Essential Business Concepts: Structures, Strategies, and Finances
1. Company Definition
A system of interrelated elements working together to maximize benefits. Economic and Financial Aspects: Companies create wealth by paying productive factors, contributing to societal economic development. Legal-Commercial Aspect: A business is an asset aimed at profit, generating contractual relationships. Technology and Production: Companies combine production factors to create goods or services.
2. Employer
The agent responsible for directing the company’s physical and human elements, assuming risks from decisions.
3. Legal Person
A group recognized by the state as a legal entity with independent personality, organized for a specific purpose.
4. Corporate Social Responsibility (CSR)
Companies should consider the social impact of their decisions, aiming for societal and environmental benefits.
5. Action (Stock)
A portion of a company’s capital, granting voting rights and benefits.
6. Holdings (Shares)
Equal parts of capital in a limited company, granting voting rights and benefits.
7. Company (Public Limited Company)
A commercial entity with capital divided into shares, where partners are not liable for debts with personal assets.
8. Limited Company
A company with capital divided into non-negotiable shares, where members have limited liability.
9. Cooperative Society
A democratic company where workers manage, with limited liability and open membership.
10. Worker-Owned Company
Corporations or limited companies where permanent workers hold majority interest.
12. Individual Entrepreneur
The owner who invests in the company, aiming for return on investment and increased company value.
13. General Environment
External factors with minimal influence on the company, affecting all businesses.
14. Specific Environment
Factors directly affecting the company’s sector, with potential for company influence.
15. Cost Leadership
Achieving lower costs than competitors with acceptable quality and pricing for market share growth. Examples: DIA, LIDL.
16. Differentiation Strategy
Offering a unique product perceived as premium, often resulting in higher costs.
17. Concentration or Specialization Strategy
Focusing on a specific buyer group, product segment, or geographic market.
18. SWOT Analysis
A summary of strategic analysis, evaluating strengths, weaknesses, opportunities, and threats.
19. Porter’s Analysis
Five competitive forces determining industry rivalry: competitors, new entrants, substitutes, supplier power, and customer power.
20. Diversification Strategies
20.1. Horizontal Diversification
Introducing new products related to existing ones (e.g., toothbrush and toothpaste).
20.2. Vertical Diversification
Expanding into pre-production or post-production stages (e.g., soft drink company producing glass containers).
20.3. Heterogeneous Diversification
Introducing unrelated products (e.g., gardening company entering clothing market).
21. Expansion
Strengthening existing product/market combinations.
22. Market Penetration
Increasing usage among current customers, attracting competitors’ customers, and attracting new users.
23. Market Development
Introducing existing products to new markets (e.g., Johnson’s shampoo).
24. Product Development
Introducing new products to existing markets (e.g., Coca-Cola launching fruit drinks).
Growth Strategies
Company Growth: Enhancing products and markets.
Internal Growth: Developing new products/markets through in-house R&D.
External Growth: Acquiring or merging with established companies.
27. Fusion (Merger)
Combining companies of similar size (e.g., Banco Santander + Central Hispano Bank = BSCH).
28. Absorption
One company takes leadership in a merger.
29. Franchise
Licensing a trademark and business methods for a fee.
31. SMEs (Small and Medium Enterprises)
Companies with fewer than 250 employees and turnover under EUR 50 million.
32. Heritage (Assets)
Goods and receivables for business operations.
33. Annual Accounts
Integrated documents (Balance Sheet, Profit and Loss Account, Memory) representing a fiscal year’s financial status.
34. Working Capital
Current assets funded by permanent capital, essential for liquidity.
35. Performance
Company’s ability to generate profits.
36. Benefit (Profit)
Total income minus expenses in a fiscal year.
37. Procurement and Production Area
Responsible for raw materials and production processes.
38. Efficiency
38.1. Technical Efficiency
Using fewer inputs for the same output.
38.2. Economic Efficiency
Achieving the same output at a lower cost.
39. Productivity of a Factor
Output per employee or work hour.
40. Global Productivity
Output value per total factors used.
41. Fixed Costs
Costs independent of production volume.
42. Variable Costs
Costs varying with production volume.
43. Direct Costs
Costs directly attributable to specific products.
44. Indirect Costs
Costs not directly attributable to specific products.
45. Breakeven Point
Sales volume covering all expenses.
47. Cost of Inventory
Costs associated with storing and handling inventory (storage, handling, labor, investment, launching).
48. Just in Time
Optimizing production by providing materials as needed.
49. Financial Position
Managing financial resources and investments.
50. Investment
Applying resources to enhance operational capacity.
51. Internal Funding (Self-Financing)
Funds generated by company activity (enrichment and maintenance).
52. External Funding
Funds from outside the company (credit, factoring, discounting, bank financing).
53. Expansion of Capital
Increasing company resources through issuing shares or retained earnings.