Adding Value

Providing consumers with an incentive to buy your product by making them feel they are getting more for their money. At its simplest level "3 for the price of 2" offers are a good example of this. "Bundling" is another technique common with electronic products - free games, CD's, software, T-shirts, etc are offered with the basic product when you buy it. It is also a means of getting rid of slightly out of date accessories - the extras on offer are rarely current products, but are usually surplus stock. Increasingly, the use of "limited edition" releases is common, especially in the VideoTape market - basic tapes are smartly packaged with background notes, posters, extra tapes and impressive containers. They may only be released in a particular format for a few weeks to encourage a sudden leap in demand. In reality, anything produced in more than a few thousand units can hardly be described as a "limited" edition, and popular tapes regularly sell 250,000 or more in a few weeks.

Advertising Standards Authority (ASA)

An Independent organisation controlling standards in advertising, by using a voluntary code for advertisers. It can act upon complaints from its members or from the public by "naming and shaming" businesses that display misleading or offensive adverts. Not all complaints are upheld by the ASA though.

Advertising

The Advertising Association describes advertisements as "messages, paid for by those who send them, intended to inform or influence people who receive them." It is important to understand that Advertising is just ONE marketing tool, and there are many others, although it is the one we encounter most in our daily lives. Adverts cost money, especially if you go to an Advertising Agency to have them produced for you. Choosing the right media for advertising is also vital if you want your target market to se e the message. There are two broad categories of advertisement: Persuasive Ads seek to influence you into acting on their message, usually by buying something. Informative Ads offer information that may be of use to you but are generally less aggressive in tone.

Advisory, Conciliation & Arbitration Service (ACAS)

ACAS is an organisation set up to deal with industrial disputes. As the title suggests, they provide advice to employers and employees about their rights and responsibilities to each other, they attempt to settle disputes between both sides, and they pass judgement on disputed cases. They are a private organisation that remain unbiased and objective in dealing with the people who come to them for help

After-Sales Service

Before purchasing a complicated or expensive item, the buyer will feel more comfortable about it if they know there is help available after the purchase. A good example is free 24 hour Helplines for computer buyers to use if in difficulty. Similarly, double-glazing companies will re-visit customers once work is done, or telephone to see if they're satisfied. Guarantees are a form of after-sales service: sometimes minor alterations need making after an item has been installed in a home, or a car dealer may offer free servicing of a new car for a short period after purchase. The better the after-sales service, the more likely the customer is to buy the product.

Aims of Business

Aims are best described as overall goals a business seeks to achieve, and they will vary according to a variety of factors. Typical aims include:

• Making a profit
  
• Survival
  
• Greater turnover
  
• Increased market share
  
• Growth through Takeovers, expansion or mergers
  
• Achieving a good reputation
  
• Satisfying customer needs
  

and many others. The steps by which Aims are achieved are called Objectives. Some businesses summarise their aims in a "Mission Statement" that appears at the start of significant documents.

Appraisal

Measuring an employee's performance, usually against pre-agreed targets. Employees who reach or exceed their targets may receive extra pay or bonuses in some organisations.

Asset

An asset is something you own which has a money value. In most cases this means an item used by a business, available cash, unsold stock, or money invested for the future. Assets are recorded on a Balance Sheet and divided into two types: Fixed Assets are items that are unlikely to be sold within 12 months (eg buildings, equipment). Current Assets are items that will be sold or disposed of during the next 12 months (eg cash, stock).

Automation

Where machines are used to replace human or animal labour. Automation can be used to complete difficult, dangerous, or repetitive tasks, and machines do not need food, rest, or sleep. However they do need maintaining by humans, and they are more costly to begin with. Manufacturers use automation to speed up or increase the volume of production, or to lower Unit Costs. The extra sales that result should eventually pay off the extra cost of the machines

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Bad Debt

A debt that is unlikely ever to be recovered from whoever owes you the money. A sensible business will allow for this occurrence when planning their finances - it is known as a "provision" for bad debt. In times of recession bad debt is more common as many businesses are likely to struggle and fail.

Balance of Payments

The measure of a country's trade with other countries, calculated by taking the value of its imports from the value of its exports. The Balance of Trade "on the current account" (that is often referred to in the news) includes both "visible" (goods) and "invisible" (services) exports and imports in the calculation. When exports exceed imports the balance is said to be "favourable". When imports exceed exports the balance is said to be "adverse".

Balance Sheet

This is an essential financial document for all businesses, and one that is required by law from plc's. It lists all the business's Assets and Liabilities and their values and gives a "snapshot" of the business's overall money value at a given time. plc's have to make their balance sheet public each year. It is important to note that a Balance Sheet is only a temporary summary that can change daily, and is NOT a picture of the previous year's trading

Bank Loan

Money borrowed from a bank. Repayments are usually spread over a period of months or years, but are subject to Interest. The longer you take to repay the loan, the less you pay each month but the more you pay back over the whole length of the loan. Interest rates may vary over time so repayments may vary too. For larger loans your bank will look for some security in the form of an asset that you must surrender if you fail to repay the loan.

Bank Services

Banks offer four key services to their business customers: Money Transfer, Business Advice, Finance, and a Deposit Account. Other services may be offered too.

Batch Production

A midway point between Job and Flow Production - items are made in quantity but not for a "mass" market. They are made in batches in response to demand, and each batch will require a minimum run in order to remain economical. A Bakery usually batch produces different types of bread rolls, mass produces sliced bread, and possibly job produces an individual cake for a special occasion. Similarly a printer will Batch produce a few thousand brochures for a local business, whilst a national newspaper will mass-produce a few million newspapers for the whole country.

Basic Needs

Those needs identified by Maslow as essential for survival: shelter, warmth, food, clothing etc. People seek work to earn pay that enables them to meet these needs first. If spare cash is available, other needs will be considered.

Bonus

Extra payments, sometimes seasonal (ie Xmas) but usually as a one-off reward for success in exceeding targets. They can provide an incentive if fairly applied, but it is not always easy to put a money value on success, and it is not easy to measure excellence in a way acceptable to all staff.

Branding

Stamping your company's own identity on what you make or sell by giving it a distinctive name and image. This is so common now that we take it for granted - instead of asking for a chocolate bar we ask for it by its brand name (ie Mars, Milky Way, Snickers). Brand names enjoy national advertising and popularity, and customers that like a particular brand will return to buy more of it. A brand name also reassures the customer that the product will be the same wherever they buy it: burgers vary in taste and quality between one chip shop and another, but if bought in a well known outlet under a brand name they usually taste the same wherever you go

Break Even

The point at which a business's Revenue (income) is equal to its Total Costs (outgoings). Before Break Even the business is making a loss. After Break Even the business is making a profit. On a Break Even chart, it is shown by the point where the Revenue line crosses the Total Costs line - if this point is projected downwards it shows the Break Even level of output, and if projected across it shows the Break Even level of income. It is important NOT to confuse the idea of Break Even with the measurement of Cash Flow - a business that has broken even may still have a negative Cash Flow later on.

British Standards Institute (BSI)

The British Standards Institute (BSI) is a standards and quality services organisation. BSI works with manufacturing and service industries, businesses and governments to establish British, European and international standards of manufacturing. The BSI "Kitemark" is the UK's most recognised product certification mark. It is proof that a product meets a certain specification. When a product displays the Kitemark, the purchaser can be more confident that the product will be safe and fit for its intended purpose.

Budget

This is a financial plan for future action that attempts to forecast amounts of income and spending. Most people from Governments down to individual households have to budget in order to spend within their means. The Budget that appears on TV from time to time is the Government's financial plan for running the country, and it affects businesses and households through 5 major changes:

• Income Tax - a higher rate will mean people have to pay more tax on their earnings and will have less to spend on consumer goods.
• VAT - if the rate is increased, or if VAT is extended to more goods/services they will become more costly and reduce demand for them.
• Corporation Tax - if this tax on business profits is increased, businesses will have less money for investment, dividends, or meeting running costs.
• National Insurance - paid by both employers and employees towards state healthcare and pensions. If contributions increase, employees will have less money to spend, and employers' costs will increase.
• Road Tax & Duty on Petrol - an increase will affect the running costs of private and business vehicles. Company Cars also attract certain income tax concessions - if these change it becomes less beneficial to run a company car.

Building Society Loan

Similar to a Bank Loan, until recently Building Societies offered different services than Banks did, but increasingly they are becoming like banks. They tend to concentrate more on mortgages, and their loans are subject to interest like bank loans.

Business Advice

It is important to banks that their business customers run healthy long-lasting businesses, so one of their key services is to offer business advice. This will cover most aspects of running a business and may include printed materials, videos, software, or visits from advisers. The "starting a business" packs issued by most banks are a good example of this.

Business Plan

Any bank taking on a business customer and offering them their services will require a business plan to be drawn up and discussed first. Many banks will include plan-writing software free in their "starting a business" packs. A business plan presents essential detail about the business, its personnel, it's targets, its financial needs, and what it intends to achieve.

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CAM

Computer Aided Manufacture - where microchip technology is employed to assist in making products, for example computer controlled tools that shape materials according to data fed in by the operator. Computers can also be used to control production line movement and storage of finished items.

Capital

Money available for investment in machinery, buildings, and any items needed to produce goods/services. Capital sometimes refers to the wealth-creating items once bought, too.

Capital Intensive

Any activity that involves spending a high proportion of money on machines is considered capital intensive. Typically, factories that invest in the latest, most expensive production technology fit this description. Capital intensive industries are those with a lot of mechanised or automated processes, whereas labour intensive industries rely on a large workforce (eg Third World agriculture).

Cash and Carry

A particular form of wholesaling where the buyer is responsible for transporting the goods away from the wholesaler's premises. The advantage of this is that the buyer can avoid delivery charges and delays, and can drop in to the wholesalers for goods at any time. However, the buyer will need a vehicle large enough to carry the crates and boxes bought and will have to pay the running costs of that vehicle. To use a Cash and Carry you must have an account with them, and to qualify for this you must be a retailer, not a consumer.

Cash Flow

This refers to the amount of cash available to a business at any particular time. It is important to know that it is NOT an indication of how profitable a business is - A profitable business can still have a poor cash flow. Cash flow problems occur when payments owed to the business are delayed or too much cash is spent by the business. A healthy cash flow is achieved when the amount of cash coming in is more or less equal to the amount of cash going out. If too much cash builds up this is also a problem because it is not earning the business any money.

CBI

The Confederation of British Industry: An organisation to which many businesses and Employers Organisations belong - its role is similar to that of the TUC for Employees. The CBI is seen as the "voice" of British Business, and states the Employers' point of view. It seeks to influence Government thinking on the economy, and negotiates on occasions with the TUC.

Celebrity Endorsement

Using popular personalities to promote products is a long established practice - actors and actresses have been associated with well known brand names for decades. They are (of course) paid a substantial fee that is negotiated with their agent, and for any "hot" star promotional work can sometimes bring in as much money as their daily work! Even when the advert cannot use their screen personality for copyright reasons, it is often enough for their image to put across a message. For example, Neil Morrissey and Lesley Ash advertise Homebase by playing on their TV personalities. Similarly, providing voice-overs for adverts is a popular sideline for certain celebrities; Chris Tarrant, Richard Briers, Angus Deayton, Alexei Sayle, Stephen Fry, Hugh Laurie and Dawn French regularly appear in voice only on ads for popular products. Of course, using celebrities can backfire - for example David Beckham's World Cup tantrum. Eric Cantona has not been popular in the advertising world since the fan kicking incident and Actress/Model Liz Hurley nearly lost her Estee Lauder contract when her boyfriend was involved in a much-reported scandal. Advertisers have to tread carefully where high profile stars are involved.

Centralisation

Where control and decision-making powers in an organisation are limited to a few people at the top of the chain of command. The authority to make key decisions is not delegated to the lower levels of the organisation. In a centralised organisation, staff lower down the hierarchy will have to wait for decisions to be made higher up before proceeding with a course of action. This may slow down their normal working.

Chain of Command

The route along which orders pass from top to bottom in an organisation. The lines on an organisation chart represent the chain of command. Each level in the hierarchy is answerable to the level above it. It is considered unacceptable to by-pass the chain of command when subordinates wish to communicate with their superiors.

Chain of Distribution/Distribution Channels

How products move from producer to consumer. Many move via a wholesaler and a retailer (eg household goods), while some are sold to the consumer by the producer direct (eg factory shops or "pick your own" fruit). Major retailers may stockpile popular goods in warehouses or Regional Distribution Centres (RDC's) of their own to ensure a steady supply. The main considerations for business are the cost of storage and the reliability of supply. Warehousing costs money, and unreliable suppliers can bring business activity to a halt, creating cash flow problems in both cases. Any business that relies heavily on the efficient movement of stock must have an effective system of stock control.

Cinema Advertising

Around 1500 screens exist in the UK, and with the rise of more up to date multiplex cinemas there has been a steady increase in the number of cinema goers in recent years. There is a strong bias towards the 7-14 and 15-24 age groups, and campaigns can be placed regionally or connected to a particular film title. Advantages can include: the impact of a large screen, the ideal age range of the audience who are most likely to have money to spare, and the fact that it is hard not to watch a cinema advert - you are seated facing the screen in an enclosed space, waiting for the film to start. Disadvantages include the fact that there are few regular cinemagoers, popular films tend to run for a long time (so campaigns are lengthy), and the low coverage of older age groups.

As a footnote, another form of cinema advertising is "product placement" whereby your product features in the film itself. This may be because your company helped to fund the movie's production, or because you donated products when the sets and props were being organised. Examples include Sony electronic equipment in James Bond films, the De Lorean Car in Back to the Future, and well-known logos appearing in the background.

Collective Bargaining

The principle upon which Trade Unions are based: it is thought to be better for employees to negotiate with their employers through their Union representatives rather than on their own, thus gaining strength through numbers. Unions negotiate at local or national level, depending on the nature of the business. Many employers support collective bargaining as it makes pay negotiations less complicated, even though both sides rarely agree in the early stages.

Competition

A situation whereby businesses compete for customers, by trying to offer better value than their competitors do. In this situation, products will continually improve or get cheaper, and the consumer will always be able to choose between different competitors' products. In a monopoly situation there is little choice, and the monopoly holder will not be under the same pressure to improve quality or lower prices.

Compulsory Redundancy

This occurs when a business must lose employees to make savings or as a result of reorganising and people have to leave employment against their will. Employers will try to encourage voluntary redundancy where possible, but sometimes this is not sufficient. Employees made redundant are entitled to a redundancy settlement by law. Redundancy is based upon the notion that the specific job is no longer necessary. An employer cannot make a worker redundant then hire someone else to do the same job.

Computer Control System

All systems have inputs, processes, and outputs - computer systems sense changes around them with sensors (input), then respond to the changes (processing) by sending instructions to various devices (output). For example, an automated greenhouse system will open vents or activate heaters in response to temperature changes sensed by a thermometer. The system's program will decide the appropriate temperatures at which to make the changes.

Consumer Protection/Legislation

Measures to protect consumers (buyers) from the exploitation, misleading claims, and sub standard products of some producers (sellers). These measures may be in the form of laws (Trade Descriptions Act, Supply of Goods & Services Act) or agencies that deal with complaints (Office of Fair Trading, Advertising Standards Authority, British Standards Institute, Monopolies & Mergers Commission).

Consumer's Association

An independent organisation that examines and tests products and services on behalf of consumers then publishes its findings in its own magazine called "Which?". These reports are useful guides when trying to get value for money.

Consumption

In simple terms, the using up of goods and services by their end user. Consumer goods are those that the buyer will normally be expected to use up or wear out then possibly replace with more consumer goods.

Contract of Employment

By law, employers must provide a contract of employment for their employees. It is a formal agreement laying down what is expected of both the employee and the employer. Details include hours worked, rate and system of pay, holiday and sick pay arrangements, pension details, disciplinary arrangements, and a period of notice for ending the contract.

Co-operative

This is a business run by its workforce, with profits distributed fairly between them. Each worker has one vote in all key decisions, which are made democratically. Where managers are required, they are elected by the work force. Originally formed as an alternative to 19th century business organisations, supporters believe they increase employee motivation, but employees must be prepared to get fully involved, and in order to compete they have to run profitably. Making a co-operative succeed is not an easy task in modern society.

Cost of Sales

The cost of making or obtaining the items you sell to your customers. If you manufacture a product your Cost of Sales will include the raw material and power costs involved in making it. If you sell finished goods to your customers (eg High Street Store) your Cost of Sales is the cost of buying the goods you sell before you add your mark up (Profit).

Cost Plus Pricing

A pricing strategy that involves adding an agreed mark up to the unit cost of producing the item. For example, if it cost 99p to make each item and the required mark up was 30p then the selling price would be £1.29. The main problem with this strategy is that it ignores competitors' prices and may leave their items more expensive.

Cost of Trading/Expenses

The various costs of running the business, including rent, heat, light, wages, distribution costs etc. Bad debts and depreciation should also be included here if accounts are to be accurate. Profit & Loss Accounts make a distinction between Cost of Trading and Cost of Sales to see how much is being spent on the two different areas of the business.

Council Tax

Money paid by householders and businesses to local government for the services they provide (ie education, waste disposal, emergency services, road maintenance etc). Householders pay according to the value of their property. Businesses pay a separate business rate as some of the services they use are more specialised than those provided for householders.

Current Account

A bank account for keeping and transferring everyday cash. Typically, income is paid in, and bills are paid out in the form of Cheques, Direct Debits, or Standing Orders. Credit Transfers are often used for paying salaries. Business accounts involve charges for every service the bank provides, whilst private accounts are usually free of charge whilst the balance remains greater than zero. Current accounts can earn interest, but not usually very much.

Current Assets

Assets that the business would normally expect to dispose of within 12 months, for example unsold stock, or raw materials for production.

Current Liabilities

Liabilities that the business would normally expect to pay off within 12 months, for example energy bills or raw materials bills.

Current Ratio

A liquidity ratio that uses figures from a business's Balance Sheet to determine whether or not it can pay its immediate debts. It assumes any unsold stock will be sold during the year, and is not as demanding a test as the Acid Test Ratio. It is calculated in the following way:

Current Assets
------------------------- Expressed as a ratio (ie 5:4)
Current Liabilities

Curriculum Vitae (CV)

From the Latin "progress of life", this is a summary of your life and work so far, usually starting with your High School qualifications. It includes details of jobs and employers, extra qualifications, experience and interests that are relevant to a job or promotion you are seeking. Ideally it should be as short as possible, but informative too.

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Data Protection Act

A series of measures designed to ensure that confidential information held on computers is accurate, up to date, kept secure, and is not misused by those who compile it.

Debentures

Also called loan stock, debentures are long term loans to a company with a guarantee that a fixed rate of interest will be paid at regular intervals. Debenture holders are creditors of the company and the loan is made on condition that assets will be surrendered if the interest cannot be paid. Like all loans, debentures are eventually paid off at some future date. This is a form of external finance.

Debt Collectors

A business that is owed money can pay a specialist firm to arrange to recover the outstanding payments. The money will eventually be returned, but the Debt Collection Agency will have to be paid a fee. This is very much a last resort, and it is important to conduct debt recovery legally, and not using threats.

Decentralisation

Organisations that allow for the delegation of decision-making powers are said to be decentralised - decisions can be made at all levels of the chain of command so it is not necessary to wait too long for authority from the higher levels.

Decline

The 5th and final stage of the Product Life Cycle - Falling demand for the product causes the rate of sales to decline until it is no longer economical to produce it. The decline stage is normal for most products, although some that achieve "classic" status never seem to go into decline. This stage can be postponed by re-launching the product to remind consumers of its qualities, or by offering price cuts or other promotions to boost sales.

Delegation

Allowing decisions to be made lower down the chain of command in an organisation. For example a manager passes responsibility for a particular task or course of action to one of their staff. Similarly, a delegation can be a group of people who have been selected to represent a higher authority, for example a Japanese Trade Delegation.

Departmental Aims (Finance)

The key aim of anyone responsible for a business's finances will be to carry out full and accurate recording of all the business's transactions in order to ensure accurate financial planning. They will also seek to keep all areas of the business within their planned budget and to predict future financial needs and prepare for them. Where possible, they will investigate cost-cutting measures to avoid wastage and inefficiency. Maintaining a healthy cash flow will be necessary, and the careful use of spare cash to ensure the maximum possible return will also be an important goal.

Departmental Aims (Marketing)

The main aim of any marketing department is to convert potential customers into actual customers, and then into regular customers. Ideally, they will persuade the entire potential market to buy their product or service, but in reality this rarely happens. The department will seek to use its resources in the most effective way to achieve this, and will try to employ the ideal marketing mix for every product or service the business sells. Marketing is highly competitive, and gaining a reputation for quality and impact in the marketing world is also a key aim.

Departmental Aims (Personnel)

The personnel department's main aim will be to ensure a motivated and effective workforce. Careful recruitment, selection, and training, along with fair payment, useful welfare services and good communications will help to achieve this. The Department should also try to ensure a reasonable and legal approach to employees leaving employment, for whatever reason. The phrase "behind every successful business is a smile" is a significant one here - any form of stress prevents effective working.

Departmental Aims (Production)

The Production Department's aims will typically include: ensuring a smooth and efficient system of production through careful planning and control, maintaining and improving the quality of the product, making the goods on schedule and in the right quantity, and keeping costs within the production budget - reducing them wherever possible.

Deposit Account

This is a bank account that earns interest, and spare cash can be kept in it for short periods. This is a convenient form of internal finance.

Depreciation

A steady drop in the value of an asset due to wear and tear or obsolescence. All businesses should make allowances for such losses, as the asset will eventually need replacing or upgrading. A common example is cars, most of which lose around 60% of their original value after 3 years of domestic use. Not all assets depreciate with time - certain types of land and property may gain value, as will some antiques or collectors' items. Generally speaking, depreciation happens to assets in constant daily use by the business for the purposes of producing goods/services.

Desk Research

Using secondary data for market research rather than going out to gather primary data.

Direct Marketing

Communicating directly with the consumer in their home by mail or phone. With developments in text processing and database software in recent years, there has been an explosion in the amount of "junk mail" that is sent to our homes. Messages can be tailored to individual market segments by searching databases on customer behaviour. These databases are compiled from information filled in on the various forms that accompany a purchase, including any form of credit card transaction. Internet users often receive junk e-mail (or "spam") which can waste time and money, as it has to be downloaded. Guarantee Registration Cards often include mini questionnaires to gather data about the purchaser. Databases are sometimes sold on to other companies or used by them for an agreed fee. A more intrusive form of direct marketing is the use of phone calls either at random or as a follow up to a previous purchase. Market researchers to gather up-to-date opinions on products or political issues sometimes use phone calls.

Dismissal

When an employee is dismissed from a job for misconduct, following a number of warnings (including at least two in writing). Employees who feel they have been treated unfairly may take out unfair dismissal proceedings against their employer.

Distribution

The movement of goods from producer to consumer along channels of distribution, that might involve wholesalers and/or retailers. Transport methods will vary according to a number of factors, including type of goods, distance from market, and cost.

Division of Labour

Where different jobs are given to different people, instead of everybody doing all the jobs themselves. If you work in the personnel department you are specialising in personnel work, while people in other departments specialise in other jobs. In a factory using flow/mass production, different people on the production line will perform different tasks. The advantage of this system is that individual workers only have to be skilled in certain tasks - they don't need to know everything. This means they can be paid less for their skills, and production costs are kept low. In its extreme form (ie 19th century factories or third world "sweatshops") young children are paid very little to work for long hours at simple repetitive tasks. Division of Labour has some disadvantages - firstly if taken to extremes it can amount to exploitation, and secondly workers cannot easily take on the tasks of others on different tasks because they haven't been fully trained. Finally, working on the same repetitive task can become boring - workers will eventually lose interest in the quality of what they produce.

Duty

A form of taxation collected on the sale of certain goods (eg imported tobacco, perfume, and alcoholic drinks), usually by HM Customs and Excise. A major proportion of the cost of petrol is duty. Levels of duty on these goods are often changed by a government's Budget.

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E-Commerce

Selling goods and services electronically, usually from an internet website. At a simple level, customers can e-mail orders to the seller, or send payments to a postal address shown on the web page. An increasing number of websites allow credit card transactions to take place using secure lines - most major credit cards allow people to buy goods from abroad in foreign currency too. This type of selling is likely to increase on a massive scale in coming years, and fortunes are already being made by people who have exploited the market early. Shares in the Amazon.com online store increased in value by 5600% in the two years following their issue and the company's founder Jeffrey Bezos is now listed among the world's wealthiest people.

Economies of Scale

In simple terms, the more a business produces, the less it costs to make each unit. This means that businesses can charge less per unit for mass-produced goods sold in large quantities, and in turn can make savings by buying their raw materials in bulk. The bigger the business, the more likely it is to benefit from Economies of Scale - consequently this provides a major incentive to grow. The reason for Economies of Scale is the existence of Fixed Costs. As the level of output increases, the proportion of the Unit Cost accounted for by Fixed Costs steadily decreases, so the Unit Cost decreases too. This is why (for example) a printer may charge 10p a sheet for single photocopies, but only 5p a sheet for runs of 10,000 photocopies or more.

Economy Measures

When a business makes a determined effort to cut down its costs by changing working routines and practices. For example, energy efficient heating and lighting will cut energy costs, closer monitoring of phone use lowers phone bills, whilst greater efficiency and less wastage in production will cut production costs. Money saved from such measures can be used as a source of internal finance.

EFTPOS (Electronic Fund Transfer at Point of Sale)

Paying for items bought using a credit card reading till - this transfers the funds from the customer's account into the retailer's account whilst the customer is at the point of sale. A cheque transfers the funds a few days later, whereas EFTPOS is instant.

Electronic Communication

A massively expanding form of communication provided by the more common forms of information technology. Data is communicated in its most basic forms as sequences of Ones and Zeroes that computers can interpret and translate into text, sound, and pictures using appropriate software. Phone, cable and satellite lines convey the majority of electronic communication extremely rapidly and over long distances. However, the need for a regular power supply is essential to make this system work, and not all countries can ensure this.

Employer's Liability Insurance

If an employee suffers loss or injury in the workplace and the employer is found to be negligent, this insurance policy will pay the compensation. The policy is taken out by the employer and paid for by them.

Employment Legislation

Laws passed by government to outline the rights and responsibilities of employers and employees towards each other. Key elements of UK employment legislation include: The Health & Safety at Work Act, The Sex Discrimination Act, The Race Relations Act, The Equal Pay Act, and (in connection with personnel record keeping) The Data Protection Act.

Employment Protection Act

An act which provides protection for employees, including a minimum period of notice to quit a job, and measures to prevent or compensate for unfair dismissal.

Enterprise

Also called "entrepreneurship", it refers to the availability of people willing to take the risk of running a business and making business decisions. It is hard to measure exactly, as it depends on personal qualities and a certain attitude of mind.

Environmental Health Department

A local government body concerned with maintaining public health. They can take measures to prevent disease, the spread of vermin, pollution, unlicenced tipping, and other forms of environmental hazard caused by negligence.

EPOS (Electronic Point of Sale)

In simple terms an electronic till or method of recording and/or receiving payment. In larger companies, their EPOS network will be linked to a mainframe computer and could be tied into their stock control system.

Equal Pay Act

This law ensures men and women in similar jobs are given equal rates of pay. Prior to the act this wasn't always the case.

EU (European Union)

An alliance of countries centred around Europe, with the intention of developing closer economic, political, and military links, and preventing the sort of disputes that led to the two world wars. Within the EU, goods, services, money, and people can cross national boundaries with greater ease than elsewhere. The EU is currently working towards the introduction of a single currency (the Euro) for all member countries. Workers in the EU can freely seek work in other member states without the need for visas or work permits that other countries outside the EU might demand. Certain laws and restrictions are imposed on member countries by the EU, which often leads to clashes with individual governments who want to control their own legal systems.

European Investment Bank Loan Support Scheme

This makes low cost funds available for capital investment projects that will create new jobs. The European Investment Bank is a non-profit making institution whose shareholders are the member states of the European Union. Loans from £20,000 to £10 million are available over periods from four to 15 years, but must not exceed 50% of total project costs. The interest rate is negotiable. To qualify, the business should have net fixed assets of under £60 million, and less than 500 employees. Preference is given to businesses employing less than 250. The total project expenditure should not exceed £20 million.

Exchange Rate

The price you have to pay to buy a foreign currency. If you trade with other countries, the exchange rate will affect how much money you spend or receive.

For example, if the exchange rate is $2 to every £1, a British exporter to the USA charging $100 for an item will receive £50 from their American customer. If the exchange rate is $1.6 to every £1 then charging $100 will mean they receive £62.50 for the same item, without having to change its price in the USA.

However, the opposite is also true: if the same firm imports raw materials from France at 100 francs a unit, an exchange rate of 9 francs to every £1 will mean they pay £11.11 per unit. If the exchange rate changes to 7 francs to every £1, they will have to pay £14.28 per unit. This will make their product more expensive to produce.

When the pound is strong, importers save and exporters lose money - when the pound is weak importers pay more and exporters gain money.

Exporting

Distributing goods or services in a way that earns foreign currency. This usually involves sending the items abroad and selling them there. However, another form of export is Tourism, where foreign tourists pay foreign currency to visit this country. This is known as an "invisible export" because it earns foreign money without sending anything abroad.

Extension Strategies

Ways of keeping a product in its Maturity stage in the Product Life Cycle by keeping the customers interested in it or by creating new demand. Special offers, re-launches, joint promotions, or cashing in on nostalgia for the product are all examples. Sometimes a product's fortunes revive due to it featuring in a popular TV series or film, or by simply becoming trendy again.

External Constraints

Restrictions that originate outside a business. The business will have little or no direct control over them, and attempting to change them may take time. For example, a law is unlikely to be changed until a sufficient number of people protest against it or vote out the government that made it. When considering external constraints it is best to start with the weather and work downwards through factors like geography, international events, laws, government decisions and policies, economic trends, and the local business environment. Anything that restricts a business in the pursuit of profit can be seen as a constraint, but some rules must exist to prevent exploitation and dishonesty. External constraints include:

Central government:
Taxation, VAT, Customs duty
Consumer legislation
Employment legislation
Agencies (OFT, MMC)

Local Government
Planning regulations
Agencies (Environmental Health, Trading Standards)
Council tax

European Union (EU)

Finance
Interest rates & Exchange rates

Competition

Pressure groups

External Finance

Money obtained from a source outside the business. This will usually involve paying a fee or compound interest on the amount borrowed so it is a more costly way of obtaining money. It will also involve paperwork, and obtaining it may depend upon the business being in a healthy financial state.

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Factoring

A service offered by private companies and some banks. If you are short of cash because some customers haven't yet paid for goods/services received, a Factor will pay you most of the amount owed and pursue the debts themselves. For this service they keep a percentage of the money they recover. In effect you get around 90% of the money owed, but it is immediately available to you. Factoring is a useful way of avoiding cash flow problems that may cost you extra in bank charges.

Factors of Production

The limited resources that each society uses to produce goods/services to meet the needs and wants of its members. The four factors are Land, Labour, Capital, and Enterprise, and different societies possess them in different proportions. The fact that they are limited means that it is unlikely that everyone's needs will be immediately met. An economy is any system that attempts to use these resources.

Field Research

Collecting primary data for market research - gathering new information at first hand. Methods include questionnaires, interviews, and sampling.

FIFO (First In First Out)

A system of stock control that ensures that the oldest stock is used first. In the case of perishable goods this is essential to avoid deterioration of the stock. As the price of stock varies over time, the older stock will have been cheaper to buy too, so using it will lower the costs of production.

Final Account

At the end of a business's Trading Year it should prepare a Final Account, consisting of a Trading and Profit & Loss Account for the previous 12 months, and a Balance Sheet. Plc's have to make their Final Account public, while other businesses will get their accountants to prepare it. Their purpose is to assess the performance of the business, and various calculations (or ratios) can be employed to analyse this.

Finance House

An organisation that provides equipment to a business without them having to pay for it immediately. This can be done by Leasing the equipment (similar to renting it), or by offering a hire purchase arrangement. This means the business pays for the item in instalments (including interest) and owns it when all the instalments are paid. This is a form of External Finance.

Financial Control

Also known as Management Accounting, businesses seek to control their finances for a number of reasons. To make sure they have enough money for their needs. To analyse their costs and keep them as low as possible. To plan for the future by forecasting (using data from previous years). To analyse the business's financial position. To compare their performance with similar businesses, and to ensure they are working efficiently.

Finance Sources

Quite simply, places where a business can obtain money from. Finance may be obtained from within the company itself (internal source) which usually involves little or no cost, or from outside the company (external source), which will probably involve fees and/or interest charges. Finance sources include:

Internal:
Owners' Capital, Retained Profits, Selling Assets, Selling Investments, Reducing Stock, and Economy Measures within the business.

External (Short Term):
Overdraft, Loan, Hire Purchase, Trade Credit from suppliers, Debt Factoring, and Debt Collectors.

External (Medium Term):
Term Loan, Syndicated Loan, and Leasing.

External (Long Term):
Term Loan, Mortgage, and Debentures

Government Sources:
Small Firms Loan Guarantee Scheme
Small Firms Training Loan Scheme
European Investment Bank Loan Support Scheme

Fixed Costs/Overheads

Costs that must be paid whether or not the business produces any goods or services, and which do not change with the level of production. For the sake of Break Even calculations, Fixed Costs are assumed to be constant at all levels of production, so the Fixed Cost line is the only horizontal line on the Break Even chart. Examples of Fixed Costs include rent on property/equipment, standing charges for services, fixed interest loan repayments, and Council Tax (based on value of property and services provided). The greater a business's Fixed Costs, the higher its start-up costs will be, and the longer it may take to Break Even.

Flat Rate

Payment at a fixed rate per week or month - this makes a business's wage bill more predictable but does not reward Employees for extra work, so output is usually not maximised.

Flotation

The first offer of a company's shares to the public when that company becomes a plc. A lot of time, effort, money, and presentation will need to go into such an important event. Attracting the right attention is vital, otherwise there may not be enough investors to raise the amount of share capital hoped for. A business whose future plans depend on successful Flotation will go through a very tense time as they "float" their shares on the Stock Exchange.

Flow/Mass Production

Where products are passed along a production line for individual tasks to be completed by different workers. This results in large numbers of identical products being made in order to meet the needs of a mass market. Unskilled or semi-skilled workers, who are paid less than skilled workers, can complete the simpler tasks. As each worker only needs the tools for their own job, the tooling costs per person are low compared to Job Production, and these tools are in constant use. Economies of Scale and low Unit Costs ensure low prices for mass produced goods. Increasingly, manufacturers are setting up in third world countries to take advantage of cheap labour costs.

Forecast

In the same way that a weather forecast attempts to predict the weather by looking at past data, a financial forecast attempts to predict a business's financial position in the future by looking at past data. Forecasting helps businesses plan ahead, and is useful in predicting cash flow problems and the possible need for an overdraft or loan.

Franchise

A large company with a popular product, service, or brand name (franchiser) allows a sole trader to act as their agent (franchisee) in return for a share of the profits produced (royalty). A surprising number of well-known businesses are franchises, including specialist shops and fast food restaurants. The main attraction of a franchise is that it offers a tried and tested product to the customers, and the franchiser may also offer help with training, premises, publicity etc. However, the franchisee will have to pay Royalties from their profits, and may have to rely on the franchiser for stock and other essentials. It is a less independent form of ownership, and the franchiser will not automatically renew the franchise if the business is not profitable. Some start up capital is required from the franchisee, so a certain amount of financial risk is involved

Fringe Benefits/Perks

Extra incentives for employees (not always in the form of money), which sometimes avoid tax and other restrictions on pay. Examples include: low cost meals, sporting/social facilities, company car, subsidised travel, discounts on company goods, financial services, pension schemes, private health schemes, removal costs, profit sharing, performance related pay, etc.

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Goods

Physical objects that have to be produced in order for consumers to purchase them and use them - items you can see. In international trade, goods are called "visibles".

Grant

Money for a specific purpose, offered by a particular organisation. It may not have to be paid back but it will usually have conditions attached to its use, and there may be competition for it. Lottery Fund grants are an example: not everyone who applies gets one, and they often have to provide an equal amount of money to finance their proposed project (known as "match funding").

Gross Pay

Your income before any items like tax, national insurance, and pension contributions are deducted from it. This is the figure quoted on job advertisements.

Gross Profit

Calculated on a Trading Account, this is the difference between Sales Revenue and the Cost of Sales (cost of making the items).

Gross Profit Margin (%)

Shows the percentage of turnover represented by Gross Profit (see trading account), or how many pence out of every £1 sales is Gross Profit. It is calculated by the formula:

(GROSS PROFIT / TURNOVER) x 100

If this percentage increases it is because sales have improved, or the Cost of Sales is decreasing.

Growth (1)

Next to profitability, this is probably the most common business aim. Only by growing can a business benefit from economies of scale, and the security and status that goes with being a larger company. Small companies can (and do) survive, but more often than not face stiff competition from bigger organisations offering cheaper products/services or more widespread coverage. Every business must attempt to grow to the point where its management feels secure despite competition from others.

Growth (2)

Stage 2 of the Product Life Cycle - the stage following introduction, where the rate of sales is steadily increasing until the regular rate of demand for the product is established. Growth will obviously be more dramatic for more popular products.

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Hands On Trial

Offering customers a free chance to try the product or service for themselves. In some ways this can be highly effective as people get first hand experience of the item on offer, and not just advertisers' images and slogans. However, the quality of the product or service must be sufficient to impress the user - any fault will be picked up very quickly indeed. Examples include test-driving cars, free samples of food or cosmetics in shops, mobile displays at shows and events, and sachets of products attached to magazines or posted through your letterbox.

Health & Safety at Work Act

By law, employers and employees have an obligation to create a safe working environment with the correct equipment, training, protection, processes, procedures, and practices. Employers must also take out Employer's Liability Insurance to protect their workforce from the consequences of negligence and/or injury.

Herzberg

US Psychologist who identified "hygiene factors" in work that meet basic needs, including acceptable working conditions for employees. Other motivating factors he identified include recognition, achievement, advancement, and responsibility. Employers need to offer these to their workers if they want to create a positive attitude to work.

Hierarchy

An organisation arranged in order of each member's rank or position. Most businesses have some form of hierarchy (even co-operatives, where more experienced members will tend to get more say and carry more influence), but how they use it varies. In the armed forces and uniformed occupations there are strict hierarchies with a well-defined chain of command that orders must pass through from top to bottom, and requests must pass from bottom to top. In other organisations, people may have better access to those higher up through the use of committees, informal meetings, and face to face communication. In urgent situations, a strict but clear hierarchy with efficient procedures can work well, but the main disadvantage is that people at different ends feel remote from each other, and information doesn't always flow freely from one level to the other.

Hire Purchase

An external finance source: a finance house buys the item(s) on behalf of the purchaser. The purchaser then repays the finance house in small regular instalments (plus interest) until the debt is repaid. The finance house is the legal owner of the item(s) until all the instalments have been paid, but the purchaser gets to use the item(s). If the instalments cannot be paid the item(s) may be reposessed by the finance house. This is a common method of buying large household goods "on credit". Sometimes interest free credit is available, allowing repayments to be spread without the extra cost of interest.

Horizontal Integration

A merger or Takeover involving two businesses in the same industry, and at the same stage of production. For example, the merging of two building societies, or two water companies.

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Income

Money coming in to a household or business. In the case of a household it might not be just earnings - interest/dividends from investments, social security payments, and other forms of income can be included. Similarly a business's income may not be limited to sales revenue - it may also invest in other businesses, sell assets, or receive grants/loans from external sources.

Industrial Action

When negotiations between employees and employers break down, employees may resort to Industrial Action to make their protest more costly to their employer. Types of action include: non co-operation with a working routine or a person, working to rule (where every last little rule is observed meticulously to slow work rates down), overtime bans, and (as a last resort) strikes.

Industrial Dispute

A dispute exists where employers and employees disagree over an issue and refuse to compromise with each other. Unions and employers' organisations may become involved or it may be referred to ACAS. Industrial action may occur during an Industrial Dispute.

Industrial Relations

Relations between employers and employees, usually in connection with working conditions, pay, and job prospects. In larger businesses, employers negotiate with representatives of trade unions through the personnel department.

Inflation

The rate by which prices rise, usually over a year. It can also be seen as the rate by which money loses value. For example, if the annual inflation rate is 3%, it means that £100 cash on January 1st would only be worth £97 on December 31st. To prevent inflation, the Bank of England raises the base rate of interest to make loans more expensive (ie mortgages) and make investment more attractive. This reduces the amount of spare cash people have to spend. To counter the effects of inflation, individuals and businesses should invest their spare cash otherwise it loses value. A company's workforce will also expect annual pay rises to be at least equal to the rate of inflation; otherwise their spending power will decrease.

Insurance

A way of guaranteeing your security for the future. Usually it involves insuring a place, object, or person against a possible future event (usually loss or accident). If the event occurs, the policyholder receives a payment to help make up for the loss. The policy costs money (a premium) which increases with the value of the item insured and the amount of risk involved. By law, some things must be insured (ie cars, mortgaged property).

Interest

The amount charged for borrowing money, or the amount paid out for investing money. The % rate of interest quoted by a bank or building society is based upon the "base rate" quoted by the Bank of England. This rate is reviewed every month and will change in response to various economic pressures, especially inflation. Businesses that borrow money to survive will pay close attention to interest rate changes, as it will affect their costs, and ultimately their prices.

Interest Rate

The percentage rate of interest charged for a loan or paid out for an investment. Banks and Building Societies set their interest rates according to the Base Rate decided each month by the Bank of England. If inflation appears to be increasing then the Base Rate will be increased to encourage investment, raise the price of borrowing, and take spare money out of the economic system. Actual interest rates are always slightly higher than the current Base Rate.

Internal Constraints

Restrictions inside the business, which the business may or may not be able to directly change. A good starting point for listing internal constraints is the four factors of production (land, labour, capital, & enterprise). Is the business in the right place? Does it have sufficient space? Are the workforce properly paid, trained, and motivated? Are they working inefficiently? Does the business have enough finance and equipment or proper premises? Are the owners willing to take risks? Is their style of management effective? All these (and others) will affect the success of the business, and management can change many if required.

Internal Expansion

The most common form of growth in business, this can occur through producing and selling more of its current products, selling the products in a new market, or by diversifying into other products. Growth requires finance of some sort, in order to pay for the necessary changes in the way the business operates.

Internal Finance

Money that is available from within the business, and doesn't involve going to external sources. It is cheaper and easier to use this source of money but it may mean you have to reduce your cash reserves. Examples include the use of retained profits, the sale of assets and/or investments, and capital provided by the company's owners.

International Trade

Countries trade goods/services with other countries for a number of reasons: To obtain items they cannot produce themselves (ie Middle Eastern Oil). To earn foreign currency by selling exports to other countries (ie selling uniquely British items abroad like Cheddar cheese, scotch whisky, cricket equipment etc). To sell to wider markets and benefit from higher profits and business growth (ie Harry Ramsden's fish & chips outlets abroad). To offer their domestic population a wider choice of goods and services (ie importing bananas, Japanese electronic goods, and foreign wines).

Introduction

Stage 1 of the Product Life Cycle, when the product first appears on the market. This normally involves a low initial rate of sales, which steadily increases if the product becomes more popular. Aggressive marketing or an unforeseen level of demand might increase the rate of sales here.

Investment

Using money to earn more money, rather than simply keeping it stored away. Spare money that is not invested will lose value due to inflation. Safe investments (ie building society accounts) usually carry a lower rate of return than riskier ones (ie shares).

Invisibles

Services that are exported to other countries, for example tourism, consultancies, and transport.

Invoice

Details of the goods supplied, including date, quantity, price per item, and how the total cost is calculated. Sellers issue invoices with goods supplied to buyers - they are NOT receipts, because payment for the goods may not have been made yet.

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JIT (Just In Time)

A stock control system aimed at reducing storage costs and minimising the amount of money tied up in unused stock. It requires short lead times (the interval between ordering stock and its delivery) and a very low level of safety stock. It is a risky approach - an unforeseen delivery delay or a sudden surge in demand could halt the production line due to stock shortages.

Job Production

Where a single product is made from start to finish by a single person or small production unit. Skilled labour is required to cope with all the different tasks, so workers will need to be paid more. Also, the cost per worker of providing all the necessary tools is quite high, and some tools will remain unused as each step of production proceeds. This method is often used to produce items to individual specifications, for example made-to-measure clothing, hand-made gifts, works of art, custom built sporting equipment, and other "one-off" tasks. Due to high unit costs this is the most expensive method of production, hence the higher prices usually charged for unique items.

Job Satisfaction

A variety of factors make work satisfying - these include: pay level, fringe benefits (perks), working hours, working environment, job security, team spirit, and a feeling that your efforts have been worthwhile.

Job Security

The feeling that one's job will be secure for the future. Employees who feel secure in their work will be more content than those living under the shadow of possible redundancy. In times of recession genuine Job Security is rare, as Employers struggle to generate profits in the face of declining sales. Employees who feel insecure about their jobs tend to save money rather than spend it, which in turn deprives other businesses of money and keeps the recession going.

Joint Promotions

Linking up with products and outlets that have a similar target market to your own. For example, a game console manufacturer running a competition on a popular soft drink's packaging, or a toy offer on the back of a popular children's' breakfast cereal. This is also known as third party promotion. Launching an offer on a related or complimentary product can also be useful, for example a petrol station chain running an offer on car accessories.

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Labour

Human labour: people capable of any form of work. It is assumed that they must be paid for their work. Labour is often the most costly factor of production in modern societies, but may be cheaper overseas.

Labour Mobility

The ability (or willingness) of workers to move to where jobs are available. Many people are reluctant to uproot from their home community, whilst some may simply lack the skills or training required by jobs outside their local area. Similarly, not everyone can afford to relocate, and some may simply be unaware of opportunities elsewhere.

Land

The area of land where economic activity takes place, including housing, building, transport, agriculture, leisure, and extractive industry. It is assumed that all such land a) costs money and b) is owned by somebody.

Lateral/Conglomerate Integration

When a business diversifies by merging with/taking over a business in a different industry. This reduces risk and opens up new markets - Tobacco companies have recently followed this route in the face of changing demand in industrialised countries for tobacco products. As their core business declines, they move into other areas that are expanding.

Leasing

Under a leasing agreement, a finance company purchases a piece of equipment for a business to use, which the business pays them an agreed sum for. The leasing company owns the item, but the business uses it. The leasing company may also be responsible for maintaining the equipment, or in the case of computers, upgrading it. This will make the business's Fixed Costs more expensive, but reduces the need for spending on large capital items, so leaves more money available in the short term. For example, a company needing a large fleet of cars for its sales staff may choose to lease them rather than buy them. Leasing is a form of external finance.

Liability

A liability is something you owe which has a money value. They are recorded on a balance sheet and divided into two types. Long term liabilities are debts you are unlikely to pay off during the next 12 months (eg mortgage, long term loan). Current liabilities are debts you will pay off during the next 12 months (eg cost of raw materials, electricity bills).

LIFO (Last In First Out)

A stock control system that uses the most recently purchased goods first - this will ensure that up to date components are being used but could raise production costs. This is because recently purchased items may have cost more to buy than items bought some time ago.

Line Function

Line managers control the staff within their department only - they do not normally have responsibilities outside their immediate area or specialism.

Liquidity

A measure of a business's ability to pay its debts - "liquid assets" include cash or items that can be changed into cash rapidly.

Local Newspaper Advertising

Most towns have a locally based newspaper that may be part of a larger publishing group that serves a particular region. As with national papers, adverts can be across whole pages or parts of pages or can appear in the classified section. Loose inserts can also be placed in local papers and targeted at particular areas for delivery. News coverage or features highlighting particular businesses or shopping areas can also help draw attention to your business. The disadvantages are much the same as for national papers, although a weekly local paper might stay in a household longer than a daily national paper. A further disadvantage is that people can use a local directory to find the local services they may need - they don't have to look for newspaper ads to see what's available.

Location

For businesses that need direct access to their customers, the right choice of location is vital. When locating the site for a business a number of factors need to be considered: Are competitors nearby? Can you obtain raw materials and/or stock easily? Where is your market? Are transport links adequate? Can you communicate with customers and suppliers? Is a suitably skilled labour force available locally? Do certain national or local government policies affect the area? In some cases the climate or geology may be important for growing a particular type of plant. With the growth of e-commerce, location has become less important for some companies. To sell on the internet you simply need a good source of supply and a reliable system of despatching your goods: your customers might be anywhere in the world.

Long Term Liabilities

Featuring on a balance sheet, these are debts that would not normally be paid off within the next 12 months, for example a mortgage or a long term loan.

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Magazine Advertising

The readership of national magazines may vary from a few thousand to over a million. Developments in I.T. have meant that quality low circulation magazines can be produced in increasing quantities. The magazine market is highly fragmented, and hundreds of specialist titles exist, meaning that highly focused advertising is possible. The main advantage of a magazine over a newspaper is that a magazine is usually used more than once - people rarely read an entire magazine in one sitting, and tend to return to it over a period of time - they are often kept too. Most magazines carry colour adverts, which have more visual impact. Disadvantages include the need for advance planning - editors may need ads up to 3 months in advance for monthly titles. The specialised nature of the readership also means broad campaigns (ie breakfast cereal) are hard to manage, and magazine ads tend to reach more women than men.

Manager

A manager is usually somebody who controls a department within an organisation (eg personnel manager). They may have supervisors working for them as well as the department's workforce. The number of people a manager controls is known as their "span of control" and depends upon the whole department's effectiveness, the complexity of their work, ease of communication, the type of decisions they make, and the resources available to them.

Mark Up

What a seller adds to the cost of something before selling it on to the customer. Their mark up decides how much profit they make. The more hands the item passes through, the higher the price, as each seller adds their mark up. This is why some people prefer to buy a second hand car privately rather than through a dealer who will want to add a mark up to the car's price.

Market Research

Finding out information about the people to whom you intend to sell your product/service. This may take the form of primary data or secondary data. If you are intending to sell to an untried market, this type of research is essential to see if you have a chance of success.

Market Segment

An identifiable group of consumers with similar wants or needs related to your product or service. There are many ways in which a population can be categorised: age, sex, occupation, income, location, education, and so on. Each group has wants/needs that businesses seek to fulfil by selling goods and/or services. Each business will try to serve its entire market segment, but few will succeed. A business that sells to more than 30% of its market segment is generally thought to be a monopoly. An extreme example is the computer software manufacturer Microsoft, who are thought to control around 80% of their market segment.

Market Share

The proportion of your potential market that you are actually serving. A 30% market share is usually considered to be a monopoly, and few businesses ever achieve or exceed this. Examples of those who have include the Internet company Freeserve, and Microsoft, the software corporation. Businesses will constantly strive to increase their market share, as the market for some products can be measured in £ billions.

Market Size

The size of a market can be measured in many ways - households, people, number of sales, value of sales, geographical area, and so on. It is simply a way of measuring the size of the goal you are aiming for.

Marketing Mix

A combination of factors that businesses use to persuade potential customers to buy their product or service. These include the so-called "four p's" - product, price, packaging, and promotion. Various marketing tools are also used to attract attention. Different products require a different marketing mix - for example, a range of colours and endorsement by a celebrity might sell fashion clothing but would probably not sell flower pots - each product has its own marketing needs.

Marketing Plan/Campaign

Like a military campaign, a marketing campaign is a long-term plan with specific goals to be achieved by its end. Different marketing tools will be applied at different stages of the product's Life Cycle for different purposes - there will need to be a suitable build up, a high profile launch, then regular repeats of the basic message until it appears that the market has been saturated. Even then, clever re-marketing can stave off the final decline. Even "classic" products sometimes need their image restating: Levi 501 jeans and Corn Flakes have both launched campaigns based on nostalgia for how good the product used to be. Long established companies can often play on their early roots by claiming to have been there first: notice how many Jeans companies use Wild West images to imitate the Levi Strauss Company's 19th Century origins.

Maslow

US Psychologist who identified 5 groups of human needs that people try to satisfy one by one by seeking paid work. Firstly, Basic needs are those connected with survival (ie food, shelter), Safety needs include security from harm. Next, Social needs include companionship and identification with a group. Ego needs include self-esteem and status, and (finally) Self-Fulfilment needs include job satisfaction and achieving ambitions.

Maturity

Stage 3 of the Product Life Cycle - By this stage, after initial growth, the rate of sales (ie per month or year) becomes more or less fixed, and the business seeks to meet a steady demand for the product. If this stage occurs too early, re-marketing the product may help to boost the rate of sales.

Maximum Level

The maximum amount of a particular stock item that a business can afford to keep at any one time.

Media Coverage

Unlike advertising (which costs money), Media Coverage can also be achieved through Public Relations (PR) work, whereby journalists, editors, DJ's and Presenters are encouraged to write or talk about the product or service on offer. Usually this involves Press Releases issued by a company's Marketing Department or by an Advertising Agency they have hired. Press Releases include facts, figures, opinions, and pictures for inclusion in the Media. Media Competitions are also useful - your product is promoted by offering it as a prize in a well-publicised competition. Charity events also attract donations from companies anxious to appear on prime time TV in a favourable light. Clearly, this system is open to abuse, and occasionally businesses revert to various forms of bribery to get their product/service mentioned by high profile personalities. Similarly, PR can involve the deliberate placement of products where they will be seen by many people - offering a thirsty celebrity a drink in a cup with a prominent logo can provide an ideal photo opportunity!

Merger

Where two businesses join together by agreement, rather than by one gaining control of the other. In the case of Horizontal Integration (and sometimes Vertical and Lateral Integration) some reorganisation of the business may follow, and people may be transferred to different parts of the business, or made redundant to avoid duplication of work. New jobs may also be created, and (where possible) existing staff retrained.

Minimum Level

The point at which a stock item will need reordering to avoid shortages on the production line.

Mixed Economy

Where the economy consists of a mixture of privately owned businesses and public sector services. Government is responsible for essential services such as health, education, the armed forces, policing, and the transport network. Privately owned businesses dominate employment and the economy but operate within laws and restrictions set down by government.

Mobility of Labour

Money Transfer

A key service offered by banks to account holders. Money is transferred to and from the account in a number of ways. Credit transfer is the most common method whereby payments are sent from and received into a customer's account. Direct Debits are used for paying regular bills where the amount paid varies (ie phone bill), and Standing Orders are used to pay fixed amounts of money at regular intervals. Banks will also handle credit card transactions with other countries, foreign currency exchange, and cashpoint withdrawals.

Monopolies & Mergers Commission (MMC)

A government body that checks to see if proposed mergers between large companies will harm the interests of consumers. If the enlarged company holds too much of a market share it may stifle consumer choice and keep prices higher than they should be under free competition. The MMC can also investigate existing monopolies - it has no power to act on its findings but reports to The Secretary of State for Trade & Industry who can order any monopoly to be broken up.

Mortgage

One of the most common forms of external finance used by homeowners to purchase a house. It is a loan whose repayments are usually spread over 25 years. Various means of repayment exist and the amounts involved change as Interest Rates change. As the amount involved is usually tens of thousands of pounds a small % change in these rates can have quite an impact on a household's monthly income. Businesses also use mortgages for buying large items such as property and equipment. If you fail to make repayments the mortgage lender can repossess the property and sell it to recover your debt.

Motivation

In simple terms, why we do something - motivation theorists such as Maslow and Herzberg studied why people work, and their thinking has influenced the way many businesses treat their workforces.

Multinational

A large business with production and marketing operations in more than one country, for example McDonalds, Microsoft, and ICI. Early multinationals' different branches used to operate like independent companies in each country, but with improved transport and communications it is now easier to co-ordinate operations around the world.