CCEA A22 business key terms with complete verified definitions. (A+)

CCEA A22 business key terms with complete verified definitions. (A+) Mission statement. Sets out a business's overall purpose to direct and stimulate the entire organization. Aims Long term plans of the business from which its corporate objectives are derived. Objectives Medium to long term goals established to coordinate the business. Profit Measures the extent to which revenues from selling a product exceed the costs incurred in producing it over time. Cash flow The amount of money moving into and out of a business over a time period. Stakeholders Individuals or groups (such as employees, customers and local residents) who have an interest in the business. Revenue The earnings or income generated by a firm as a result of its trading activities (also called turnover or sales revenue). Profit The surplus of total revenue over total costs for a business over a trading period. Fixed costs Costs that do not alter when a business alters its level of output. Examples include rent and rates. Variable costs Costs that alter directly with the business's level of output, for example, fuel costs. Total costs Fixed and variable costs added together. Average costs Total costs of production divided by the level of production or output to give the cost of producing a single unit of output. Sole trader A business that is owned and managed by one person, but it may employ other people. Unlimited liability Occurs when an individual or group of individuals is personally responsible for all the actions of their business. Company A business organization that has its own legal identity and that has limited liability. Incorporation The process of establishing a business as a separate legal entity that allows it to benefit from limited liability. Shareholder An investor in and one of the owners of a company. Limited liability Means that in an event of financial difficulties, the personal belongings of shareholders are safe. Dividends A share in the profits of a company that are distributed to the holders of certain types of company shares. Market capitalization The total value of the issued shares of a public limited company. Takeover Occurs when one company acquires control of another company by buying more than 50% of its share capital. Privatization The process under which the state sells businesses that it has previously owned and managed to private individuals and businesses. Market conditions Number of features of a market such as the level of sales, the rate at which they are changing and the number and strength of competitors. Demand A term used by economists to indicate the amount of a particular good or service that consumers or organizations want, and can afford, to buy at given prices. Gross Domestic Product (GDP) Measures the value of a country's total output of goods and services over a period of time, normally one year. Business ethics Refer to whether a business decision is perceived as morally right or wrong Real incomes Incomes that are adjusted for the rate of inflation (or increase in prices) to show changes in purchasing power Interest rates The price of borrowed money Good A physical product such as a house or a designer suit Service An intangible item such as insurance or decorating Product A general term which includes goods and services Fair trade A social movement that exists to promote improved trading terms and living conditions for producers of products in less developed countries Sustainable production Occurs when the supply of a product does not impose costs on future generations by, for example, depleting non-renewable resources Leadership Includes the functions of ruling, guiding and inspiring other people within an organization in pursuit of agreed objectives Management Planning, organizing, directing and controlling all or part of a business enterprise Authority The power or ability to carry through an action Delegation Passing authority down the organizational hierarchy Empowerment Provides subordinates with the means to exercise power or control over their working lives Decentralization Passing authority from the center of the organization to those working elsewhere in the business Programmed decisions Familiar and routine decisions Non programmed decisions Less structured decisions that require unique solutions Risk The chance of incurring misfortune or loss Uncertainty A situation in which there is a lack of knowledge and events, outcomes or consequences are unpredictable Opportunity cost The next best alternative foregone Scientific decision making Based on data and uses logical, rational approach to decision making Decision tree A model that represents the likely outcomes for a business of a number of courses of action on a diagram showing the financial consequences of each Probability The chance of a particular event occurring Expected values The financial outcomes from a specific course of action adjusted to allow for the probability of it occurring Net gains The expected values of a course of action minus the costs associated with it Ethics Moral principles, which should underpin business decisions and actions The external environment Comprises those external forces (such as changes in competition or consumers' incomes) that can influence a business's activities Stakeholders Groups or individuals who have an interest in a business Social responsibility The duties a business has towards stakeholder groups such as employees, customers and the government Market conditions A number of features of a market, such as the level of sales, the rate at which they are changing and the number and strength of competitors Communication The exchange of information or ideas between two or more parties Stakeholder engagement A process by which managers involve individuals and groups who may be affected by their decisions in those decisions Consultation A process by which one group discovers the views of another one Marketing objective A target set for the marketing function, for example to increase sales by 10% within Big data A term used to describe a massive volume of both organized and non-organized information that is very large Primary market research Gathers data for the first time for a specific purpose Sales value Measures the level of sales in a given period in pounds sterling (in the UK) Sales volume Measures the level of sales in a given period in terms of units sold Market share Measures the sales of one brand or business as a percentage of total market sales in a given period Sales growth The percentage change in sales volume or value over a given period Market growth The percentage change in the total sales in the market over a given period Globalization The increasing trade between countries and the growing internationalization of businesses Marketing research Involves gathering and analyzing data relevant to the marketing process Competitiveness Measures the extent to which a business offers good value for money relative to competitors Primary market research Involves gathering data for the first time Secondary market research Uses data that already exists Target population All the items or people that are relevant to the market research being undertaken Sample A group of people or items selected to represent the target population Market mapping Analyses market conditions to identify the position of one product or brand relative to others in the market in terms of given criteria Confidence level The probability that the research findings are correct Confidence interval The possible range of outcomes for a given confidence level Brand A "promise of an experience" and conveys to consumers a certain assurance as to the nature of the product or service they will receive Patent Protects new inventions and covers how things work, what they do, how they do it, what they are made of and how they are made Trade mark A sign which can distinguish the goods and services of a business from those of its competitors Price elasticity of demand (PED) Measures how responsive demand is to changes in the price, all other factors constant Income elasticity of demand (YED) Measures how responsive demand is to changes in the income, all other factors constant Big data Refers to large and complex data sets Segmentation Occurs when similar customer needs and wants are grouped within a market Market segments The groups of similar needs and wants within a market Targeting Occurs when a business decides which segments it wants to operate in Niche marketing Focuses on a particular segment of the market Mass market An approach that aims to provide products that meet some of the needs of a large proportion of the market Positioning Identifies the benefit and price combination of a product relative to competitors Marketing mix The combination of marketing choices that can be used by a business to influence consumers to buy products Consumer products Goods bought for consumption by the general public Industrial products Goods bought for use in business processes Relationship marketing An approach to marketing in which a company seeks to build long term relationships with its customers by providing consistent satisfaction Product life cycle model Shows the sales of a product over its life Product portfolio analysis Examines the market position of all of the products of a business, for example in terms of market share or market growth Boston Matrix Analyses all of the firm's products in terms of their market share and the growth of the market Balanced portfolio An appropriate mix of products in terms of their market shares and market growth Social media Refers to the social interaction among people where they create, share or exchange information and ideas in virtual communities Viral marketing A marketing technique that uses social media and networks to raise brand awareness and boost sales by getting users to recommend the promotional campaign to others Multichannel distribution Means that customers can buy the product in several ways, for example in store, online or 'click and collect' E-commerce The buying and selling of products through an electronic medium such as the internet Operations management Describes the activities, decisions and responsibilities of the managing production and delivery of products and services Labor intensive Means a relatively high proportion of labor in the production used compared to capital equipment, for example hairdressing Capital intensive Uses a relatively high proportion of capital equipment relative to labor, for example a bottling process Supply chain Is the series of activities involved in taking the initial resources to providing the final product Operations objective Is a target set for the operations function such as to improve the proportion of deliveries on time by 5% within two years. Competitive advantage Is a way in which a business offers superior value to its competitors Total costs Are made up of fixed costs and variable costs Unit costs Are the cost per unit, that is total cost/number of units Capacity Is the maximum output of a business at a moment in time given its resources Capacity utilization Measures the existing output over a given period as a percentage of the maximum output Labor productivity Is the amount of output per employee Efficiency Is measured by the inputs used to generate output Lean production Occurs when managers reduce waste and therefore operations become more efficient Quality Is measured by the extent to which an operation meets its customer requirements Quality assurance Is the maintenance of target quality by attention to detail at every stage of the process Quality control Is the system of maintaining standards by testing or inspecting the output against standards Mass customization Is the term for producing on a large scale while still enabling individual customer preferences to be met Inventory Is the goods or stock it holds Part time staff Work less than a full working week, for example 20 hours per week Temporary staff Work for a limited period of time, for example for the summer only Supply chain Refers to all of the providers of resources (such as money, people, finance, machinery, equipment) at different stages of the operations process Vertical integration Is the combination of two or more stages of production normally operated by separate companies Corporate social responsibility Refers to the extent to which a business takes into account its stakeholder views and accepts its obligations to society over and above the legal requirements Outsourcing Is when a business uses an outside supplier Financial objective Goal or target pursued by the finance department (or function) within an organization Profit Measures the extent to which revenues from selling a product over some time period exceed the costs incurred in producing it Cash flow The movement of cash into and out of a business over time Income statement Records a business' sales revenue over a trading period and all relevant costs incurred as well as the business' profit or loss Gross profit Income received from sales minus the cost of goods and services sold Direct costs Expenditure that can clearly be allocated to a particular product or area of the business e.g. raw materials and components Indirect costs Expenditure that relates to all aspects of a business' activities, such as maintenance costs for buildings or senior managers' salaries Operating profit The financial surplus arising from a business' normal trading activities and before taxation Profit for the year A measure of a business' profits that takes into account a wider range of expenditures and incomes including taxation Investment The purchase of assets such as property, vehicles and machinery that will be used for a considerable time by the business Non-current assets Items that a business owns and which it expects to retain for one year or longer Capital expenditure Spending undertaken by businesses to purchase non-current assets such as vehicles and property (it is another form of investment) Capital structure Refers to the way in which a business has raised the capital required to purchase its assets Budgets Financial plans that forecast revenue from sales and expected costs over a time period Variance analysis The process of investigating any differences between forecast data and actual figures Cash flow forecasts State the inflows and outflows of cash that the managers of a business expect over some future period Trade credit The period of time given by suppliers before customers have to pay for goods and services Break even output That level of output or production at which total costs exactly equal revenue from sales Contribution The difference between revenue and variable costs Margin of safety Measures the amount by which a business' current level of output exceeds break-even output Profitability A measure of financial performance that compares a business' profits to some other factors such as revenue Profit margin A ratio that expresses a business' profit as a percentage of its revenues over some trading period Internal source of finance A source of finance that exists within the business External source of finance An injection of funds into the business from individuals, other businesses or financial institutions Short term finance Finance needed for a limited period of time, normally less than one year Long term finance Sources of finance that are needed over a longer period of time, usually over a year Bank loan The amount of money provided by a business for a stated purpose in return for a payment in the form of interest charges Overdraft Exists when a business is allowed to spend more than it holds in its current bank account up to an agreed limit Venture capital Funds advanced to businesses thought to be relatively high risk in the form of share and loan capital Share capital Finance invested into a company as a result of the sale of shares in the business Mortgages Long term loans, repaid over periods of up to 50 years, and used to purchase property Debentures Loans with fixed interest rates that are long term and may not even have a repayment date Crowdfunding Practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet. Opportunity cost The next best alternative that is foregone. Trade credit Offered when purchasers are allowed a period of time (frequently 30,60 or 90 days) to pay for products they have bought. Human resource objectives The targets pursued by the HR function or department of the business. Labor productivity Measures the output of a firm in relation to its number of employees. Quality The extent to which a product meets the customer’s needs. Employee engagement Describes the connection between a business's employees and its mission, goals and objectives. Employee involvement Exists in a business in which people are able to have an impact on decisions and actions that affect their working lives. Training A process whereby an employee gains job related skills and knowledge. Talent development The development and guidance of outstanding or star employees who have the potential to make major contributions to an organization’s performance and success. Diversity Recognizing the differences between individual employees and also the differences that may exist between different groups of employees. Unit labor costs Measure the labor cost per unit of output produced. Labor turnover The percentage of a business's employees who leave the business over some period of time (normally a year). Labor retention The extent to which a business holds onto its employees. Human resource plan Assesses the current and future capacity of a business's workforce and sets out actions necessary to meet the business's future human resource needs. Big data Describes the enormous quantity of structured and unstructured data that is difficult to process using traditional techniques such as databases. Job design The process of grouping together or dividing up tasks and responsibilities to create complete jobs. Job enrichment Occurs when employee's jobs are redesigned to provide them with more challenging and complex tasks. Empowerment A series of actions designed to give employees greater control over their working lives. Authority The power to give orders, make decisions and to control events and people. Organizational structure. The way a business is arranged to carry out its activities. Organizational design A process to ensure that the organization is appropriately designed to deliver organizational objectives in the short and long term. Levels of hierarchy Refer to the number of layers of authority within an organization i.e. how many levels exist between the CEO and the shop floor employee. Span of control The number of subordinates directly responsible to a manager. Chain of command The line of communication and authority existing within a business i.e. a shop floor worker reports to a supervisor, who is responsible to a departmental manager and so on. Delegation The passing down of authority (but not responsibility) down the organizational structure. Employer brand The business's reputation as an employer. Human resource flow The movement of employees through an organization, starting with recruitment. Recruitment and selection The process of filling an organization’s job vacancies by appointing new staff. Redundancy Takes place when an employee is dismissed because a job no longer exists. Dismissal Takes place when an employer terminates an employee's contract of employment and leads to employees exiting the human resource flow. Redeployment Occurs when an employee is offered suitable alternative employment within the same business. Motivation Describes the factors that arouse, maintain and channel behavior towards a goal. Division of labor. The breaking down of production into a series of small tasks carried out repetitively by relatively unskilled labor. Time-and-motion study Measures and analyses the ways in which jobs are completed, with a view to improving these methods. Commission A method of payment in which the amount paid is related to the value of goods or services that an employee sells. Piece rate A system whereby employees are paid according to the quantity of a product they produce. Performance related pay Some part of an employee's pay is linked to the achievement of targets at work. Variable pay A flexible form of pay that offers employees a highly individual pay system related to their performance at work. Employee welfare A broad term covering a wide range of facilities that are essential for the well-being of a business's employees. Appraisal The process of considering and evaluating the performance of an individual employee. Teamworking When an organization breaks down its production processes into large units instead of relying upon the use of the division of labor. Trade union An organization of workers established to protect and improve economic position and working conditions of its members. Collective bargaining Entails negotiations between management and employee's representatives, often trade unions, over pay and other conditions of employment. Trade union wage premium The percentage difference in average gross hourly earnings of union members compared with non-members. Works council A forum within a business where workers and management meet to discuss issues such as working conditions, pay and training. Communication The transfer of information between people. Arbitration A procedure for the settling of a dispute, under which the parties agree to be bound by the decision of a third party. Industrial dispute A disagreement between an employer and its employees, usually represented by a trade union, over some aspect of the terms and conditions of employment. Conciliation A method of resolving individual or collective disputes in which a neutral third party encourages the continuation of negotiations. Mission an organization aims or long-terms intentions, its ultimate purpose; a business mission is sometimes the same as its corporate aims. Corporate objectives goals of the whole organization rather than of different elements of the organization. They are set in order to co-ordinate the activities of, give a sense of direction to, and guide the actions of the whole organization. They are dictated by the mission or corporate aims of an organization. Strategy the medium to long term plan through which an organization aims to attain its objectives. Tactics the means by which a strategy is carried out; a range of different tactics may be used as a part of the single strategy. Strategic decision making concerns the general direction and overall policy of an organization. Strategic decisions have significant long-term effects on an organization and therefore require detailed consideration and approval at the senior management level. They can be high risk because the outcomes are unknown and will remain so for some time. Functional decision making tends to short to medium term and is concerned with a specific functional area rather than overall policy. Functional decisions are usually taken to support the implementation of strategic decisions and are usually made by middle management. SWOT analysis a technique that allows an organization to assess its overall position, or the position of one of its divisions, products or activities. It uses an internal audit to assess its strengths and weaknesses, and an external audit to assess its opportunities and threats. Balance sheet a document describing the financial position of a company at a particular point in time. It compares the value of items owned by the company (its assets) with the amounts that it owes (its liabilities). Income statement an account showing the income and expenditure (and thus the profit or loss) of a company over a period of time. Management accounting the creation of financial information for use by internal users in a business, to predict, to plan, to review and control the financial performance of the business. Assets items that are owned by a business. Balance sheet a financial statement that summarizes are companies’ assets, liabilities, and shareholders' equity at a particular point in time. Non-current assets resources that can be used repeatedly in the production process, although they do wear out (depreciate) or lose value over time. These are often known as fixed assets. Examples are land, buildings, machinery and vehicles. Current assets short-term items that circulate in a business on a daily basis and can be expected to be turned into cash within one year. Financial accounting the provision of financial information to show external users the financial performance of the business. It concentrates on historical data. Liabilities debts owed by an organization to suppliers, shareholders, investors or customers who have paid in advance. Non-current liabilities are debts due for re-payment after more than one year. Current liabilities are debts scheduled for repayment within one year. Total equity or total shareholders' equity (capital) funds provided by shareholders to set up the business, fund expansion and purchase fixed assets. Share capital the funds provided by shareholders through the purchase of shares. Reserves and retained earnings those items that arise from increases in the value of the company, which are not distributed to shareholders as dividends, but are retained by the business for future use. Gross profit revenue minus cost of sales. The gross profit shows how efficiently a business is converting its raw materials or stock into finished products. Operating profit the revenue earned from everyday trading activities minus the costs involved in carrying out those activities. It is also gross profit minus expenses. Ratio analysis a method of assessing a firm's financial situation by comparing two sets of linked data. Profitability (or performance) ratios measure the efficiency with which a business makes profit, in relation to its size. Return on capital employed measures the profitability of a business by calculating its operating profit as percentage of the capital that a business has at its disposal - that is, its capital employed. Liquidity ratio measures the ability of a business to stay solvent (pay its liabilities) in the short term. Current ratio measures liquidity by expressing current assets as a ratio to current liabilities. Solvency a measure of a firm's ability to pay its debts on time. A firm that can meet its financial commitments is described as 'solvent'; a firm that cannot meet its financial commitments is described as 'insolvent'. Performance metrics measure a business's activities and performance. These measures should be suited to the needs of stakeholders as a whole, rather than focus on the needs of shareholders and managers. Core competences (often known as core competencies) the unique ability or abilities of a business that enable it to achieve a competitive advantage. Short-termism a tendency for businesses to priorities current performance rather that the long-term sustainability of the business. Kaplan and Norton's balanced scorecard a strategic planning and management system used to ensure that a business's activities are linked to its vision statement. Uses 4 different perspectives - financial, customer, internal business processes, learning and growth. Elkington's The triple bottom line describes a means of assessing business performance that considers three different factors; financial returns (profit) social responsibility (people) and environmental values (planet). Enterprise almost any business or organization can be called an enterprise, but the term usually refers to the process by which new businesses are formed and new goods and services created and brought to the market. Enterprises are usually led by an entrepreneur. Increasingly the term 'enterprise' is sued when discussing the development of skills relevant to becoming a successful entrepreneur and establishing a successful business enterprise, including the importance of risk taking. Infrastructure the 'economic arteries and veins; roads, ports, railways, airports, power lines, pipes and wires that enable people goods, commodities, water, energy and information to move about efficiently'. Also defined as 'the physical assets underpinning the UK's network for transports, energy, generation and distribution, electronic communication, solid waste management, water distribution and waste water treatment. Gross domestic product (GDP) a measure of economic activity; the total value of a country's output over a given period of time, usually provided as quarterly or annual figures. The business cycle a regular pattern of ups and downs in demand and output within an economy over a period of time. (boom / recession-downturn / slump / recovery-upturn). Exchange rates the price of one's country currency in terms of other currencies. Inflation an increase in the general level of prices within an economy. Inflation also means that there is a fall in the purchasing power of money. In contrast, deflation is a decrease in the general level of prices within an economy or a rise in the purchasing power of money. Fiscal policy the use of taxation and government expenditure to influence the economy. Monetary policy controlling the money supply and the rate of interest in order to influence the level of spending and demand in the economy. Protectionism the extent to which a government uses controls to restrict the number of imports entering the country. Globalization the increased integration and independence of national economies; it involves increased international trade, increased inward investment and an increased role for global multinational companies. Emerging economies (emerging markets) developing countries that have potential to grow and develop in the terms of productive capacity and market opportunities; from an investment point of view they are seen as developing countries, in which investment would be expected to achieve higher returns but be accompanied by greater risk. Social change any significant change over time in behavior patterns and cultural values and norms. Urbanization the increase in the proportion of people living in towns and cities. Migration the permanent movement of people from one region to another. Migration can be internal, that is within a country and for which urbanization is an example or international, that is between countries. Corporate social responsibility (CSR) the duties of an organization towards employees, customers, society and the environment; companies that accept their corporate social responsibility usually do so by integrating social and environmental concerns into their business operations and their interactions with stakeholders. Carroll's CSR pyramid a pyramid illustrating four tiers; economic responsibilities (to be profitable), legal responsibilities (to obey laws), ethical responsibilities (to be ethical and do what is fair and just) and philanthropic responsibilities (to be good corporate citizens and support the quality of life in the community). Technological change adapting new applications of practical or mechanical sciences to industry and commerce; it includes information and communication technology (ICT), which is the creation, storing and communication of information using microelectronics, computers and telecommunications. Porter's five forces (or competitive forces) a model developed by Michael Porter to analyses the competitive environment in which a business operates; the five forces are: the threat of entry, buyer power, supplier power, competitive rivalry and substitute threat. Investment decisions the process of deciding whether or not to undertake capital investment (the purchase of non-current assets) or major business projects. Investment appraisal a scientific approach to investment decision making, which investigates the expected financial consequences of an investment, in order to assist the company in its choices. Payback period the length of time that it takes for an investment to pay for itself from net returns provided by that particular investment. Average rate of return ARR total net returns divided by the expected lifetime of the investment (usually a number of years), expressed as a percentage of the initial cost of the investment. Net present value NPV the net return on an investment when all revenues and costs have been converted to their current worth. Investment criteria the ways in which a business will judge whether an investment should be undertaken. Risk and uncertainty the probability of unforeseen circumstances that may harm the success of a business decision. Sensitivity analysis a technique used to examine the impact of possible changes in certain variables on the outcome of a project or investment. Ansoff's matrix a strategic or marketing planning model that can be used to help a business decide its strategic direction in terms of its product portfolio and target markets. Strategic positioning the view people take of a business that results from the business's strategic decision making. Porter's Generic Strategies a model which identifies marketing strategies i.e. cost leadership, differentiation or focused cost leadership/ focused differentiation based on whether the target market is mainstream or niche and whether the strategic advantage comes from low-cost production or high perceived value. Product differentiation the degree to which consumers see a particular brand as being different from other brands, for example because of a unique selling point/proposition (USP). A USP is a feature of a product or service that allows it to be differentiated from other products. Competitive advantage a benefit (or benefits) that a firm has in comparison to its rivals, allowing it to achieve greater sales and profits and retain more customers than its competitors. Competitiveness the ability of businesses to sell their products successfully in the market in which they are based. Retrenchment the cutting back of an organization’s scale of operations. Organic (internal) growth when a firm expands its existing capacity or range of activities by extending its premises or building new factories from its own resources, rather than integration with another firm. External growth when a firm expands by integrating with another firm as a result of either a merger or a takeover. Integration the coming together of two or more businesses via a merger or a takeover. Merger where two or more firms agree to come together under one board of directors. Takeover (also known acquisition) where one firm buys the majority shareholding in another firm and therefore assumes full management control. Technical economies of scale the lower unit costs that arise because larger firms are able to use more efficient techniques of production and to benefit from the law or principle of increased dimensions. Purchasing economies of scale a reduction in unit costs as a result of buying in large quantities; these are sometimes called buying economies of scale. Managerial economies of scale larger firms have greater scope to benefit from the specialization of labor at supervisory and manager level in each of the functional areas of the firm. Economies of scope cost advantages that result from firms providing a variety of products rather than specializing in the production or delivery of a single product. The experience curve indicates that the higher the cumulative volume of production, the lower the direct cost per new unit produced; essentially, the more experienced a firm gets at making a product, the better, faster and cheaper it is likely to be making it at. Synergy the whole is greater than the sum of parts; synergy is sometimes summarized as '1+1=3'. Overtrading takes place when a business grows too quickly without organizing sufficient long-term funds to support the expansion. This puts a strain on working capital. Greiner’s model of growth a model describing different phases of company growth, each of which includes calm periods of evolutionary development and growth that ends with a period of crisis and revolution. Ventures the term used for a range of different arrangements between two or more firms; most usually involve companies in the early stage of development with high growth potential; venture capitalists or larger companies invest in these companies knowing that the risk is high but the rewards are equally high. Franchise when a business (the franchisor) gives another business (the franchisee) the right to supply its product or service. Vertical integration the coming together of firms in the same industry but at different stages of the production process; vertical integration can be backwards or forwards. Forwards - a manufacturer integrating with the retailer selling its product. Backwards - a manufacturer integrating with the supplier of raw materials. Horizontal integration the coming together of firms operating at the same stage of production and in the same market. Conglomerate integration the coming together of firms operating in unrelated markets. Innovation the successful exploitation of new ideas. Innovation enables businesses to compete effectively in an increasingly competitive global environment. Product innovation the creation and launch of a good or service that is new, or a significant change to an earlier good or service. Process innovation the creation of a new way of making, providing or delivering a particular or service. Kaizen (or continuous improvement) a policy of implementing small, incremental changes in order to achieve innovation, better quality and/ or greater efficiency. These changes are invariably suggested by employees and emanate from a corporate culture that encourages employees to identify potential improvements. Research and development (R&D) the scientific investigation necessary to discover new products or manufacturing processes, and the procedures necessary to ensure that these new products and processes are suited to the needs of the market. Intrapreneurship acting like an entrepreneur within a large organization. Benchmarking the process of setting competitive standards, based on the achievements of other firms, against which a firm will monitor its progress. The benchmarking firm tends to focus on the companies that are the best in its industry ('best in class’s) but for specific functions a company may compare itself with firms in other industries. Intellectual property any intangible assets that arise from human knowledge and ideas. Patent an official document granting the holder the right to be the only user or producer of a newly invented product or process for a specified product. Copyright legal protection against copying for authors, composers and artists. Trademark signs, logos, symbols or words displayed on a company's products or on its advertising, including sound or music, which distinguish its brands from those of its competitors. International markets geographically, markets outside the international border of a company's home country; the opposite of an international market is a domestic market, which is the geographic region within the national boundary of a company's home country. Off-shoring when companies outsource or subcontract business activities overseas, largely because labor and other production costs are much cheaper there; also, knowns as outsourcing off-shore. Re-shoring the reverse of off-shoring; the transfer of business operations back to the country of origin; also knows as on-shoring. Export goods or services produced in one country are sold in another country. Licensing a business arrangement whereby one company gives another company permission to0 manufacture its goods, offers its servi9ces, and use its technology, brand or expertise for a specified fee or royalty. Alliances agreements between two or more companies to combine their strengths and expertise in order to undertake a mutually beneficial project - in this context, involving entry to an international market; alliances can include strategic alliances and joint ventures. Direct investment the taking of a controlling ownership in a company in one country by a company based in another country; this can be via organic growth or by the takeover of a foreign business; sometimes known as foreign direct investment. Multinational a business that operates in several countries but is managed from one (home) country; examples include Nike, Coca-Cola, Wal-Mart, Toshiba, Honda; the term is often abbreviated to MNC (multinational company/cooperation). Bartlett and Ghoshal's international strategy involves taking products first produced for the domestic market and then selling them internationally with only minimal local customization; it is most appropriate when pressures for cost reduction and for local responsiveness are low. Bartlett and Ghoshal's multi-domestic strategy focuses on increasing profitability by customizing a firm’s products so that they provide a good match to tastes and preferences in different international markets; most appropriate when there is a high pressure for local responsiveness and low pressure for cost reduction; this is sometimes known as a localization strategy. Bartlett and Ghoshal's global strategy focuses on increasing profitability by benefiting from costs reductions that come from economies of scale, experience curve effects and location economies; it is most appropriate when there is high pressure for cost reduction and low pressure for local responsiveness; the strategy is sometimes known as global standardization strategy. Bartlett and Ghoshal's transnational strategy tries simultaneously to achieve lower costs through location economies, economies of scale and experience curve effects and to differentiate products across different international markets; most appropriate when there are high pressures for cost reduction and for local responsiveness. Internationalization the growing tendency of companies to operate across national boundaries; all activities that a company undertakes with regards to its relations with foreign markets, whether buying supplies from abroad, exporting, licensing products abroad, entering into alliances or directly investing in operations abroad. Digital technology electronic technology which uses binary numbers (1 or 0) to store, generate and process data. E-commerce the buying and selling of goods and services and/or transmission of funds or data, using an electronic network, such as the internet. Big data large pools of data that can be captured, communicated, aggregated, stored and analyzed. Data mining the process whereby a business transforms raw data into useful information, to support the various activities of the business. Enterprise resource planning (ERP) a business's use of its information's systems so that it can automate and integrate its cores business processes. Incremental change small adjustments made, usually over a long period of time, towards a desired end result; it usually does not alter current working practices in any significant way. Lewin's force field analysis the 'force field' consists of two opposing forces - one set of forces, the driving forces, are working for change, and the other set, the restraining forces, are working against change occurs when driving forces are stronger than the restraining forces. Flexible organization an organization that can respond quickly to changes taking place in the external environment; includes a flexible workforce structure that allows capacity to be increased or reduced quickly and easily in response to external pressures. Delayering the removal of one or more layers of hierarchy from the management structure of an organization; it leads to a flatter hierarchical structure with a wider span of control. Flexible employment contracts working arrangements that give some degree of flexibility about how long, where, when and at what times employees work; the flexibility can be in terms of working time, working location or the pattern of working. Organic structures features include flat organizational structures; horizontal communication and interactions; low levels of specialization because knowledge resides wherever it is most useful; decentralization involving a great deal of formal and informal participation in decision making. Mechanistic structures features include hierarchical and bureaucratic organizational structures; highly centralized authority; formalized procedures and practices; highly specialized functions. Knowledge and information management (KIM) the practice of organizing, storing and sharing vital knowledge and information, so that everyone in an organization can benefit from its use. Kotter and Schlesinger's four reasons for resistance to change parochial self-interest; misunderstanding and lack of trust; different assessments; and low tolerance for change. Kotter and Schlesinger's six ways of overcoming resistance to change Education and communication; participation and involvement; facilitation and support; negotiation and agreement; manipulation and co-optation; explicit and implicit coercion. Organizational culture the unwritten code that affects the attitudes and behavior of staff, approaches to decision making and the leadership style of management; the shared values of an organization, including the beliefs and norms that affect every aspect of work life, from how people greet each other to hoe major policy decisions are made. Task culture power is derived from the expertise required to complete a task or project; it is usually associated with a small team approach or small organizations co-operating to deliver a project; the emphasis is on results and getting things done. Role culture power is hierarchical and clearly defined in a company's job descriptions; a person's power derives from their place or role within a highly structures organization; detailed rules indicate how people and departments interact with each other, customers and suppliers. Power culture power is concentrated in a small group or central figure, who determines the dominant culture. Person culture a culture where the organization exists as a vehicle for people to develop their own careers and expertise; the individual is the central point; if there is a structure, it exists only to serve the needs of the individuals within it. Hofstede's national cultures a model of cultural dimensions that distinguishes one country's culture from another; the model measures and compares the cultural dimensions of different countries and demonstrates that there are national and regional cultural groupings that affect the behavior of organizations. Strategic implementation the stage when a strategic plan is put into effect in order to achieve the objectives for which it has been designed; the stage where strategies are translated into policies, rules, procedures and operational targets within the different functional areas, Network analysis a method of planning business operations in order to identify the most efficient way of completing an integrated task or project. Critical path analysis (CPA) the process of planning the sequence of activities in a project in order to discover the most efficient and quickest way of completing it. Critical path the sequence of activities in a project that must be completed within a designated time in order to prevent any delay in overall completion of the project. Total float for an activity the number of days that an activity can be delayed without delaying the project (LFT - EST - duration of the activity). Planned strategy where the main elements of the strategy have been planned in advance and implementation involves putting the precise plan into effect in order to achieve the previously agreed objectives; also known as intended strategy. Emergent strategy unplanned strategy that emerges in response to unexpected opportunities and challenges; a response to internal and external changes that were not envisaged at the time of the original planned strategy. Strategic drift a situation where a company responds too slowly to changes in its external and competitive environments; a company continues with a strategy that may have served it very well in the past but it no longer suited to the current circumstances. Divorce of ownership control separation of the two functions of ownership and control in public limited companies; ownership entails providing finance and therefore taking risks; control involves managing the organization and making decisions. Corporate governance a set of relationships between a company's management, its board, its shareholders and other stakeholders; a system for protecting the interests of the owners (shareholders) of a company. Strategic planning the process of determining an organization’s long-term goals and then devising a plan (strategy) to achieve them. Contingency planning planning for unexpected and, usually, unwelcome events that are, however, reasonably predictable and quantifiable; the objective is to reduce the risks and costs of such events on an organization.