Chapter 1:

1. Business activity: The process of producing goods and services to satisfy consumer demand.

2. Need: A good or service which is essential to living.

3. Want: A good or service which people would like, but is not essential for living.

4. Economic problem: Unlimited wants cannot be met because there are limited factors of
production. This creates scarcity.

5. Factors of production: The resources needed to produce goods and services - land, labour,
capital and enterprise.

6. Scarcity: There are not enough goods and services to meet the wants of the population.

7. Opportunity cost: The benefit that could have been gained from an alternative use of the
same resource.

8. Specialisation: People and businesses concentrate at what they are best at.

9. Consumer goods: Products which are sold to the final consumer. They can be seen and
touched, for example computers and food.

10. Division of labour: Production is divided into separate tasks and each employee does just one
of those tasks.

11. Consumer services: Non-tangible products such as insurance services, transport.

12. Capital goods: Physical goods, such as machinery and delivery vehicles, used by businesses
to help produce other goods and services.
 Chapter 2

1. Primary sector: Firms whose business activity involves the extraction of natural resources.

2. Secondary sector: Firms that process and manufacture goods from natural resources.

3. Tertiary sector: Firms that supply a service for customers and other businesses.

4. Chain of production: The production and supply of goods to the final customer involves
activities from primary, secondary and tertiary sector businesses.

5. Mixed economy: An economy where the resources are owned and controlled by both the
private and the public sectors.

6. Private sector: The part of the economy that is controlled by individuals and companies for
profit.

7. Public sector: The part of the economy that is controlled by the state or government.
 Chapter 3:

1. Entrepreneur: An individual who has an idea for a new business and takes the financial risk
of starting up and managing.

2. Business plan: A detailed written document outlining the purpose and aims of a business
which is often used to persuade lenders or investors to finance a business proposal.

3. Revenue: The amount a business earns from the sale of its products.

4. Business start-up: A newly formed business. They usually start small, but some might grow
to become much bigger.
 Chapter 4

Sole trader: A business that is owned and controlled by just one person who takes all the risks and
receives all of the profits.

Start-up capital: The finance needed when first setting up a business.

Partnership: A business formed by two or more people who will usually share responsibility for the
day-to-day running of the business. Partners usually invest capital in the business and will share
profits.

Unincorporated business: A business that does not have legal identity separate from its owners. The
owners have unlimited liability for business debts.

Unlimited liability: If an unincorporated business fails, then the owners might have to use their own
money to finance any business debts.

Shareholder: A person or organization that owns shares in a limited company.

Private limited company: Often a small to medium-sized company; owned by shareholders who
have limited liability. The company cannot sell its shares to the general public.

Public limited company: Often a large company; owned by shareholders who have limited liability.
The company can sell its shares to the general public.

Ordinary shareholders: The owners of a limited company.

Limited liability: The shareholders in a limited liability company which fails only risk losing the
amount they have invested in the company and not any of their personal wealth.

Dividend: A payment, out of profits, to shareholders as a reward for their investment.

Collateral: Non-current assets offered as security against borrowing.

Franchise: A business system where entrepreneurs buy the right to use the name, logo and product of
an existing business.

Joint venture: Two or more businesses agree to work together on a project and set up a separate
business for this purpose.

Public corporation: A business organization that is owned and controlled by the state.
 Chapter 5

Objective: A statement of a specific target to be achieved.

Market share: The revenue of a business expressed as a percentage of total market revenue.

Corporate social responsibility (CSR): Business taking responsibility for the impact their activities
might have on society and the environment.

Pressure group: A group of like-minded people that put pressure on businesses and the government
to change their policies to reach a predetermined objective.

Social enterprise: A business with social objectives that reinvests most of its profits back into the
business or into benefiting society at large.

Stakeholder: An individual or group which has an interest in a business because they are affected by
its activities and decisions.
 Chapter 6

Motivation: The factors that influence the behavior of employees towards achieving set business
goals.

Labour productivity: A measure of the efficiency of employees by calculating the output per
employee.

Absenteeism: Employees’ non-attendance at work without a good reason.

Labour turnover: The rate at which employees leave a business.

The theory of economic man: The view that humans are motivated only by money.

Piece-rate: Paying employees for each unit produced.

Hygiene factors: The factors that must be present in the workplace to prevent job dissatisfaction.

Motivators: The factors that influence a person to increase their efforts.

Job dissatisfaction: How unhappy and discontent a person is with their job.

Financial rewards: Cash and non-cash rewards paid to employees which are often used to motivate
employees to increase their efforts.

Non-financial rewards: Methods motivate employees that do not give any financial reward.

Hourly wage rate: A payment to employees based on a fixed amount for each hour worked.

Salary: A fixed annual payment to certain grades and types of staff

Commission: A payment to sales staff based on the value of the items they sell.

Bonus scheme: Employees receive extra payments for achieving targets based on performance.

Fringe benefits: Non-cash rewards often used to recruit or retain employees and to recognize the
status of certain employees.

Profit sharing: An additional payment to employees based on the profits of the business.

Job rotation: Increasing variety in the workplace by allowing employees to switch from one task to
another.

Job enlargement: Increasing or widening tasks to increase variety for employees.

Job enrichment: Organising work so that employees are encouraged to use their full abilities.
Job satisfaction: How happy and content a person is with their job.

Quality circles: Groups of employees who meet regularly to discuss work-related problems.

Team working: Organising production so that groups of employees complete the whole unit of work.

Delegation: Passing responsibility to perform tasks to employees lower down in the organisation.
 Chapter 7

Organizational structure: The formal, internal framework of a business that shows how it is
managed and organized.

Functional departments: The main activities of a business: finance, marketing, operations, human
resources and research and development.

Hierarchy: The number of levels in an organizational structure.

Chain of command: The route through which authority is passed down through an organization.

Subordinate: An employee who is below another employee in the organization’s hierarchy.

Span of control: The number of subordinates reporting to each supervisor/manager.

Delayering: Reducing the size of the hierarchy by removing one or more levels - most often middle
management.

Centralized organization: One where all the important decision-making power is held at head office,
or the centre.

Decentralized organization: One where the decision-making powers are passed down the
organization to lower levels.

Directors: Appointed or elected members of the Board of Directors of a company who have the
responsibility for determining and implementing the company’s policy. Some directors also have a
management role for example a marketing director.

Anual General Meeting(AGM): A meeting for shareholders that limited companies must hold once
every year.

Chief executive officer(CEO): The most senior manager responsible for the overall performance and
success of a company.

Manager: An individual who is in charge of a certain group of tasks, or a certain area or department
of a business, for example factory manager.

Supervisor: An individual who checks and controls the work of subordinates.

Delegation: Passing authority down through the organizational hierarchy to a subordinate.

Autocratic leadership: A leadership style where the leader makes all the decisions.

Democratic leadership: A leadership style where employees take part in decision-making.

Trade union: An organization of employees aimed at improving pay and working conditions and
providing other services, such as legal advice, for members.
 Chapter 8

Internal recruitment: Filling a vacant post with someone already employed in the business.

External recruitment: Filling a vacant post with somebody not already employed in the business.

Job description: A list of the key points about a job, job title, key duties, responsibilities and
accountability.

Person specification: A list of the qualifications, skills, experience and personal qualities looked for
in a successful applicant.

Shortlist: A list of candidates who are chosen from all of the applicants to be interviewed for the job.

Induction training: A training programme to help new recruits become familiar with their
workplace, the people they work with and the procedures they need to follow.

On-the-job training: Training at the place of work; watching or following an experienced employee.

Off-the-job training: Training that takes place away from the workplace, for example at college,
university or specialist training provider’s premises.

Resignation: Termination of employment by the employee, perhaps because they have found a job
with a different employer.

Retirement: Termination of employment due to the employee reaching an age beyond which they do
not need to work.

Redundancy: Termination of employment by the employer because the job is no longer needed.

Dismissal: Termination by the employer because the employee has broken company rules or is not
performing work to the required standard.
 Chapter 9

Communication media: The methods used to communicate a message.

Feedback: The receiver’s response to a message.

Effective communication: Information passes between two or more people or groups, with feedback
to confirm that the message has been received and understood.

Two-way communication: The receiver is allowed to respond to the message and the sender listens
to the response.

Chapter 10

Customer base: The group of customers a business sells its products to.
Market: All customers and consumers who are interested in buying a product and have the financial
rescources to do so.

Target Market: Individuals or organizations identified by a business as the customers or consumers

Customer: An individual or business that buys goods and services from a business.

Consumer markets: Markets for goods and services bought by the final consumer.

Industrial markets: Markets for goods and services bought by other businesses to use in their
production process.

Business enviroment: the combination of internal and external factors that influence the operations of
a business.

Free trade: No barriers exist that might prevent trade between different countries.

Niche marketing: Developing products for a small segment of the market.

Mass marketing: Selling the same product to the whole market.

Market segment: A part of the whole market in which consumers have specific characterisitics.

Market segmentation: Dividing the whole market into segments by consumer characteristics and
then targeting different products to each segment.

Geographic segmentation: Dividing consumers in the market by geographic area.

Demographic segmentation: Dividing consumers in the market by factors such as age, gender,
income, ethnic bakcround and social class.

Psychographic segmentation: Dividing consumers in the market by lifestyles, personalities and

Chapter 11
Market research: The process of collecting, recording and analysing data about the customers,
competitors and market for a product.

Unique selling point: the special feature of a product that sets it apart from competitors' products.

Market-oriented: Products are developed based on consumer demand as identified by market

Product-oriented: The firm decides what to produce and then tries to find buyers for the product.

Primary research: The collection of first-hand data for the specific needs of the firm.

Secondary research: The collection of data from second-hand sources.

Quantitative research: The collection of numerical data that can be analysed using statistical
techniques.

Qualitative research: The collection of information about consumers’ buying behaviour and their
opinions about products.

Sample: A representative sample of the target market selected to take part in market research.