Short 2-3 marks questions (definitions,...)

mention these key phrases/terms to earn full marks

[not finished yet, still updating...]

Section 1 - Understanding business activity

1.1 business activity

Define the term "need"

a service or good that is essential for living

such as water, food

Define the term "want"

a service or good that people would like to have but is not essential for living

such as computer, laptop

What are the "factors of production"

are the resources needed to produce the good or service, these resources are limited

land, labour, capital, enterprise

Define "scarcity"

the lack of sufficient resources, products to fulfill the total wants of the population

Define "opportunity cost"

the benefit gained from the next best option/alternative given up

such as a person choosing to buy a car and losing the opportunity/ability to buy a house

Define "specialization"

occurs when people and businesses concentrate on the tasks/skills they are best at

What is "division of labour"

a form of specialization when the production process is split into different tasks and each worker performs one of these tasks

What is a “business”

an organization or individuals whose combine the factors of production to produce the goods and services to satisfy the customer needs and wants

Define “added value”

the difference of the selling price and cost of producing the product (which is the raw materials, components)

1.2 classification of businesses

Define "primary sector"

industries that extract natural resources of the Earth and turn them into raw materials for other businesses to use

such as coal mining, farming,...

Define "secondary sector"

industries that manufacture goods using the raw material from the primary sector

such as car factories, breweries,...

​Define "tertiary sector"

industries that provide services to other businesses as well as the consumers

such as banks, hospitals,...

​Define "de-industrialization"

occurs when there is a decline in the importance of the secondary manufacturing sector of industry in a country

​Define "mixed economy"

when there are both private and public sectors in the economic system

​Define "capital"

the money that is invested into the business by the owners

things that the business own

1.3 enterprise, business growth and size

Define "entrepreneur"

a person who organizes, operates and take the risks financially for a new business venture.

What is a "business plan"

a document containing the business objectives and important details about the operations, finance and owners of the new business

Define "capital employed"

the total amount of capital/money invested used for the acquisition of profits by a firm or project.

​Define "internal growth"

occurs when a business expands its existing operations.

such as opening more factories,...

Define "external growth"

is when a business takes over or merges with another business.

What is "a merger"

is when the owners of two businesses agree to join their firms together to make one business.

What is "a takeover"

is when one business buys out the owners of another business which then becomes part of the 'predator' business

​Define "horizontal integration"

is when one firm merges with or takes over another one in the same industry in the same sector.

​Define "vertical integration"

is when one firm merges with or takes over another one in the same industry but in a different sector.

Vertical integration can be forward or backward.

​Define "conglomerate integration"

is when one firm merges with or takes over a firm in a completely different industry.

This is also known as diversification.

1.4 types of business organisation

Define "sole trader"

is a business owned and controlled by one person

the person is entitled to all the profit but also all the liabilities

Define ‘partnership’

a business formed by two or more people (max 20) agree to share the responsibilities as well as profits

Define "limited liability"

means that the debts/liability of shareholders in a company is only limited to the amount they invested.

if the business goes bankrupt then the maximum amount the shareholders lose is the money they invested in, not their territories

​Define "unlimited liability"

means that the owners of a business can be held responsible for the debts of the business they own - if their debts exceeded the amount invested in then they will have to pay the debts using their own territories

​What is "an unincorporated business"

a privately owned business, often owned by one person who has unlimited liability as the business is not legally registered as a company and doesn't have a separate legal identity. Sole traders and partnerships are unincorporated businesses.

​What is an "incorporated business"

a company with unlimited liability as the business is legally registered as a company and has a separate legal identity.

​Define "shareholders"

are the owners of a limited company. They buy shares that represent part ownership of a company.

​Define "An Annual General Meeting (AGM)"

is a legal requirement for all companies. Shareholders may attend and vote on whom they want to be on the Board of Directors for the coming year.

​Define "dividend"

are payments made to shareholders from the profits (after tax) of a company. They are the return to shareholders for investing in the company.

​Define "franchise"

is a business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buys the license to operate this business from the franchisor.

1.5 business objectives and stakeholder objectives

​Define "profit"

is the total income of a business (sales revenue) subtract the total costs.

​Define "market share"

is the proportion of total market sales achieved by one business.

Define "social enterprise"

a business or organisation that has social objectives as well as an aim to make a profit to reinvest back into the business.

the triple bottom line (social, economic, environment)

​Define "stakeholder"

individual or group with a direct interest in the performance and activities of a business.

Section 2 - People in business

2.6 motivating workers

​what is "motivation"

the reason why employees want to work hard and work effectively for the business.

​Define "wage"

the payment for work, usually paid weekly.

​Define "salary"

the payment for work, usually paid monthly.

​Define "commission"

the payment relating to the number of sales made.

Define "profit-sharing"

a system whereby a proportion of the company's profits is paid out to employees.

​Define "bonus"

an additional amount of payment above basic pay as a reward for good work.

​Define "performance-related pay"

a payment which is related to the effectiveness of the employee where their output can easily be measured.

​Define "share ownership"

when shares in the company are given to employees so that they become part owners in the company.

​Define "appraisal"

a method of assessing the effectiveness of an employee.

​Define "fringe benefits"

non-financial rewards given to employees as a motivation

​Define "job satisfaction"

the enjoyment derived from feeling that you have done a good job.

​Define "job rotation"

involves workers swapping round and doing each specific task for only a limited time and then changing round again.

​Define "job enlargement"

where extra tasks of a similar level of work are added to a worker's job description.

Define "job enrichment"

involves looking at jobs and adding tasks that require more skill and/or responsibility

2.7 organisation and management

​Define "organisational structure"

refers to the levels of management and division of responsibilities within an organisation.

​Define "chain of command"

is the structure in an organisation that allows instructions to be passed down from senior management to lower levels of management.

​Define "span of control"

is the number of subordinates working directly under a manager.

​Define "line manager"

people who have direct responsibility over people below them in the hierarchy of an organisation.

​Define "staff manager"

are specialists who provide support, information and assistance to line managers.

Define "delegation"

means giving a subordinate the authority to perform particular tasks.

​Define "leadership styles"

are the different approaches to dealing with people when in a position of authority- autocratic, laissez-faire or democratic.

​Define "autocratic leadership"

a leadership style where the manager expects to be in charge of the business and to have their orders followed.

​Define "laissez-faire leadership"

where organization makes the broad objectives of the business known to employees, but then they are left to make their own decisions and organize their own work.

​Define "democratic leadership"

a leadership style gets other employees involved in the decision-making process.

​Define "trade union"

is a group of workers who have joined together to ensure their interests are protected.

2.8 recruitment, selection and training of workers

​Define "recruitment"

is the process from identifying that the business needs to employ someone up to the point at which applications have arrived at the business.

​Define "job analysis"

a document identifies and records the responsibilities and tasks relating to a job.

​Define "job description"

a document outlines the responsibilities and duties to be carried out by someone employed to do a specific job.

​Define "job specification"

is a document which outlines the requirements, qualifications, expertise, physical characteristics, etc. for a specified job.

​Define "internal recruitment"

is when a vacancy is filled by someone who is an existing employee of the business.

​Define "external recruitment"

is when a vacancy is filled by someone who is not an existing employee and will be new to the business.

​Define "induction training"

is an introduction given to a new employee, explaining the firm's activities, customs and procedures and introducing them to their co-workers.

​Define "on-the-job training"

when new employees are watching a more experienced worker doing the job to learn from them, usually there will be a trainer who is an experienced worker

​Define "off-the-job training"

involves being trained away from the workplace, usually by specialist trainers.

Define "workforce planning"

establishing the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required.

​Define "redundancy"

is when an employee is no longer needed and so loses their job. It is not due to any aspect of their work being unsatisfactory.

​What is an "ethical decision"

a decision taken by a manager or a company because of the moral code observed by the firm.

​What is "an industrial tribunal"

is a legal meeting which considers workers' complaints of unfair dismissal or discrimination at work.

​Define "contract of employment"

a legal agreement between employer and employee listing the rights and responsibilities of workers.