Charities
non-profit social enterprises that provide voluntary support for good causes (from society's point of view), such as protection of children, animals and the natural environment
Cooperatives
for-profit social enterprises set up, owned and run by their members, who might be employees and/or customers
Company/Corporation
a business that is owned by shareholders. It has been issued a certificate of incorporation, giving it a separate legal identity from its owners.
Deed of Partnership
the legal contract signed by the owners of a partnership. More formal ones specify the name and responsibilities of each partner and their share of any profits or losses.
Incorporation
this means that there is a legal difference between the owners of a company and the business itself. This ensures that the owners are protected by limited liability.
Initial Public Offering (IPO)
this occurs when a business sells all or part of its business to shareholders on a stock exchange for the first time
Limited Liability
a restriction on the amount of money that owners can lose if their business goes bankrupt (i.e. shareholders cannot lose more than they invested in the company)
Microfinance
the type of financial service aimed at entrepreneurs of small businesses, especially females and those on low incomes
Non-governmental organizations (NGOs)
private sector not-for-profit social enterprises that operate for the benefit of others rather than primarily aiming to make a profit
Partnerships
a type of private sector business owned by 2-20 people. They share the responsibilities and burdens of running and owning the business
Privately Held Company
a business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public
Private Sector
the part of the economy run by private individuals and businesses, rather than by the government (sole traders, partnerships, companies, and cooperatives)
Publicly Held Company
an incorporated business that allows the general public to buy and sell shares in the company via a stock exchange. All shareholders enjoy limited liability.
Public Sector
the part of the economy controlled by the government (state health and education services, national defense)
Sole Trader
a self-employed person who runs and controls the business and is the sole person held responsible for its success (profits) or failure (unlimited liability)
Social Enterprises
revenue-generating business with social objectives at the core of their operations. They can be for-profit or non-profit businesses, but all profits or surpluses are reinvested for that of social purpose rather than being distributed to shareholders and owners.
Stock Exchange
a market place for trading stocks and shares of public limited companies.
Unlimited Liability
a feature of sole traders and ordinary partnerships who are legally liable for all monies owed to their creditors, even if this means that they have to sell their personal possessions to pay for their debts.
For-profit Social Enterprise
an organization that often earns profit, some of which might be distributed to owners, but the primary aim is to provide a social service.
Non-profit Social Enterprise
an organization that is less willing to (and often does not) earn a profit or surplus, instead the primary aim is to provide a social service.
Globalization
Actions or processes that involve the entire world and result in making something worldwide in scope.
Impact of Globalization
Increased competition;
Greater brand awareness;
Skill transfer;
Closer collaboration
Multinational corporation (MNC)
an organization that operates in two or more countries, with its head office usually based in the home country
Advantages to host country
Job creation
Economic growth,
Knowledge and technology transfer
Greater choice of products,
Increased competition, and
Short-term infrastructure projects.
Disadvantages for host countries
Profits being repatriated,
Loss of cultural identity,
Job losses
Brain drain,
Social responsibilities
Loss of market share,
Competitive pressures, and
Vulnerability/Short-term plans.
Gross domestic product (GDP)
the value of a country's annual output or national income
Host country
any nation that allows a multinational company to set up in its country
Protectionist policies
measures imposed by a country to reduce the competitiveness of imports, such as tariffs (import taxes), quotas and restrictive trade practices
Transnational corporation
has regional head offices rather than a single international base
Reasons of becoming a MNC
- increased customer base
- cheaper production costs
- economies of scale
- Brand development and brand value
- avoid any protectionist policies
- spread risks
Demerger
happens when a company sells off a part of its business, thereby separating into two or more business entities. It usually happens due to cultural conflicts, inefficiencies and incompatibilities
Brand acquisition
An alternative strategy to a complete merger or takeover for MNCs is to buy one of the brands of the target company
Arbitration
Method of stakeholder conflict resolution with all stakeholder groups in conflict agreeing to accept the decision or judgment of the independent arbitrator.
Competitors
These are the firm's rivals, which operate in the same industry and contest for the same customers.
Conciliation
Method of stakeholder conflict resolution which aims to align the incompatible interests of different stakeholder groups by helping different parties to better understand each other's interests.
Conflict
This refers to the mutually exclusive and incompatible interests of different stakeholder groups. If this is not managed, it often leads to protracted disagreements, disputes and arguments in the workplace.
Customers
These are the firm's clients, individuals and other businesses, who purchase the organization's goods and/or services. Their interests include competitive prices, fit-for-purpose products and overall value for money.
Directors
The group of senior managers who run a company on behalf of the owners of the company.
Employees
These are the workers within an organization. Their interests include: job security, a competitive remuneration package, a safe working environment, and opportunities for career development.
External stakeholders
Stakeholder groups that are not directly involved in the running of an organization but have a direct interest in its operations.
Financiers
Financial institutions (such as banks) and individual investors who provide source of finance for businesses. They are interested in the organization's ability to generate profits and to repay debts.
Internal stakeholders
These stakeholders are part of the organization, such as employees, managers, directors, and shareholders.
Local community
The general public and local businesses that have a direct interest in the activities of the organization. They are interested in the firm's ability to create jobs and to operate in a socially responsible way.
Managers
The people hired to be responsible for overseeing certain functions, operations or departments within an organization.
Pressure groups
Individuals who come together or organizations that are set up for a common concern. They aim to influence government and public opinion in order to create the desired social change.
Shareholders
The people or organizations that have shares in a company. Their interest is financial, i.e. regular dividends and a higher share price.
Stakeholders
The individuals, organizations or groups with a vested interest in the actions and outcomes of a specific organization. They are directly affected by the performance of the business.
Suppliers
Organizations that provide the goods and support services for other businesses. Their interests include receiving regular orders and receiving payments from their business customers on time.
Acquisition
This is a method of external growth that involves one company buying a controlling interest (majority stake) in another company, with the agreement and approval of the target company's Board of Directors.
Average cost
This refers to the cost per unit of output.
Backward vertical integration
This occurs when a business amalgamates with a firm operating in an earlier stage of production, such as a car manufacturer taking over a supplier of tyres or other components.
Conglomerates
These are businesses that provide a diversified range of products and operate in a range of different industries.
Demerger
This occurs when a company sells off a part of its business, thereby separating into two or more businesses. It usually happens due to conflicts, inefficiencies and incompatibilities following an earlier merger of two or more companies.
Diseconomies of scale
These are the cost disadvantages of growth.
Average costs
These are likely to eventually rise as a firm grows due to a lack of control, coordination and communication.
Economies of scale
This refer to lower average costs of production as a firm operates on a larger scale due to gains in productive efficiency, such as easier and cheaper access to source of finance.
External diseconomies of scale
This occurs due to factors beyond its control which cause average costs of production to increase as an industry grows.
External economies of scale
This occurs when an organization's average cost falls as the industry grows. Hence, all firms in the industry benefit.
External growth (or inorganic growth)
This occurs when a business grows and evolves by collaborating with, buying up or merging with other organizations.
Financial economies of scale
These are cost savings made by large firms as banks and other lenders charge lower interest (for overdraſts, loans and mortgages) because larger businesses represent lower risk.
Forward vertical integration
This is a growth strategy that occurs with the amalgamation of a firm operating at a later stage in the production process, such as a book publisher acquiring book retailers.
Franchising
This refers to an agreement between a franchisor selling its rights to other businesses (franchisees) to allow them to sell products under its corporate name in return for a fee and regular royalty payments.
Horizontal integration
This is an external growth strategy that occurs when a business amalgamates with a firm operating in the same stage of production.
Internal diseconomies of scale
This occurs due to internal problems of mismanagement, causing average costs of production to increase as a firm grows.
Internal economies of scale
This occurs within a particular organization (rather than the industry as a whole) as it grows in size.
Internal growth (also known as organic growth)
This occurs when a business grows using its own capabilities and resources to increase the scale of its operations and sales revenue.
A joint venture
This is a growth strategy that combines the contributions and responsibilities of two or more different organizations in a shared project by creating a separate legal enterprise.
Lateral integration
This refers to external growth of firms that have similar operations but do not directly compete with each other, such as PepsiCo acquiring Quakers Oats Company.
Marketing economies of scale occur
This is when larger businesses can afford to hire specialist managers, thereby improving the organization's overall efficiency and productivity.
A merger
This is a form of external growth whereby two (or more) firms agree to form a new organization, thereby losing their original identities.
The optimal level of output
This is the most efficient scale of operation for a business. This occurs at the level of output where the average cost of production is minimized.
The Purchaser
This refers to the acquiring company in an acquisition or the buyer of another company in a takeover.
Purchasing economies of scale
This occurs when larger organizations can gain huge cost savings per unit by purchasing vast quantities of stocks (raw materials, components, semi-finished goods and/or finished goods).
Risk bearing economies of scale
This occurs when large firms can bear greater risks than smaller ones due to having a greater product portfolio.
Specialization economies of scale
This occur when larger firms can afford to hire and train specialist workers, thus helping to boost their level of output, productivity and efficiency.
Strategic alliances
These are formed when two or more organizations join together to benefit from external growth, without having to set up a new separate legal entity.
Synergy
This is a benefit of growth, which occurs when the whole is greater than the sum of the individual parts when two or more business operations are combined. Synergy creates greater output and improved efficiency.
A takeover (also referred to as hostile takeover)
This occurs when a company buys a controlling interest in another firm without the prior agreement or approval of the target company's Board of Directors.
The target company
This refers to the organization that is purchased by another in an acquisition or takeover deal.
Technical economies of scale
These are cost savings by greater use of large-scale mechanical processes and specialist machinery, such as mass production techniques which help to cut average costs of production.
Vertical integration
This takes place between businesses that are at different stages of production.
Corporate social responsibility (CSR)
This is the conscientious consideration of ethical and environmental practice related to business activity. A business that adopts CSR acts morally towards all of its various stakeholder groups and the well-being of society as a whole.
An ethical code of practice
This is the documented beliefs and philosophies of an organization, so that people know what is considered acceptable or not acceptable within the organization.
Ethical objectives
These are organizational goals based on moral guidelines, determined by the business and/or society, which direct and determine decision-making.
Ethics
These are the moral principles that guide decision-making and business strategy. Morals are concerned with what is considered to be right or wrong, from society's point of view.
A mission statement
This refers to the declaration of an organization's overall purpose. It forms the foundation for setting the objectives of a business.
Objectives
These specify what an organization strives to achieve. They are the goals of an organization, such as growth, profit, protecting shareholder value and ethical objectives.
Strategic objectives
These are the longer-term goals of a business, such as profit maximization, growth, market standing and increased market share.
Strategies
These are the various plans of action that businesses use to achieve their targets. They are the long-term plans of the organization as a whole.
Tactical objectives
These are short-term goals that affect a unit of the organization. Tey are specific goals that guide the daily functioning of certain departments or operations.
Tactics
These are the short-term plans of action that businesses use to achieve their objectives.
A vision statement
This is an organization's long-term aspirations, i.e. where the business ultimately wants to be.
Adding value
The process of producing a particular good or service that is worth more than the cost of the resources used to produce it.
Business
A decision-making organization established to produce goods and/or provide services.
Business plan
An official document with details of an organization and the proposals for reaching its aims and objectives (goals).
Entrepreneur
A business-minded person who manages, organizes and plans the production process, taking risks with business decision-making.
Entrepreneurship
The knowledge, skills and experiences of individuals who have the capability to manage the overall production process.
Factors of production
The collective term for the resources used in the production process, i.e. land, labour, capital and entrepreneurship.
Finance and accounts
Function of an organization responsible for ensuring that the business has sufficient funds in order to conduct its daily operations.
Goods
Physical products, such as food, clothes, furniture, cars and smartphones.