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EDEXCEL A LEVEL BUSINESS PAPER 3 ADVANCED
INFORMATION STUDY GUIDE
price elasticity of demand a measure of the sensitivity of demand to changes in price Competitive Pricing When the product is priced in line with or just below competitors' prices to try to capture more of the market. Cost Plus Pricing adding a percentage (the mark-up) to the costs of producing a product to get the price. Mark-Up The percentage added to unit cost that makes a profit for a business when setting the price Penetration Pricing setting a low initial price on a new product to appeal immediately to the mass market and get established in the market. Prices might be raised once established.
Predatory Pricing selling a product below cost to drive competitors out of the market Pricing Strategy The pricing policies or methods used by a business when deciding what to charge for its products Product Life Cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity, and decline and the sales that can be expected at each stage. pyschological pricing pricing goods and services at price points that make the product appear less expensive than it is e.g. £9. Price Skimming Charging the highest possible price that buyers who most desire the product will pay before lowering the price at a later date. Unit Costs The same as average cost (total cost divided by output) Competitive Market
Differentiation The extent to which consumers view your product or service as being different from those of competitors within the market e.g. branding Price Leadership one firm sets its price first, and other firms then follow Dynamic Pricing the practice of changing prices for products and services in real time in response to supply and demand conditions. It is often used by the likes of hotels and airlines to reflect demand. Auction Sites Web-based businesses offering participants the ability to list products for consumer bidding for a fee. curriculum vitae (CV) A document that sets out information about person, including qualifications, employment history and interests.
External Recruitment the process of seeking new employees from outside the firm Internal Recruitment the process of seeking employees who are currently within the firm to fill open positions Induction training Training given to new employees when they first start a job job description a written description of the basic tasks, duties, and responsibilities required of an employee holding a particular job Off-the-job training Training that takes place away from the work area. on-the-job training
shortlisted candidate Amongst the final group of candidates for a job selected from a larger initial group. Employment Agency a business that helps people to find work and employers to find workers Jobcentre a government office where people can get advice in finding work and where jobs are advertised Headhunting persuading somebody to leave their present job to work for another company often with the promise of more money or better working conditions.
Apprenticeship a combination of classroom instruction and on-the-job training as a novice learns a trade or skills from other skilled workers. Job rotation a job enrichment strategy that involves moving employees from one job to another, proving them with new skills and experiences and therefore improving motivation. Mentoring The process by which a junior-level employee develops a deep and long-lasting relationship with a more senior-level employee within the organization Capacity the maximum amount that a business is capable of producing with existing resources. Capacity utilisation The proportion of maximum output capacity currently being achieved.
Base rate the rate of interest established by the Bank of England around which commercial banks e.g. Natwest, HSBC structure their own interest rates. Boom A time of fast economic growth where GDP is growing at its fastest. Consumer Price Index (CPI) A common measure of price changes used in the EU. It is the main method used for the calculation of inflation within the UK. Deflation A situation in which prices are declining Depreciation (of a currency) a fall in the price of one currency relative to another
Downturn A period in the economic cycle where GDP grows, but more slowly Economic, trade or business cycle Regular fluctuations in the level of output in the economy Exchange Rate the value of a currency in one country compared with the value in another Fiscal Policy Government policy that attempts to manage the economy by controlling taxing and levels of government spending.
Recession A less severe form of depression. It is characterised by two successive quarters of negative economic growth. Recovery Phase A period where economic growth begins to increase again after a recession. Slump or depression The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment Taxation The charges made by government on the activities, earnings and income of businesses and individuals Business confidence a measure of the degree of optimism of firms regarding the future of the economy. The more optimistic they are about the future the more likely they are to take risks and to investment in new projects. Consumer confidence
a measure of how optimistic consumers are about the overall state of the economy and their own personal finances. Consumers spend more money when confidence levels are high. Anti-competitive or restrictive practices Attempts by firms to prevent or restrict competition Barriers to entry obstacles to competition that prevent others from entering a market Collusion two or more businesses agreeing to a restrictive practice such as price fixing. Contract of Employment A written agreement between an employer and an employee in which each has certain obligations Discrimination favouring one person over another on grounds such as race, religion or sexuality.
Market Structures The characteristics of a market, such as the size of the barriers to entry to the market, the number of businesses in the market or whether they produce identical products, which determine the behaviour of businesses within the market Niche Market A smaller part of a larger market in which customers have more specific needs and wants Mass Market all possible customers in a market, regardless of the differences in their specific needs and wants Investment Appraisal The evaluation of an investment project to determine whether or not it is likely to be worthwhile Average Rate of Return (ARR) Measures the annual net return on an investment as a percentage of its initial cost Capital Cost The amount of money spent when setting up a new venture Discounted Cash Flow (DCF)
A method of investment appraisal that takes interest rates into account by calculating the present value of future income Investment the purchase of new capital goods Net Cash Flow cash inflows - cash outflows Net Present Value (NPV) the sum of the present values of expected future cash flows from an investment, minus the cost of that investment Payback Period the amount of time it takes to recover the initial investment of a business Present Value The value today of a sum of money available in the future Average Rate of Return Formula Net return (profit) per annum / Capital Outlay (cost) x 100 Ethical Considerations the social and environmental consequences of a financial decision Risk Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit.
Stakeholder Approach firms work to meet the demands of multiple stakeholders—employees, suppliers, and the community. Shareholder Approach the firm exists to maximize the wealth of its owners e.g. shareholders Protectionism the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports. Administrative barriers Rules and regulations (such as trading standards and strict specifications) that make it difficult for importers to penetrate an overseas market Dumping Where an overseas firm sells large quantities of a product below cost in the domestic market Embargo an official ban on trade or other commercial activity with a particular country. Import Quota a limit on the number of products in certain categories that a nation can import
infant industries those industries that are just getting started and have yet to establish themselves. They might require some form of protection. Subsidy Financial support given to a domestic producer to help compete with overseas firms Tariffs or Customs Duties A tax on imports to make them more expensive Trade Barriers Measures designed to restrict trade
