GCE A/L Business Studies flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Business environment

The set of internal and external forces surrounding a firm. Internal factors are controllable; external micro and macro forces are not directly controlled and shape opportunities and threats.

PESTLE analysis

A framework classifying macro-environmental forces as Political, Economic, Social, Technological, Legal, and Environmental. It helps a firm anticipate external change it cannot control.

Market segmentation

Dividing a heterogeneous market into subgroups of buyers with similar needs, using demographic, geographic, psychographic, or behavioural criteria, so that a tailored marketing mix can be offered to each chosen segment.

Sole trader

A business owned and run by one person with no separate legal personality. The owner keeps all profit but has unlimited liability for business debts and raises capital mainly from personal savings and loans.

Limited liability

A legal protection meaning shareholders can lose only the capital they invested, not their personal assets, because the company is a separate legal person responsible for its own debts.

Franchise

An arrangement where a franchisee pays an initial fee and continuing royalties to a franchisor in return for the right to trade under an established brand and use its proven operating system.

Public corporation

A business owned and controlled by the state, funded by government capital, typically set up to provide a public service and judged on service objectives as well as financial performance.

Profit maximisation

An objective of producing at the output where marginal cost equals marginal revenue, the point at which the difference between total revenue and total cost is greatest.

Stakeholder

Any individual or group with an interest in, or affected by, a business's activities, including shareholders, employees, customers, suppliers, lenders, government, and the local community.

Principal-agent problem

A conflict arising when managers (agents) pursue their own goals, such as growth or status, rather than maximising returns for the owners (principals), requiring monitoring and incentive alignment.

Price elasticity of demand

The percentage change in quantity demanded divided by the percentage change in price. Above one demand is elastic, so a price cut raises total revenue; below one it is inelastic.

Ansoff matrix

A growth framework crossing products with markets: market penetration, product development, market development, and diversification. Diversification carries the highest risk because both product and market are new.

Product life cycle

The stages a product passes through: development, introduction, growth, maturity, and decline. Marketing mix and cost strategies change at each stage as competition and sales volume shift.

Cash cow

In the BCG matrix, a business unit with high market share in a low-growth market. It generates surplus cash used to fund stars and selected question marks rather than heavy reinvestment.

Break-even output

The quantity at which total revenue equals total cost, calculated as fixed costs divided by contribution per unit, where contribution is selling price minus variable cost per unit.

Economies of scale

Reductions in average cost per unit as output rises, arising from purchasing, technical, managerial, financial, and marketing advantages of larger scale operations.

Just-in-time production

A stock system where materials arrive only as required by production. It reduces holding costs and waste but leaves the firm exposed to supply disruptions and demand shocks.

Total quality management

An approach where every employee takes responsibility for quality at each stage, aiming for zero defects through continuous improvement, teamwork, and customer focus rather than end-of-line inspection.

Labour turnover

The rate at which employees leave a business, calculated as leavers divided by average number employed, multiplied by one hundred. High rates raise recruitment and training costs.

Herzberg two-factor theory

A motivation theory separating hygiene factors, such as pay and working conditions, which prevent dissatisfaction, from motivators, such as achievement and responsibility, which create genuine satisfaction.

Job enrichment

Redesigning a job to give the holder more responsibility, variety, and autonomy, often including planning and checking tasks, to raise intrinsic motivation rather than simply adding more tasks.

Gross profit margin

Gross profit divided by revenue, expressed as a percentage. It shows the proportion of sales left after cost of goods sold and indicates pricing and production cost efficiency.

Current ratio

Current assets divided by current liabilities. It measures a firm's ability to meet short-term obligations; a value near two is often considered comfortable, though norms vary by industry.

Return on capital employed

Operating profit divided by capital employed, expressed as a percentage. It measures how efficiently the capital invested in the business generates profit and allows comparison across options.

Cash flow forecast

A projection of expected cash inflows and outflows over future periods, used to identify cash shortages in advance and arrange overdrafts or other short-term finance.

Consideration

The element of a valid contract requiring each party to give something of value, such as money or a promise, in exchange for the other party's promise.

Unfair dismissal

Termination of employment without a fair reason or fair procedure, such as lacking warnings or consultation. An employment tribunal may order reinstatement or compensation.

Corporate social responsibility

A business's voluntary commitment to act ethically towards stakeholders and society, going beyond legal minimum requirements in areas such as environment, labour practice, and community impact.

Barriers to communication

Factors that distort or block a message between sender and receiver, including jargon, hierarchy distortion, information overload, cultural difference, and emotional filtering.

Management information system

A computer-based system that collects, processes, and presents internal and external data to support managerial planning, control, and decision-making at operational and strategic levels.

SWOT analysis

A strategic audit listing internal strengths and weaknesses alongside external opportunities and threats, used to match a firm's capabilities to the conditions of its environment.

Kotter change model

An eight-step sequence for leading change: create urgency, build a coalition, form a vision, communicate it, empower action, secure short-term wins, consolidate gains, and embed change in culture.

Strategic drift

A gradual failure of strategy to keep pace with changes in the business environment, often because past success breeds complacency and internal culture resists adaptation.