Chapter 1 Chapter 2

A need is a good or service essential The primary sector of industry A takeover or acquisition is when
for living. extracts and uses the natural one business buys out the owners
resources of Earth to produce raw of another business, which then
A want is a good or service which materials used by other businesses. becomes part of the predator'
people would like to have, but which
business (the business which has
is not essential for living. People's The secondary sector of industry taken it over).
wants are unlimited. manufactures goods using the raw-
materials provided by the primary A merger is when the owners of
The economic problem sector. two businesses agree to join their
- there exist unlimited wants but
limited resources to produce the goods businesses together to make one
The tertiary sector of industry
and services to satisfy those wants. business.
provides services to consumers and
This creates scarcity. the other sectors of industry.
Horizontal integration Is when
Factors of production are those one business merges with or takes
De-industrialisation occurs when
resources needed to produce goods or over another one in the same
there is a decline in the importance
services. industry at the same stage of
of the secondary, manufacturing
There are four factors of production production.
sector of industry in a country.
and they are in limited supply.
A mixed economy has both a private Vertical integration is when one
Scarcity is the lack of sufficient sector and a public (state) sector. business merges with or takes
products to fulfil the total wants of the over another one in the same
population. industry but at a different stage of
Capital is the money invested into a
business by the owners. production. Vertical integration
Opportunity cost is the next best can be forward or backward.
alternative given up by choosing
another item. Chapter 3 Conglomerate integration is when
one business merges with or takes
Specialisation occurs when people and Entrepreneur is a person who
over a business in a completely
businesses concentrate on what they organises, operates and takes the
risk for a new business venture. different industry.
are best at.
This is also known as
A business plan is a document diversification.
Division of labour is when the
production process is split up into containing the business objectives
different tasks and each worker and important details about the
performs one of these tasks. It is a operations, finance and owners of
form of specialisation the new business.

Businesses combine factors of Capital employed is the total value

production to make products (goods of capital used in the business.
and services) which satisfy people's
Internal growth occurs when a
wants.
business expands its existing
operations.
Added value is the difference between
the selling price of a product and the
External growth is when a business
cost of bought-in materials and
takes over or merges with another
components.
business. It is often called
integration as one business is
integrated into another one.
 Chapter 4 Chapter 5
Sole trader is a business owned by Public limited companies are Business objectives are the
one person. businesses owned by aims or targets that a
shareholders but they can sell business works towards.
Limited liability means that the shares to the public and their
liability of shareholders in a company shares are tradeable on the Profit is total income of a
is limited to only the amount they Stock Exchange. business (revenue) less
invested. total costs.
An Annual General Meeting
Unlimited liability means that the is a legal requirement for all Market share is the
owners of a business can be held companies. Shareholders may percentage of total market
responsible for the debts of the attend and vote on who they sales held by one brand or
business they own. want to be on the Board of business.
Their liability is not limited to the Directors for the coming year.
investment they made in the business.
A social enterprise has
Dividends are payments social objectives as well as
Partnership is a form of business in made to shareholders from an aim to make a profit to
which two or more people agree to the profits (after tax) of a
jointly own a business. reinvest back into the
company. They are the return business.
to shareholders for investing
A partnership agreement is the in the company.
written and legal agreement between A stakeholder is any person
business partners. or group with a direct
A franchise is a business
It is not essential for partners to have interest in the performance
based upon the use of the
such an agreement but it is always and activities of a business.
brand names, promotional
recommended.
logos and trading methods of
an existing successful
An unincorporated business is one
business. The franchisee buys
that does not have a separate legal
the licence to operate this
identity. Sole traders and partnerships
business from the franchisor.
are unincorporated businesses.

A joint venture is where two

Incorporated businesses are
or more businesses start a
companies that have separate legal
new project together, sharing
status from their owners.
capital, risks and profits.
Shareholders are the owners of a
limited company. They buy shares A public corporation is a
which represent part-ownership of the business in the public sector
company. that is owned and controlled
by the state (government).
Private limited companies are
businesses owned by shareholders but
they cannot sell shares to the public.
 Teamworking involves using
Chapter 6 groups of workers and
Supervisors are junior
managers who have direct
allocating specific tasks and control over the employees
Motivation is the reason why responsibilities to them. below them in the
employees want to work hard and organisational structure.
work effectively for the business. Training is the process of
improving a worker's skills. Staff managers are specialists
A wage is payment for work, who provide support,
usually paid weekly. Promotion is the information and assistance to
advancement of an employee line managers.
Time rate is the amount paid to an in an organisation, for
employee for one hour of work. example, to a higher job/ Delegation means giving a
managerial level. subordinate the authority to
Piece rate is an amount paid for perform particular tasks.
each unit of output. Chapter 7 Leadership styles are the
Organisational structure refers to the different approaches to dealing
A salary is payment for work,
levels of management and division with people and making
usually paid monthly. of responsibilities within an decisions when in a position of
organisation.
authority - autocratic,
A bonus is an additional amount
democratic or laissez-faire.
of payment above basic pay as a Organisational chart refers to a
reward for good work. diagram that outlines the internal
management structure. Autocratic leadership is where
the manager expects to be in
Commission is payment relating charge of the business and to
Hierarchy refers to the levels of
to the number of sales made. management in any organisation, have their orders followed.
from the highest to the lowest.
Profit sharing is a system whereby Democratic leadership gets
a proportion of the company's A level of hierarchy refers to other employees involved in
profits is paid out to employees. managers/supervisors/ other the decision-making process.
employees who are given a similar
level of responsibility in an Laissez-faire leadership makes
Job satisfaction is the enjoyment
organisation.
derived from feeling that you have the broad objectives of the
done a good job. business known to employees,
Chain of command is the structure in
but then they are left to make
an organisation which allows
Job rotation involves workers instructions to be passed down from their own decisions and
swapping around and doing each senior management to lower levels organise their own work.
specific task for only a limited of management.
A trade union is a group of
time and then changing around
The span of control is the number of employees who have joined
again.
subordinates working directly under together to ensure their
a manager. interests are protected.
Job enrichment involves looking
at jobs and adding tasks that Directors are senior managers who A closed shop is when all
require more skill and/or lead a particular department or
employees must be a member
division of a business.
responsibility. of the same trade union.
Line managers have direct
responsibility for people below them
in the hierarchy of an organisation.
 Redundancy is when an Feedback is the reply from the receiver

Chapter 8 employee is no longer needed

and so loses their job. It is not
which shows whether the message has
arrived, been understood and, if
Recruitment is the process from due to any aspect of their work necessary, acted upon.
identifying that the business needs to being unsatisfactory.
employ someone up to the point at which One-way communication involves a
applications have arrived at the business. A contract of employment is a message which does not call for or
legal agreement between an require a response.
Employee selection is the process of employer and employee, listing
evaluating candidates for a specific job the rights and responsibilities of Two-way communication is when the
and selecting an individual for receiver gives a response to the message
workers.
employment based on the needs of the and there is a discussion about it.
organisation.
An industrial tribunal is a type
Formal communication is when
of law court (or in some
A job analysis identifies and records the messages are sent through established
countries, a legal meeting) that
responsibilities and tasks relating to a job. channels using professional language.
makes judgments on
disagreements between
A job description outlines the Informal communication is when
responsibilities and duties to be carried out companies and their employees,
information is sent and received
by someone employed to do a specific job. for example, workers'
casually using everyday language.
complaints of unfair dismissal or
A job specification is a document which discrimination at work. Communication barriers are factors that
outlines the requirements, qualifications, stop effective communication of
expertise, physical characteristics, etc., for An ethical decision is a decision messages.
a specified job. taken by a manager or a
company because of the moral Chapter 10
Internal recruitment is when a vacancy is code observed by the firm. Marketing is identifying customer wants
filled by someone who is an existing and satisfying them profitably.
employee of the business. Chapter 9
Communication is the transferring A customer is a person, business or other
External recruitment is when a vacancy is
of a message from the sender to the organisation which buys goods or services
filled by someone who is not an existing
employee and will be new to the business. receiver, who understands the from a business.
message.
Part-time employment is often considered Customer loyalty is when existing
to be between 1 and 30-35 hours a week. A message is the information or customers continually buy products from
instructions being passed by the the same business.
Full-time employees will usually work 35
sender to the receiver.
hours or more a week. Customer relationships is communicating
Internal communication is between with customers to encourage them to
Induction training is an introduction given
members of the same organisation. become loyal to the business and its
to a new employee, explaining the
products.
business's activities, customs and
procedures and introducing them to their External communication is between
fellow workers. the organisation and other Market share is the percentage of total
organisations or individuals. market sales held by one brand or business.
On-the-job training occurs by watching a
more experienced worker doing the job. The transmitter or sender of the A consumer buys goods or services for
message is the person starting off personal use - not to re-sell.
Off-the-job training involves being trained
the process by sending the message.
away from the workplace, usually by
Mass market is where there is a very large
specialist trainers.
The medium of communication is number of sales of a product.
Workforce planning is establishing the the method used to send a message,
workforce needed by the business for the for example, a letter is a method of A niche market is a small, usually
foreseeable future in terms of the number written communication and a specialised,
and skills of employees required. meeting is a method of verbal segment of a much larger market.
communication.
Dismissal is when employment is ended Market segment is an identifiable sub-group
against the will of the employee, usually The receiver is the person who of a whole market in which consumers have
for not working in accordance with the receives the message. similar characteristics or preferences.
employment contract.
 Chapter 12 Promotional pricing is when a
Chapter 11 The marketing mix is a term which is product is sold at a very low
price for a short period of time.
Market research is the process of gathering, used to describe all the activities
which go into marketing a product or
analysing and interpreting information about a
service. Dynamic pricing is when
market.
These activities are often summarised businesses change product
as the four Ps- product, price, place prices, usually when selling
A product-orientated business is one whose
and promotion. online, depending on the level of
main focus of activity is on the product itself.
demand.
The USP is the speciat feature of a
A market-orientated business is one which product that differentiates it from the Price elastic demand
carries out market research to find out products of competitors. is where consumers are very
consumer wants before a product is developed
sensitive to changes in price.
and produced. The brand name is the unique name of
a product that distinguishes it from
A marketing budget is a financial plan for the Price inelastic demand is where
other brands.
marketing of a product or product range for consumers are not sensitive to
some specified period of time. It specifies changes in price.
Brand loyalty is when consumers
how much money is available to market the keep buying the same brand again and
product or range, so that the Marketing
department knows how much it may spend.
again instead of choosing a
competitor's brand.
Chapter 14
A distribution channel is the
Primary research is the collection and Brand image is an image or identity means by which a product is
collation of original data via direct contact given to a product which gives it a passed from the place of
with potential or existing customers. (Also personality of its own and production to the customer.
called field research.) distinguishes it from its competitors'
brands.
An agent is an independent
Secondary research uses information that has person or business that is
already been collected and is available for use Packaging is the physical container or
wrapping for a product. It is also used appointed to deal with the sales
by others. (Also called desk research.)
for promotion. and selling appeal. and distribution of a product or
range of products.
A questionnaire is a set of questions to be
The product life cycle describes the
answered as a means of collecting data for
stages a product will pass through
market research.
from its introduction,
through its growth until it is mature,
Online surveys require the target sample to
and then finally its decline.
answer a series of questions over the internet.
Interviews involve asking individuals a series Extension strategy is a way of
of questions, often face-to-face or over the keeping a product at the maturity
phone. stage of the life cycle and extending
the cycle.
A focus group is a group of people who are
representative of the target market.
Chapter 13
Cost-plus pricing is the cost of
A sample is the group of people who are manufacturing the product plus a profit
selected to respond to a market research mark-up.
exercise, such as a questionnaire.
Competitive pricing is when the product
A random sample is when people are selected is priced in line with or just below
competitors' prices to try to capture more
at random as a source of information for
of the market.
market research.
Penetration pricing is when the price is
A quota sample is when people are selected on set lower than the competitors' prices in
the basis of certain characteristics (such as order to be able to enter a new market.
age, gender or income as a source of
information for market research. Price skimming is where a high price is
set for a new product on the market.
 Average cost per unit is the total
Chapter 15 Chapter 17 cost of production divided by
Promotion is where marketing A marketing strategy is a plan to total output (sometimes referred
activities aim to raise customer combine the right combination of the to as unit cost').
four elements of the marketing mix for
awareness of a product or brand,
a product or service to achieve a Economies of scale are the factors
generating sales and helping to
particular marketing objective(s). that lead to a reduction in average
create brand loyalty.
costs as a business increases in
Advertising paid for Chapter 18 size.
communication with potential Productivity is the output measured
customers about a product to against the inputs used to create it. Diseconomies of scale are the
encourage them to buy it. factors that lead to an increase in
The buffer inventory level is the average costs as a business grows
Informative advertising is where inventory held to deal with uncertainty beyond a certain size.
the emphasis of advertising or sales in customer demand and deliveries of
promotion is to give full supplies. Break-even level of output is the
information about the product. quantity that must be produced/
Lean production is a term for those sold for total revenue to equal
Persuasive advertising is techniques used by businesses to cut
total costs (also known as break-
advertising or promotion which is down on waste and therefore increase
even point).
efficiency, for example, by reducing the
trying to persuade the consumer
time it takes for a product to be
that they really need the product Break-even charts are graphs
developed and become available for
and should buy it. which show how costs and
sale.
revenues of a business change
The target audience refers to people with sales. They show the level of
Kaizen is a Japanese term meaning
who are potential buyers of a 'continuous improvement' through the sales the business must make in
product or service. elimination of waste. order to break even.

Sales promotions are incentives Just-in-time (JIT) is a production The revenue of a business is the
such as special offers or special method that involves reducing or income during a period of time
deals aimed at consumers to virtually eliminating the need to hold
from the sale of goods or services.
achieve short-term increases in inventories of raw materials or unsold/
Total revenue = quantity sold x
sales. inventories of the finished product.
price.

Chapter 16 Job production is where a single

The break-even point is the level
product is made at a time.
Social media marketing is a form of of sales at which total costs =
internet marketing that involves Batch production is where a quantity of total revenue.
creating and sharing content on social one product is made, then a quantity of
media networks in order to achieve another item will be produced. Margin of safety is the amount by
marketing and branding goals. It which sales exceed the break-
includes activities such as posting text Flow production is where large even point.
and image updates, videos, and other quantities of a product are produced in
content that achieves audience a continuous process. It is sometimes
The contribution of a product is
referred to as mass production.
engagement, as well as paid social its selling price less its variable
media advertising. cost.
Chapter 19
Viral marketing is when consumers are Fixed costs are costs which do not vary
encouraged to share information online in the short run with the number of
about the products of a business. items sold or produced. They have to be
paid whether the business is making any
e-commerce is the 'online buying and sales or not. They are also known as
selling of goods and services using overhead costs.
computer systems linked to the eternet
and apps on mobile (cell) phones. Variable costs are costs which vary
directly with the number of items sold or
Dynamic pricing is when businesses produced.
change product prices, usually when
selling online, depending on the level Total costs are fixed and variable
of demand costs combined.
 Chapter 20 Crowdfunding is funding a project or
venture by raising money from a large Chapter 24
Quality means to produce a good or a
number of people who each contribute Accounts are the financial records of a
service which meets customer
a relatively small amount, typically via firm's transactions.
expectations.
the internet.
Accountants are the professionally
Quality control is the checking for Chapter 23 qualified people who have
quality at the end of the production
The cash flow of a business is the cash responsibility for keeping accurate
process, whether it is the production of
inflows and outflows over a period of accounts and for producing the final
a product or a service. It uses quality
time.
inspectors as a way of finding any accounts.
faults.
Cash inflows are the sums of money
Final accounts are produced at the end
received by a business during a period
Quality assurance is the checking for of the financial year and give details of
of time.
quality standards throughout the the profit or loss made over the year and
production process by employees, the worth of the business.
Cash outflows are the sums of money
whether it is the production of a product paid out by a business during a period
or a service. An income statement is a financial
of time.
statement that records the income of a
Total Quality Management (TQM) is A cash flow cycle shows the stages business and all costs incurred to earn
the continuous improvement of between paying out cash for labour, that income over a period of time (for
products and processes by focusing on materials, and so on, and receiving cash example, one year). It is also known as
quality at each and every stage of from the sale of goods. a profit and loss account.
production.
The revenue is the income to a business
Chapter 22 Profit is the surplus after total costs
during a period of time from the sale of
have been subtracted from revenue.
Start-up capital is the finance needed goods or services.
by a new business to pay for essential A cash flow forecast is an estimate of
non-current (fixed) and current assets future cash inflows and outflows of a Retained profit is leftover profit-
before it can begin trading. business, usually on a month-by-month owners use this profit to re invest incase
basis. if expansion or to buy expensive
This then shows the expected cash machinery / Retained profit is the net
Working capital is the finance needed balance at the end of each month. profit reinvested back into a company,
by a business to pay its day-to-day after deducting tax and payments to
costs. Net cash flow is the difference, each owners, such as dividends.
month, between inflows and outflows.
Capital expenditure is money spent on Gross profit is a difference between
non-current (fixed) assets which will Closing cash (or bank) balance is the revenue earned and the cost if brought
amount of cash held by the business at in material to produce those products.
last for more than one year.
the end of each month.This becomes GP = Sales Revenue-cost of sales
next month's opening cash balance.
Revenue expenditure is money spent
Net profit is the profit made by a
on day-to-day expenses which do not Opening cash (or bank) balance is the business after all costs have been
involve the purchase of a long-term amount of cash held by the business at deducted from revenue. It is calculated
asset, for example, wages or rent. the start of the month. by subtracting overhead costs from
gross profits.
Working capital is the capital available
Internal finance is obtained from to a business in the short term to pay
within the business itself. Depreciation is the fall in the value of a
for day-to-day expenses/amount of
fixed asset over time.
fund available to business in the Short
External finance is obtained from term for day to day expenses.
sources outside of and separate from
the business.

Micro-finance is providing
financial services -
including small loans - to poor people
not served by traditional banks.
 An import quota is a physical
Chapter 25 Chapter 27 limit on the quantity of a
The statement of financial position Gross Domestic Product product that can be imported.
shows the value of a business's (GDP) is the total value of output of goods
assets and liabilities at a particular and services in a country in one year. Monetary policy is a change in
time. interest rates by the government
A recession is when there is a period of or central bank, for example,
Assets are those items of value falling GDP. the European Central Bank.
which are owned by the business.
They may be non-current (fixed) Inflation is the increase in/ the average Exchange rate appreciation is
assets or (short-term) current price level of goods and services over time. the rise in the value of a
assets. currency compared with other
Unemployment exists when people who are currencies.
Liabilities are debts owed by the willing ande able to work cannot find a job.
business. They may be non-current Supply side policies try to
Economic growth is when a country's GDP increase the competitiveness of
(long-term). liabilities or (short-
increases - more goods and services are industries in an economy
term)
produced than in the. previous year. against those from other
current liabilities.
countries. Policies to make the
The balance of payments records the economy more efficient.
Non-current assets are items owned
difference between a country's exports and
by the business for more than one
imports.
year
Real income is the value of income, and it
Current assets are owned by a
falls when prices rise faster than money
business and used within one year.
income.

Non-current liabilities are long- Exports are goods and

term debts owed by. the business, services sold from one country to
repaid over more than one year. other countries.

Current liabilities are short-term Imports are goods and services bought in by
debts owed by the business, repaid one country from other countries.
in less than one year.
The exchange rate is the price of one
Chapter 26
currency in terms of another, for example,
Capital employed is shareholders' £1: $1.5..
equity plus non-current liabilities
and is the total long-term and Exchange rate depreciation is the fall in the
permanent capital invested in a value of a currency compared with other
currencies.
business.
Fiscal policy is any change by the
Liquidity is the ability of a business government in tax rates or public sector
to pay back its short-term debts by spendina.
using current assets.
Direct taxes are paid directly from incomes,
Profitability is the measurement of for example, income tax or profits tax.
the profit made relative to either the
value of sales achieved or the Indirect taxes are added to the prices of
capital invested in the business. goods and taxpayers pay the tax as they
purchase the goods, for example, VAT,

Illiquid means that assets are not Disposable income is the level of income a
easily convertible into cash. taxpayer has after paying income tax.

An import tariff is a tax on an

imported product.
 A consumer boycott is when consumers
Chapter 28 decide not to buy products from
businesses that do not act in a socially
Social responsibility is when a business
responsible way.
decision benefits stakeholders other than
shareholders, for example, a decision to Ethical decisiohs are based on a
protect the environment by reducing moral code.
pollution by using the latest and 'greenest' Sometimes referred to as
production equipment. 'doing the right thing

Environment is our natural world Chapter 29

including, for example, pure air, clean Globalisation is the term now
water and undeveloped countryside. widely used to describe increases in
worldwide trade and movement of
Global warming is a gradual increase in people and capital between
the overall temperature of the Earth's countries.
atmosphere, generally thought to be
caused by increased levels of carbon Free trade agreements exist when
dioxide, CFCs, and other pollutants in the countries agree to trade imports/
atmosphere. exports with no barriers such as
tariffs and quotas.
A pressure group is made up of people
who want to change business (or An import tariff is a tax placed on
government) decisions by taking action, imported goods when they arrive
such: as organising consumer boycotts. into the country.

Private costs of an activity are the costs An import quota is a restriction on

paid for by a business or the consumer of the quantity of a product that can be
the product. imported.

Private benefits of an activity are the Protectionism is when a government

gains to a business or the consumer of the protects domestic businesses from
product. foreign competition using tariffs and
quotas.
External costs are costs paid for by the
rest of society, other than the business, as Multinational businesses are those
a result of business activity. with factories, production or service
operations in more than one country.
External benefits are the gains to the rest These are sometimes known as
of society. other than the business, as a transnatiohal businesses.
result of business activity.

Social cost = external costs +

private costs.

Social benefit = external benefits +

private benefits.

Sustainable development is development

which does not put at risk the living
standards of future generations.

Pressure groups are groups of people who

act together to try to force businesses or
governments to adopt certain policies.