‘A’ LEVEL

BUSINESS STUDIES

REVISION GUIDE

KEY DEFINITION TERMS

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2018 PRODUCTION
 Privatisation – it refers to the transfer of ownership from the public sector into the hands of private
players / sector
 Industrialisation – It refers to the growth in the importance of manufacturing sector.
 Nationalisation – It is whereby the government possesses some privately owned companies
 Commercialisation – It is the transfer of government companies into private companies so that they can
operate profitably
 Going public – It is the conversion of private limited companies into public limited companies
 Public sector – It is that part of the economy that is owned by the government with the aim of
maximising people`s welfare
 Private sector – It refers to that part of the economy that is owned by the private players with an aim of
maximising profits
 Franchise – It is an agreement whereby one business agrees to use another trader`s name to carry out
trading activities whilst paying some royalties over a given period of time
 Demerger – It refers to the splitting of a company that once amalgamated into several companies
 Divestment – It refers to the selling of dogs in order to concentrate on cash cows
 Corporate culture – It refers to norms, traditions, personality or character that evolves in an organisation
that forces organisational members to have in a charismatic way without necessarily thinking about it
 Multinational company – It is a large corporation with many subsidiaries in different countries
 Indigenisation policy – It refers to government action of empowering the local people to be the owners
of the means of production in the country
 International Business - It is a large corporation with many subsidiaries in different countries
 International trade – It refers to the buying and selling of goods and services between different countries
 Management by out – It is whereby managers of a company by shares from existing shareholders and
become owner managers
 Contracting out – It is whereby a company cedes some noncore-activities to another company so that it
concentrates on core activities
 Management By Objectives – It is a form of worker participation whereby workers are included in
decision making and objective setting
 Power – It refers to the ability to do work
 Responsibility – it refers to the individual`s obligation to carry out assigned tasks which will have been
assigned by the superior
 Accountability – it refers to holding a subordinate answerable for responsibility and authority given to
them by superiors
 Centralisation – it refers to the extent to which authority to make decisions has been retained by top
management
 Delegation – it is the appointing of a subordinate by a superior in order to carry out assigned tasks on
behalf of the superior
 Decentralisation – it refers to the degree or extend to which authority to make decisions has been
lowered to the peripherals of management
 Span of control – refers to the number of subordinates that a manger can direct effectively and
efficiently
 Broad Span Of Control – refers to a large number of subordinates under one manager
 Exploitative-Authoritative leadership style – is whereby the manager demands unquestionable obedience
from the subordinates on the basis that the leader knows best. There is a total exclusion of subordinates
in decision making and communication is one way
 Motivation – it is a process of energising, channelling, sustaining and triggering worker behaviour to
like work and increase productivity
 Job Designing – refers to restructuring or redesigning of work
 Job Enrichment/Vertical Work loading – refers to adding complexities onto a piece of work inorder to
make it more challenging and interesting
 Job Enlargement/Horizontal work loading – it is the grafting of old jobs into new one in order to make it
more challenging and interesting
 Job Rotation – it is the systematic and planned movement of workers from one work to another so as to
gain a variety of skills and reduce boredom
 Line Staff Organisation – it is one where specialist managers are hired by top management in order to
give specialist advice to line managers
 Matrix organisational structure – it is one in which employees report to both functional divisional
managers and to a group manager
a) Marketing – it refers to the analysis and evaluation of information about human needs and wants in
order to satisfy them effectively.
b) Selling – it refers to getting a product to a customer at a given price
c) Price – it refers to the monetary value attached to a product
 Market research – it is the collection, analysis and evaluation about the needs and wants of customers
 Marketing research – it refers to the gathering analysis and evaluation of information about needs and
wants of the customers including competitor activities and other environmental issues
 Market segment – it is a sub group which is made up of consumers with similar characteristics
 Market segmentation – it is the sub division of a total heterogeneous market into smaller homogeneous
markets made up of consumers with similar characteristics such as sex
 Forecasting – it refers to the prediction of the future behaviour of a variable such as sales
 Quantitative techniques of forecasting – these are groups of predicting the future behaviour of a variable
based on human judgement in no quantitative terms e.g Delphi and panel concensus
 Halo effect – it is the result of using family brands whereby if one product bearing a family brand has
been very successful, the other products under the same brand will also be successful. The reverse is
also true
a) Hawthorne effect – it refers to the conclusions made by Elton Mayo from his Hawthorne experiment
which are workers would increase productivity when they are singled out due to group motivation
b) Production would increase if workers perceive that management is concerned about their welfare
c) Productivity would rise if workers are working under sympathetic supervisors
 Marketing strategy – it refers to the various methods formulated by the marketing department in order to
archive long term objectives
 Marketing mix – is a strategy of manipulating 4P`s (Product, Price, Promotion and Place) which is
adopted by management to meet the needs and wants of the target market
 Mass marketing – it refers to the provision and selling of products to an undifferentiated market made up
of consumers with different needs and wants
 Niche marketing – it refers to the identification and serving of untapped segment never exploited by big
firms
 Target marketing – it refers to the provision and selling of products concentrating on a particular
segment made up of consumers with similar characteristics
 Test marketing – it refers to the launch of a few products in a small segment to obtain customers
reaction to a new product
 Customer services – it refers to the assistance given to customers before, during or after a transaction.
For example free delivery
 Market share – it refers to sales of a company expressed as a percentage of total sales in an industry
 Market size – it refers to total sales in an industry
 Productivity – it refers output per unit of input
 Worker productivity – it refers to productivity/man/hour
 Flow production – it is whereby goods are produced in a continuous process
 Batch production – it is whereby similar goods are produced in separate lots
 Job production – it is whereby goods are produced according to customer specification
 Break even quantity – it refers to the level of output that a firm can make and produce zero losses /zero
profits
 Fixed costs – these are costs that remain constant even when output is changed .e.g rentals
 Variable costs – these are costs that change proportionally to the level of output
 Marginal cost pricing – is whereby a firm puts a value to its products after considering variable costs
only
 Absorption cost pricing – is whereby a firm put a value to its products after considering both fixed and
variable costs
 Buffer stock – is the minimum safety stock that management considers desirable and is kept for
unforeseen eventualities
 Economic order quantity – it refers to the amount of stock that can be re-ordered that minimises ordering
costs and keeping costs down
 Lead time – is the period or duration that lapses between the initiation of an order and the time of
receiving that particular order
 Lean production – is a series of techniques that are designed to reduce costs or wastages and enhance
quality e.g quality circles
 Quality – is the fitness for purpose intended
 Investment appraisal – it refers to the assessment of viability of a project in order to see the wisdom
behind undertaking or rejecting it
 Product positioning – is the replacing of the good in the market with customers needs in mind relative to
other goods
 Product position – it refers to the gap that a product occupies in the market relative to other products
 Efficiency – is doing things right
 Effectiveness – is doing right things
 Liquidity – it refers to the ability of a business to meet its short term financial obligations using its short
term financial resources
 Profitability – is the ability for a business to generate sufficient revenue in order to cover its costs of
sales and expenses
 Depreciation (applied to finance) – is the fall in the external value of the currency due to market forces
and demand and supply
 Cost centre – it is an area /department where costs are calculated/incurred
 Profit centre – it is an area/department where profits are calculated
 Gearing/financial leverages – it refers to the degree to which a business depends on borrowed funds
 Devaluation – is the deliberate lowering of the external value of a currency by monetary authorities in
order to stimulate exports
 Payback period technique – refers to non- discounting method of investing appraisal used to calculate
the time taken by a project to generate sufficient funds/inflows to recoup its initial outlay
 Payback period – it refers to the time taken by a project in order to generate sufficient inflows to recoup
its initial outlay
 Work study – it refers to the systematic analysis and measurement of a task in order to determine the
best method and standard time of performing it
 Method study – refers to the systematic recording and evaluation of ways of doing proposed and existing
work in order to identify the most effective way of performing a job
 Time study – refers to the systematic measurement of work so as to determine the standard time of
performing a task
 Piece rate system – it is the method of payment whereby earnings of a worker are found by multiplying
rate/unit by the total output produced
 Time rate system – is a method of payment whereby earnings of a worker is found by multiplying rate
per hour by the total hours spent at work
 Value engineering – is a technique in new product developed to gain customer acceptance of a product
by producing low cost goods highly accepted by the consumers
 Benchmarking – it refers to the setting of standards with reference to a remarkable competitor in order to
improve the quality of the firm`s products
 Diversify – means provision of variety of products in addition to those in existence
 Product portfolio – is a collection of goods supplied by a company
 Training programme – is the one designed to impart skills to workers so as to improve job performance
 Induction training – is the introduction of a new worker to the new job and the new job to the new
worker and also to the organisation
 Recruitment – the provision of a pool/group of candidates i.e large enough to let mangers select the
qualified employees they need
 Selection – it refers to the choosing of candidates in order to fill in a vacancy
 Quality circles – these are groups of 6-8 members from the same department who meet regularly
discussing issues on how to increase productivity and quality
 Cell working – is the production in self -contained units whereby machines and workers are grouped in
about 6-15 members and are responsible for whole work units
 Budget – it is a plan in financial terms
 Budgeting – it is planning in financial terms
 Zero budgeting it refers to an approach of operating a business without setting some financial plans but
dealing with an issue as it comes
 Planning is predetermining future course of action designed to give sense, purpose and direction to an
organisation
 Quality assurance – refers to the measure that business undertake in order to guarantee consumers that
the product is suitable for the intended purpose
 Quality control – refers to the series of techniques that managers employ in order to make sure that the
final product satisfies the consumers. E.g training, quality raw materials
 Deindustrialisation – refers to the growth in the importance of the tertiary sector and the decline of
manufacturing sector
 Denationalisation – is the restoration of companies previously acquired by the government back into the
hands of private owners
 Stake holder – is any- one who has a say or an effect in a business
 Shareholder – is an internal stakeholder who have invested his capital through buying shares of the
company e.g. ordinary shareholder
 Horizontal integration – is the fusion of two or more companies operating at the same stage of
production, producing similar products and are direct competitors into one company e.g. TM and OK
Form TMOK
 Lateral integration – is the fusion of two or more companies operating at the same stage of production,
using similar marketing techniques but are not direct competitors into one company e.g. The merging of
TV and Radio Seller
 Vertical integration refers to the growth of a company by acquiring services of either its customers or
supplier
 Merger - is the fusion of two or more companies into one company
 Takeover - is a contested merger
 Training programme –it is one designed to impart skills into the workers to improve current job
performance
 Democratic leadership style – it is whereby subordinates are included in decision making and
communication is two way
 Autocratic leadership style – is whereby managers do no include subordinates in decision making and
communication is one way
 Margin of safety – is the difference between current output and break even point
 Intangible assets – these are those resources without any physical form but bring revenue to a company
e.g. goodwill
 Critical path – refers to the longest route on the network diagram which gives the shortes possible
duration to finish the project
 Dummy activity - is an imaginary activity that consumes neither time nor resources and is included to
show logical dependence
 Inflation – is the continuous rise of prices of basic commodities in the economy
 Product differentiation – means the way sellers try to make their products unique from those of its
competitors
 Profit – is the excess of revenue over expenditure
 Cash – it is a current asset
 Contribution – it is the excess of over variable cost
 Debt factoring – refers to selling debt at a discount or buying debt at a discount
 Delayering - refers to the removal of some levels of management from the organisational structure to
create flatter structures
 Import quota – is a quantitative restriction on goods imported over a given period of time
 Import tariff – is an amount of tax that is charged on good imported in order for them to be more
expensive than local goods
 Economies of scale - a fall in cost per unit as output increases
 Diseconomies of scale – a rise in cost per unit as output increases
 Job evaluation – is the systematic analysis of work in order to determine its standing relative to others in
non-financial terms
 Pilot production – production of goods on a smaller scale so as to test whether or not the product can be
manufactured economically
 Organising – it is a process of monitorisation, departmentalisation and reorganisation of work
 Policy – is a frame work that regulates the way things are done in an organisation
 Mode – refers to the number that is appearing most or a number with the highest frequency
 Median – refers to roughly the middle term whenever the numbers are arranged in ascending or
descending order
 Mean – refers to the average of the distribution
 Capacity utilisation – refers to an extend at which the company is using its resources
 Development Programme –is a process designed to impart/develop skills necessary for future work
activities
 Skimming pricing – is the charging of introductory price to a new and unique product to cover research
and development costs
 Penetration pricing – it refers to the charging of low introductory price to a new unique product in order
to gain a place in the market
 Labour turnover –is the rate at which workers join and leave the organisation
 Debenture holders – these are creditors to a business who would have lend long term capital to the
business and they receive fixed interest rates
 Price elasticity of demand – it refers to the degree of responsiveness of quantity demanded of a good due
to a change in price
 Promotional elasticity of demand – it refers to the degree of responsiveness of quantity demanded of a
good due to a change in money spend on advertising
 Elasticity of demand – it refers to the degree of responsiveness of quantity of a good or service due to a
change in any variable that cause demand to change
 Plan – it is a pre-determined course of action designed to give sense purpose and direction to the
organisation
 Float – it refers to the time that can be added to an activity without affecting the commencement of the
succeeding activity that its earliest starting time
 Total float – it refers to aggregated time that can be added to activities without affecting the overall
completion time of the project
 Dog – refers to a loss making product with a low market share and growth
 Cash cow – is a firm`s profitable product that is generating sufficient cash in a slowly growing market
 Position description – it is the written document of a management post covering title, duties and location
on the organisational chart
 Hiring specification – is a written description showing the qualifications, age, experience and the nature
of the work
 Blending technique – is a decision making tool that can be used by managers to identify different
possible combinations of goods that can be produced to increase the firm`s revenue and profits
 Job analysis – it refers to the systematic assessment of work in order to make it possible to write a job
description and a hiring specification
 Business plan – it is a written document that enables business to start business from scratch. It contains
name of business natures and expected revenues and can be used when sourcing bank loans
 Leasing – it is whereby a business agrees to use another business`s asset for a given period of time
whilst paying some royalties to the lessor
 Market – is the set of all actual and potential buyers and sellers of a product
 Going private – it is the transfer of a public limited company into a private limited company
 Level of production – it refers to the amount of output a firm is producing
 Overtrading – is the situation whereby a business rapidly over-expands through stock piling thereby
ending up facing liquidity problems
 Market penetration – it is a growth strategy of increasing sales by selling more of existing products in
existing markets
 Job description – it is written document of a non- management position covering its title, duties and
responsibilities and including its location on the organisational chart
 Diversification – it is growth strategy of increasing sales by developing and selling new products in new
markets
 Market extension – it is growth strategy of increasing sales by selling more existing products in new
markets
 Product development – it is a growth strategy of increasing sales by selling new products in existing
markets
 Authority – it is the right to command
 Chain of command – it is the downward flow of authority in an organisation from the top management
to the shop flow workers
 Grapevine – it refers to informal communication channels through which informal communication
passes
 Job description – it is a written document of a non-management occupation, covering title duties and its
location on an organisational chart
 Working capital – it is the amount of money needed in the day to day running of the business
 Organisation chart – it refers to a pictorial representation of formal organisational structures
 Debt financing – it refers to sourcing business funds through long term borrowing
 Equity financing – it refers to sourcing business funds through ordinary shares
 Desk research/Secondary research – it refers to gathering information from readily available sources
such as files
 Field/Primary research – it refers to gathering first hand information from the consumers
 Capital intensity – is when a business uses a production method that employs more machines than labour
 Labour intensity – is when business uses a production method that employs more workers that machines
 Selling – is getting a product to the consumer at a price
 Price – is the monitory value attached to a product
 Joint venture – is a business formed by two or more established company through contributing capita to
finance a common project
 Venture capital – is money contributed by two or more established businesses to finance a common
project