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Business Definitions

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  Business definitions accountability: when a business acts in the best and highest interests of its owners. Full and complete ‘disclosure’, which means to be open and not hide the truth, ensures that the books of account are kept accurately and that the information reflected in them, and which is summarised in reports, is based on the true and actual transactions. Another term for accountability is stewardship. accounting: a managerial and administrative tool for recording financial transactions, so that a summary of what has happened to business money can be traced acquisition: (takeover) when one business takes control of another business by purchasing a controlling interest in it p. 97 assets: items of value to the business that can be given a monetary value p. 245 audit: an independent check of the accuracy of financial records and accounting procedures p. 284 Australian Business Number (ABN): a single identifying number that a business uses when dealing with government departments and agencies p. 388 autocratic leadership style: the manager tends to make all the decisions, dictates work methods, limits worker knowledge about what needs to be done to the next step to be performed, frequently checks employee performance and sometimes gives feedback that is punitive. p. 175 award: an employee ’s minimum pay and conditions p. 265   balance of payments (BOP): a record of a country’s trade and financial transactions with the rest of the world over time, usually one year p. 329 balance sheet: a statement of the business’s assets and liabilities (financial position) at a particular time using the heading ‘as at’ to pinpoint when it was created p. 245 bank overdraft: the bank allows a business to overdraw their account up to an agreed limit for a specified time, to overcome a temporary cash shortfall. p. 373 bankruptcy: a declaration that a business or person is unable to pay his or her debts p. 108 behavioural approach: (to management) stresses that people (employees) should be the main focus of the way in which the business is organised p. 179 benchmark: a standard by which something can be measured or judged p. 145 best practice: business practices that are regarded as the best or of the highest standard in the industry p. 309 body language: the use of gestures, facial expressions and posture to communicate p. 131 brand: a name, term, symbol or design that identifies a specific product and distinguishes it from its competitors p. 227 brand logo: a graphic representation that identifies a business or product p. 227 break-even analysis: used to determine the level of sales that needs to be generated to cover the total cost of production p. 415 budget: the business’s financial plan for the future p. 419   bureaucracy: the set of rules and regulations that control a business p. 167 business: can be defined as the organised effort of individuals to produce and sell, for a profit, the products that satisfy individuals’ needs and wants p. 7 business activity statement (BAS): records a business’s claim for input tax credits and accounts for GST payable p. 387   business (corporate) culture: the values, ideas, expectations and beliefs shared by members of the organisation p. 78 business environment: the surrounding conditions in which the business operates. It can be divided into two broad categories: internal and external. p. 51 business ethics: the application of moral standards to business behaviour p. 282 business information system (BIS): (also referred to as a management information system (MIS) ) gathers data, organises and summarises them, and then converts them into practical information p. 300 business life cycle: the stages of growth and development a business can experience p. 88 business opportunity: can be described as something an entrepreneur can see as an avenue to success. It is often identified when a person believes they can provide a good or service in a better or different way from those already on the market. p. 355 business plan: the ‘road map’ for future growth and development within a business. It sets out the desired goals and direction of t he business. p. 392 cash flow: the money coming into the business in the form of cash receipts, and the money leaving the business as cash payments p. 92 cash flow projection: the changes to the cash position brought about by the operating, investing and financial activities of the business p. 416 cash flow statement: shows the movement of cash receipts (inflows, such as money from sales) and cash payments p. 236 chain of command: a system that determines responsibility, supervision and accountability of members of the organisation p. 173 change: any alteration in the business and work environment p. 291 change agent: a person or group of people who act as catalysts, assuming responsibility for managing the change process p. 307 change management: a methodical approach to dealing with change, both from the perspective of a business and on the individual level p. 309 channels of distribution: ways of getting the product to the customer p. 229 choice: the act of selecting among alternatives p. 13 classical approach: (to management) stresses how best to manage and organise workers so as to improve productivity (output) p. 165 closing stock: the value of stock on hand at the end of the financial year p. 241 common law (employment) contract: when employers and employees have the right to sue for compensation if either party does not fulfil their part of the contract p. 268 communication: the exchange of information between people; the sending and receiving of messages p. 128 compensation: the payment or benefits (or both) an employee receives in exchange for their labour p. 265  competition: rivalry among businesses that seek to satisfy a market p. 356 competitive advantage: the strategies used by a business to gain an ‘edge’ over its  competitors p. 434 complementary business: a business that sells a similar range of goods and services p. 72 computer aided design (CAD): a computerised design tool that allows the business to create product possibilities from a series of input data p. 411 computer aided manufacture (CAM): software that controls the manufacturing process p. 411 conflict of interest: when a person takes advantage of a situation or piece of information for his or her own gain rather than for the employer’s interest p. 284   consumer buying behaviour: the decisions and actions of consumers when they purchase goods and services for personal household use p. 221 contingencies: unanticipated events that can lead to financial difficulty. For a business to be well managed, it needs to have saved money for such events. p. 232 contingency approach: the need for flexibility and adaptation of management practices and ideas to suit changing circumstances p. 189 continuous improvement: an ongoing commitment to achieving perfection p. 211 control process: establishing standards in line with the goals of the business, measuring the performance of the business against those standards or benchmarks, and making changes where necessary to ensure that the goals of the business have been met p. 171 controlling: compares what was intended to happen with what has actually occurred p. 171 Corporate Code of Conduct: a set of ethical standards for managers and employees to abide by p. 284 cost of goods sold (COGS): the value of stock that a business has sold to its customers p. 241 creditors: those people or businesses who are owed money p. 108 curriculum vitae or résumé: a summary of a person’s previous employment  experience p. 259 data: unprocessed facts and figures such as sales figures and customer complaints p. 300 debt finance: money obtained through loans p. 372 decision making: the process of identifying the options available and then choosing a specific course of action to solve a specific problem p. 136 delegation: the handing over of certain tasks or responsibilities to an employee who is suitably capable and qualified to carry them out p. 181 deregulation: the removal of government regulation from industry, with the aim of increasing efficiency and improving competition p. 56 development: activities that prepare staff to take greater responsibility in the future p. 262 dismissal: when the behaviour of an employee is unacceptable and it then becomes necessary for a business to terminate the employee’s employment contract p. 277 diversification: (or conglomerate integration) when a business acquires or merges with a business in a completely unrelated industry p. 98 dividend: part of a business’s profit that is divided among shareholders p. 12   division: the separation of key business functions into specialised units or departments. The business is divided into functional areas. p. 197 driving forces: forces that support the change p. 306 e-business: (electronic business) using the Internet to conduct business p. 441 ecological sustainability: when economic growth meets the needs of the present population without endangering the ability of future generations to meet their needs p. 85 e-commerce: the buying and selling of goods and services via the internet economic cycles: (or business cycles) periods of growth (‘boom’) and reces sion (‘bust’) that occur as a result of fluctuations in the general level of economic activity p. 52 economic growth: when a nation increases the real value of goods and services over a period of time p. 328 economy: a system used to determine what to produce, how to produce and to whom production will be distributed p. 327 effectiveness: measures the degree to which a goal has been achieved p. 122 efficiency: compares the resources needed to achieve a goal (the costs) against what was actually achieved (the benefits) p. 122 elaborately transformed manufactures (ETMs): manufactured goods that are highly processed and valued. They are complex because of the amount of processing they have undergone. p. 203 employee selection: gathering information about each applicant for a position, then using that information to choose the most appropriate applicant p. 257 employee training: the process of teaching staff how to perform their job more efficiently and effectively by boosting their knowledge and skills p. 162 employment contract: a legally binding, formal agreement between an employer and an employee p. 266 enterprise agreement: a negotiated arrangement between an employer and a union or a group of employees p. 267 entrepreneur: someone who starts, operates and assumes the risk of a business venture in the hope of making a profit p. 15 equity finance: the funds contributed by the business owner(s) to start and then expand the business p. 373 establishment costs: costs involved in setting up the business p. 374 e-tailer: an electronic retailer p. 368 evaluation: the process of assessing whether the business has achieved stated objectives p. 418 expenses: costs. Specifically, expenses are the costs incurred in the process of acquiring or manufacturing a good or service to sell and the costs (direct and indirect) associated with managing all aspects of the sales of that good or service. p. 241 external environment: factors over which the business has very little control p. 51 external recruitment: filling job vacancies with people from outside the business p. 256 Fairtrade: a trading partnership that seeks greater equity (fairness) in international trade. It promotes the rights of marginalised workers, especially in low-income countries. p. 281  finance: how a business funds its activities —  for instance, where it gets the money to trade, why it chooses to use certain lenders —  as well as the costs, risks and benefits of different types of borrowings p. 234 financial resources: funds the business uses to meet its obligations to various creditors p. 75 financial statements: reports that summarise transactions over a period of time p. 236 fi nished product: product that is ready for customers to buy and use p. 7 fi xed costs (FC): costs that do not vary regardless of how many units of a good or service are produced p. 415 fl atter organisational structures: evolved due to a ‘de - layering’ of management  structures resulting in the elimination of one or more management levels p. 186 fl exible manufacturing: production by computer controlled machines that can adapt to various versions of the same operation p. 296 fl oat: the raising of capital in a company through the sale of shares to the public p. 48 forecasts (or projections): the business’s predictions about the future p.  414 franchise: buying the rights from another business to distribute its product under its name p. 43 franchisee: an individual or business that purchases a franchise p. 43 franchisor: an individual or business that grants a franchise p. 43 geographical spread: the presence of a business and the range of its products across a suburb, city, state or country or the globe p. 25 global business , or transnational corporation (TNC): a large business with a home base in one country that operates partially owned or wholly owned businesses in other countries p. 26 globalisation: the process that sees people, goods, money and ideas moving around the world faster and more cheaply than before p. 58 goal: a desired outcome (target) that an individual or business intends to achieve within a certain time frame p. 144 goods: items that can be seen or touched p. 7 goods and services tax (GST): a broad-based tax of 10 per cent on the supply of most goods and services consumed in Australia pp. 61, 387 goodwill: the monetary value attached to the reputation of a particular business p. 359 government enterprises: government-owned and operated businesses p. 43 grant: any monetary or financial assistance that does not generally have to be repaid p. 412 gross domestic product (GDP): the total money value of all goods and services produced in Australia over a one-year period p. 328 gross profit: the term given to the sales less cost of goods sold (COGS) p. 241 high technology (hi-tech): a broad term used to describe new and innovative types of businesses that depend on advanced scientifi c and engineering knowledge p. 337 holistic: an approach that looks at the whole picture p. 300 horizontal integration: when a business acquires or merges with another fi rm that makes and sells similar products p. 98 human resource/employment cycle: covers all stages in the process of employing staff, from initial planning through to recruitment, selection, induction, training and development, performance management, and eventual separation of employment p. 251 human resource management (HRM): in its simplest terms, defined as the effective management of the formal relationship between the employer and the employees p. 250 human resource planning: the development of strategies to meet the business’s  future staffing needs p. 254 human resources: the employees of the business and are generally its most important asset p. 75 income: money received by a person for providing his or her labour, or a business from a return on its investments p. 12 income statement , or statement of financial performance: a summary of the income earned and the expenses incurred over a period of trading. It helps users of information see exactly how much money has come into the business as revenue, how much has gone out as expenditure and how much has been derived as profit. p. 240 incorporated: the process companies go through to become a separate legal entity from the owner/s p. 35 incorporation: the process that companies go through to become incorporated, i.e. to become a registered company and a separate legal entity p. 40 incremental change: results in minor changes, usually involving only a few employees p. 293 industry: businesses that are involved in similar types of production p. 30 inertia: an unenthusiastic response to proposed change p. 305 information: processed data that have been deliberately selected and organised to be useful to an individual manager p. 300 information resources: the knowledge and data required by the business, such as market research, sales reports, economic forecasts, technical material and legal advice p. 75 innovation: an improvement on something already established p. 1 3 input tax credit: an allowable tax deduction that a business can claim for any GST included in the price of business inputs p. 387 inputs: resources used in the process of production p. 202 insolvent: when a company is not able to pay its debts as and when they fall due p. 110 intangibles: services that cannot be touched p. 200 interdependence: the mutual dependence that the key functions have on one another. The key business functions work best when they overlap, and employees work towards common goals. For each function area to perform at capacity, it depends on the support of the others. p. 196 interest: the cost of borrowing money p. 373 internal environment: factors over which the business has some degree of control p. 51 internal recruitment: filling job vacancies with present employees, rather than looking outside the business p. 256 interpersonal (people) skills: those skills needed to work and communicate with other people and to understand their needs p. 127 intrapreneur: an individual who takes on the entrepreneurial roles within a business p. 159 invention: the development of something new p. 13 involuntary cessation: when the owner is forced to cease trading by the creditors of the business p. 108 involuntary separation: when an employee is asked to leave the business against their will p. 277   job analysis: a systematic study of each employee’s duties, task s and work environment p. 255  job description: a written statement describing the employee’s duties, tasks and  responsibilities associated with the job p. 256  job specification: a list of the key qualifications needed to perform a particular job in terms of education, skills and experience p. 256 labour productivity: how much an employee can produce in a set period of time p. 158 leadership: the ability to influence people to set and achieve specific goals p. 135 leadership style: a manager’s way of doing t hings —  their behaviour and attitude p. 174 lean manufacturing/production: an operational strategy aimed at achieving the shortest possible production time by eliminating waste p. 407 learning organisation: monitors and interprets its environment, seeking to improve its understanding of the relationship between its actions and its environment p. 263 leasing: a long-term source of borrowing for businesses. It involves the payment of money for the use of equipment that is owned by another party. p. 438 liabilities: items of debt owed to other organisations (e.g. suppliers, banks) and include loans, accounts to be paid by the business, mortgages, credit card debt and accumulated expenses p. 246 limited liability: a feature of corporate ownership that limi ts each owner’s  financial liability to the amount of money he or she has paid for the business’s  shares p. 41 liquidation: when an independent and suitably qualifi ed person —  the liquidator —  is appointed to take control of the business with the intention of selling all the company’s assets in an orderly and fair way in order to pay the creditors p. 109   liquidity: the amount of cash a business has access to and how readily it can convert its assets into cash so that debt can be paid p. 236 local business: has a very restricted geographical spread; it serves the surrounding area p. 25 logistics: the management of business operations, such as the purchasing, storage, transportation and delivery of goods along the supply chain p. 407 long-term growth: the ability of a business to continually expand p. 407 maintenance: the provision of working conditions to encourage employees to remain with the business p. 264 management: (contemporary definition) the process of working with and through other people to achieve business goals in a changing environment. Crucial to this process is the effective and efficient use of limited resources. p. 121 management consultant: someone who has specialised knowledge and skills within an area of business p. 309 management hierarchy: the arrangement that provides increasing authority at higher levels of the hierarchy p. 172 manager: someone who coordinates the business’s limited resources in order to  achieve specific goals p. 121 manipulation: the skilful or devious exertion of influence over someone to get them to do what you want p. 301 market analysis: collecting, summarising and analysing information about the state of the market, customers, the threats and opportunities that the market presents, and any advantages or disadvantages that the business is likely to have over its competitors p. 365 market concentration: the number of competitors in a particular market. There are four main types of market concentration. p. 64 market segmentation: when the total market is subdivided into groups of people who share one or more common characteristic p. 220 market share: the business’s share of the total industry sales for a particular  product pp. 23, 148 marketing: the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives (American Marketing Association). A more simplified definition is that marketing is a total system of interacting activities designed to plan, price, promote and distribute products to present and potential customers. p. 216 marketing concept: a business philosophy that states that all sections of the business are involved in satisfying a customer’s needs and wants while achieving the busines s’s objectives p. 218   marketing mix: the combination of the four elements of marketing, the four Ps —  product, price, promotion and place —  that make up the marketing strategy p. 224 marketing strategies: actions undertaken to achieve the business’ s marketing goals p. 224 mass marketing: seeks a large range of customers p. 220 mass production: the process of manufacturing standardised goods on a huge scale by automation p. 165 mentor: someone —  usually a more experienced employee —  who helps develop a less experienced employee (the protégé) mentoring: the process of developing another individual by offering tutoring, coaching and modelling acceptable behaviour p. 161 merger: when the owners of two separate businesses agree to combine their resources and form a new organisation p. 97 micro business: employs fewer than five people (including the owner) p. 24 modifying: the process of changing existing plans, using updated information to shape future plans p. 422 monitoring: the process of measuring actual performance against planned performance p. 418 monopolistic competition: where there is a large number of buyers and sellers in a particular market, e.g. local retailing shops p. 65 monopoly: complete concentration by one firm in the industry, e.g. Australia Post p. 65 mortgage: a loan secured on some type of asset p. 373 motivation: the individual, internal process that directs, energises and sustains a person’s behaviour p. 160   multiskilling: allows employees to develop skills in a wide range of tasks through ongoing training p. 162 national business: business that operates within just one country p. 26 net profit: the difference between the gross profit and operating and non-operating expenses p. 242 niche market: a narrowly selected target market segment p. 223 nonverbal communication: any message that is not written or spoken p. 131 objective: a specific statement detailing what a business (or individual) needs to achieve in order to accomplish its vision p. 404 occupational health and safety (OH&S): the responsibility the employer has to ensure the workplace is safe for employees and that steps are taken to minimise harm p. 273 oligopoly: where a small number of larger firms have a greater control over a market, e.g. car manufacturers p. 65
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