Business Organization & Environment Notes (IB)

Business

An organization engaged in commercial, industrial, or professional activities that can be for-profit or non-profit.

Factors of Production

The resources used by businesses to produce goods and services, including land, labor, capital, and enterprise.

Outputs

The goods and services produced by businesses.

Goods

Tangible items that can be seen and touched, such as shoes or furniture.

Services

Intangible items that cannot be seen or touched but have visible results, such as hairdressers' services or financial services.

Consumer Goods

Goods bought by individuals for personal use, such as food or clothing.

Producer Goods

Goods used by businesses to produce other goods, such as machinery or equipment.

Human Resources

The function responsible for managing people in an organization, including recruitment and training.

Finance and Accounting

The function responsible for managing the financial operations of an organization and recording transactions.

Marketing

The function responsible for anticipating, identifying, and satisfying the needs and wants of consumers through promoting and selling products or services.

Operations Management/Production

The function responsible for managing the resources used for the production of goods and services.

Private Sector

Organizations owned, controlled, and managed by private individuals to make a profit.

Public Sector

Organizations owned, controlled, and managed by the government to provide essential goods and services for the general public.

Sole Traders

Businesses owned and run by one individual with no legal distinction between the owner and the business.

Partnerships

Businesses owned by two or more people who share the ownership, profit, and liabilities.

Incorporated Organizations

Organizations that are legal entities separate from their owners, with limited liability for shareholders.

Private Limited Companies

Companies that are privately owned, have limited liability, and cannot sell shares on national stock markets.

Public Limited Companies

Companies whose shares are traded on national and international stock exchanges, allowing the public to buy and sell shares.

Entrepreneurship

The act of demonstrating enterprise and initiative to make a profit.

Intrapreneurship

The act of demonstrating entrepreneurial thinking within a large organization to develop new products or services.

Public Limited Company (PLC)

A type of company that requires a minimum share capital and allows anyone to buy shares. Shareholders have voting rights and can control the business if they own more than 50% of the shares.

Separation of Ownership and Control

The situation where the decision-makers (directors) of a company are not the owners. This can cause problems if the directors do not act in the shareholders' interests.

Advantages of Companies

Access to large amounts of capital through selling shares, legal continuity, dividends for shareholders, economies of scale, specialist managers and employees, better customer recognition, and brand loyalty.

Disadvantages of Companies

Lack of confidentiality due to public accounts, less flexibility with the risk of diseconomies of scale, more standardized with less personal service, high set-up costs due to legal requirements, and potential loss of control for original owners.

For-Profit Social Enterprises

Businesses that aim to make a profit while also making a positive impact on the world. Examples include cooperatives, microfinance institutions, and public-private partnerships (PPPs).

Non-Profit Social Enterprises

Organizations that reinvest any surplus income for the benefit of their members and operate independently from the government. Examples include charities and non-governmental organizations (NGOs).

Vision Statement

A general statement that describes where a business wants to be in the future and the values it holds.

Mission Statement

A concise statement that defines the purpose and primary objectives of an organization, stating "who we are and what we do."

Aims

Broad statements of intent that describe what an organization wants to achieve and where it wants to be in the future.

Objectives

Specific targets required to achieve an organization's aims, defined in measurable outcomes.

Business Strategy

A plan that outlines how an organization will achieve its corporate objectives.

Business Tactics

Operational activities undertaken regularly to implement the business strategy.

SMART Objectives

Objectives that are Specific, Measurable, Achievable, Relevant, and Time-bound.

Hierarchy of Objectives

The order in which objectives are set, starting with survival as the most basic goal and progressing to long-term strategic aims.

Changes in Internal and External Environments

Internal changes refer to factors within a business's control, while external changes are factors outside of its control. Both types of changes can present opportunities or threats to the business.

Ethical Objectives

Moral principles and values that guide the behavior of an organization and its stakeholders.

Corporate Social Responsibility (CSR)

The positive role of an organization in its environment and its social impact. It encompasses the ethical objectives of the organization.

Ethical decisions

Decisions that go beyond legal compliance and consider the ethical implications of a business action.

SWOT analysis

An internal audit that assesses a business's strengths, weaknesses, opportunities, and threats.

Stakeholders

Individuals and groups with a vested interest in the success and operations of a business.

Stakeholder analysis

Identifying and sorting stakeholders based on their impact on a proposed action and the impact the action will have on them.

External environment

Activities and events outside a firm that affect its operations and choices.

STEEPLE analysis

A classification of the external environment that considers social, technological, economic, environmental, political, legal, and ethical factors.

Economies of scale

Cost advantages that a business gains as it grows in size.

Internal growth

Organic growth achieved through a business's own resources and activities.

External growth

Inorganic growth achieved through mergers or takeovers.

Small business advantages

Benefits of being a small business, such as focus, exclusiveness, personalized service, and less competition in niche markets.

Big business advantages

Benefits of being a large business, such as economies of scale, brand loyalty, market leader status, access to funds, and long-term survival.

Mergers and acquisitions (M&As)

The joining of two firms, either through a merger or acquisition, to form a larger business entity.

Joint ventures

An agreement between two or more organizations to undertake a specific business activity for a limited period of time, sharing profits and investment.

Strategic alliances

Collaborative agreements between two or more firms to pursue common goals and commit resources, with each firm maintaining its independence.

Franchising

An agreement where a business (franchisor) sells rights to another business or individual (franchisee) to use its brand name, logo, and products/services in return for a fee or royalty.

Horizontal mergers

Mergers between firms in the same industry and sector, aiming to increase market share and achieve cost economies.

Vertical mergers

Mergers between firms in different sectors, either forward or backward integration, to gain control over distribution channels or ensure supply.

Conglomerate mergers

Mergers between firms in different businesses and sectors, diversifying activities and spreading risk.

Fishbone diagram

A visual tool used to identify the causes of a problem or event, with the main problem represented as the head of a fish and the causes as bones.

Decision tree

A diagrammatic representation of options and probabilities used to make decisions in uncertain circumstances, with squares representing decision points and circles representing chance nodes.

Force field analysis

A method to analyze the balance between driving forces (promoting change) and restraining forces (hindering change) in order to develop strategies for change management.

Gantt chart

A visual representation of project progress, showing tasks, their start and end dates, relationships between tasks, and resource allocation.

Qualitative data

Data that is descriptive in nature and focuses on qualities or characteristics rather than quantities or numbers.

Quantitative data

Data that is numerical in nature and can be measured or counted.

Interdependent tasks

Tasks that rely on each other and cannot be completed independently.

Deadlines (milestones)

Specific dates or timeframes set for the completion of certain tasks or goals.

Erosion of work quality

The gradual decline or deterioration in the quality of work due to prioritizing meeting deadlines over maintaining high standards.