BUSS3 Keywords

Functional Objectives & Strategies    Aims / goalsGeneral statements of what a business intends to achieve.  Precise   details of those intentions are set out in objectivesBusiness unit strategyHow a business attempts to compete successfully in a particular marketCorporate objectivesObjectives that relate to the business as a whole.  Usually set   by top management.Corporate strategyConcerned with the overall purpose and scope of the business activitiesCost leadershipA business strategy  concerned with aiming to be the lowest-cost producer in an industry.  Usually requires exploitation of economies   of scaleFunctional objectivesSet for each major business function – designed to ensure that the corporate objectives are metMission statementA statement of the overall  purpose of the businessShareholder valueWhere shareholders earn a  return from their investment which is greater than their required rate of   returnSMART objectivesObjectives that are more  likely to be achieved because they are Specific, Measurable, Achievable,  Realistic and TimedSocial responsibilityThe way in which a business meets its responsibilities to society as a key external stakeholderSWOT analysisAssessment of the internal strengths and weaknesses of a business and the external opportunities and   threats that the business needs to considerTargetsSimilar to objectives. Targets are often set at an individual or   team level Financial Strategies and Accounts    Acid-test ratioA liquidity ratio that looks at whether a business can pay for current liabilities out of cash and   near-cash assets (it ignores the value of stocks)Asset turnoverA ratio that calculates the relationship between revenues and the total assets employed in a businessAssetsAmounts owned by, or owed to a businessAverage rate of returnA measure of the total accounting return from an investment projectBalance sheetThe financial statement that provides a snapshot of the assets and liabilities of a business at a   particular dateCapital expenditureExpenditure on assets which are intended to be kept in the business (e.g. IT systems, machinery) rather   than sold or turned into productsCash flow targetsSpecific objectives set by a business for cash-flow generated by a businessCorporation taxThe tax levied on the profits of companies.  The percentage   varies depending on the size of the profits earned; typically 20-30%Cost minimisationA strategy of achieving the most cost-effective way of delivering goods and services to the required   level of qualityCreditor daysA ratio that estimates the average period (in days) taken to settle amounts owed by a business to   suppliersCurrent ratioA simple and popular measure of liquidity that assess the ability of current assets (e.g. cash,  stocks) to finance current liabilities (e.g. trade creditors)DebenturesA long-term source of finance – a debenture is a form of bond or long-term loan issued by a companyDebtor daysA ratio that focuses on the average time it takes for trade debtors to settle their accounts.  Usually measured in daysDepreciationAn accounting estimate of the fall in value of a fixed asset over timeDiscount factorThe multiplication factor that converts a projected cost or benefit in a future year into its present   valueDividendAmounts paid to shareholders out of the profits earned by a company.Dividend yieldA measure of shareholder return – calculated by comparing the dividend per share by the share priceFixed assetsAssets such as property, equipment and vehicles that are intended to be retained and used in a   business for more than one yearGearingA ratio that focuses on the  long-term financial stability and capital structure of a business. The   gearing ratio measures the proportion of assets in a business that are   financed by borrowingGoing concernA business that is viable and able to continue in business for the foreseeable futureGoodwillAn intangible asset that can be included in a balance sheet = the difference between the net assets of   a business acquired and the price paid for the businessIncome statementA financial statement that summarises the trading results of a business over a specific period – usually   one yearInvestment appraisalAnalytical techniques to help management evaluate the returns from potential investments, and to help   choose between competing investmentsLiabilitiesAmounts owed by a business to othersLiquidityThe ability of a business to finance required payments to creditorsNet present valueThe present value of a series of future net cash flows that will result from an investment, minus   the amount of the original investmentOperating profitThe profit earned by a business from its entire trading operations – stated before financing (e.g.  interest) and taxOvertradingWhere a business suffers financial difficulties from expanding too quickly – usually suffering set-up   losses and increased working capitalPayback periodThe time it takes for a project to repay its initial investmentProfit centresA separately-identifiable part of a business for which it is possible to identify revenues and costs   and calculate a relevant profitProfit qualityThe sustainability of profit from one period to the next.   Higher quality profit is profit that is likely to be repeated rather   than affected by one-off itemsProfitabilityThe amount of profit earned  in a period (absolutely measure) or rate of profit earned compared with   revenue (relatively measure)ProvisionsAmounts set aside to cover future costs or liabilities (e.g. redundancies, business closures, legal   disputes)Ratio analysisInterpretation of financial performance by calculating and interpreting ratiosRetained earningsProfits earned by a business that are kept in the business rather than distributed as dividendsRevenue expenditureSpending on day-to-day operation of the business – e.g. paying for materials, staff costs,  management salaries, advertisingRights issueThe issue of new shares to existing shareholders in order to raise new finance.  The new shares are usually offered at a   significant discount to the existing share price to encourage take-upROCEA measure of the percentage return that a business earns from the capital employed in the business.  Often referred to as the “primary ratio”Share capitalThe amount invested into a company by shareholdersShareholder returnsThe rewards earned by shareholders = dividends paid to them + any increase in the value of their   sharesStock turnoverA liquidity ratio that looks at how often a business rotates its stock during a yearTrade creditorsAmounts that a business owes to its suppliersTrade debtorsAmounts that are owed to a  business from its customersWorking capitalThe net amount invested by  a business to finance day-to-day trading: usually calculated as current   assets less current liabilities Marketing Strategies    Ansoff’s MatrixA strategic model for  helping a business analyse the relationship between general strategic   direction and suitable marketing strategiesAverageA term for various measures   of central tendency, including the mean, mode and medianCompetitive advantageSkills, competences,  resources and other advantages that enable a business to out-perform its   competitionCorrelationA measure of how close the   relationship it (positive or negative) between an independent variable and a   dependent variableCustomer relationship   management (CRM)The process of building a   long-term, profitable relationship between a business and its customersDiversificationThe relatively risky   strategy of trying to enter new markets with new products (from Ansoff   matrix)ExtrapolationThe use of trends   established by historical data to make predictions about future valuesGrowth rateThe percentage growth over   a particular period.  Market growth   rates are typically quoted in terms of percentage growth per yearMarket analysisThe process of analysing   the size, structure and growth of a market in order to support marketing   decisionsMarket developmentA growth strategy where the   business seeks to sell its existing products into new markets - e.g.  exporting (from Ansoff matrix)Market penetrationA relatively low-risk   growth strategy where a business focuses on selling existing products into   existing markets (from Ansoff matrix)Market shareThe proportion of a market   revenue or sales volume that is captured by a business or brandMarketing budgetSpecific amounts that are   allocated to activities in the marketing planMarketing planThe actions that management   intend to take via the marketing mix in order to achieve marketing objectivesMoving averageA calculation that takes a   data series and “smoothes” the fluctuations in data to show a trend averageProduct developmentA growth strategy where a   business aims to introduce new products into existing markets (from Ansoff   matrix)Product positioningThe way in which the   marketing function tries to create an image or identity in the minds of the   target marketRepositioningChanging the marketing mix   for a product to appeal to a different market segmentSales forecastingTechniques for estimating   the likely demand (revenue and volume) for a product in future periodsTarget marketThe market segment or   segments which a business is attempting to enter with the chosen marketing   mixTest marketingLaunching a new product or   service in a limited part of the target market in order to gauge the   viability of the product and assess the most appropriate marketing mixTrendA general direction in   which something tends to move Operational Strategies    Capital intensityThe extent to which   production or operations depend on investment in and use of capital – i.e.  machinery, IT systems, buildings etcCritical path analysisProject management tool   that uses network analysis to help manage complex and time-sensitive   operationsDiseconomies of scaleFactors which result in   higher unit costs as production output reaches too high a levelEconomies of scaleCost advantages that a   business can exploit as a result of expanding its scale of production.  Economies of scale reduce the average   (unit) cost of productionEfficiencyA measure of the ability of   a business to achieve the required level of production whilst minimising the   use of resourcesIndustrial inertiaWhere a business decides to   stay in its existing location despite potentially better locations being   available to itInnovationPutting an new idea or   approach into action – the commercial exploitation of ideasJust-in-timeMethod of lean production   where production resources arrive at the moment they are required rather than   being held in stockKaizenA cultural approach to lean   production and quality assurance.   Involves encouraging employees to constantly seek and implement small   incremental changes to production in order to improve quality and efficiencyLabour intensityThe extent to which   production or operations depend on investment in and use of labour – i.e.  people, trainingLabour productivityThe level of output per   unit of labourLead-timeThe period of time between   an order being placed and being receivedLean productionAn approach to management   that focuses on cutting out waste whilst still ensuring quality.Marketing economiesWhere marketing costs per   unit sold can be lowered by spreading marketing costs over larger outputMinimum efficient scaleThe minimum output a   business needs to achieve in order for its to be able to minimise unit costsMultinationalA business which owns   operations in more than one countryNetwork analysisBreaking a project down   into separate activities and their requirementsOffshoringWhere a business has work   done for it overseasOutsourcingWhere a business has work   done for it by someone elseProductivityMeasures of how effective a   business is in turning resources (e.g. labour hours) into outputPurchasing economiesCost savings that arise   from buying in bulk or from a more powerful relationship with a supplier due   to increased outputQuotaA restriction on the volume   or quantity of a good that can enter or be sold in a market (form of trade   barrier)ScaleThe size or output of a   business, best measured relative to that of direct competitorsSubcontractingPart of outsourcing – where   another business is used to provide part of the production processTariffA tax levied on imports to   increase their price compared with domestic goods (form of trade barrier)Technical economiesReductions in unit costs   arising from the effective use of technologyUnit costsThe key measure of   productive efficiency – calculated as total costs divided by total output   (over a specific period) Human Resource Strategies    ArbitrationAn alternative to a court   of law in determining legal and employment disputes. Involves a specialist   outsider being asked to make a decision on a disputeCentralisationAn organisational structure   where authority rests with senior management at the centre of the businessCommunicationThe process by which a   message or information is exchanged from a sender to a receiverConciliationA way of mediating   industrial disputes to gain agreement without going to arbitrationCore workersEmployees who are part of   the core workforce of a business – central to the business activitiesDecentralisationAn organisational structure   where authority is delegated further down the hierarchy, away from the centreDelayeringThe process of removing one   or more layers from the organisational structureDownsizingThe reduction in the scale   and resources of a business, usually involving job losses and/or the sale or   closure of business unitsFlexible workingThe range of employment   options designed to help employees balance work and home life (e.g.  part-time, job-sharing, Homeworking, annualised hours contracts)Gap analysisAnalysis of the difference   between the workforce needs or a business and its current capabilitiesHard   HRM          An approach to HRM based on   treating employees as resources in the same way as any other business   resourceHuman resource management   (HRM)Strategies for managing   people in order to achieve business objectivesLabour shortageWhere a business finds it   does not have sufficient employees in number, or with the right skills and   experience, for its needsPeripheral workersEmployees who are on the   fringe of the core workforce.  They are   not essential (core) workers, and their activities can often be outsourced or   provided using flexible contractingSoft HRMAn approach to HRM based on   treating employees as the most important resource in a businessStaff turnoverThe proportion of staff   that leave their employment with a business over a period – usually measured   over a yearTeamworkingIndividuals work in groups   rather than focusing on their own specialised jobsTrade unionOrganisations of employees   who seek to negotiate their employment terms through collective bargainingWorkforce planningHow a business determines   how many and what kind of employees are requiredWorks councilA formal meeting of   employer and employees to consider issues affecting the business and   workplace – mandatory for larger businesses in the EU

New Page