Business Management Concepts IBDP

what is the primary sector?

the primary sector is all the businesses that extract raw materials

what is the secondary sector?

the secondary sector transforms raw materials extracted by primary sector businesses into goods (manufacturing).

what is the tertiary sector?

the tertiary sector is the provision of services (banking, education, retail stores etc)

what is the quatenary sector?

the quatenary sector includes services that relate to data, knowledge, and IT (e.g. videogame/app development)

reasons to start entrepreneurship include…

• financial rewards

• innovation

• life-work balance

• filling in the market gap

• independence

• responsibility

• personal interest

what is the private sector?

the private sector encompasses organizations owned by private individuals who typically aim to make a profit

what is the public sector?

the public sector are organizations owned by the government that provide important services to citizens (e.g. healthcare, education)

what is a mission statement?

a statement of why the organization exists and helps guide how the firm acts and makes decisions

what is a vision statement?

a vision statement is a long term aspirational statement of who the firm wants to become in the future

what is CSR

Corporate social responsibility - focuses on how a company behaves from an ethical POV (its environment and social impact)

CSR can improve brand image and improve employee motivation, but may also lead to the increased conflict in a business due to the costs of acting in an ethical way.

what are stakeholders?

stakeholders are individuals or groups who are impacted by the actions of the business, wether directly or indirectly.

internal vs external stakeholders

• internal stakeholders

  • Those who are part of a business

  • includes employees and managers

• external stakeholders

  • those who are not part of a business

  • includes customers, suppliers, and the government

(its essential for a business to manage conflict between its stakeholders, as stakeholder objectives are often conflicting)

define internal growth

a company using its own resources to crow (cheaper + less risky)

define external growth

using a third party such as a partner to grow (faster + more risky and esxpensive)

internal growth strategies…

• acquisition

• joint venture

• strategic alliance

• franchising

external growth strategies…

• increasing market share

• developing new products

• market penetration

growing as a business entails benefits such as…

• earning more profits

• better recognition from customers

• greater access to financing

• attract more talent

staying small as a business entails benefits such as…

• better relationship building with customers

• owners can maintain control and ownership of the firm

economies of scale definition

when average costs fall as a result of the business operating on a large scale

diseconomies of scale defenition

when average costs increase as a result of the business producing more

multinational corporations benefits

they can access a wider customer base abroad giving customers more choice and signifiant employment opportunities

factors that influence HR planning

• demographic changes

• labour mobility

• immigration

• flexitime

• gig economy

4 main reasons why employees resist change…

1. Self interest

2. Misinformation

3. Low tolerance

4. Interpretation of circumstances

managing employee resistance to change can include:

1. clear communication

2. employee involvement

3. recognition and rewards

4. planned implementation

what is delegation?

when a manager entrusts a subordinate with a responsibility or task this often builds motivation and trust

what is the span of control?

the span of control is how many subordinates each manager is responsible for.

wide vs narrow span of control

• a wide span of control means the manager is responsible for a few employees

• a narrow span of control means the manager is only responsible for a few employees

what do levels of heirarchy show?

the various levels of formal authority within an organisation

what are chains of command

lines of authority for decisions/orders

• long = many lines of hierarchy

• short = few levels, faster communication

bureaucracy

• administrative systems, rules, and procedures

• ensures clarity and consistency

• can reduce creativity and innovation

• useful in contexts needing strict procedures (eg government)

centralized vs decentralized decision making

• centralized: few (senior managers) make decisions → faster, more control

• decentralized: decisions spread across organization → slower but empowers employees

neither approach is always the best — depends on business needs

delayering

removing levels of hierarchy → from tall to flat structure

saves costs

can improve communication and decision making

matrix structure

• combines people from different departments (e.g marketing, finance, HR)

• encourages collaboration across functions

flat structure (horizontal)

✅ Easier communication

✅ more informal relationships

❌ more authority/responsibility

❌ harder for close supervision

tall structure (vertical)

✅ clear expectations for rules and procedures

✅ more promotion opportunities

❌ slower, more complex decision making

❌ risk of departments not communicating with eachother

project based structure

• temporary teams from different departments

• mixes skills from different departments

• ❌ task prioritization, managing multiple projects

handys shamrock organization

• organises workers into three categories/groups

  • professional core: full time, essential employees

  • contingent workforce: temporary/short-term staff

  • outsourced vendors: external specialists for specific tasks/projects

• ✅ flexibility and cost savings

• ❌ lower motivation for contingent workers

scientific decision making

• based on data, facts, and objective analysis

• informed but slower process, depending on accurate data

intuitive decision making

• based on experience, insight, or ‘gut feel’

• faster, useful in urgent situations

• risk of personal bias

4 factors of production

• land

• labour

• capital

• enterprise

Features of an entrepreneur

• Risk-taking

• Innovation

• Persistence

Advantages of converting from privately held to publicly held company

• Capital influx (Advantage)

• Brand visibility (Advantage)

• Liquidity (Advantage)

Features of a cooperative

• Democratic Control (Advantage)

• Shared Profits

• Limited Liability (Advantage)

Features of a privately held company

• Limited liability (Advantage)

• Shares cannot be sold on the public stock market

• Separate Legal Entity (Advantage)

Features of a publicly held company

• Limited liability (Advantage)

• Shares can be bought on the public stock market (Advantage)

• Seperate legal entity (Advantage)

• Final accounts must be publicized

Disadvantages

• Lack of privacy (Disadvantage)

• Dilution of control (Disadvantage)

Features of a NGO

• Social or Environmental Mission

• Independent from government control

• Heavy reliance on volunteers

What is a pressure group?

A pressure group is an organized group seeking to influence business or government actions to achieve change.

Franchising (advantages and disadvantages of franchisor)

Franchising is giving licensing rights to a firm to sell goods and services using your brand or trademark products.

Advantages:

• Rapid Expansion

• Regular Income

Challenges:

• Loss of Control

• Reputational Risk

Types of internal economies of scale

1. Financial economies

2. Marketing economies

3. Managerial economies

4. Technical economies

5. Purchasing economies

6. Risks bearing economies

7. Specialization economies

Takeover

A company controlling stake in another company (owning more than 50% of the shares)

Internal and external forms of growth

Internal: Using your own ability to grow.

• Retained profit

• Selling shares to the public

External: Using outside factors to grow.

• Takeover

• Franchising

• Mergers and acquisitions

External economies of scale

Advantages that accrue to an industry as a result of growth of firms within the industry.

Advantages

• Increased research and development

• Increased raw materials and support service

• Increased technical knowledge

gig economy defenition

The gig economy workers that are typically on short-term, flexible and temporary contracts.

Chain of command defenition

the chain of command is who delegates a task to who

it shows the reporting lines within a company

levels of hierarchy definition

number of layers of formal authority in an organization

autocratic leadership style

autocratic leadership is strict and rigid management where decision making is centralized

ADVANTAGES

• Easier coordination

• There is efficiency in the decision making process

DISADVANTAGES

• Employees may not feel heard or seen

• Employee motivation may decrease

• The company may not be as successful or efficient in tasks

situational leadership style

situational leadership style is flexible leadership that responds to the present need

ADVANTAGES:

• appropriate decision making based on the situation

• high motivation for staff

DISADVANTAGES:

• decision making will not be as fast

democratic leadership style

democratic leadership style means the decisions are made via voting

DISADVANTAGES:

• popularity contest/decisions are made based on persuasive skills as opposed to facts and credentials.

• slow decision making process.

laissez fair leadership style

laissez fair leadership style means there is minimal involvement of authority within day to day work of employees

ADVANTAGES:

• high motivation for employees

• the level of employee input increases

DISADVANTAGES:

• inefficiency with employees (employees may not want to do something)

paternalistic leadership style

paternalistic leadership style is where actions are taken in the best interest of the employees

ADVANTAGES:

• High employee motivation

• Employees have a say in the management

• Provides an inclusive workspace

DISADVANTAGES:

• Slow decision making process

• the output may not yield the same amount as competitors

fringe benefits

fringe benefits are financial benefits of a business in addition to the salary (e.g. transport allowances).

Induction training-features

induction training is training new people

knowledge shared to the employees is new knowledge

Vrooms expectancy theory

vrooms expectancy theory states that people would have no motivation to undertake a task without reward at the end (e.g. working with no pay)

maslows motivational theory

*see image*

herzbergs two factor theory (motivation)

hygiene factors: clean environment, respect, company policy, status.

motivators: money, pay, salary, bonuses, promotion

taylors scientific theory (motivation)

taylors scientific theory states that you do work based on the input that youve been given (more money = more work)

mclellands aquired needs theory (motivation)

states that:

• some people work because of the need to achieve,

• others are motivation by power,

• others are motivated by the need for affiliation

equity and expectancy theory (motivation)

input = output

deci and ryans theory (motivation)

deci and ryans theory states there are three things that motivate someone intrinsically (internally):

1. autonomy (controlling your own destiny/fulfillment)

2. competence

3. connection with others

Types of financial rewards

• performance related pay

• fringe benefits (anything paid in addition to salary)

• employee share ownership

Types of training

• induction training (training new people)

• on the job training (training current staff while on the job)

• off the job training (training current staff while away from the work station)

Non-financial reward

Non-financial rewards are non-monetary awards such as

• job enrichment

• enhancing someones role

• job rotation

• job enlargement

Appraisal methods

appraisal is performance review

four methods include:

1. formative (day-to-day reviewing of jobs)

2. summative appraisal (at the end of the year)

3. 360º (two people appeasing each other)

4. self-appraisal (evaluating yourself)

power culture (zeus)

an organization that is based on power (e.g. military)

• strict command

• fast decision making

role culture (apollo)

an organization where formal structures and procedures facilitate the smooth running

task culture (athena)

an organization where the role of managers are supported by clear objectives

person culture (dionysus)

an organization where individuals interests take center stage (the interest of the employees)