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Level 6

The business organisation


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Market Share
The proportion of total market sales sold by one business.
Economies of scale
The reasons why average costs of each item fall as a firm expands.
Organic growth
Expansion from within the business (e.g. by opening more shop branches).
Inorganic growth
Expansion by merging with or taking over another business.
Internet selling
Marketing products through the business's website.
Franchisee
The firm that buys the franchise rights from the existing business.
Franchisor
The existing firm that sells the franchise rights to another business.
Merger
An agreement between business owners to combine two businesses and operate as a larger one.
Takeover
Purchasing another business from its owners.
Horizontal integration
Joining two businesses in the same industry and stage of production (e.g. two hairdressing businesses).
Vertical backward integration
Joining two businesses in the same industry but a different stage of production, towards the supplier (e.g. a computer manufacturer's takeover of a 'chip' maker).
Vertical forward integration
Joining two businesses in the same industry but a different stage of production, towards the customer (e.g. a farmer's takeover of a butcher's shop).
Diversification
Joining two businesses in different industries (e.g. an insurance company merges with a publishing business).
Monopoly
Any business with more than a 25 per cent market share.
Limited company
A business recognised as a legal unit that offers investors (shareholders) limited liability.
Private limited company (LTD)
A company that cannot sell shares to the general public. It is not listed on the Stock Exchange.
Public limited company (PLC)
A company able to sell shares to the general public by being listed on the Stock Exchange.
Limited liability
Investors (shareholders) in a limited company can only loose their investment in the business if it fails; they cannot be forced to sell assets to pay off the firm's debts.
Shareholders
Part owners of a limited company - they own shares in it.
Dividend
Payment made to shareholders from company profits - usually made annually,
Divorce between ownership and control
When directors control a limited company and thousands of shareholders own it, but the two groups may have different objectives.
Ethical objective
A business aim to 'do the right thing' according to the values and beliefs of mangers, even if this is not the most profitable way (e.g. pay workers in low-wage countries above average rates).
Environmental objective
A business aim to protect the environment during its operations (e.g. to recycle waste water). This will reduce social costs.
Social costs
The costs of the business activity, including both financial costs paid by the firm and the costs on society (e.g. factory pollution).
Social benefits
The benefits of a business activity, not just to the firm but to society (e.g. new jobs created by business expansion).
Globalisation
Increasing trend for goods to be traded internationally and for companies to locate abroad.
Off-shoring
Making products or parts of products in other countries. Services can be off-shored too, as with telephone call centres moving to India.
Multinational
A business with operations in more than one country.