An evaluation of the environment in which a company operates. The PEST analysis is completed for strategic planning purposes and includes a review of the following areas:
Political environment
Economic conditions
Social-cultural context
Technological aspects of the business and the industry in which it operates
Contributed by: Managerwise Staff
Peter Principle
The Peter Principle states that a person will continue to receive promotions up in an organization until he or she reaches a level that he or she is incompetent to fill. The promotions will then stop. The principle is spelled out in detail and tongue-in-cheek in a book, The Peter Principle, by Dr. Laurence J. Peter and Raymond Hull. Subsequent books by Dr. Peter include The Peter Pyramid, The Peter Prescription and The Peter Plan.
Contributed by: Managerwise Staff
piece rate
The rate per unit that is paid when an employee's compensation is derived wholly or partly from a set amount that is paid for each item that the employee produces.
A method of accounting for mergers that creates a consolidated balance sheet for the merged company by adding together the line items on the balance sheets of the separate pre-merger firms.
Rewarding desired employee behaviors. Those rewards can be monetary, but they might also be gifts or public acknowledgment or just words of encouragement.
Reducing prices, typically below the costs of production, in an attempt to force competitors out of the market. In many jurisdictions this contravenes competition laws, particularly if the predatory pricer intentionally incurs short term losses in the hope of reducing competition in the market.
Contributed by: Managerwise Staff
preemptive right
A right granted to existing shareholders that gives them the right, but not the requirement, to buy a portion of any new common share offering up to the percentage of shares they owned prior to the new share offering being sold. This allows shareholders to ensure that their ownership in the company will not be diluted when new shares are sold.
Companies are under no legal obligation to grant preemptive rights to shareholders unless that right has already been included in the company's articles of incorporation. In some jurisdictions preemptive rights are considered to be binding only if they are included in the company's articles of incorporations.
An organization's ability to set prices without generating an inordinate negative affect on demand for its products and/or services. Pricing power is affected by a number of factors, including the value that buyers place on the goods and/or services, the level of competition, the availability of goods or services that can be substituted for the organization's goods or services (e.g., public transit could be substituted for car ownership) and overall inflation.
Pricing power is an issue for more than just companies selling goods and services. For example, one can discuss the pricing power of unions or individual employees when it comes to setting wages.
Contributed by: ManagerWise Staff
prime rate
The interest rate at which banks lend to their most-favored customers (i.e. the ones that they consider to be the most financially sound) for loans that are considered to be the most secure. Interest rates for other loans are often expressed explicitly or calculated implicitly as the prime rate plus some percent.
Contributed by: Managerwise Staff
principal shareholder
Any shareholder owning at least 10% of a company's outstanding shares. There may be no principal shareholders in a company and, clearly, there can be at most 10. (In reality, in the common use of the word there would have to be less than 10, because one usually speaks of principal shareholders only when talking about publicly traded company, but a company in which 100% of shares are divided among only 10 shareholders would not be able to trade on a stock exchange.)
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