Co-operative: a business organisation owned by its members who have equal voting rights

Franchise: a business model in which a business [franchisor] allow another operator

[franchisee] to trade under their name
Limited Liability: a legal status which means that a business owner is only liable for the
original amount of money invested in the business
Unlimited Liability: a legal status which means that a business owner is liable for all debts
of the business
Partnership: a business organisation that is usually owned by between 2-20 people
Sole trader/ sole proprietor: a business organisation that has a single owner
Limited company: a business organisation that has a separate legal entity from that of its
owners
Private Limited Company [Ltd]: Usually small/ medium sized (family) businesses where
shares are transferred privately from one individual to another; all shareholders agree on the
transfer of shares/ not advertised publicly.
Public Limited Company [Plc]: a company owned by shareholders where the shares can be
traded openly on the stock market (i.e. to the public)
Private equity company: a business usually owned by private individuals backed by
financial institutions
Stock market: a market for second-hand shares
Stock market flotation/ Initial Public Offering (IPO): the process of a company ‘going
Product Orientation: Business focuses on the production process or product itself (i.e. gas,
electricity, water supply etc) (p. 8)
Market Orientation: Business focuses on the consumer’s needs by continually identifying,
reviewing and analysing them (i.e. clothing retailer, supermarket chain etc) (p. 8)
4 Ps of marketing: Product, Price, Promotion, Place (p. 73)
Marketing Strategy: A set of plans that aim to achieve a specific marketing objective (p.73)
Market share: percentage of the total market that an individual firm supplies; measured
by revenue (turnover)/ sales volume/ profit
Market size: measures the total value (revenue) of a given market, the total (sales)
volume of a given market, [or the total profit in a given market]
Market growth: percentage increase in the size of a market over a specified period of
time (NB: could be for the whole market, or an individual firm’s share of the market)
Market positioning: The view consumers have about the quality, value for money, and
image of a product in relation to its competitors (p. 22); market repositioning =
changing this view of the product for the consumer.
Market maps (perceptual maps): a two-dimensional diagram that shows two of the
attributes of a brand v rival brands in the market (p. 22)
Mass market/ marketing: Offering undifferentiated products to all customers; a large
market in which products with mass appeal are targeted [ p. 6]
Niche market/ marketing: Targeting a specific, well defined, segment of the market; a
smaller market usually within a large market/ industry [ p. 6]
Product differentiation: Used by a business to distinguish its product from those of its
competitors [p. 20, 22]
Unique Selling Point/ Proposition: Used by a business to distinguishdifferentiate its product
from
those of its competitors [ p. 22]
Added value: The difference between the price that us charged and the total cost of the
inputs required to create the product/ service (i.e. high quality customer service etc)
Market segmentation: the division of a market into groups, each of which has
distinctive or similar customer preferences (e.g. age, gender, income, hobbies/ interests,
location, ethnic origin/ culture, occupation, life style). (p.15-16).
Geographic segmentation: Market segmentation based on location/ where a person lives
Demographic segmentation: Market segmentation based on age, gender, income, social class,
ethnicity, religion
Psychographic segmentation: Market segmentation based on customers’ attitudes, opinions,
lifestyles
Market Research: the collection, presentation, and analysis of information relating to the
marketing and consumption of goods & services
Qualitative market research: Collection of data about attitudes, beliefs, and intentions
Quantitative market research: Collection of data that can be quantified (i.e. counted!)
Primary (field) market research: Gathering of new information which does not already exist
Secondary (desk) market research: Collection of data that already exists
Sample/ sampling (incl. random, stratified, quota methods): a small group of people/
information that represents a proportion of a total market when carrying out market research
Sampling Bias: Researcher’s subjective collection and/or interpretation of data!
Sampling Methods: random, stratified, quota methods
Total product concept: How companies can analyse a product to market and sell it
more effectively. The concept has four dimensions: the generic, the expected, the
augmented, and the potential product (TG, p. 33)
Augmented product: Refers to services and other activities that support the marketing
of the core product (TG, p. 33)
Product life cycle: shows the different stages that a product passes through over time/
sales that can be expected at each stage.
Extension Strategies: methods used to prolong the life of a product, including product
adjustments & promotion (C/BK, p. 70; 76)
The Product Portfolio (The product mix): Made up of product lines whereby old
products are gradually phased out by new products; the collection of products a business
is currently marketing (p. 71; 76).
Product lines: A product line is a group of products which are very similar (p. 71, 76).
Boston Matrix (Growth Share Matrix/ Boston Consulting Group Matrix – BCG
Matrix): a 2 x matrix model that analyses a product portfolio according to the growth of
rate of the market (i.e. market growth) and the relative market share of products within
the market (p. 76,)
Price elasticity of demand [PED]: the responsiveness of demand to a change in price;
price elastic demand = a change in price results in a greater change in demand
Pricing strategy: Pricing policies or methods used by a business when deciding what to
charge for its products (p. 62)
Cost plus (cost-based) pricing: adding a percentage (the mark-up) to the costs of
producing a product to get the price (p. 62); more common for physical products

Market-based (value-based) pricing: customers’ subjective worth of a product –

usually used for services
Pricing Strategies (p. 62):
Price skimming/ creaming: setting a high price initially and then lowering it later
Penetration pricing: setting a low price when launching a new product in order to get
established in the market
Loss-Leader pricing: An aggressive pricing strategy in which a store sells selected goods
below cost in order to attract customers who will, according to the loss leader philosophy, make
up for the losses on highlighted products with additional purchases of profitable goods
Competitive (Status Quo) pricing: pricing strategies based on the prices charged by rivals
(includes price takers v price makers)
Psychological pricing: setting the price slightly below a rounded figure (e.g. £9.99)
Predatory/ destroyer pricing: setting a low price for forcing rivals out of business
PED: IMPORTANT FEATURES!
PED measures the responsiveness of demand to a change in price.
A steep demand curve = product with price inelastic demand (i.e. demand for product is
unresponsive to price change) - see Fig. 1 (p. 35);
A shallow demand curve = product with price elastic demand (i.e. demand for product is
responsive to price change) - see Fig. 1 (p. 35);
PED is ALWAYS a negative number; however ignore during findings – see below!
0 – 1 (i.e. a decimal) = Demand is PRICE INELASTIC – see Table 1 (p. 38)
1+ = Demand is PRICE ELASTIC - see Table 1 (p. 38)
Factors which influence PED (p. 36-37)
PED = an important tool in determining pricing strategy (cf. ‘Competitive pricing’ v ‘price
skimming’).
If PED = inelastic, rise in price = increase in Total Revenue (TR)/ fall in price = decreases TR;
If PED = elastic, rise in price = decrease in TR/ fall in price = increases TR –
Promotion: an attempt to obtain and retain customers by drawing their attention to a firm or its
products
Above-the-line promotion: placing adverts using the media
Below-the-line promotion: any promotion that does not involve using the media
Advertising: communication between a business and its customers where images are
placed in the media to encourage the purchase of products
Viral [digital] marketing: any strategy that encourages people to pass on messages to
others about a product or a business electronically
Branding: [process] involved in giving a product a name, sign, symbol/logo, design, or
any feature that allows consumers to instantly recognise the product and differentiate it
from those of its competitors (p. 52);
Advertising (promotional) elasticity of demand [AED]: a measure of a market's
sensitivity to increases or decreases in advertising saturation. Advertising elasticity is a
measure of an advertising campaign's effectiveness in generating new sales. It is
calculated by dividing the percentage change in the quantity demanded by the
percentage change in advertising expenditures. A positive advertising elasticity indicates
that an increase in advertising leads to an increase in demand for the advertised good or
service.
Advertising [above-the-line]:
 Internet (viral/ digital marketing)
 TV/ radio
 WoM(word of mouth)
 Banners/ posters/ billboard
 Newspapers
NB Different categories of advertising:
Informative/ persuasive/ reassuring advertising!
Non-advertising [below-the-line]:
 Sales promotions
 Public relations
 Merchandising & packaging
 Direct mailing
 Direct selling/ personal selling
 Exhibitions & trade fairs
TYPES OF BRANDING (P. 52)
Manufacturer brands: brands created by the producers of goods & services
Own-label brands (distributor/ private bands): products manufactured for Wholesalers or
retailers by other businesses, but the wholesalers/ retailers sell the product under their own
name (e.g. Tesco Baked Beans)
Generic brands: Products that only contain the actual name of the product
category rather than company/ product name (e.g. aluminium foil, carrots,
BENEFITS OF STRONG BRANDING (P. 52-53)
 Added value
  Ability to charge premium prices
 Reduced price elasticity of demand (PED)
WAYS TO BUILD A BRAND (P.53)
 Exploiting a unique selling point (USP)
 Advertising
 Sponsorship
 Using social media
Agent/ broker: an intermediary that brings together buyers & sellers
Breaking-bulk: dividing a large quantity of goods received from a supplier before
selling them on in smaller quantities
Direct selling: producers (manufacturers) selling their products directly to consumers
Distribution: the delivery of goods from the producer to the consumer
Distribution channel: the route taken by a product from the producer to the consumer
E-commerce (Online Distribution): the use of electronic systems to sell goods &
services
Intermediaries: links between the producer & the consumer
Retailer: a business that buys goods from manufacturers & wholesalers, and sells them
in small quantities to consumers
Wholesaler: a business that buys goods from manufacturers & sells them in smaller
quantities to retailers
Complementary goods: goods that are purchased together because they are consumed
together
Demand: the quantity of a product bought at a given price over a given period of time
Demand curve: a line drawn on a graph that shows how much of a good [product] will
be bought at different times
Inferior goods: goods for which demand will fall if income rises or, rise if income falls
Normal goods: goods for which demand will rise if income rises or, fall if income falls
Substitute goods: goods that can be bought as an alternative to others, but perform the
same function
Marketing strategy: a set of plans that aim to achieve a specific marketing objective
FACTORS LENDING TO A CHANGE IN DEMAND(P. 24-25)
 Prices of substitutes
 Prices of compliments
 Changes in consumer incomes (normal v inferior goods)
 Fashions, tastes & preferences
 Advertising and branding
 Demographics (incl. age distribution, gender distribution, geographical distribution, ethnic
groups)
 External shocks (incl. competition, government, economic climate, social & environmental
factors)
 Seasonality
Capital: the money provided by the owners in a business
Capital expenditure: spending on business resources that can be used repeatedly over a
period of time
Internal finance: money generated by the business or its current owners
Retained profit: profit after tax that is ‘ploughed back’ into the business
Revenue expenditure: spending on business resources that have already been consumed
or will be very shortly
Sale & leaseback: the practice of selling assets, such as property or machinery, and
leasing them back from the buyer
Opportunity cost: when choosing different alternatives, the opportunity cost is the
benefit lost from the next best alternative [s] to the one…chosen
Trade-offs: (in business)…compromise between two different alternatives
Authorised share capital: the maximum amount that can be legally raised
Bank overdraft: an agreement between a business and a bank that means a business can
spend more money than it has in its account (going ‘overdrawn’). The overdraft limit is
agreed and interest is only charged when the business goes overdrawn.
Capital gain: the profit made from selling a share for more than it was bought.
Crowd funding: where a large number of individuals (the crowd) invest in a business or
project on the internet, avoiding the use of a bank
Debenture: a long-term loan to a business
Equities: another name for an ordinary share
External finance: money raised from outside the business
Issued share capital: amount of current share capital arising from the sale of shares
Lease: a contract to acquire the use of resources such as property or equipment
Peer-to-peer lending (P2PL): where individuals lend to other individuals without prior
knowledge of them, on the internet
Permanent capital: share capital that is never repaid by the company
Secured loans: a loan where the lender requires security, such as property, to provide
protection in case the borrower defaults
Share capital: money introduced into the business through the sale of shares
Unsecured loans: where the lender has no protection if the borrower fails to repay the
money owed
Venture capitalism: providers of funds for small or medium-sized companies that may
be considered too risky for other investors
Gearing ratios: exploration of the capital structure of the business by comparing the
proportions of capital raised by debt and equity (see p. 374 for formula!)
Return on Capital employed (ROCE): the profit of a business as a percentage of the
total amount of money used to generate it
Main sources of internal finance:
 Owner’s capital
 Retained profit
 Sale of assets
Main sources of external finance:
 Family & friends
 Banks
 Peer-to-peer lending (P2PL)
 Business angels [see Q1]
 Crowd funding
 Other businesses
Methods of [external] finance:
 Loans
 Bank loans (incl. unsecured loans)
 Mortgages
 Debentures
 Share capital (incl. issued share capital/ authorised share capital/ permanent capital/
 capital gain)
 Ordinary shares (equities)
 Preference shares
 Deferred shares
Methods of [external] finance [Contd]:
 Venture capital
 Bank overdraft
 Leasing
 Trade credit
 Grants
Average cost (unit cost): the cost of producing one unit, calculated by dividing the total cost
by the output
Fixed cost: a cost that does not change as a result of a change in output in the short run [i.e.
when output = 0/ at capacity, the level of fixed costs = same]
Long run: the time period where all factors of production are variable
Profit: the difference between total costs & total revenue. Can be negative!
Sales revenue (Total Revenue): the value of output sold in a particular time period. It is
calculated by price x quantity output
Sales volume: the quantity of output sold in a particular time period
Semi-variable cost: a cost that consists of both fixed and variable elements
Short-run: the time period where at least one factor of production is fixed
Total cost: the entire cost of producing a given level of output
Total Revenue (Sales Revenue): the amount of money the business receives from selling
output
Variable cost: a cost that rises as output rises [in direct proportion, i.e. if output doubles then
variable costs will also double!]
[Direct Costs: costs which can be identified directly with the production of a good/service e.g.
raw material]
 [Indirect Costs: costs which cannot be matched against each product because they need to be
paid whether or not the production of goods or services takes place e.g. rent on Premises]
Contribution: the amount of money left over after variable costs have been subtracted from
revenue. The money contributes towards fixed costs and profit.
Break-even: when a business generates just enough revenue to cover its total costs
Sales Volume: Sales revenue/ selling price [i.e. Sales volume = for number of units sold]
Sales Revenue (Total revenue): Selling price x sales volume [quantity of output]
Total Cost=Fixed Cost + Variable Cost
Average Cost (Unit Cost): Total Cost/ Output
Contribution (per unit): Selling Price [per unit] – Variable Cost [per unit]
Total Contribution: Total Revenue – Total Variable Cost
Unit Contribution * number of Units Sold
Profit & Loss: Profit = Total Contribution – Fixed Costs [Profit = Total Revenue – Total
Costs], Margin of safety * contribution per unit
Break-even Output (per unit): Fixed Costs / Contribution [per unit]
Break-even: when a business generates just enough revenue to cover its total costs
Break-even chart (graph): a graph containing the total cost and total revenue lines, illustrating
the break-even output
Break-even output: the output a business needs to produce so that its total revenue and total
costs are the same
Break-even point: the point at which total revenue and total costs are the same
Contribution: the amount of money left over after variable costs have been subtracted from
revenue. The money contributes towards fixed costs and profit
Margin of safety: the range of output between the break-even level and the current level of
output, over which a profit is made
Contribution (per unit): Selling Price [per unit] – Variable Cost [per unit]
Break-even Output (per unit):Fixed Costs / Contribution [per unit](i.e. neither profit/ loss!)
Break-even Point: Total Costs (FCs + VCs) = Total Revenue (i.e. neither profit/ loss!)
Price Charged: Total Revenue (at break-even level of output) / break-even output
Variable Cost (per unit): Total Cost (at break-even level of output) – Fixed Costs / break-even
level of output