Public limited companies- Businesses that can sell shares on the stock exchange. Public sector businesses- Businesses owned by the government. Franchising- Big named businesses allowing entrepeneurs to sell products under their name. Decentralised structure- A business that spreads decision making.
Organisational charts- Charts showing the structure of a business. Tall structure- Businesses that have lots of layers within the business structure. Flat structure- Businesses that have few layers within the business structure.
Market research- Researching the market. Quantitative data- Data that is in numerical form. Qualitative data- Data that is opinions and views. The Boston Matrix- A way to analyse a product portfolio. Product life cycle- The life cycle a product goes through in terms of levels of demand.
This can be a far cheaper and easier way to expand the company than the alternative of opening more branches itself. This occurs where a firm takes over or merges with another firm at the same stage of production i. This is a factor that restricts the business from achieving its objectives, but it is within the control of the business. The main internal constraints are finance, marketing, people and production. This can be obtained from retained profits, working capital and the sale of fixed assets.
This is a way of securing and using property for a restricted period of time. When the lease runs out, the ownership of the property returns to the freeholder the owner. This is a method of securing and using fixed assets other than property without the need for the initial cash outlays needed to purchase the asset. This is the idea that the owners of a company shareholders are only responsible for the amount of money that they have invested into the company, rather than their personal assets.
Thus if a firm becomes insolvent, the maximum that creditors can receive is the shareholders' initial investment. The word 'Ltd' or 'PLC' appear after the company's name to inform creditors that the business has limited liability. This occurs when managers from outside a company buy up the shares and take control of the company.
This strategy is pursued if the managers believe that they can run the firm more efficiently than the current management. This occurs when the managers of a business buy out the shareholders, and therefore own and control the business. The management believe that they can improve the profitability and efficiency of the business.
This is an agreement between the managements and shareholders of two companies to bring both firms together under a common board of directors. It is also referred to as amalgamation or integration. This is a business organisation which has its headquarters in one country, but has manufacturing plants in many other countries. At the end of each financial year ordinary shareholders receive a dividend per share that they own, but only after debenture holders, preference shareholders, long-term debt holders and the government through taxes have been paid.
Similarly, if the company becomes insolvent and goes into liquidation, ordinary shareholders are the last group of people to receive any return, after all other debts have been paid.
This is a business organisation where two or more people trade together under the Partnership Act of Most partners in a partnership will have unlimited liability , which means each partner is liable for the debts of the other partners.
Common examples of partnerships include solicitors, doctors, veterinarians and accountants. Forming a partnership allows more capital to be used in the business than is the case with a sole trader, and the pressures and responsibilities involved in running the business are spread over several individuals. This is a share paying a fixed dividend, which is considerably less risky than an ordinary share.
If the company becomes insolvent and goes into liquidation, then preference shareholders would be repaid in full before ordinary shareholders.
This is also true of dividends, which are paid to preference shareholders before ordinary shareholders receive theirs. This is that part of the economy consisting of agriculture, fishing and the extractive industries such as oil exploration and mining. This is a small to medium-sized business that is usually run by a small number of people shareholders and in many cases it is a family run business.
The shareholders can determine their own objectives without the emphasis on short-term profits, that are so common among public limited companies. The remainder of the economy is called the public sector. The public sector includes public corporations nationalised industries , public services such as the National Health Service and local services such as swimming pools, street cleaning, libraries, etc.
PLCs are the only type of company allowed to be quoted on the Stock Exchange. These companies have to disclose their annual accounts, are open to take-over bids.
This is a document which companies have to produce when they go public ie when they wish to float on the Stock Exchange. It gives details about the company's activities and anticipated future profits. It has to conform to the Companies Act and be handed to the Registrar of Companies.
This is a contract to raise cash by selling the freehold to a piece of property and then buying it back on a long-term lease. This ensures that the firm can stay in its premises and therefore can carry on trading as if nothing has happened.
The money released through this process enables the firm to improve its liquidity position, although its owns less fixed assets than before. This is that part of the economy involved in the making and manufacturing of goods. Over the past twenty years, the UK has seen a large decline in the number of people employed in the secondary sector of the economy, due to firstly a fall in demand for the output and secondly due to the replacement of workers by machines mechanisation.
Common examples of sole traders include corner shops, newsagents and market traders. They have unlimited liability for their debts and often have little available finance for expansion. They often employ waged workers, yet keep all the profit after tax for themselves.
This is a market for securities the collective name for stocks and shares. Its main functions are to enable firms or governments to raise capital and to provide a market in second-hand shares and government stocks. This involves purchasing over 50 per cent of the share capital of a company and then being able to exert full control over it.
This process is also known as acquisition or integration. This is an attempt by a company to buy a controlling interest i. This is done by offering the target firm's shareholders a significantly higher price for their shares than the prevailing market price. This is that part of the economy concerned with providing goods and services to customers. It is the largest sector in terms of employment in the UK, accounting for over two-thirds of the workforce. This refers to the fact that the owners of certain business organisations sole traders and partnerships are not limited to the extent of their debts.
They will have to sell off their own assets and use their own personal wealth, if necessary, to meet the debts of their business. If the business debts are greater than their own personal wealth, then the business may be forced into bankruptcy. This occurs when two firms join together through a merger or a take-over that operate in the same industry, but at different stages in the production chain.
Backward vertical integration means buying out a supplier e. Forward vertical integration means buying out a customer e. This bases the marketing strategy of a business on its existing strengths , rather than on what the customer wants e. Nestle developing a mousse-style dessert, based on its successful Smarties brand. This refers to index number data, and it relates to the year that is chosen for comparison with other years it has an index number of This is a measurement of the degree of certainty to be attached to a conclusion which is drawn from a sample finding.
This measures the relationship that exists between two or more variables. A positive or direct correlation is said to exist where one variable increases along with the other, and vice versa e. A negative or indirect correlation is said to exist where one variable declines as the other rises, and vice versa e.
This is an attempt by a business to lengthen the product life-cycle for a particular brand. It is likely to be used at either the maturity or early decline stages of the life-cycle. Types of extension strategy include:. This means calculating and analysing recent trends, and assuming that these trends will continue into the future.
They can then be used to predict, to a reasonable level of accuracy, how a particular variable such as sales will change in the future. This is a statistical measure which is designed to make changes in a set of data such as sales figures easier to manage and interpret.
It involves giving one item of data a value of the base period , and adjusting the other items of data in proportion to it. This means the commercial exploitation of an invention i.
This is a pricing strategy for a new product. The product is launched onto the market at a low price in order to build up a strong customer following. This low price aims to steal market share from existing competitors and it deters new competitors from entering the industry. This is the process of gathering data on the habits, lifestyle and attitudes of actual and potential customers, with a view to developing products to meet their needs.
This involves breaking the market down using various criteria, in order to identify distinct groups of customers. The main ways in which a market can be segmented are:. This measures the percentage of all the sales within a particular market that are held by one product or by one company. This is a framework for making marketing decisions in a scientific manner. It is derived from F W Taylor's method of decision-making. The model has five stages. Stage 1 - Set the marketing objective Stage 2 - Gather the data that will be needed to help make the decision Stage 3 - Form hypotheses Stage 4 - Test the hypotheses Stage 5 - Control and review the whole process.
This outlines the marketing objectives and strategy of a business. The plan is normally developed in three stages:. This is a medium- to long-term plan for meeting marketing objectives. A marketing strategy is implemented through the marketing mix product, price, promotion and place. This is a method of identifying the trend that exists within a series of data.
It calculates an average figure for every few items of data - therefore eliminating any fluctuations which may exist, in order to show the underlying trend.
It is the opposite strategy to mass marketing. This is first-hand information that is specifically related to a firm's needs. This involves gathering first-hand data that is specifically concerned with a firm's products, customers or markets. It is gathered through questionnaires, observation or experimentation e. This theory states that all products follow a number of stages during their commercialisation introduction, growth, maturity, saturation and decline.
Each product will pass through these stages at different speeds. This refers to the range of products produced by a business. This portfolio should range over a variety of markets and a variety of stages in the product life cycle. One way of analysing the product portfolio of a business is through the Boston Matrix.
It is carried out through interviews and discussion groups. This involves segmenting the population and interviewing a given number of people in each segment, according to their demographic characteristics. This involves giving every person in the population an equal chance of being interviewed to find out their tastes, shopping habits, etc. This shows changes in the price of the average person's shopping basket.
The RPI is the main measurement of inflation in the UK and is calculated through a weighted average of each month's price changes. This is a group of people who are chosen to take part in a market research campaign.
Their views and opinions are assumed to be representative of the population as a whole. This is market research information which is collected from second-hand sources e. This is a method of sampling that interviews people from a specific subgroup of the population, rather than from the population as a whole.
This method of sampling would be chosen buy a business if the buyers of its products fell into a certain age-group or geographic area, rather than being spread across the whole population. This is the launch of a new product within a small geographic area rather than nationally , in order to measure its potential sales and profitability. This reduces the risk and the costs associated with a national failure.
This is a method of promotion that a business has to pay for. It is carried out through a variety of mediums, such as television, newspapers, magazines, cinema or radio. This measures the effect on the demand for a product, following a change in advertising expenditure.
It is calculated by the formula:. If a large fall in advertising expenditure lead to just a small fall in quantity demanded, then the product would be advertising inelastic. This is an organisation which monitors advertisements in print i. This is the way that the business attempts to achieve its advertising objectives. The advertising strategy will usually state the necessary finance that must be available and the relevant media to be used.
This means creating a name and identity for a product which differentiates it from those of competitors. This is the product brand which has the largest market share in a particular industry.
This is where customers are happy with their purchase of a particular product, and will return to purchase it again in the future. These are products which are purchased by households, and are likely to last for a considerable period of time e. This is selling price minus variable costs per unit.
The remaining money contributes towards covering fixed costs. This means arriving at the selling price for a product by adding a profit mark-up to the total costs per unit.
This refers to promotional material that is sent directly to certain homes and addresses, which are selected from a list of known customers e. This refers to promotional activities that involve the business making direct contact with potential customers e.
These are the stages involved in getting the product from the factory to the customers e. This measures the effect on the demand for a product, following a change in the income of customers. If a large fall in income leads to a small fall in quantity demanded, then the product would be income inelastic. This term refers to a product which has its retail price set at a level which is less than its costs of production. This strategy is often used by multi-product businesses, which hope that customers will buy their loss leader product, as well as a range of their other products which carry a significant profit margin.
The business function which involves getting the right product to the right place, at the right price, using appropriate methods of promotion, and doing it profitably. This term refers to the four main marketing strategies through which a business will attempt to achieve its marketing objectives. This is a pricing strategy for a new product, designed to undercut existing competitors and discourage potential new rivals from entering the market. The piece of the product is set at a low level in order to build up a large market share and a high degree of brand loyalty.
This refers to the colour, shape and presentation of the product and its protective wrappings. This is an important element in the promotional mix that a business chooses, because packaging can create a Unique Selling Point U. P for a product. This is a pricing strategy which involves a business setting a price for a product at such a low level that their competitors are either forced to leave the market or, more seriously, are forced out of business.
This is a pricing strategy which involves a business charging different prices to different people for the same product or service. This strategy aims to maximise the sales revenue of the business, by charging a higher price to those groups of customers who have a low elasticity of demand, and charging a lower price to those groups who have a high elasticity of demand. For example, the train companies charge a high price early in the morning to commuters, and a lower price several hours later for other members of the public, for the same distance and journey from London to Birmingham.
This refers to a situation where a given percentage change in the price of a product results in a larger percentage change in the level of demand for it e.
These products are considered to be price sensitive, since even a small rise in price can result in a large fall in demand. This measures the effect on the demand for a product, following a change in its price. If a large fall in the price of the product leads to a small fall in quantity demanded, then the product would be price inelastic.
An answer of more than one indicates that the demand for the product is price elastic. An answer of between zero and one indicates that the demand for the product is price elastic. This refers to a situation where a given percentage change in the price of a product results in a smaller percentage change in the level of demand for it e. This is the term used to describe a product or brand which is a dominant force in the marketplace and it can set its price at any level it chooses.
The price that is set by competitors will therefore be dictated by the price leader. This is the opposite to a price leader. It refers to the products of a business which are not market-leaders, and therefore they have to set their price based upon the level set by the dominant product in the market place. This refers to a situation where two or more businesses lower their prices in an attempt to win sales and market share from each-other.
Price wars are most likely to start in very competitive markets, where the growth potential is very high and consumer sales are very lucrative e. Consumers are the only group who really benefit from a price war in the short-term, since they pay lower prices. However, if the price war results in one or more of the competitors becoming unprofitable and being put out of business, then the consumer may be faced with less choice and higher prices than before the price war started.
This refers to the different ways that a business can decide on the price s to charge for its product s. The main pricing methods are:. This is a strategy of bringing new products to the marketplace. It can either involve making slight improvements to existing products, or by developing and launching totally new products.
This is the perceived difference s that consumers believe exist between one product and its competitors. A product with a high degree of differentiation can be sold at a high price, therefore yielding a high profit-margin. This is a promotional strategy designed to boost the sales of a product in the short-term using such tactics as a price discount, free products, competitions, discount coupons, etc.
This is a pricing strategy for a new product, designed to create an up-market, expensive image by setting the price at a very high level. It is a strategy often used for new, innovative or high-tech. This is an investment appraisal technique which calculates the average annual profit of an investment project, expressed as a percentage of the sum of money invested. This is a graph showing the total revenue and the total costs of a business at various levels of output.
It is a form of Management Accounting and it enables a manager to see the expected profit or loss that a product will face at different levels of output. This refers to the point on a break-even chart where the total revenue T. R of a business or product is equal to its total costs T. It can also be calculated mathematically by using the following formula:. This is a financial plan for the forthcoming year, that is drawn up to help a business achieve its objectives. It covers aspects such as sales, production expenses, etc.
This refers to the system of regular comparison of budgeted figures for revenue and expenses with the actual outcomes. Any differences between the budgeted figures and the actual outcomes are known as variances — these need to be investigated and the reasons for their existence must be established. This is total revenue minus total variable costs.
This is the amount of money that each unit that is sold contributes towards covering the fixed costs of the business. Once the fixed costs are covered, all extra contribution is profit. This is a department or a division of a business to which certain costs can be allocated e. This is a cost which can be attributed to the production of a product, and it will vary in direct proportion to output e. These are costs which do not vary with output , and would be incurred even when output was zero e.
These are total fixed costs divided by the number of units produced. They are often referred to as average fixed costs. This is a cost which is not directly attributable to production e. These are those employees such as office and cleaning staff who are not involved directly in the process of production or customer service.
If the resulting figure the NPV is positive, then the project is viable and should be undertaken. This is an investment appraisal technique which estimates the length of time that it will take to recoup the initial cash outflow of an investment project.
This is the amount of revenue that remains for a business or a product, after all costs have been deducted i. This is a department or a division within a business which operates independently and produces its own annual profit and loss account.
This is the number of units of output that the business produces above its break-even point. It represents the number of units that the production level could decrease by, before the business would make a loss. This is a cost which varies directly with the number of units that the business produces e. In other words, as the level of output increases, then so too will the variable costs that the business has to pay. These are the total variable costs divided by the number of units produced.
They are often referred to as average variable costs. This is the difference between the actual results of the business and the figures that the business budgeted for the year e. This is where a budget is set to zero for a given time-period, and the manager of the particular division or department then has to justify any expenditure which he wishes to make. It is often used in an economic recession or a downturn in the industry, when money is not as readily available.
This is an item that a business owns — it can either be a fixed asset owned for more than 12 months or a current asset owned for less than 12 months. This is the present value of all the assets of the business minus current liabilities. This is a snapshot at a given point in time, showing the assets, liabilities and capital of a business.
It essentially shows the net worth of a business. This is the total of all the long-term finance of the business. Essentially it shows where the business raised its money from loans, share capital and reserves. Capital employed equals assets employed. This is expenditure on items of capital and new fixed assets e. This is a Management Accounting document which outlines the forecasted future cash inflows from sales and the outflows raw materials, wages, etc per month for a business. This is a Financial statement which shows the cash inflows and the cash outflows for a business over the past 12 months.
It represents the direct costs of manufacturing a given level of output. These are any monies which the business owes to its suppliers, which will be settled within the next 12 months e.
This is an item that a business owns for less than 12 months e. This is an item that a business owes to an external body, which will be settled within 12 months e. These are the people who owe the business money e. This is the fall in the value of fixed assets, either due to their use, due to time, or due to obsolescence. Essentially, depreciation divides up the historic cost of a fixed asset over the number of expected years that it will be used by the business.
A business organisation which has its own legal identity and which has limited liability. An investor in and one of the owners of a company. Occurs when an individual becomes insolvent. You are declared bankrupt when the court takes control of your earnings and allows you to repay the money over a given number of years. The services and facilities that support day-to-day business activity. Factors that are not easily measurable, e.
Costs that do not change with the level of output, e. Occur when jobs no longer exist, e. Occurs when a superior entrusts a task to a subordinate. Earnings or income generated by a firm as a result of its trading activities. Alter directly with the level of output, e.
Fixed and variable costs added together. The difference between sales revenue and variable costs; it is used to pay fixed costs and to provide profits. Removing ad is a premium feature.
Listed below are 50 key terms that AQA BUSS1 students need to ensure they understand and can define / explain in the exam. A process through which a business increases the worth of the resources included in production so that customers perceive the product to be worth more than the cost of the.
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Key Terms. Business- Something that provides a good or a service. Gap in the market- Where there is a demand for a good or service that is . Business Studies Unit 1 AQA Key Words. 0 Sign In Sign Up for Free Sign Up AS Business Studies - Key Terms Start flashcards. Front of flashcard Back of flashcard Adding Value. Upload Image The process of a business increasing the worth of a product.
Start studying AS Business Studies Key Terms. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Start studying AS Business Studies Key Terms (FULL). Learn vocabulary, terms, and more with flashcards, games, and other study tools.