Definitions Business Management

1.1: Introduction to BM

Term Definition
Primary Sector Industries that extract natural resources
Secondary Sector Firms that manufacture and process products from natural resources
Tertiary Sector Firms that provide services to costumers
Quaternary Sector Focused on information technology (IT) businesses and information service
providers
Entrepreneur Someone who takes the financial risk of starting and managing a new
venture
Intrapreneur someone within a large corporation who takes direct responsibility for
turning an idea into a profitable finished product
Business Plan A written document that describes a business, its objective and its strategies,
the market it is in and its financial forecasts.

1.2: Types of organization

Term Definition
Public Sector Organizations accountable to and controlled by
central or local government
Private Sector Comprises businesses owned and controlled by
individuals or group of individuals
Mixed Economy Economic resources are owned and controlled
by both private and public sectors
Free market Economy Economy resources are owned largely by the
private sector with very little state intervention
Command economy economy resources are owned planned and
controlled by the state
Privatization The sale of public sector organizations to the
private sector
Public corporation A business enterprise owned and controlled by
the state also known as nationalize industry or
public sector enterprise
Sole trader A business in which one person provides with
the permanent finance and in return has full
control of the business and is able to keep all of
the profits
Partnership A business formed by two or more people to
carry on a business together with share capital
investment and usually shared responsibilities
Limited liability The only liability or potential loss as
shareholder has if the company fails is the
amount invested in the company not the total
wealth of the shareholder
Share A certificate confirming part ownership of a
company and entitling the shareholder to
dividends and certain shareholders right
Private limited company A small to medium sized business that is owned
 by shareholders who are often members of the
same family this company cannot sell shares to
the general public
Shareholders Individuals or institutions that buy or own
shares in a limited company
Public limited company plc A limited company often a large business with
the legal right to sell shares to the general public
its share price is quoted on the national stock
exchange
Social enterprise A business with mainly social objectives that
reinvests most of its profits into benefiting
society rather than maximizing returns to
owners
Cooperative A group of people acting together to meet the
common needs and aspirations of its members
sharing ownership and making decisions
democratically
Triple bottom line The three objectives of social enterprises which
is economy social and environmental
Microfinance The provision of very small loans by specialist
finance businesses usually not traditional
commercial banks
Public private partnership (PPP) Involvement of the private sector in the form of
management expertise or financial investment in
public sector projects aimed at benefiting the
public
Private finance initiative (PFI) Investment by private sector organizations in
public sector projects
Nonprofit organization Any organization that has games other than
making and distributing profit and which is
usually governed by a voluntary board
Non-governmental organization (NGO) A legally constituted body with no participation
or representation of any government which has
specific aim and purpose e.g., supporting
disadvantaged groups in developing countries or
advocating the protection of human rights
Charities An organization set up to raise money to help
people in need or to support concerns that
require funding

1.3: organizational objectives

Term Definitions
Mission Is that in mind of the business core aims first in a way to motivate employees
statement and to stimulate interest by outside groups
Vision Statement of what the organization would like to achieve or accomplish in the
statement long term
Corporate aims The long-term goals which a business hopes to achieve
Divisional or Shut on medium term goals or targets which must be achieved for an
operational organization to attend its corporate aims
objectives
Operational S is for specific
 objectives M is for measurable
A is for achievable
R is for realistic and relevant
T is 4 times specific
Strategy A long-term plan of action for the whole organization designed to achieve a
particular goal
Tactic Shut down policy or decision aimed at resolving a particular problem or meeting
a specific part of the overall strategy
Ethics Moral guidelines that determine decision-making
Ethical code My document detailing accompanies rules and guidelines on staff behavior that
must be followed by all employees
Stakeholders People or groups of people who are can be affected by and therefore have an
interest in any action by an organization
Corporate social Concept that applies to those businesses that consider the interests of society by
responsibility taking responsibility for the impact of their decisions and activities on
customers employee’s communities and also the environment
Social Audit An independent report on the impact of a business has on society this can cover
pollution levels health and safety record sources of supplies customer
satisfaction and contribution to the environment
Swot Analysis A form of strategy and analysis that identifies and analyzes the men internal
strengths and weaknesses and extended opportunities and threats that will
influence the future direction and successful business
Ansoff’s Metric They used to show the degree of risk associated with the 4th growth strategies
of market penetration market development product development and
diversification

1.4: Stakeholders

TERMS DEFINITIONS
Stakeholder Concept The view that business and their manager have
responsibilities to a wide range of groups, not
just shareholders

1.5: External Environment

Terms Definition
Steeple analysis An acronym framework for analyzing the
external environment factors effecting business
objectives and strategies
Economy growth Increase in the level of a country serious
domestic product or gdp
Recession Six months or two quarters of failing gdp
Unemployment The number of people in an economy willing
and able to work who cannot find employment
Exchange rate The value of 1 currency in terms of another
currency
Information technology IT Do use of electronic technology together store
process and communicate information
Fiscal policy Changes in government spending levels and tax
rates
Inflation Digit of change in the average level of prices
 Cost push inflation
Demand pull inflation
Monetary policy
1.6: Growth and Evolution
Terms
Scale of operation
Economies of scale
Diseconomies of scale
Internal growth
External growth
Merger
Take over
Horizontal integration
Forward vertical integration
Backward vertical integration
Conglomerate integration
Joint venture
Strategic alliances
Franchise
Globalization
Free trade
Caused by rising costs forcing businesses to
increase prices
Caused by excess demand in an economy for
example economic boom
Changes in the level of interest rates which
make loan capital more or less expensive
Definition
The maximum output that can be achieved using
the available inputs or resources this skill can
only be increased in the long term by employing
more of all inputs
Reductions in affirms unit average cost of
production that results from an increase in the
scale of operation
Factors that cause average cost of reduction to
rise when the scale of operation is increased
Expansion of a business by means of opening
new branches shops or factories
Business expansion achieved by means of
merging with or taking over another business
from either the same or a different industry
An agreement by shareholders and managers of
two businesses to bring both firms together and
their common board of directors both businesses
owning shares in the newly merged business
When a company buys over 50% of the shares
of another company and becomes the
controlling owner often referred to as
acquisition
Integration with a firm in the same industry and
at the same stage of production
Integration with a business in the same industry
by the custom of the existing business
Integration with a business in the same industry
but a supplier of the existing business
Merger with a takeover of a business in a
different industry
Two or more businesses agree to work closely
together on a particular project and create a
separate business division to do so
Agreements between firms in which each agrees
to commit resources to achieve an agreed set of
objectives
A business that uses the name logo and trading
systems of an existing successful business
Did growing integration of countries through
increased freedom of global movement of goods
capital and people
No restrictions or trade barriers exist that might
 prevent or limit trade between countries
Protectionism Using barriers to free trade such as tariffs and
quotas to protect countries on domestic
industries
Multinational company or business Business organization that has its headquarters
in one country but with operating branches
factories and assembly plants in other countries

3.1: Final Account

Terms Definition
Window dressing Presenting the accounts of a business in the best
possible almost less flattering way which could
potentially mislead users of accounts
Depreciation The decline in the estimated value of a fixed
asset overtime
Assets Items of monetary value that I own of business
Profit and loss accounts or income statement or Records revenue cost profit or loss of a business
statement of comprehensive income over a given period of time
Balance sheet or statement of financial position An accounting statement that records the values
of business assets liabilities and shareholders
equity at one point in time
Liabilities A financial obligation of a business is that it is
required to pay in the future
Cash flow statement or statement of cash flows Shows where cash was received from and what
it was spent on
Gross profit Equal to sales revenue less cost of sales
Sales revenue The total value of sales made during the trading.
Equal to selling price multiply quantity sold
Operating profit Gross profit minus overhead expenses
Dividends The share of the profits paid to shareholders as a
return for investing in the company
Retained profit Did Prophet left of the old deductions including
dividends have been made this is ploughed back
into the company as a source of income
Low quality profit One off profit that cannot easily be repeated or
sustained
High quality Profit Profit that can be repeated and sustained
Shareholders’ equity Total value of assets less total value of liabilities
Share capital The total value of capital raised from
shareholders by the issue of shares
Debtors Customers will have white products on credit
and will pay cash at an agreed date in the future
Current liabilities Depth of the business that will usually have to
be paid within one year
Intellectual property An intangible asset that has been developed
from human ideas and knowledge
Market value The estimated total value of a company if it
were taken over
Straight line depreciation A constant amount of depreciation is subtracted
from the value of the asset each year
Reducing balance method Calculus depreciation by subtracting a fixed
percentage from the previous year value
Net book value The current balance sheet value of a non-current
asset equals 2 original cost minus accumulated
depreciation