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132 Cards in this Set
- Front
- Back
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Functional Objectives & Strategies
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Aims / goals
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General statements of what a business intends to achieve. Precise details of those intentions are set out in objectives
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Business unit strategy
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How a business attempts to compete successfully in a particular market
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Corporate objectives
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Objectives that relate to the business as a whole. Usually set by top management.
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Corporate strategy
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Concerned with the overall purpose and scope of the business activities
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Cost leadership
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A business strategy concerned with aiming to be the lowest-cost producer in an industry. Usually requires exploitation of economies of scale
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Functional objectives
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Set for each major business function – designed to ensure that the corporate objectives are met
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Mission statement
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A statement of the overall purpose of the business
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Shareholder value
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Where shareholders earn a return from their investment which is greater than their required rate of return
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SMART objectives
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Objectives that are more likely to be achieved because they are Specific, Measurable, Achievable, Realistic and Timed
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Social responsibility
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The way in which a business meets its responsibilities to society as a key external stakeholder
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SWOT analysis
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Assessment of the internal strengths and weaknesses of a business and the external opportunities and threats that the business needs to consider
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Targets
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Similar to objectives. Targets are often set at an individual or team level
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Financial Strategies and Accounts
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Acid-test ratio
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A liquidity ratio that looks at whether a business can pay for current liabilities out of cash and near-cash assets (it ignores the value of stocks)
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Asset turnover
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A ratio that calculates the relationship between revenues and the total assets employed in a business
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Assets
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Amounts owned by, or owed to a business
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Average rate of return
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A measure of the total accounting return from an investment project
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Balance sheet
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The financial statement that provides a snapshot of the assets and liabilities of a business at a particular date
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Capital expenditure
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Expenditure on assets which are intended to be kept in the business (e.g. IT systems, machinery) rather than sold or turned into products
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Cash flow targets
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Specific objectives set by a business for cash-flow generated by a business
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Corporation tax
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The tax levied on the profits of companies. The percentage varies depending on the size of the profits earned; typically 20-30%
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Cost minimisation
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A strategy of achieving the most cost-effective way of delivering goods and services to the required level of quality
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Creditor days
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A ratio that estimates the average period (in days) taken to settle amounts owed by a business to suppliers
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Current ratio
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A simple and popular measure of liquidity that assess the ability of current assets (e.g. cash, stocks) to finance current liabilities (e.g. trade creditors)
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Debentures
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A long-term source of finance – a debenture is a form of bond or long-term loan issued by a company
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Debtor days
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A ratio that focuses on the average time it takes for trade debtors to settle their accounts. Usually measured in days
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Depreciation
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An accounting estimate of the fall in value of a fixed asset over time
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Discount factor
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The multiplication factor that converts a projected cost or benefit in a future year into its present value
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Dividend
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Amounts paid to shareholders out of the profits earned by a company.
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Dividend yield
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A measure of shareholder return – calculated by comparing the dividend per share by the share price
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Fixed assets
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Assets such as property, equipment and vehicles that are intended to be retained and used in a business for more than one year
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Gearing
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A ratio that focuses on the long-term financial stability and capital structure of a business. The gearing ratio measures the proportion of assets in a business that are financed by borrowing
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Going concern
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A business that is viable and able to continue in business for the foreseeable future
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Goodwill
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An intangible asset that can be included in a balance sheet = the difference between the net assets of a business acquired and the price paid for the business
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Income statement
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A financial statement that summarises the trading results of a business over a specific period – usually one year
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Investment appraisal
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Analytical techniques to help management evaluate the returns from potential investments, and to help choose between competing investments
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Liabilities
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Amounts owed by a business to others
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Liquidity
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The ability of a business to finance required payments to creditors
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Net present value
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The present value of a series of future net cash flows that will result from an investment, minus the amount of the original investment
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Operating profit
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The profit earned by a business from its entire trading operations – stated before financing (e.g. interest) and tax
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Overtrading
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Where a business suffers financial difficulties from expanding too quickly – usually suffering set-up losses and increased working capital
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Payback period
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The time it takes for a project to repay its initial investment
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Profit centres
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A separately-identifiable part of a business for which it is possible to identify revenues and costs and calculate a relevant profit
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Profit quality
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The sustainability of profit from one period to the next. Higher quality profit is profit that is likely to be repeated rather than affected by one-off items
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Profitability
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The amount of profit earned in a period (absolutely measure) or rate of profit earned compared with revenue (relatively measure)
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Provisions
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Amounts set aside to cover future costs or liabilities (e.g. redundancies, business closures, legal disputes)
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Ratio analysis
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Interpretation of financial performance by calculating and interpreting ratios
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Retained earnings
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Profits earned by a business that are kept in the business rather than distributed as dividends
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Revenue expenditure
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Spending on day-to-day operation of the business – e.g. paying for materials, staff costs, management salaries, advertising
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Rights issue
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The issue of new shares to existing shareholders in order to raise new finance. The new shares are usually offered at a significant discount to the existing share price to encourage take-up
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ROCE
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A measure of the percentage return that a business earns from the capital employed in the business. Often referred to as the “primary ratio”
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Share capital
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The amount invested into a company by shareholders
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Shareholder returns
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The rewards earned by shareholders = dividends paid to them + any increase in the value of their shares
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Stock turnover
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A liquidity ratio that looks at how often a business rotates its stock during a year
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Trade creditors
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Amounts that a business owes to its suppliers
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Trade debtors
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Amounts that are owed to a business from its customers
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Working capital
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The net amount invested by a business to finance day-to-day trading: usually calculated as current assets less current liabilities
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Marketing Strategies
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Ansoff’s Matrix
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A strategic model for helping a business analyse the relationship between general strategic direction and suitable marketing strategies
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Average
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A term for various measures of central tendency, including the mean, mode and median
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Competitive advantage
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Skills, competences, resources and other advantages that enable a business to out-perform its competition
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Correlation
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A measure of how close the relationship it (positive or negative) between an independent variable and a dependent variable
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Customer relationship management (CRM)
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The process of building a long-term, profitable relationship between a business and its customers
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Diversification
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The relatively risky strategy of trying to enter new markets with new products (from Ansoff matrix)
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Extrapolation
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The use of trends established by historical data to make predictions about future values
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Growth rate
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The percentage growth over a particular period. Market growth rates are typically quoted in terms of percentage growth per year
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Market analysis
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The process of analysing the size, structure and growth of a market in order to support marketing decisions
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Market development
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A growth strategy where the business seeks to sell its existing products into new markets - e.g. exporting (from Ansoff matrix)
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Market penetration
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A relatively low-risk growth strategy where a business focuses on selling existing products into existing markets (from Ansoff matrix)
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Market share
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The proportion of a market revenue or sales volume that is captured by a business or brand
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Marketing budget
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Specific amounts that are allocated to activities in the marketing plan
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Marketing plan
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The actions that management intend to take via the marketing mix in order to achieve marketing objectives
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Moving average
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A calculation that takes a data series and “smoothes” the fluctuations in data to show a trend average
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Product development
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A growth strategy where a business aims to introduce new products into existing markets (from Ansoff matrix)
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Product positioning
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The way in which the marketing function tries to create an image or identity in the minds of the target market
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Repositioning
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Changing the marketing mix for a product to appeal to a different market segment
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Sales forecasting
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Techniques for estimating the likely demand (revenue and volume) for a product in future periods
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Target market
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The market segment or segments which a business is attempting to enter with the chosen marketing mix
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Test marketing
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Launching a new product or service in a limited part of the target market in order to gauge the viability of the product and assess the most appropriate marketing mix
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Trend
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A general direction in which something tends to move
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Operational Strategies
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Capital intensity
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The extent to which production or operations depend on investment in and use of capital – i.e. machinery, IT systems, buildings etc
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Critical path analysis
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Project management tool that uses network analysis to help manage complex and time-sensitive operations
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Diseconomies of scale
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Factors which result in higher unit costs as production output reaches too high a level
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Economies of scale
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Cost advantages that a business can exploit as a result of expanding its scale of production. Economies of scale reduce the average (unit) cost of production
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Efficiency
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A measure of the ability of a business to achieve the required level of production whilst minimising the use of resources
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Industrial inertia
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Where a business decides to stay in its existing location despite potentially better locations being available to it
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Innovation
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Putting an new idea or approach into action – the commercial exploitation of ideas
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Just-in-time
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Method of lean production where production resources arrive at the moment they are required rather than being held in stock
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Kaizen
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A cultural approach to lean production and quality assurance. Involves encouraging employees to constantly seek and implement small incremental changes to production in order to improve quality and efficiency
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Labour intensity
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The extent to which production or operations depend on investment in and use of labour – i.e. people, training
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Labour productivity
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The level of output per unit of labour
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Lead-time
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The period of time between an order being placed and being received
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Lean production
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An approach to management that focuses on cutting out waste whilst still ensuring quality.
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Marketing economies
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Where marketing costs per unit sold can be lowered by spreading marketing costs over larger output
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Minimum efficient scale
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The minimum output a business needs to achieve in order for its to be able to minimise unit costs
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Multinational
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A business which owns operations in more than one country
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Network analysis
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Breaking a project down into separate activities and their requirements
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Offshoring
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Where a business has work done for it overseas
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Outsourcing
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Where a business has work done for it by someone else
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Productivity
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Measures of how effective a business is in turning resources (e.g. labour hours) into output
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Purchasing economies
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Cost savings that arise from buying in bulk or from a more powerful relationship with a supplier due to increased output
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Quota
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A restriction on the volume or quantity of a good that can enter or be sold in a market (form of trade barrier)
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Scale
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The size or output of a business, best measured relative to that of direct competitors
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Subcontracting
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Part of outsourcing – where another business is used to provide part of the production process
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Tariff
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A tax levied on imports to increase their price compared with domestic goods (form of trade barrier)
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Technical economies
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Reductions in unit costs arising from the effective use of technology
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Unit costs
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The key measure of productive efficiency – calculated as total costs divided by total output (over a specific period)
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Human Resource Strategies
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Arbitration
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An alternative to a court of law in determining legal and employment disputes. Involves a specialist outsider being asked to make a decision on a dispute
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Centralisation
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An organisational structure where authority rests with senior management at the centre of the business
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Communication
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The process by which a message or information is exchanged from a sender to a receiver
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Conciliation
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A way of mediating industrial disputes to gain agreement without going to arbitration
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Core workers
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Employees who are part of the core workforce of a business – central to the business activities
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Decentralisation
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An organisational structure where authority is delegated further down the hierarchy, away from the centre
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Delayering
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The process of removing one or more layers from the organisational structure
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Downsizing
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The reduction in the scale and resources of a business, usually involving job losses and/or the sale or closure of business units
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Flexible working
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The range of employment options designed to help employees balance work and home life (e.g. part-time, job-sharing, Homeworking, annualised hours contracts)
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Gap analysis
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Analysis of the difference between the workforce needs or a business and its current capabilities
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Hard HRM
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An approach to HRM based on treating employees as resources in the same way as any other business resource
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Human resource management (HRM)
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Strategies for managing people in order to achieve business objectives
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Labour shortage
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Where a business finds it does not have sufficient employees in number, or with the right skills and experience, for its needs
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Peripheral workers
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Employees who are on the fringe of the core workforce. They are not essential (core) workers, and their activities can often be outsourced or provided using flexible contracting
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Soft HRM
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An approach to HRM based on treating employees as the most important resource in a business
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Staff turnover
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The proportion of staff that leave their employment with a business over a period – usually measured over a year
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Teamworking
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Individuals work in groups rather than focusing on their own specialised jobs
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Trade union
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Organisations of employees who seek to negotiate their employment terms through collective bargaining
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Workforce planning
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How a business determines how many and what kind of employees are required
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Works council
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A formal meeting of employer and employees to consider issues affecting the business and workplace – mandatory for larger businesses in the EU
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