Page 343 - (DK) The Business Book

GLOSSARY 341

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