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1.1 Glossary of key terms

 Reading task

Unit 1.1 - Glossary of key terms: What is a business?

 

Key termDefinition
Adding value
The process of producing a particular good or service that is worth more than the cost of the resources used to produce it.
Business
A decision-making organization established to produce goods and/or provide services.
Consumers
The individuals or organizations that actually use a product.
Customers
The individuals or organizations that purchase a product.
Entrepreneurs
The individuals who take risks in overseeing a business organization or business venture, usually in pursuit of profit.
Entrepreneurship
The knowledge, skills and experiences of individuals who have the capability to manage the overall production process.
Factors of production
The collective term for the resources used in the production process, i.e. land, labour, capital and entrepreneurship.
Finance and accounts
Function of an organization responsible for ensuring that the business has sufficient funds in order to conduct its daily operations.
Goods
These are physical (tangible) products, such as cars, clothes, flowers, food, furniture, smartphones, and toys.
Human resources (HR)
The business function that handles all aspects relate to the workforce, involving all aspects of a firm's operations related to staff (personnel) within an organization.
Marketing
Business function of identifying the needs and wants of customers so that the organization can provide goods and services to meet these requirements and desires, usually in a profitable way.
Needs
The basic necessities that an individual must have in order to survive, such as food, water, and shelter.
Operations (or operations management)
The business function referring to the process of making goods and providing services from the available resources of a business to meet the needs and wants of its customers.
Primary sector
Business activity involved with the extraction of natural resources, e.g. fishing, mining and agriculture.
Production
The process of creating goods and/or services using the factors of production available to the business.
Quaternary sector
Business activity involving the creation or sharing of knowledge and information.
Secondary sector
Business activity involved with the manufacturing or construction of finished products.
Services
Intangible products, such as haircuts, tourism, public transport, banking, insurance education, and healthcare.
Tertiary sector
Business activity that involves providing services to customers, i.e. consumers and business clients.
Value added
The numerical difference between the cost of factor inputs in the production process and the price that the final output is sold for.
Wants
These are the desires of individual customers, i.e., the goods and services that they would like to have (rather than things they need to survive), such as a new smartphone, a family holiday in an overseas location, fresh flowers, or jewellery.

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