrowed money or paid to savers for deposits. Interest rates affect the cost of borrowing for businesses and influence consumer spending and investment decisions.
Unit 6
Internal recruitment
The process of filling a job vacancy by promoting or transferring an existing employee. Internal recruitment is often cheaper and quicker than external recruitment, and maintains employee motivation.
Unit 2
J
Job description
A formal document detailing the duties, responsibilities, reporting structure, and key requirements of a job position. Job descriptions help candidates understand expectations and assist in recruitment and performance management.
Unit 2
Job production
A method of production where each product is made individually to meet specific customer requirements. Examples include wedding cakes, custom furniture, and tailored suits.
Unit 4
Just in case (JIC)
An inventory management approach where businesses hold extra stock as a buffer against unexpected demand or supply disruptions. JIC ensures availability but increases storage and holding costs.
Unit 4
Just in time (JIT)
An inventory management system where materials are ordered and received just when they are needed for production. JIT reduces storage costs and waste, but requires reliable suppliers and accurate forecasting.
Unit 4
L
Leadership styles
The different approaches managers use to lead their teams. The three main styles are autocratic (leader decides alone), democratic (team involved in decisions), and laissez faire (team given freedom to decide).
Unit 2
Lean production
A production philosophy that aims to eliminate waste and maximise efficiency by improving processes and reducing unnecessary activities. Lean production often includes JIT and continuous improvement methods.
Unit 4
Liabilities
Amounts a business owes to others. Current liabilities (overdrafts, trade payables) must be paid within a year. Non current liabilities (long term loans, mortgages) are owed for more than a year.
Unit 5
Limited liability
A legal arrangement where owners are responsible for business debts only up to the amount they invested. Limited liability protects personal assets if the business fails.
Unit 1
Limited liability company (Ltd)
A private company where shares are owned by specific individuals or organisations. Limited liability companies have limited liability for shareholders and can raise capital by selling shares.
Unit 1
Loan
A fixed amount of money borrowed from a bank or other lender, repaid over an agreed period with interest. Loans are used for larger purchases and longer term needs.
Unit 5
Loss
A financial situation where total costs exceed total revenue. A loss occurs when a business performs poorly or fails to generate sufficient sales.
Unit 1
M
Margin of safety
The difference between a business's actual (or expected) level of output and its break even point. It shows how much sales could fall before the business starts making a loss.
Unit 4
Market
The demand for products or services from consumers. A market can be defined by geography, demographics, or product type, and represents potential customers for a business.
Unit 3
Market research
The systematic collection and analysis of data about a market, competitors, and consumers. Market research informs business decisions about products, pricing, and marketing strategies.
Unit 3
Market segmentation
The division of a market into groups of consumers with similar characteristics or needs. Segmentation allows businesses to target specific groups with tailored marketing messages and products.
Unit 3
Market share
The percentage of total sales in a market that belongs to one business. It is calculated by dividing the business's sales by the total market sales and multiplying by 100.
Unit 3
Market size
The total value or volume of sales in a market over a given period. It can be measured by the total revenue earned by all businesses in that market or by the total number of units sold.
Unit 3
Marketing mix
The combination of product, price, place, and promotion used to market a product. The marketing mix is a strategic tool for meeting customer needs and achieving business objectives.
Unit 3
Maslow's Hierarchy of Needs
A motivation theory that ranks human needs in a hierarchy from basic physiological needs to self-actualisation. The theory suggests people are motivated to fulfil higher-level needs once lower needs are met.
Unit 2
Merger
When two businesses of similar size agree to join together to form one new, larger business. Both companies stop existing separately.
Unit 1
Minimum wage
The lowest hourly rate of pay that employers are legally required to pay their workers. The rate varies by age and is set by the government.
Unit 6
Motivation
The driving force that inspires employees to work effectively and achieve business objectives. Motivation can be influenced by factors such as pay, recognition, job satisfaction, and career development.
Unit 2
Multinational company (MNC)
A business that operates in more than one country. MNCs have their headquarters in one country and production or sales facilities in others.
Unit 6
N
Needs and wants
Needs are things essential for survival (food, water, shelter). Wants are things people would like but do not need to survive. Businesses exist to satisfy both needs and wants.
Unit 1
Net cash flow
The difference between cash inflows and cash outflows over a given period. A positive net cash flow means more money is coming in than going out.
Unit 5
Net profit
The profit remaining after ALL costs (including overheads and expenses) have been deducted from revenue. Net profit = Gross profit minus Expenses.
Unit 5
Net profit margin
A ratio showing net profit as a percentage of revenue. It measures overall profitability after all costs. Net profit margin = (Net profit / Revenue) x 100.
Unit 5
Niche market
A small, specialised segment of a larger market. Businesses targeting a niche focus on meeting the specific needs of a small group of customers, often with less competition but a smaller customer base.
Unit 3
Not for profit organisation
An organisation established to provide services or support to a cause rather than to make profit for owners. Any surplus revenue is reinvested into the organisation's mission.
Unit 1
O
Opportunity cost
The next best alternative that is given up when a decision is made. For example, if a business spends money on new equipment, the opportunity cost might be the marketing campaign it could not afford.
Unit 1
Organisational structure
The way an organisation is arranged and how authority, responsibilities, and communication flow. Common structures include hierarchical, flat, matrix, and divisional structures.
Unit 2
Overdraft
A short term borrowing facility that allows a business to spend more money than it has in its bank account, up to an agreed limit. Interest is charged on the amount overdrawn.
Unit 5
Overhead costs
Indirect expenses that are not directly tied to production but are necessary to run a business, such as utilities, rent, and administration. Overhead costs must be covered before a business can make a profit.
Unit 4
P
Partnership
A business structure where two or more individuals jointly own and operate the business. Partners share profits, losses, and unlimited liability unless they are limited partners.
Unit 1
Penetration pricing
A pricing strategy where a new product is launched at a low price to quickly gain market share. Penetration pricing can attract customers away from competitors but may reduce initial profit margins.
Unit 3
Person specification
A document outlining the skills, experience, qualifications, and personal qualities required for a job position. The person specification helps in selecting the most suitable candidates during recruitment.
Unit 2
Place
The distribution channels through which a product reaches the customer. Place includes the choice between direct sales, retail stores, wholesalers, and online platforms.
Unit 3
Pressure group
An organisation that represents the interests of a specific group and seeks to influence business and government policy. Pressure groups campaign on issues such as the environment, workers' rights, and consumer protection.
Unit 6
Price
The amount of money charged for a product or service. Price is a key element of the marketing mix and must balance affordability for consumers with profit requirements for the business.
Unit 3
Primary research
The collection of new, original data directly from sources such as customers, through surveys, interviews, or experiments. Primary research is more expensive but provides current, specific information.
Unit 3
Primary sector
The part of the economy that extracts raw materials from the earth, such as farming, mining, fishing, and forestry.
Unit 1
Private limited company (Ltd)
A private company where shares are owned by specific individuals or organisations. Limited liability companies have limited liability for shareholders and can raise capital by selling shares.
Unit 1
Private sector
Businesses owned and run by private individuals, funded by sales revenue and investment. The main aim is usually to make a profit.
Unit 1
Product
A good or service offered for sale to satisfy customer needs. Product is one element of the marketing mix and includes features, quality, branding, and packaging.
Unit 3
Product life cycle
The stages a product goes through from introduction to decline. The cycle includes introduction, growth, maturity, and decline stages, each requiring different marketing strategies.
Unit 3
Productivity
A measure of how effectively resources such as labour and materials are used to produce output. Higher productivity means more output from the same amount of input, improving profitability.
Unit 4
Profit
The financial gain made when total revenue exceeds total costs. Profit is the primary objective for most businesses and is used to reward owners, reinvest in the business, or distribute to shareholders.
Unit 1
Promotion
Marketing activities designed to communicate a product's benefits to customers and encourage purchase. Promotion includes advertising, sales promotions, public relations, and personal selling.
Unit 3
Promotional pricing
A temporary reduction in price to attract customers and boost sales in the short term. Examples include buy one get one free offers, seasonal sales, and limited time discounts.
Unit 3
Public limited company (Plc)
A company whose shares are traded on the stock exchange and available to the public. Plcs have limited liability, access to large amounts of capital, but face strict regulatory requirements.
Unit 1
Public sector
Organisations owned and run by the government, funded by taxation. Examples include the NHS, state schools, and the police.
Unit 1
Q
Qualitative data
Information that describes qualities, characteristics, or opinions rather than numbers. Qualitative data includes customer feedback, focus group discussions, and detailed descriptions of consumer behaviour.
Unit 3
Quality assurance
A systematic process to ensure that production methods meet set quality standards. Quality assurance focuses on preventing defects through careful planning and process control.
Unit 4
Quality control
The inspection and testing of finished products to identify and remove defective items. Quality control is a final check to ensure products meet quality standards before sale.
Unit 4
Quantitative data
Information expressed in numerical form, such as sales figures, market size, or customer demographics. Quantitative data can be analysed statistically to identify trends and patterns.
Unit 3
R
Recruitment
The process of finding and hiring suitable candidates for job vacancies. Recruitment includes advertising, screening applications, interviewing candidates, and selecting the best match.
Unit 2
Retained profit
Profit that is kept within the business rather than distributed to owners or shareholders. It is an internal source of finance that does not need to be repaid.
Unit 5
Revenue
The total money earned by a business from selling goods or services before deducting costs and expenses. Revenue is calculated by multiplying the price per unit by the quantity sold.
Unit 1
Reward
The financial or personal benefit gained from undertaking a business venture. Rewards for entrepreneurs can include profit, independence, and personal satisfaction.
Unit 1
Risk
The possibility of loss or failure in a business venture. Business risks include market risk, financial risk, and operational risk, and must be managed to protect the business.
Unit 1
S
Scarcity
The basic economic problem that there are unlimited wants but limited resources to satisfy them. This means choices must be made about how resources are used.
Unit 1
Secondary research
The use of existing data previously collected for other purposes, such as industry reports, census data, or competitor information. Secondary research is cheaper and quicker than primary research.
Unit 3
Secondary sector
The part of the economy that manufactures and processes raw materials into finished goods, such as factories, construction, and food processing.
Unit 1
Selection
The process of choosing the most suitable candidate from applications received for a job vacancy. Selection involves interviews, tests, references, and assessment of candidates.
Unit 2
Shareholder
A person or organisation that owns shares (a portion of ownership) in a limited company. Shareholders receive a share of the profits (dividends) and can vote on major company decisions.
Unit 1
Social media
Digital platforms and networks used for communication and sharing content. Businesses use social media for marketing, brand building, customer engagement, and market research.
Unit 3
Sole trader
An individual who owns and operates a business alone, bearing all profits and losses personally. Sole traders have unlimited liability but retain full control and keep all profits.
Unit 1
Span of control
The number of employees directly supervised by a manager. A narrow span of control means fewer subordinates per manager, allowing closer supervision.
Unit 2
Stakeholder
Any person or group with an interest in or affected by the business, including employees, customers, suppliers, owners, and the local community. Different stakeholders have different priorities and interests.
Unit 1
Statement of financial position
A financial document showing what a business owns (assets), what it owes (liabilities), and the value of the owner's investment (equity) at a specific point in time. Also known as a balance sheet.
Unit 5
Stock control
The process of managing the amount of stock (inventory) a business holds, ensuring there is enough to meet demand without holding too much (which ties up cash and storage space).
Unit 4
Supply
The quantity of a product or service that producers are willing and able to supply at a given price. Supply is affected by production costs, technology, and the number of suppliers in the market.
Unit 1
Supply chain
The sequence of activities and organisations involved in producing and delivering a product from raw materials to the final customer. The supply chain includes procurement, production, warehousing, and distribution.
Unit 4
Sustainability
The ability to meet present needs without compromising the ability of future generations to meet theirs. Sustainability in business involves responsible use of resources and environmental protection.
Unit 6
T
Takeover
When one business buys enough shares in another business to take control of it. The bought business becomes part of the buying company.
Unit 1
Target market
The specific group of consumers that a business aims to reach with its marketing efforts. The target market is identified through market segmentation and analysis of customer characteristics and needs.
Unit 3
Tariff
A tax placed on imported goods to make them more expensive, protecting domestic businesses from foreign competition. Tariffs increase the price consumers pay for imported products.
Unit 6
Taylor's Scientific Management
An approach to management that seeks to improve efficiency through scientific analysis of work. Taylor's theory emphasises breaking work into tasks, training workers, and using financial incentives.
Unit 2
Technology
Tools, systems, and processes used to improve business operations and product quality. Technology enables automation, faster communication, better data analysis, and creation of new business models.
Unit 4
Tertiary sector
The part of the economy that provides services to consumers and businesses, such as retail, healthcare, education, banking, and transport.
Unit 1
Total costs
The sum of all fixed costs and variable costs at a given level of output. Total costs = Fixed costs + Variable costs.
Unit 4
Total quality management (TQM)
A management philosophy focused on continuous improvement of quality throughout all business processes. TQM involves all employees working to meet and exceed customer expectations.
Unit 4
Trade credit
An agreement where a supplier allows a business to receive goods now and pay for them at a later date (typically 30, 60, or 90 days). This helps businesses manage their cash flow.
Unit 5
Trade union
An organisation that represents the interests of workers. Unions negotiate with employers on pay, working conditions, and other employment issues on behalf of their members.
Unit 2
Training
The process of teaching employees new skills or knowledge required for their job. Training can be on the job or off the job, and is essential for employee development and productivity.
Unit 2