GLOSSARY
Cost leadership A strategy
whereby companies aim to offer the
cheapest product(s) or service(s) in
their industry or market and thereby
gain a competitive advantage over
their rivals.
Creative accounting Accounting
practices that seek to portray a
company’s finances in either a
positive or negative light through a
range of accounting techniques.
Although unconventional, and often
used to depict artificial profit levels,
such practices are generally legal.
Credit crunch A sudden reduction
in the availability of credit in a
banking system. A credit crunch
often occurs after a period in which
credit is widely available.
Crowdsourcing Tapping into
collective online knowledge by
inviting large numbers of people,
via the Internet, to contribute ideas
on different aspects of a business’s
operations. A related concept is
“crowdfunding,” which involves
funding a project or venture by
raising capital from individual
investors via the Internet.
Default The failure to repay a
loan under the terms agreed.
Deficit A financial situation in which
a business’s expenditure exceeds
its revenue.
Demand The desire, willingness,
and ability of consumers to purchase
a product or service.
Differentiation A strategy whereby
companies distinguish their products
or services from the offerings of
rival companies through cost,
improved features, or marketing
and promotion in order to achieve
a competitive advantage in a
crowded market sector.
Distribution The movement
of goods and services from the
producer or manufacturer through
a distribution channel (such as a
vendor or agent) to the end consumer,
customer, or user.Diversification A strategy to
minimize risk and raise revenue by
distributing expenditure across a
number of different business units or
products, and across a range of
different markets and even
geographical areas.Dividend An annual payment made
by a company to its shareholders,
usually as a portion of its profits.
Dividend payouts are made at the
discretion of a company’s directors.Early adopter A business or a
customer who uses a new product or
new technology before others.E-commerce Abbreviated from
“electronic commerce,” the buying
and selling of products and services
by businesses and consumers via the
Internet and electronic systems.Emotional intelligence (EQ)
The ability to perceive, control, and
evaluate emotions in oneself and
in others. US psychologist Daniel
Goleman noted that high EQ is
common in business leaders and
facilitates other leadership traits.Emotional Selling Proposition
(ESP) A marketing strategy that
creates an emotional connection
(such as pride, humor, or desire)
between the customer and the
brand, impelling them to purchase.Entrepreneur A person who
takes commercial risk in the hope
of making a profit.Equity In investment, the value of
shares issued by a company;“equity” also denotes part or
full ownership in a company. In
accounting, the net worth of a
company or individual, calculated
by subtracting total liabilities
from total assets.First-mover advantage The
benefits resulting from being the first
business to enter a market.Fixed cost A cost, such as rent or
salaries, that does not change
according to the number of goods or
services produced.Forecasting The use of past data
to predict future trends and assess
the likely demand for a business’s
goods and services.Free market An economy in which
decisions about production are made
by private individuals and
businesses on the basis of supply
and demand, and in which prices
are determined by the market.Groupthink A quirk of group
dynamics, in which individuals in a
group place higher priority on
achieving a consensus with one
another than on effective and
rational decision-making.Hygiene factors A series of
workplace factors identified by US
psychologist Frederick Herzberg that,
if poorly managed, contribute to job
dissatisfaction. A separate set of
factors—motivators—encourage
job satisfaction.Inflation The steady increase in the
overall prices of goods and services
in an economy.Interest rate The amount of
interest—the charge for borrowing a
sum of money—paid annually by a
borrower, measured as a percentage
of the total amount borrowed.341