IB Business Management 1.1-1.7

All profits go to one person and this person has complete control over all important decisions. It also has flexibility in terms of working hours, changes to operations, etc.. The business has privacy and minimal legal formalities. It has close ties to costumers.

Advantages of a sole trader

- Easy access to finance - Investors have limited liability - There is continuity - There are possibilities for expansion - An established organizational structure exists

Advantages of companies

- Partners often bring different skills and qualities, partnerships often have more efficient production. - Bring more expertise to a business - As they are perceived of greater stability and lower risk, thy have more access to finance. - Partners help in case of emergencies. - More chance of continuity.

Advantages of partnerships

Long-term goals

Aims

Helps a business plan their growth strategies.

Ansoff matrix

is an analytical tool to devise product and market growth strategies.

Ansoff's Matrix

Marketing, Finance, Human Resource Management and Operations Management

Business Functions

is a report detailing how a business sets out to achieve its aims and objectives.

Business Plan

A plan to achieve strategic objectives (asking who, when, what, where, why?)

Business strategy

A plan to achieve tactical objectives.

Business tactic

Organizations that are involved in the production of goods and/or the provision of services

Businesses

The finance needed to set up a business and pay for its continued operations or expansion. Also includes the man-made goods used in the production process (capital goods)

Capital

Physical goods that are used by an industry to aid in the production of other goods and services, such as machines and commercial vehicles

Capital Goods

Aim to generate profit

Commercial (profit-based) organizations

- Building up costumer loyalty - Creating a positive image - Developing a positive work environment - Reducing risk of legal issues - Satisfying costumer expectations on ethical behavior - Increasing profits

Commercial reasons for ethical objectives

The owner and the business do not share liability, bigger and more stable business. Shareholders own a fraction of the business in the form of shares, and this is a way of getting finance for the business.

Companies or corporations

Refers to situations where people have disagreements on certain matters due to differences in their opinions. It can lead to arguments and tension between various stakeholder groups.

Conflict

are businesses that provide a diversified range of products and operate in an array of different industries.

Conglomerates

The physical and tangible goods sold to the general public. They include cars and washing machines, which are referred to as durable consumer goods. Non-durable consumer goods include food, drinks and sweets that can only be used once

Consumer Goods

Non-tangible products that are sold to the general public and include hotel accommodation, insurance services and train journeys

Consumer Services

A business has an obligation to operate in a way that will have a positive impact on society.

Corporate social responsibility

is one of Porter's generic strategies that concentrate on gaining a competitive advantage by reducing costs.

Cost Leadership

is the process of choosing between the alternative options.

Decision Making

are a type of quantitative decision-making tool that calculates the probable values of different options, minimising the risks.

Decision trees

refers to the systematic process of dealing with business problems, concerns or issues.

Decision-making Framework

Combination of threats and weaknesses, which leads to the business acting defensively and quickly

Defensive strategies

occurs when a firm makes its products from those of its competitors.

Differentiation

The senior members of staff who have been elected by shareholders of a company to run the business on their behalf.

Directors

- Setting up takes a lot of time and it is expensive. - Selling shares publicly does not guarantee finance - Owners risk partial or entire loss of control of the business - Loss of privacy - The company has no control over the stock market (share prices might fall) - A company has limited control over who buys its shares.

Disadvantages of companies

- Each partner has unlimited liability. - Less access to loans than companies. - An individual partner does not have complete control over the business. - Profits have to be shared between partners. - Partner may disagree

Disadvantages of partnerships

It can be challenging and highly time consuming, which leads to stress and ineffectiveness in some cases due to the fact that one person has to make all decisions. Lack of continuity if the owner dies and limited scope for expansion. This also comes with limited capital and unlimited liability.

Disadvantages of sole trader

are the cost disadvantages of growth.

Diseconomies of scale

Combining a new product and a new market, the riskiest growth strategy.

Diversification

is a high-risk growth strategy that involves a business selling new products in new markets.

Diversification

- depletion of renewable resources - global warming - organic farming - carbon footprints

Ecological influences

measures changes in the GDP of a country over time. Growth occurs if there is an increase in GDP for two consecutive quarters

Economic Growth

- The economic or business cycle - The rate of economic growth - Rate of inflation - The rate of unemployment - The exchange rate - Interest rates

Economic influences

refers to lower average costs of production as a firm operates on a larger scale.

Economies of Scale

Risk taking individuals who combine the other factors of production into a unit that is capable of producing goods and services. It provides a managing, decision-making and coordinating role

Enterprise

People who manage, organise and plan the other three factors of production. They are risk takers who exploit business opportunities in return for profit

Entrepreneurs

- corruption - transparency - codes of business behavior - fair trade

Ethical influences

Goals based on established codes of behavior, that when met, allow the business to provide some social or environmental benefit.

Ethical objectives

moral values and judgements that society believes organizations should consider in their decision making

Ethics

the value of a country's currency in terms of another country

Exchange rate

is a written statement placed at the beginning of a business plan and summarizes the information given in the main business plan.

Executive Summary

refers to an increase in the average costs of production as a firm grows due to factors beyond its control.

External Diseconomies of Scale

occurs when a business grows by collaborating with, buying up or merging with another firm.

External Growth

Not part of the organization but have a direct interest in its actions (includes customers, suppliers, financiers, and government).

External Stakeholders

- Social - Technological - Economic - Ethical - Political - Legal - Ecological

External changes

Resources needed by businesses to produce goods or services

Factors of Production

The management of money and credit and banking and investments

Finance

is a decision-making framework based on identifying the root causes of a problem or issue.

Fishbone Diagram

The organization aims to improve human, social or environmental well being.

For-profit social enterprise

refers to an agreement between a franchisor selling its rights to other businesses to allow them to sell products under its name in return for a fee and royalty payments.

Franchise

The increased integration and interdependence of the world's economies.

Globalization

- Market penetration - Market development - Diversification - Product development

Growth strategies

Combining the strengths of a business with market opportunities. Most positive short-term strategy

Growth strategies

is an external growth strategy that occurs when a business acquires or merges with a firm operating in the same stage of the chain of production in the same industry.

Horizontal Integration

The process of determining human resource needs and then recruiting, selecting, developing, motivating, evaluating, compensating, and scheduling employees to achieve organisational objectives

Human Resource Management

The process experienced by a country that moves away from primary production towards manufacturing as its principal sector for national output and employment

Industrialization

Members of the organization (including employees, shareholders, managers, and directors)

Internal Stakeholders

An individual who behaves like an entrepreneur while working within a large organization which enables them to create new products, services, systems, etc.

Intrapreneur

The act of behaving like an entrepreneur while working within a large organization where freedom and financial support is given to create new products, services, systems, etc.

Intrapreneurship

refers to decision-making that is based on gut feeling, and/or instinct rather than relying on quantitative or scientific techniques.

Intuitive Decision Making

refers to a growth strategy that combines the contributions and responsibilities of two different organisations to a shared project by forming a separate legal enterprise.

Joint Venture

The physical and mental human effort used in the production process

Labour

Natural resources that can be found on the planet. This includes renewable and non-renewable natural resources such as water, wood, fish and physical land itself

Land

- regulations - employment laws - health and safety legislation - competition laws

Legal influences

People responsible for the daily running of a business.

Managers

is a medium-risk growth strategy that involves selling existing products in new markets.

Market Development

is a low-risk growth strategy that involves businesses choosing to focus on selling existing products in existing markets.

Market Penetration

Expands the market by looking for new markets or new market segments with existing product.

Market development

When a business grown by increasing its market share, selling existing products in an existing market

Market penetration

The commercial processes involved in creating and designing, promoting and selling and distributing a product or service

Marketing

is a form of growth whereby two (or more) firms agree to form a new organization, losing their original identities.

Merger

To provide small amounts of finance to those who traditionally would not have access to it. The money is lent with specified. Conditions to use and scheduled repayments.

Micro-financiers

More grounded objectives, an intermediate step on the way to the vision

Mission statement

An organization that operates in two or more countries.

Multinational Company

They aim to support a cause that is considered socially desirable (greenpeace)

Non-governmental organization (NGO)

Social enterprises that do not aim to make a profit at all, instead they generate surpluses.

Non-profit social enterprises (NPO)

Day-to-day objectives set by floor managers.

Operational objectives

The management of processes used to design, supply, produce, and deliver goods and services to customers

Operations Management

Cost measured in terms of the next best alternative forgone when a choice is being made

Opportunity Cost

occurs when a business grows internally, using its own resources to increase the scale of its operations and sales revenue.

Organic Growth

Political, Economic, Social and Technological

PEST Analysis

a decision-making framework used to analyze the opportunities and threats of the political, economic, social and technological environments on business activity

PEST analysis

Political, Economic, Social, Technological, Legal and Ecological

PESTLE Analysis

It is formed by two or more people.

Partnerships

are the carious methods that businesses use to aid their decision making such as SWOT analysis and decision trees.

Planning Tools

- political stability - trade policies - regional policies - lobbying or electioneering

Political influences

Consist of individuals with a common concern who seek to place demands on organizations to act in a particular way or to influence a change in their behavior.

Pressure groups

Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms

Primary Sector Business Activity

The part of the economy under the control of private individuals and businesses, rather than the government. Examples may include sole traders, partnerships and companies

Private Sector

Can only sell shares privately to friends or family

Private limited company

is a medium risk growth strategy that involves selling new products in existing markets.

Product Development

=total revenues-total costs

Profits

any measure taken by a government to safeguard its businesses from foreign competitors. This presents a threat for businesses trying to operate in overseas markets.

Protectionism

The part of the economy that is under control of the government. examples may include state health and education services, the emergency services and roading infrastructure

Public Sector

Can sell shares on the market

Public limited company

A business created between the private and public sectors with a social aim. (Healthcare, education)

Public-private partnership (PPP)

A subset of the tertiary sector and involves service jobs concerned with research and development, management and administration, and processing and disseminating information.

Quaternary Sector

Specific- Clear and well defined Measurable- objective has to be measured to see wether it is achieved or not Achievable- realistic Relevant- the objective has to be of use Time-specific- sufficient time frame

SMART

Social, Technological, Economic, Ecological, Political, Legal and Ethical

STEEPLE Analysis

The first stage in the planning process. Helps to brainstorm the perceived strengths, weaknesses, opportunities and threats.

SWOT Analysis

is a popular analytical tool used to assess the internal strengths and weaknesses and the external opportunities and threats of an organisation or a decision.

SWOT Analysis

refers to decision-making based on systematic and logical framework to remove subjectivity and emotions from decision-making.

Scientific Decision Making

Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothing and construction

Secondary Sector Business Activity

Refers to the notion that shareholders are the key stakeholder group as any business ultimately belongs to its shareholders

Shareholder concept

- lifestyles - social mobility - demographics - education - fashions or tastes

Social influences

One person owns and runs a business

Sole trader

Refers to the organization of people who have a common interest and collectively act to achieve that interest.

Special interest group (SIG)

Individuals or organizations that have a direct interest in the activities and performance of a business.

Stakeholders

The owners of a company. Shares in a company can be held by individuals and other organizations.

Stockholders

when two or more businesses cooperate in a business venture for mutual benefit, however the businesses remain completely independent organizations.

Strategic Alliance

Global objectives. Medium to long-term objectives set by senior managers

Strategic objectives

refers to any medium-to long-term plan of how a business intends to achieve its goals.

Strategy

Medium to short-term objectives set by middle managers.

Tactical objectives

are a method of protectionism whereby the domestic government taxes foreign imports

Tariffs

- technological improvements - new technology transfer - infrastructure - ICT - Research and development

Technological influences

Firms that provide services or products to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications

Tertiary Sector Business Activity

Land, Labour, Capital and Enterprise

The Factors of Production

Offering products that stand out from other products that are available on the market.

Unique selling point

Is the difference between a product's price and the total cost of the inputs that went into making it. It is the extra worth created in the production process

Value Added

Integration between firms that have similar operations but do not directly compete with each other.

Vertical integration

A philosophy, vision or set of principles which steers the direction and behaviour of an organization. Long-term objectives

Vision statement