Benchmarking: A technique for comparing performance against that of others, typically competitors in the same industry. The technique was first used extensively in manufacturing environments where producers could compare their performance with that of others. This is usually achieved by looking at the most efficient firms within an industry or in similar industries.
Cannibalization: The phenomenon where a new brand extension or line extension takes sales away from established brands that are owned by the same organisation. This will occur when both brands are bought by the same group of consumers.
Database marketing: The use of information, held on computer systems, to undertake direct and pertinent communication with existing customers and/or prospects in the target audience.
80:20 rule: The observation that 80 per cent of sales come from 20 per cent of customers. In a strict sense the rule often is not supported; however, it is approximately true in many situations (i.e. most sales, if not exactly 80 per cent, come from a small proportion, if not 20 per cent, of customers). This is sometimes called the Pareto principle after the nineteenth-century economist who showed that income is very unevenly distributed in society.
Economic value added (EVA):A method for evaluating companies by comparing the rate of return on investment with the weighted average cost of capital. Companies seen to be earning less than their cost of capital are said to be destroying value, while those that have a rate of return above their cost of capital are creating value.
Fallen angel (US):A bond, initially of US investment grade quality, subsequently declining below that standard, then sold at high yield.
Globex: An overnight electronic trading system for futures and options developed in 1992 jointly by the Chicago Mercantile Exchange, the Chicago Board of Trade and Reuters, with the Paris Bourse.
Herstatt risk: The risk of loss in the capital value of a currency transaction, where one side of the bargain is completed, but completion on the other side is delayed. Named after the Herstatt Bank of Germany, which suffered loss in 1974 having settled the D-mark side of a transaction before closing for the night, leaving the dollar side unpaid in North America.
Instrument: A term used to denote any form of financing medium, most usually those for the purpose of borrowing in the money market, e.g. bills of exchange, bonds, certificates of deposit, Treasury bills and promissory notes. Also, it is normally used to denote the document itself.
Source: Penguin Int’l Dictionary of Business & Finance
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