IB Business Management Topics 1-5 ALL

Public limited company (PLC)

A limited company, often a large business, with the legal right tom sell shares to the general public. Its share price is quoted on the national stock exchange

Microfinance

A means of extending credit, usually in the form of small loans with no collateral, to nontraditional borrowers such as the poor in rural or undeveloped areas.

Ansoff's Matrix

A model used to show the degree of risk associated with the four strategies of *market penetration*, *market development*, *product development* and *diversification*

Shareholder

A person or institution owning shares in a limited company

Structural Change

A shift in the relative share of national output and employment that is attributed to each business sector; i.e. primary, secondary and tertiary sectors

Private limited company

A small to medium-sized business that is owned by shareholders who are often members of the same family. The company cannot sell shares to the general public

Mission statement

A statement of the business's core aims, phrased in a way to motivate employees and to stimulate interest by outside groups

Vision statement

A statement of what the organisation would like to achieve or accomplish in the long term

Pressure groups

A type of special interest group which consist of individuals with a common concern who seek to place demands on organisations to act in a particular way or to influence change in their behaviour (e.g. Greenpeace and PETA)

Public corporation

A business enterprise owned and controlled by the state - also known as a nationalised industry or a state owned enterprise

Sole trader

A business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits

Partnership

A business which is formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities

Social enterprise

A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners

Share

A certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights

Code of conduct (ethical code)

A document detailing a company's rules and guidelines on staff behaviour that must be followed by all employees

Ethical code (code of conduct)

A document detailing a company's rules and guidelines on staff behaviour that must be followed by all employees

SWOT analysis

A form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence the future direction and success of a business.

Cooperatives

A jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit.

Joint and several liability

A legal concept that makes each partner in a partnership legally liable for all the debts of the partnership.

Non-governmental organisation (NGO)

A legally constituted body with no participation or representation of any government

Social audit

An independent report on the impact a business has on society. This can cover pollution levels, health and safety record, sources of supplies, customer satisfaction and contribution to the community

Silent partner

An investor of a partnership who is not directly involved in the daily running of the business

Non-profit organisation

Any organisation that has aims other than making and distributing profit and which is usually governed by a voluntary board

Aims

Are the long-term goals of business. They are a general statement of a firm's purpose or intentions and tend to be qualitative in nature

Objectives

Are the relatively shorter term targets of an organisation. They tend to be expressed as SMART objectives

Environmental audit

Assess the impact of a business on the environment (independent audit best)

Land

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

Private Sector

Comprises businesses owned and controlled by individuals or groups of individuals

Public Sector

Comprises organisations accountable to and controlled by central or local government (the state)

Opportunity Cost

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

Consumer Services

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

How easy is it to reverse or change strategic/corporate objectives?

Difficult to reverse or change once established

Mixed economy

Economic resources are owned and controlled by both private and public sectors

Free-market economy

Economic resources are owned largely by the private sector with very little state intervention

Command economy

Economic resources are owned, planned and controlled by the state

*Internal* or *external* factors?: *Opportunities*

External

*Internal* or *external* factors?: *Threats*

External

Primary Sector Business Activity

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

Secondary Sector Business Activity

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

Tertiary Sector Business Activity

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

Corporate objectives (strategic objectives)

Important, broadly defined targets that a business much reach to achieve its overall aim

Strategic objectives (corporate objectives)

Important, broadly defined targets that a business much reach to achieve its overall aim

IPO

Initial public offering, a corporation's first offer to sell shares to the public

*Internal* or *external* factors?: *Strengths*

Internal

*Internal* or *external* factors?: *Weaknesses*

Internal

What resources are committed to tactical/divisional objectives?

Involve fewer resources than strategic objectives

Public-private partnership (PPP)

Involvement of the private sector, in the form of management expertise and/or financial investment, in public sector projects aimed at benefiting the public

Value Added

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

Stock exchange

Is the market place for trading shares of public limited companies; e.g. the New York Stock Exchange (NYSE)

The Factors of Production

Land, Labour, Capital and Enterprise

External constraints

Limiting factors in decision-making that are beyond the organisation's control.

Internal constraints

Limiting factors in decision-making that can be controlled by the organisation

What is the time for strategic/corporate objectives?

Longer term goals for the whole organisation (next few years)

Business Functions

Marketing, Finance, Human Resource Management and Operations Management

Ethics

Moral guidelines that determine decision making

How easy is it to reverse or change tactical/divisional objectives?

Often easier to change or reverse

What resources are committed to strategic/corporate objectives?

Often high-risk objectives involving many resources

Businesses

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

Stakeholders

People or groups of people who can be affected by, and therefore have an interest in, any action by an organisation

Entrepreneurs

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

Capital Goods

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

Common objectives

Profit maximisation Profit satisficing Growth Increasing market share Survival

Tactics

Refer to the short-term methods that firms can use to achieve their objectives

Strategy

Refers to the various methods that businesses can use in an attempt to achieve their mission or vision. Strategies then form long-term plans for the whole organisation

Factors of Production

Resources needed by businesses to produce goods or services

Enterprise

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

S.M.A.R.T. business objectives

S-Specific M-Measurable A-Achievable R-Realistic and Relevant T-Time specific

Who sets strategic/corporate objectives?

Set by board of directors or very senior managers

Who sets tactical/divisional objectives?

Set by senior managers for each department or division

Operational (tactical) objectives

Short-term or medium-term goals or targets which must be achieved for an organisation to attain its corporate objectives

Tactical (operational) objectives

Short-term or medium-term goals or targets which must be achieved for an organisation to attain its corporate objectives

What is the time for tactical/divisional objectives?

Shorter-term goals (6-12 months)

Entrepreneur

Someone who takes the financial risk of starting and managing a new venture

Market penetration

The *objective* of achieving *higher market shares* in *existing markets* with *existing products*

Marketing

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

Product development

The development and sale of *new products* or* new developments of existing products* in *existing markets*

Capital

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)

Targets

The level of performance or rate of improvement needed in the performance measure (e.g. each salesperson has been set a target of three new customers a month, each department is required to find savings equal to ten per cent of its annual budget)

Finance

The management of money and credit and banking and investments

Operations Management

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

Unlimited liability

The owner(s) is personally and fully responsible for all losses and debts of the business

Public Sector

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

Private Sector

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

Managers

The people responsible for the day-to-day running of the organisation, or a department within the organisation. They are accountable to directors and responsible for their staff teams

Labour

The physical and mental human effort used in the production process

Consumer Goods

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

Industrialisation

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

Human Resource Management

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

Diversification

The process of selling *different, unrelated* goods or services in *new markets*

Nationalisation

The sale of private sector businesses to the government. The sale may be voluntary, forced, coerced or the assets simply expropriated

Privatisation

The sale of public sector organisations to the private sector

Directors

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

Division of Labour

The specialisation of workers in the provision of goods and/or services by breaking a job down into particular roles or components that are repeated by the same workers

Market development

The strategy of selling *existing products* in *new markets*

Stakeholder concept

The view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders

Internal stakeholders

These stakeholders are members of the organisation; i.e. the employees, the shareholders (who own the business), managers and directors of a business

External stakeholders

These stakeholders do NOT form part of the organisation but have a direct interest or involvement in the actions of the organisation. Examples include customers, suppliers and the government

Corporate social responsibility (CSR)

This concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment

Microfinance providers

Those organisations who extend credit, usually in the form of small loans with no collateral, to nontraditional borrowers such as the poor in rural or undeveloped areas.

Limited liability

the only liability, or potential loss, a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder