Buss1 Key Terms

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BUSS 2 Key Term Definitions

©T Ockenden

Finance:

Budget – A budget is regarded as a goal or a “yardstick”; it’s something a business uses in order to work to, for example: a firm may have budgeted fixed costs of £5000, they aim to either meet this budget or fall below it to operate to the desired level.

Variance – Variance applies to budgets, and it is the difference between the forecasted or budgeted figure, and the actual figure that comes out at the end of a certain review period.

Cash flow forecast – A cash flow forecast is a document that records the expected inflows and outflows of a business.

Overdraft – Short term borrowing from a bank, a business will only take out as much money as it needs in order to cover its daily cash shortfall, because overdrafts are high interest short term finance options and can be required to pay back within 24 hours.

Factoring – Fully named debt factoring, is the process by which the debt factor company buys a percentage of the debt owed to one company by another company or customer (often around 80%). This means although the company owed to will lose 20% of the money, it means that 80% can be with them immediately rather than having to chase for it.

Sale and leaseback – This is where a company will sell an asset off in order to generate short term finance, but they will buy back the asset on a lease basis as in the will pay for it as and when they need it.

Net profit margin – Simply a profit margin is the gap between the prices the unit is sold for and how much it costs to produce it. Net profit margin is worked out by doing net profit over sales turnover x100.

Return on capital – Profit as a percentage of the capital invested in a project.

Profitability – Profitability measures profit against another variable in the business, for example you’ve got net profit margin which is profit in relation to costs, or ROC, which is profit in relation to the capital invested.

Marketing:

Niche marketing – Niche marketing is where a business is tailoring a product or service to a very specific customer or market (think cooking dinner for the queen), requires much research in to their needs and wants and other factors in order to get it right.

Mass marketing – Mass marketing is almost completely the opposite, it involves creating a product or service with mass appeal and promoting it to all types of consumers (bread and other commodities).

Business to business marketing – This is a term to describe the transactions that take place between one company and another, in this sense the customer is seen as another business.

Consumer marketing - When a company sells its products and services to the individual consumer, it is referred to in marketing-speak as B2C, or business-to-consumer.

Marketing mix – This refers to the 4 main ingredients in the marketing cake, product, price, place and promotion. Although is BUSS 2 they ask you specific stuff on each section.

USP – One feature that makes a product or service different from all its rivals, for example the apple operating system on iphone.

Product differentiation – The extent to which your product or brand is differentiated is the amount to which customers feel your product or brand is different from others in the same market.

Product life cycle – This is sort of like the “this is your life” book for a product, it comprises of stages; Introduction, growth, maturity, saturation and decline. Represented as a graph in most cases.

Product portfolio – Product portfolio analysis looks at the existing position of a company’s products. The best way is Boston matrix here; a firm can place their product in any of the four boxes and from there, decide if a new product needs to be launched or increased promotion is needed or even an introduction to a new market.

Boston matrix – The Boston matrix shows the market share of each of the firm’s products and the rate of growth of the markets each product...
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