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A
Added Value
The difference between the cost of raw materials and the price at which a firm sells the finished product. Higher added value allows a business to increase profit margins and command higher prices.
Unit 1
Ansoff's Matrix
A strategic planning tool that identifies growth strategies by considering existing and new products in existing and new markets. The four strategies are market penetration, market development, product development, and diversification.
Unit 3
Average Rate of Return (ARR)
An investment appraisal technique that calculates the average annual profit from an investment as a percentage of the initial capital invested. It is calculated by dividing average annual profit by initial investment and multiplying by 100.
Unit 3
B
Brand
A name, symbol, logo, or design that identifies a product or service and distinguishes it from competitors. A strong brand creates customer loyalty and allows a business to charge premium prices.
Unit 1
Brand Loyalty
The degree to which customers consistently purchase products from the same brand and resist switching to competitors. Strong brand loyalty provides stable revenue streams and reduces the impact of price competition.
Unit 1
Boston Matrix
A portfolio analysis tool that classifies products into four categories based on market growth rate and relative market share: stars, cash cows, question marks, and dogs. It helps businesses decide which products to invest in or divest.
Unit 3
Break Even
The level of output at which total revenue equals total costs, resulting in neither profit nor loss. At this point, contribution per unit multiplied by quantity produced equals total fixed costs.
Unit 2
Budget
A financial plan that estimates future income and expenditure for a specific period. Budgets help businesses plan spending, control costs, and monitor financial performance.
Unit 2
C
Cash Flow
The movement of money in and out of a business. Positive cash flow means more money is coming in than going out, while negative cash flow indicates more money is leaving than entering.
Unit 2
Cash Flow Forecast
A prediction of future cash inflows and outflows, typically prepared monthly. It helps businesses plan for working capital needs, identify potential cash shortfalls, and plan for financing requirements.
Unit 2
Circular Economy
An economic system designed to minimize waste by keeping resources in use for as long as possible through reuse, repair, and recycling. It contrasts with the linear economy of take, make, dispose.
Unit 4
Comparative Advantage
The ability of a country or business to produce a good or service at a lower opportunity cost than competitors. Countries specialise in producing goods where they have comparative advantage to increase trade benefits.
Unit 4
Competitive Pricing
A pricing strategy where a firm sets prices based on the prices charged by competitors rather than on cost or demand. It is commonly used in markets with similar products where differentiation is difficult.
Unit 1
Contribution
The amount remaining from revenue after variable costs are deducted. Contribution per unit equals selling price minus variable cost per unit, and is used to cover fixed costs and generate profit.
Unit 2
Core Competence
A unique skill, ability, or resource that a business possesses that provides competitive advantage and is difficult for competitors to replicate. Core competences form the basis of a firm's competitive strategy.
Unit 3
Corporate Objective
A long-term goal or target that a business aims to achieve. Examples include profit maximization, growth, market share, and sustainable development.
Unit 3
Corporate Social Responsibility (CSR)
A business's commitment to operating ethically and contributing positively to society and the environment. CSR includes policies on labour practices, environmental protection, community engagement, and transparency.
Unit 4
Corporate Strategy
Long-term plans designed to achieve corporate objectives and determine how the business will compete in its markets. It involves decisions about products, markets, and resource allocation.
Unit 3
Cultural Intelligence
The ability of a business to function effectively in culturally diverse environments and adapt to different cultural contexts. It is essential for multinational corporations operating across different countries.
Unit 4
Cost Plus Pricing
A pricing strategy where a firm calculates the total cost of producing a product and adds a percentage markup to determine the selling price. This ensures costs are covered and a profit margin is achieved.
Unit 1
D
Demand
The quantity of a product or service that consumers are willing and able to purchase at a given price. Demand is influenced by price, income, tastes, and substitute and complementary goods.
Unit 1
Decision Tree
A visual representation of different decision options and their potential outcomes. Decision trees help businesses evaluate the consequences of different strategies and make informed decisions.
Unit 3
Diseconomies of Scale
Increases in average costs that occur when a firm expands output beyond a certain level. Common causes include management difficulties, communication problems, and inefficiencies in large organisations.
Unit 3
Dynamic Market
A market characterised by rapid change, innovation, and evolution in technology, consumer preferences, and competition. Businesses in dynamic markets must be flexible and adaptable to remain competitive.
Unit 1
E
Economies of Scale
Reductions in average costs that occur as a firm increases the scale of production. This results from specialization, bulk purchasing, and spreading fixed costs over larger output.
Unit 3
Emerging Market
A developing country with rapid economic growth, industrialisation, and increasing purchasing power. Emerging markets offer growth opportunities for multinational corporations but may have higher risks.
Unit 4
Ethnocentric Approach
A strategy where a multinational corporation assumes its home country practices and values are superior and applies them globally. This approach often leads to cultural conflicts and market resistance.
Unit 4
European Union (EU)
A trade bloc of 27 European member states with common policies on trade, labour standards, and environmental regulations. The EU allows free movement of goods, services, capital, and people between member states.
Unit 4
Exchange Rate
The price of one currency in terms of another. Exchange rate fluctuations affect the competitiveness of exports, the cost of imports, and the profitability of multinational corporations.
Unit 4
Expected Value
The average outcome of a decision calculated by multiplying each possible outcome by its probability and summing the results. Used in decision tree analysis to compare options with uncertain outcomes.
Unit 3
F
Fixed Costs
Business costs that do not change with the level of output in the short term. Examples include rent, insurance, and salaries. Fixed costs must be paid regardless of production volume.
Unit 2
Franchise
A business arrangement where a franchisor grants a franchisee the right to use its brand, systems, and products in exchange for fees and royalties. Franchising allows rapid expansion with limited capital investment.
Unit 2
Foreign Direct Investment (FDI)
Investment by a multinational corporation in productive assets such as factories or businesses in a foreign country. FDI creates jobs, transfers technology, and increases economic growth in host countries.
Unit 4
G
Gearing
The ratio of debt to equity in a company's capital structure. High gearing indicates heavy reliance on borrowed funds and higher financial risk. Measured as long-term borrowing divided by shareholders' equity.
Unit 3
Geocentric Approach
A global strategy where a multinational corporation selects the best practices from anywhere in the world and applies them globally. It balances global consistency with local adaptation.
Unit 4
Global Niche Market
A small but defined segment of customers worldwide with specific needs or preferences. Global niche markets allow businesses to specialise and avoid direct competition with large corporations.
Unit 4
Globalisation
The process of increased integration of economies and societies worldwide through trade, investment, and technology. Globalisation creates opportunities for businesses to expand internationally but also increases competition.
Unit 4
Gross Profit
Revenue minus cost of goods sold (COGS). It represents profit before operating expenses, taxes, and interest are deducted. Gross profit margin indicates the efficiency of production.
Unit 2
I
Income Elasticity of Demand (YED)
A measure of how responsive quantity demanded is to changes in consumer income. Positive YED indicates normal goods, while negative YED indicates inferior goods. Calculated as percentage change in quantity demanded divided by percentage change in income.
Unit 1
Investment Appraisal
Techniques used to evaluate whether a capital investment project will be financially worthwhile. Common methods include payback period, average rate of return, and net present value.
Unit 3
Inorganic Growth
Business expansion achieved through mergers, takeovers, or acquisitions rather than internal development. It allows rapid growth but carries integration risks and cultural challenges.
Unit 3
M
Market
A group of customers with similar needs and wants, and the businesses supplying products or services to satisfy those needs. Markets are defined by geographical area, customer type, or product category.
Unit 1
Market Growth
The increase in total sales or demand within a market over a period of time. Market growth is measured as a percentage increase and indicates market opportunities and industry trends.
Unit 1
Market Mapping
A technique that visually represents how competitors position their products in a market using two variables such as price and quality. It helps identify market gaps and competitive positioning.
Unit 1
Market Research
The systematic collection and analysis of information about customer needs, competitor behaviour, and market trends. Market research informs business decisions on products, pricing, and marketing strategies.
Unit 1
Market Segmentation
The division of a market into distinct groups of customers with similar characteristics or needs. Segmentation allows businesses to tailor products and marketing strategies to specific customer groups.
Unit 1
Market Share
The proportion of total sales in a market held by one business, usually expressed as a percentage. Calculated by dividing a firm's sales by total market sales and multiplying by 100.
Unit 1
Market Size
The total value or volume of sales in a market during a specific period. Market size is measured in monetary terms (revenue) or physical units (quantity) and indicates market attractiveness.
Unit 1
Marketing Mix
The combination of product, price, place, and promotion (Four Ps) used to deliver value to customers. The marketing mix is the integrated set of tools businesses use to reach their target market.
Unit 1
Merger
The combining of two separate companies to form a single entity. In a merger, both companies agree voluntarily to combine, whereas a takeover involves one company acquiring another against its will.
Unit 3
Multinational Corporation (MNC)
A large business that operates in multiple countries through subsidiaries or branches. Multinationals have significant economic and political influence and benefit from economies of scale and global markets.
Unit 4
Mass Market
A large market segment with numerous customers who have similar, broad needs. Products for mass markets are standardised, competitively priced, and widely distributed.
Unit 1
N
Net Present Value (NPV)
An investment appraisal method that calculates the present value of all future cash flows from an investment. A positive NPV indicates the investment will add value to the firm.
Unit 3
Net Profit
Revenue minus all expenses including cost of goods sold, operating costs, interest, and taxes. Net profit represents the bottom line profit available to shareholders.
Unit 2
Niche Market
A small, specialised market segment with specific customer needs that are often not met by mass market products. Niche markets allow businesses to specialise and avoid direct competition.
Unit 1
O
Operating Profit
Gross profit minus operating expenses such as wages and utilities. Operating profit measures profitability from core business operations before interest and tax are deducted.
Unit 2
Offshoring
The relocation of business activities to another country, often to reduce labour costs or access new markets. Offshoring may include manufacturing, customer service, or software development.
Unit 4
Organic Growth
Business expansion achieved through internal development and reinvestment of profits rather than acquisitions. Organic growth is slower but allows the business to maintain control and culture.
Unit 3
P
Penetration Pricing
A pricing strategy where a firm sets a low initial price to gain rapid market share and build market presence. Once market share is established, prices may be increased.
Unit 1
Partnership
A business structure where two or more people own and operate a business together. Partners have unlimited liability and share profits and management responsibilities.
Unit 2
Payback Period
An investment appraisal method measuring the time taken for cumulative cash inflows to equal the initial investment. Shorter payback periods are preferred as they indicate faster capital recovery.
Unit 3
Price Elasticity of Demand (PED)
A measure of how responsive quantity demanded is to price changes. Calculated as percentage change in quantity demanded divided by percentage change in price. Elastic demand is sensitive to price changes, inelastic demand is not.
Unit 1
Price Skimming
A pricing strategy where a firm sets a high initial price for a new product to maximise profits from early adopters. Price is gradually reduced as competition increases and the market matures.
Unit 1
Private Limited Company (Ltd)
A business structure where shares are owned privately and cannot be traded publicly. Private companies have limited liability and may be more flexible in governance than public companies.
Unit 2
Profit
The surplus remaining after all costs are deducted from revenue. Profit is the reward for business risk and is used to reward shareholders, reinvest in the business, or build reserves.
Unit 2
Profit Margin
Profit expressed as a percentage of revenue. Profit margin indicates how efficiently a business converts sales into profit. Higher margins indicate better profitability.
Unit 2
Profitability Ratio
A financial ratio measuring how effectively a business generates profit from its resources. Common profitability ratios include return on capital employed (ROCE) and profit margin.
Unit 3
Public Limited Company (Plc)
A business structure where shares are traded publicly on stock exchanges and anyone can invest. Public companies have limited liability, professional management, and access to capital markets.
Unit 2
Porter's Five Forces
A framework for analysing industry competitiveness by examining threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and competitive rivalry. It helps assess industry attractiveness.
Unit 3
Q
Qualitative Data
Non-numerical information describing qualities, characteristics, or opinions. Examples include focus group discussions, interviews, and customer feedback. Qualitative data provides depth and understanding of customer behaviour.
Unit 1
Quantitative Data
Numerical information that can be measured and analysed statistically. Examples include sales figures, market size, and customer surveys. Quantitative data provides measurable and objective information.
Unit 1
Quota
A quantitative restriction limiting the amount of a product that can be imported into a country. Quotas protect domestic industries but reduce consumer choice and increase prices.
Unit 4
R
Ratio Analysis
The analysis of financial statements by calculating ratios that show relationships between different financial items. Ratio analysis helps assess profitability, liquidity, efficiency, and financial structure.
Unit 3
Revenue
The total income generated by a business from selling products or services during a specific period. Revenue is calculated by multiplying selling price by quantity sold.
Unit 2
Return on Capital Employed (ROCE)
A profitability ratio measuring the return generated on the capital invested in a business. ROCE is calculated as profit before interest and tax divided by capital employed, expressed as a percentage.
Unit 3
Retrenchment
A strategy where a firm reduces the scale of its operations, divests unprofitable business units, or withdraws from markets. Retrenchment is used to improve profitability or survival during difficult periods.
Unit 3
Reshoring
The relocation of business activities back to the home country after previously offshoring them. Reshoring may occur due to rising labour costs abroad, quality concerns, or changing customer preferences.
Unit 4
S
Secondary Research
Research using existing data and information already collected and published by other sources. Examples include government statistics, industry reports, and competitor analysis. It is cheaper than primary research but may be less specific.
Unit 1
Shareholder
A person or entity that owns shares in a company, entitling them to a portion of profits and voting rights. Shareholders are the owners of a business and expect returns on their investment.
Unit 2
Social Enterprise
A business formed primarily to achieve social or environmental objectives rather than to maximize profit. Social enterprises reinvest surplus revenue to further their mission.
Unit 2
Supply
The quantity of a product or service that businesses are willing and able to produce and sell at a given price. Supply is influenced by production costs, technology, and business objectives.
Unit 1
Sustainability
Business practices that meet current needs without compromising the ability of future generations to meet their needs. Sustainability encompasses environmental protection, social responsibility, and economic viability.
Unit 4
Strategic Alliance
An agreement between two or more companies to cooperate in specific areas while remaining independent entities. Strategic alliances allow companies to combine strengths and share resources to achieve common objectives.
Unit 4
SWOT Analysis
A strategic planning tool that identifies a firm's Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis helps businesses develop strategies that leverage strengths, address weaknesses, capitalise on opportunities, and mitigate threats.
Unit 3
Stakeholder
Any person or organisation affected by or having an interest in a business. Stakeholders include employees, customers, suppliers, shareholders, local communities, and governments.
Unit 2
Sole Trader
A business structure where one person owns and operates the business. Sole traders have unlimited liability and keep all profits but face personal financial risk.
Unit 2
T
Tariff
A tax imposed on imported goods to protect domestic industries and raise government revenue. Tariffs increase the price of imports, making domestic products more competitive.
Unit 4
Takeover
The acquisition of one company by another, often against the target company's wishes. A takeover results in the acquiring company gaining control and ownership of the target company.
Unit 3
Total Costs
The sum of fixed costs and variable costs at a given level of output. Total costs increase as production increases due to rising variable costs.
Unit 2
Trade Bloc
A group of countries that agree to reduce barriers to trade with each other while maintaining barriers against non-member countries. Examples include the EU and ASEAN.
Unit 4
Transfer Pricing
The price charged for goods or services transferred between different divisions or subsidiaries of the same multinational corporation. Transfer pricing affects profit allocation and tax liability.
Unit 4
U
Unlimited Liability
A legal situation where business owners are personally responsible for all debts and liabilities of the business. If the business fails, creditors can claim personal assets of the owners.
Unit 2
Unique Selling Point (USP)
A distinctive characteristic or feature of a product that differentiates it from competitors and gives reasons for customers to choose it. A strong USP creates competitive advantage.
Unit 1
V
Variable Costs
Business costs that change directly with the level of output. Examples include raw materials, production wages, and packaging. Total variable costs increase as production increases.
Unit 2
Variance
The difference between budgeted figures and actual results. Favourable variance means actual results exceed expectations, while adverse variance means results fall short of expectations.
Unit 2