IB buisness management

Consumer Goods

Are sold to the general public rather than to other businesses(B2C).

Example: video game, burger, iPhone

Capital (producer) Goods

Are products purchased by other businesses( B2B)

Example: oil, tree, land, machinery, factories, raw materials

Services

Are intangible products

Example: car wash, haircut, video rental

Profit

The positive difference between total revenue and total cost

Revenue

The inflow of money usually from the sale of products

Cost

The outflow of money often to finance production

Four Factors of Production

Land

Labour

Capital

Entrepreneurship

Land (factor of production)

Includes all natural resources that are available for production

Example: water, oil, fish, physical land, metals, etc.

Labour(factor of production)

Includes the physical and mental effort of people used in production of products

Capital (factor of production)

Includes all non natural (manufactured) resources that are used in the production or creation of other products

Example: Money, buildings, equipment, machinery, vehicles

Enterprise or Entrepreneurship (factor of production)

Refers to the management organization and planning of the other factors of production

Primary Sector Business

are involved in the extraction, harvesting, and conversion of land (natural) resources as a factor of production

Usually the dominant sector in nations with less developed economies

Examples: agriculture, fishing, mining, forestry, oil extraction

Secondary Sector Business

manufacturing industry; use raw material and other resources for the production of finished and usable goods

Usually the dominant sector in developing nations

Helps nations produce wealth since finished good cam be exported

Example: building, processing food, manufacturing, clothes, publishing firms

Tertiary Sector Business

provide services to private and corporate customers

Usually the dominant sector in developed nations

Example: retail, banking, healthcare, education, entertainment

Chain of Production (3 business sectors)

This tracks the stages of production for an item or service from extraction of the raw material until delivery of the finished product to the final customer

Four Functional Areas of a Business

Finance

Human Resources

Marketing

Operations

Finance Area of a Business

responsible for managing the firm's money

Human Resources Area of a Business

responsible for managing the personnel (labor) of the organization

Make decisions relating to training, recruitment, pay and benefits

Marketing Area of a Business

Responsible for identifying and satisfying consumer wants and needs to ensure that the firm's products sell

4 P's of Marketing

1.Product: ensure goods and services meet customers requirements

2.Place: decide on best pricing methods to sell product and generate profit

3.Price: ensure goods and services are available for purchase in convenient locations

4.Promotion: inform customers about product and its strengths

Operations Area of a Business

Responsible for the process of converting raw materials into finished goods

Private Sector Business

Any business owned, financed, and controlled by private individuals; not owned by the government

In almost every country, most business activity is in the private sector

Main goal of most private sector business is to make a profit

Public Sector Business

any organization that is accountable to and controlled by a central or local government

They provide essential goods and services

Examples of Public Sector Businesses

•Defense (armed forces)

•Health and education

•Law and order

•Some strategic industries (hydro, sewage)

Who do some organisations belong in the Public Sector

•Access - basic services are available to all regardless of location or income

Education, health care, public parks etc

•Quality- to avoid waste: high quality services that do not cut corners

Postal services, national defense etc

•Equity - to protect citizens and businesses using the police, courts and etc

To reduce unemployment, governments are a large employer of teachers, doctors and nurses

Sole Trader

A sole trader business is one in which one person provides the permanent license and in return has full control of the business and is able to keep all of the profits. All sole traders have unlimited liability.

Advantages of Sole Trader

•Easy to set up

•Owner has complete control

•Owner keeps the profits

•Able to chose times and patterns of working

•Business can be based on skills/interests of owner

•Able to establish personal relationship with staff and consumers

Disadvantages of Sole Trader

•Unlimited liability- all of owners assets are at risk

•Often faces fierce competition from larger firms

•Difficult to raise funds

•Long hours to make business pay and to keep business alive

•Lack of continuity - when the owner dies, the business dies too

Owner is unable to specialize in areas of the business that are most interesting as he/she I s responsible for the management of the business

Partnership

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

Advantages of Partnership

•Partners may specialize in different areas of the business.

•Shared decision-making

•Additional capital injected by each partner.

•Businesses losses shared between partners.

•Greater privacy and fewer legal formalities than corporate organizations (companies)

Disadvantages of Partnership

•Unlimited liability for all partners.

•Profits are shared

•As with sole traders, no continuity and the partnership will have to be reformed in the event of the death of one of the partners.

•All partners bound by the decisions of any one of them.

•Not possible to raise capital from selling shares.

•A sole trader, taking on partners, will lose independence of decision-making.

Private Limited Company

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

Advantages of Private Limited Company

•Shareholders have limited liability

•Separate legal personality

•Continuity in the event of the death of a stakeholder

•Original owner is still often able to retain control

•Able to raise capitals from sales of shares to family, friends and employees

•Greater status than an unincorporated business

Disadvantages of Private Limited Company

•Legal formalities involved in establishing the business

•Capital cannot be raised by sale of shares to the general public

•Quite difficult for shareholders to sell shares

•End-of-year accounts must be sent to companies house-available for public inspection there (less secrecy over financial affairs than sole trader or partnership)