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Labeling theory Sociological explanation for deviance from the norm, as not a condition inherent in something itself but because others have labeled it as such.
Labor intensive Description applied to an industry or production process in which labor costs are so high that they form the lion’s share of the costs.
Labor stability index Measurement showing degree of labor turnover in relation to length of time on the job.
Laboratory training In human resources, a form of relatively unstructured group dynamics in which participants learn to resolve conflicts. The emphasis is on interpersonal skills.
Laches In law, an unreasonable delay that prejudices the opposing party in a claim.
Lady Macbeth strategy In takeover or acquisition battles, a third party that tries to act as a WHITE KNIGHT but eventually joins the predator.
Laffer, Arthur Betz (1940–) American economist best known for the LAFFER CURVE, an illustration of the theory that there exists a tax rate between 0 and 100% that will result in maximum tax revenues. He was a professor at the University of Chicago Graduate School of Business.
Laffer curve Graph pattern based on economist ARTHUR LAFFER’S principle that higher taxation ultimately results in decreased revenue.
Lagging indicator Economic measurement that trails behind other indicators in a cycle. See also LEADING INDICATOR.
Laissez-faire Descriptive of a free-market economy, in which government involvement is kept to a minimum and the market essentially regulates itself.
Laissez-faire leadership In management, when the apparent leader relinquishes the right to set standards and regulate behavior and allows members the freedom to do as they please.
Lame duck In business, a company that faces intense foreign competition and is unable to survive without government subsidies or support.
Lanchester, Frederick William (1868–1946) English polymath and engineer who made important contributions to automotive engineering and operations research.
Lanchester strategy From British polymath and engineer FREDERICK WILLIAM LANCHESTER, the application of military strategy to business operations. The approach includes two linear equations, known as the linear law and the square law. The Japanese made use of Lanchester’s ideas to study business competition and competitive advantage. Market share was predicated on the strength of the sales force; the strategic elements were pricing, advertising, and product development; and the goal was to “capture” customers. With 26% of the market share, a company was vulnerable, whereas with 74% it was considered safe.
Last in, first out (LIFO) 1. A method of costing units of raw materials or finished goods issued from stock by using the latest unit value for pricing, until all stock at that price is used up. The next earliest price is applied to the next batch, and so on. 2. In human resources, ranking employees by the length of tenure; in case of redundancies or layoff, letting go of those with the least tenure first.
Late-entry strategy Trying to gain competitive advantage by introducing products after the competitors, so as to learn from their mistakes.
Lateral thinking From Maltese physician and consultant EDWARD DE BONO, used to describe a bold approach to problem solving by attacking it sideways rather than frontally, considering unorthodox solutions.
Laundering Processing of illegal or tainted money though a legitimate, usually foreign, bank or other facility so that the origin cannot be quickly traced.
Law of Contracts Law that governs agreements entered into voluntarily by two or more parties with the intention of creating a legal obligation, either orally or in writing. In equity, the remedy can be specific performance of the contract or an injunction. Contract law varies greatly from one jurisdiction to another including the difference between common law and civil law.
Law of diminishing returns Theory that if one factor of production increases while the others remain constant, the extra output generated by the additional input will eventually fall.
Law of the situation Developed by management theorist MARY PARKER FOLLETT, theory that conflict between two parties should be resolved by reference to the facts of the situation and not through a power struggle.
Law of triviality From British historian C. Northcote Parkinson, theory that the amount of time spent on any task will be in inverse relation to the monetary sum involved.
Layoff Suspension or termination of workers because they have become redundant or the production of goods has become unprofitable.
LBO LEVERAGED BUYOUT
LDC Less developed country.
Lead time Amount of time needed to complete a cycle of work, a project, or an activity.
Lead users First users of a product, who test it to determine its strengths and weaknesses in relation to its competitors.
Leadership Position, traits, and characteristics associated with the principal managers and executives who exercise authority and power, set the trends, influence and motivate their peers and subordinates, and determine the goals and fortunes of an organization. There are many styles of leadership, and each has a mode of operation: AUTHORITARIAN, DEMOCRATIC, CHARISMATIC, LAISSEZ-FAIRE, TRANSACTIONAL, TRANSFORMATIONAL, and BUREAUCRATIC. Some leaders are disciplinarians or martinets, while others are more permissive and tend to delegate power to subordinates. The test of leadership is the quality of the performance of the organization as a whole, as evidenced by the desired outcome.
Leadership theories In industrial and organizational psychology, a taxonomy of theories that define leadership qualities and styles: (1) traits, or focus on certain key personality characteristics as decisive, including confidence, communication skills, and organizational ability; (2) behavior, or focus on motivation, such as task-motivated or relationship-motivated activity; and (3) cognition, or focus on the ability to transmit ideas, values, and perceptions as performance drivers.
Leading indicator 1. Economic measurement that precedes and heralds other indicators in a cycle. See also LAGGING INDICATOR. 2. Indicator in a time-series analysis that changes in the same direction but in advance of company sales.
Leading and lagging Techniques used to bolster a company’s cash position and reduce its debt by collecting amounts payable and delaying payments of amounts due.
Leading from strength Idea that a company should concentrate on its strengths when fashioning strategies.
Lean Descriptive of an efficient and wasteless operation, with no fat or unnecessary frills. Also known as TOYOTA PRODUCTION SYSTEM or JUST-IN-TIME.
Lean back Period of cautious inaction before a government agency intervenes to correct an anomaly in a market.
Lean supply model Supply chain example developed by economist L. R. Lamming, in which the flow of materials moves from suppliers to producers in an efficient way.
Learning curve Relationship between productivity and manufacturing time and costs so that as productivity rises, manufacturing time and costs decline.
Learning organization Company that places a high premium on CONTINUOUS LEARNING by employees as a means of ensuring the firm retains its competitive advantage.
Learning plateau Stage in learning at which there is pause to allow for assimilation of the lessons, resulting in a flattening of the learning process.
Least-preferred co-workers scale Measurement to identify the extent to which a leader is predominantly task-motivated or relationship-motivated.
Leavitt, Harold (1922–2007) American management psychologist and writer whose research explored patterns of organizational communications; author of Management Psychology (1956).
Ledger Record of all financial transactions by an individual or a firm that shows income and revenue and profit and loss.
Left-brained 1 Of or relating to the thought processes, such as logic. 2. Of or relating to a person who is less creative and emotional and more analytical.
Leg In finance, one element in a complex set of transactions.
Legitimacy Acknowledgment of the legality of a person or institution, confirming authority by law and custom, and not in violation of any rules.
Letter Legal document that confirms or states a specific intention or plan. A letter of comfort is sent to a bank by a parent company, supporting the loan application of a subsidiary; a letter of credit is sent by a bank to a sister bank, authorizing the payment of a specified amount to the person named; a letter of indemnity states that the issuing organization will compensate the person to whom it is addressed for a specified loss; a letter of identification is issued by a bank to a customer to whom a letter of credit has been issued; a letter of intent sets out a person’s intentions to do something specified; a letter of license is sent from a creditor to a debtor who is having trouble raising money to pay a debt; a letter of regret is sent denying an application; a letter of renunciation is sent when a person who has been allotted shares in a new issue renounces those rights.
Level of aspiration Degree of ambition that drives a person to do his or her best to achieve defined goals.
Level-output strategy Regulation of production at a constant level, regardless of fluctuations in demand. This strategy helps to maintain a stable workforce and reduces the optimum use of capacity.
Leveraged buyout Acquisition of a company in which loan capital is used to finance the purchase and when management buys out the existing shareholders, thus becoming the owner. The debt used is secured with the assets of the target company, and the purchase is financed by substandard high-yield securities known as JUNK BONDS. The market value of the company is reappraised, and the expected cash flows are based on dramatic savings through the CANNIBALIZATION of assets and cutbacks in employment. Management ends with a sizable share of the equity, and the investment bankers pocket a large fee. Much of the actual financing comes through what is known as MEZZANINE FINANCING, whereby the investors are wealthy venture capitalists and pension funds that resell their shares in a few years to realize substantial capital gains.
Leveraged firm Company with a high level of debt.
Leveraged marketing Marketing strategy in which a company capitalizes on existing products and processes to create new products at minimal cost.
Levitt, Theodore German-born management guru and Harvard professor who taught that the central preoccupation of corporations should be to satisfy customers and not merely to produce goods. See also LEVITT’S TOTAL-PRODUCT CONCEPT.
Levitt’s total-product concept Marketing concept devised by THEODORE LEVITT, recognizing the gap between a producer’s evaluation of a product or service and the user’s or consumer’s perception of it.
Lewin, Kurt (1890–1947) German-born psychologist who pioneered the field of GROUP DYNAMICS and the human relations school of management. He developed FORCE-FIELD ANALYSIS, CHANGE MANAGEMENT, ACTION RESEARCH, and SENSITIVITY TRAINING.
Lewin model Portrayal of human behavior based on an equation, in which behavior is determined by environment and personality. From psychologist KURT LEWIN.
Liability 1. Responsibility assumed according to law or equity or obligation pertaining to a funciton or office. 2. Pecuniary debt incurred in the course of a business transation that must be legally discharged.
Liberalization Loosening of regulations and accompanying expansion of markets for free trade.
LIBOR London Inter-Bank Offered Rate, a widely used benchmark for short-term interest rates used in interbank transactions, fixed by the British Bankers’ Association. It is derived from a filtered average of interbank deposit rates for large loans with maturities between overnight and one year.
Licensing Act of permitting use of a trademark or product, manufacturing process, copyright, or patent in exchange for a fee or royalty.
Lien Legal right to retain or claim possession of property or goods owned by another until the possessor’s claims have been satisfied. A lien may be general, where the goods are held as security for all outstanding debts; or particular, where the claim is against a specific property; or possessory, where actual possession is not required; or equitable, where the claim is independent of the possession.
Life assurance Insurance policy that pays a specified amount of money on the death of the life that has been insured, or at the end of a specified period. See also INSURANCE.
Lifeboat In finance, a fund set up to rescue traders in an exchange in the event of a market collapse or insolvency.
Life-cycle costing Expenses for a fixed asset, based on the amount of money required to purchase it and its operating cost over its estimated lifetime.
Life-cycle segmentation Marketing strategy that recognizes the shifting needs of consumers based on the stages of their life.
Life-cycle strategy (LCS) Competitive strength of a business, represented by six categories (dominant, strong, favorable, tenable, weak, and nonviable). An alternative to the growth-share and market-attractiveness models developed by management consultant Arthur D. Little, in this view, every corporation is segmented into independent business units, then the life-cycle position of each is assessed and its competitive position determined. Each unit becomes a strategy center (SC), similar to a STRATEGIC BUSINESS UNIT. SCs are described in terms of competitors, prices, customers, quality, substitutability, and divestment or liquidation; that is, they could survive as independent businesses if divested. The position of an SC within its industry life cycle is determined by eight factors: market growth rate, market growth potential, breadth of product line, number of competitors, distribution of market share, customer loyalty, barriers to entry, and technology. Embryonic businesses are characterized by high growth and a fluid market, whereas natural markets are characterized by stability. The competitive position of a business is determined by qualitative factors rather than by quantitative factors, such as market share. A dominant position results from a near monopoly.
For portfolio balance, using a lifestyle model offers a balanced mix of activities, with mature businesses generating positive cash flow and enjoying a solid dominance in as many markets as possible. For developing a strategy to achieve dominance, the lifestyle model has a concept known as families of thrusts, with four forks: natural development, selective development, proven viability, and withdrawal. Growth is measured by start-up momentum, gradual gain, aggressive gain, defensive tactics, and harvesting. For a generic strategy, LCS presents 24 measures, including market production, new products, backward and forward integration, development of overseas business, licensing, rationalization of distribution and production, technological efficiency, cost cutting, and market strategies. The level of risk associated with LCS is identified by a number of factors, such as maturity and competitive position, past performance, management, and current performance. The stages of a life cycle vary widely in terms of time; markets change and the nature of competition differs from industry to industry. Innovation and the nature of entry barriers can also affect life-cycle outlooks.
LIFO LAST IN, FIRST OUT
Lifespace Human nature and physical space within which people conduct their activities.
Lifestyle In marketing, the activities, interests, opinions, and values of consumers as they impact their purchasing decisions. In turn, consumer lifestyles are an important element in marketing strategies and profitability. Lifestyle segmentation is the division of a market based on consumer lifestyles, useful in customizing marketing strategies.
Lifetime customer value Estimate of the business, and consequently the profitability, that an individual customer brings to a company over a specified length of time, based on the assumption that the customer will continue to buy those products during that time.
Lifetime employment Guarantee of full employment throughout a person’s working life.
Likert, Rensis (1903–1981) American psychologist noted for his contributions to the study of management and organizational theory, including the concepts of HUMAN ASSET ACCOUNTING, LIKERT SCALE, LINKING-PIN MANAGEMENT STRUCTURE, and SYSTEM FOUR.
Likert scale Collective results of a questionnaire widely used in attitude studies, developed by psychologist RENSIS LIKERT. Respondents indicate how much they agree or disagree with a series of statements, graded on a three- or five-point scale in lieu of either/or responses.
Limit In finance, the maximum number of fluctuations allowed in certain markets during one trading day.
Limited company Business in which the liability of its members with respect to the company’s debts is restricted to the value of their shares or by guarantee. Some partnerships may also operate under this principle.
Limited liability Condition in which shareholders are not personally responsible for the debts of the company in which they hold shares.
Line and staff System of management with two hierarchies: LINE MANAGEMENT is responsible for deciding policies and running the company’s main activities; STAFF MANAGEMENT is responsible for providing support services such as accounting, personnel management, and warehousing.
Line extending Increasing a line of products by adding variations, as for example when a soft drinks producer adds a diet drink under the same brand name.
Line filling Adding products to an existing product line in order to leave no opportunities for competitors. Line filling may be horizontal, whereby the manufacturer adds features to an existing product and produces expensive as well as cheaper models; or vertical, whereby the manufacturer produces a wide variety of brand names within a single product line.
Line management Classification of supervisors in a business, in which each manager fulfills a discrete function and is responsible for a particular department within the organizational chain of command.
Line of command See of CHAIN OF COMMAND.
Line production Mass production, in which high volumes of identical or similar products or product parts are made in a set sequence of operations. Good product design and efficient plant layouts make it possible for lower skilled workers to operate the machinery.
Linear time Time viewed as an independent entity governed by its own laws and moving in a straight line to a goal. Opposite of CYCLICAL TIME.
Linear trend Data presented in a time sequence, represented on a graph by a straight line.
Linking-pin management structure Way of conceptualizing management structure, developed by psychologist RENSIS LIKERT. In this model, an organization consists of a series of interlocking groups connected to a coherent whole, with individuals as the key links having overlapping responsibilities.
Lipstick effect Indicator of adjusted consumer purchasing behavior, based on the economic situation. Reference to the sale of lipstick; that is, during hard times, sales of lipstick increase as consumers indulge their buying habits by buying cheaper items rather than more expensive ones such as designer dresses or handbags.
Liquid market Financial market in which the spread between asking and selling prices is narrow, with many sellers and buyers at hand and where market prices are not affected by large transactions.
Liquid ratio The relationship between liquid assets and current liabilities, used to assess the liquidity of a company.
Liquidation Distribution of a company’s assets among its creditors prior to its dissolution; usually handled by a liquidator.
Liquidity Ability of an asset to be easily converted into cash, with little or no capital loss.
Liquidity trap In the liquidity preference theory of economist JOHN MAYNARD KEYNES, the concept that when interest rates are low and savings are high, investors favor cash over bonds, in anticipation of higher interest rates.
List renting Sale of a mailing list of potential customers to a direct-mail company, usually for one-time use.
Listed company Business that is listed on one of the stock exchanges and whose stock is publicly traded.
Listening Flip side of speaking, including recall listening and empathic listening. The former focuses on memory and the latter on overt expressions of approval or disapproval.
Livery company (chiefly British) One of 80 trade associations in the City of London, descended from the medieval guilds.
Living company Business that is managed for long-term success rather than for short-term profits and is sensitive to changes in the business climate.
LLDC Least less-developed country
Lloyd’s of London Corporation that is a group of independent brokers and underwriters grouped into syndicates. Begun in London in 1689 and named after its owner, Edward Lloyd, its original business was mainly maritime insurance during Britain’s role as a mercantile power in the 19th century. It still publishes the Lloyd’s Register of Ships.
Loan Money lent on the condition that it is repaid, usually with interest, at the end of a given period.
Local Regional branch of a labor union.
Localism Development approach using different strategies for different localities, based on varying cultural and environmental conditions.
Location strategy Process and mode of choosing an industrial or commercial location, important for large corporations with multiple locations for production and distribution.
Lockheed model Management form that identifies relevant variables for establishing SPANS OF CONTROL, coordination of subordinates, and direction of supervision.
Lockout Action taken by an employer in the course of an industrial dispute, denying workers access to the workplace. It is a management response to a strike.
Locus of control Center of gravity in an organization that conveys a sense of control over events.
Locus poenitentiae (Latin, “opportunity to repent”) Time and opportunity to back out of a deal before it becomes a legal document.
Logistics Detailed plan for a complex operation, usually involving physical transport and assignment.
Long position Owning shares in a company with the intention of selling them in the future, after some appreciation in value; opposite of SHORT POSITION.
Long tail 1. In marketing, the sale of a broad range of products, each in modest quantities but with large collective volume. It is common in niche marketing, in which a company makes a profit by selling small quantities of a very large number of items. 2. In economics, a situation in which a large number of companies are performing below par because of a depressed economy.
Long term 1. Description of a contract that spans two or more accounting periods. 2. Name for a debt that need not be paid for at least 10 years. 3. Classification for a bond that does not fall due for at least one year. 4. Category of unemployment that lasts for more than a year.
Longitudinal design 1. Marketing research approach that measures consumer or audience preferences over a long time, sometimes over a generation. 2. In strategic planning, projections of past events to develop future plans and scenarios.
Lorenz, Max Otto (1876–1959) American economist who developed the Lorenz curve in 1905 to describe income inequalities. His principal work is Methods of Measuring the Concentration of Wealth (1905).
Lorenz curve Graphic representation of the distribution of income and wealth in a target population. Developed in 1905 by economist MAX OTTO LORENZ.
Loss leader Product or service offered to the public at cost or below cost in order to entice customers who may buy other products over the long haul.
Low-hanging fruit 1. Metaphor for a good short-term opportunity for profit without much effort. 2. Term for consumers who are easy targets.
Low-involvement product Cheap product that calls for little or no deliberation on the part of the purchaser and is largely an impulse purchase.
Loyalty Faithfulness to a brand or service provider, built up as a result of repeated positive experiences over the years. Loyal customers are the mainstay of good business because they do not require costly persuasion. Loyalty may be reinforced through coupons and discounts offered to frequent buyers.
Luddite Person who opposes new machines, processes, and technologies, often feeling threatened by them. Evolved from Ned Ludd, a leader in the 19th-century English protest movement by textile artisans against increasing industrialization of cloth production.
Luft, Joseph U.S. psychologist who devised the JOHARI WINDOW along with Harrington Ingham in 1955. He is the author of Group Processes: An introduction to Group Dynamics (1984) and Of Human Interaction (1969).
Lutine bell Hanging in the underwriting room of Lloyd’s, this bell is rung only on rare occasions, but to mark important events; formerly it was rung once for bad news (such as the sinking of an insured ship) and twice for good news.