IB BM Unit 1 Knowledge

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List Stages of Chain of Production

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34 Terms

1

List Stages of Chain of Production

Extraction → Manufacturing → Services → Consumers

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2

Business Sectors - List 4 and describe

  • Primary (extraction of natural resources i.e. farming, fishing, mining)

  • Secondary (manufacturing / construction, heavy and light industries i.e. car manufacture, clothing)

  • Tertiary (provide services i.e. retail, healthcare, entertainment, hospitality)

  • Quarternary (intellectual knowledge i.e. researchers, education)

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3

Entrepeneur

An individual who plans, organises and manages a business, taking financial risk to do so.

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4

Intrapeneur

An employee/s who are given more creative freedom within a business.

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5

Challenges with entrepeneurship

Production problems, sources of finance, lack of knowledge/experience

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6

Business opportunities

GETCASH

  • Growth 

  • Earnings 

  • Transfer 

  • Challenge 

  • Autonomy 

  • Security 

  • Hobbies 

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7

Organisational sectors (2)

  • Public sector: government owned and controlled, providing goods or services to the public, non-profit.

  • Private sector: owned and controlled by private individuals/businesses, aim to produce profit.

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8

Types of for-profit businesses - list 4 and key features

  • Sole trader: 1 owner, easiest to set up, unlimited liability.

  • Partnership: 2-20 partners, requires partnership deed, all have unlimited liability.

  • Privately held: up to 50 shareholders, not listed on a stock exchange, limited liability.

  • Publicly held: unlimited shareholders from stock exchange, often held by investment groups, limited liability.

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9

Unlimited liability

Business owner/s personally liable for any debts, and can be sued personally. There is no protection of owners’ personal assets.

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Limited liability

Achieved through legal ‘incorporation’. Business owner/s not personally liable for any debts, and cannot be sued personally. There is protection of owners’ personal assets.

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IPO / floating

Initial public offering. When a privately held company goes public on a stock exchange.

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12

For-profit social enterprises - list 3 and describe

  • Co-operative: Member owned, democratic voting, equal rights, service-oriented, profit sharing company (food co-op)

  • Public private partnerships: Cooperation of both public and private sector, such as infrastructure projects.

  • Microfinance providers: banking service provided to low-income individuals or groups who would not otherwise have access to finance services.

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13

Non-profit social enterprises - list 2 and describe

  • Non-government organisation (NGO): Business who provides goods/services that would be characteristic of public sector businesses - think unicef in aus.

  • Charities: all profits go to charitable foundations, like salvos.

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14

Stages of organisational objectives - list 4 and describe.

  1. Vision: Longest term, broad and aspirational, rarely updated, goal-setting.

  2. Mission: Medium-long term, declaration of purpsoe, immediate time period with specific targets to achieve.

  3. Strategies: Short-medium plans of action, aiming to achieve the mission.

  4. Tactics: Individual short-term plans of action, support ‘strategies’, frequently created.

Each stage supports the above stages.

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General business objectives - list and describe

ACRONYM TBC pegg or penis thing

  • Growth: increase size of business according to a given metric

  • Profitability: maximise profits of business

  • Ethical: Applying moral principles that guide decision making.

  • Protect shareholder value: Ensure shareholders are happy by providing high returns.

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Benefits and drawbacks of ethical business practices

Benefits:

  • Increase CSR

  • Customer loyalty

  • Staff motivation

Weaknesses

  • Compliance costs

  • Stakeholder conflics (subjectivity)

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Corporate Social Responsibility

CSR is the conscientious consideration of environmental impact and legal responsibiliuty a business has above the legal requirements.

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18

What is a stakeholder?

A stakeholder is any individual or group with a vested interest in a given business, both internally and externally.

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19

Define internal stakeholder - list 3 and describe their interest.

Internal stakeholders are members of the organisation, affected by performance and activities of the business.

  • Employees: Looking for improvement in working conditions, benefits, job security, job progression.

  • Managers and directors: producing a profit for survivial and growth.

  • Shareholders: voting rights, maximising dividends, capital gains via shares.

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20

Define external stakeholder - list 3 of 6 and describe their interest.

External stakeholders are not a part of the business, but are affected directly or indirectly by its operations/performance.

  • Customers: quality of goods, price

  • Government: economic impacts, taxes, legality of business.

  • Financiers: provide sources of finance to the company, looking for return on investment.

  • Competitors

  • General community

  • Pressure groups

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21

What is stakeholder conflict?

Conflict that arises when a business cannot simultaneously meet the objectives of all of its stakeholders’ objectives.

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22

What are the external environmental factors that affect a business?

STEEPLE

  • Socio-cultural

  • Technological

  • Ethical

  • Environmental

  • Political

  • Legal

  • Economical

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23

What is an economy of scale?

When the average cost of production decreases due to a business benefitting from increased scale.

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What is a diseconomy of scale?

When a business becomes ‘too big’, causing inefficiencies that increase the average cost of production.

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25

List and describe 4 of 7 internal economies of scale.

  • Technical: advanced machinery can increase efficiency and mass-production.

  • Financial: can secure loans at lower interest rates due to lower ‘percieved risk’.

  • Manegerial: can employ stronger managers, increasing productivity and efficiency.

  • Specialisation: division of labour results in specialised roles enhancing efficiency.

  • Marketing economies

  • Purchasing economies

  • Risk-bearing economies

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26

List and describe 2 of 4 external economies of scale.

  • Regional specialisation: certain locations are known for specialising in specific industries, so firms have access to specialist labour (silicon valley).

    • Technological economies: Technological innovations as a whole increase productivity.

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27

List and describe 2 of 4 diseconomies of scale.

  • Communication diseconomies: when a business’ organisational tstructure becomes overly complicated, causing delays and inefficiencies in communication.

  • Geographical diseconomies: occurs when a business has a widespread base of operations across multiple locations/regions, leading to logistical and communication challenges.

  • Management diseconomies

  • Cultural diseconomies

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28

Merits of small vs large organisations.

Small:

  • Easy to manage and control/adapt

  • Personalised services

  • “human” business

Large

  • Afford specialists and use economies of scale

  • Access to sources of finance

  • Afford R&D

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29

Distinguish between internal and external growth.

Internal:

  • Growth using a business’ own capabilities, increasing the scale of operations, increasing market share, etc.

External:

  • Occurs through dealing with external organisations, incl. mergers, acquisitions, takeovers, joint ventures, strategic alliance.

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30

List and describe 6 methods of external growth.

  • Merger: When to businesses agree to conjoin into one single new company with its own legal identity.

  • Acquisition: When a company buys a controlling stake in another firm, in agreeance with current shareholders.

  • Takeover: When a company buys a controlling stake in another firm in a hostile manner, without agreeance from current shareholders.

  • Joint venture: When 2+ businesses set up a new legal entity, and split up costs, risk, and profit.

  • Strategic alliance: When 2+ businesses work together on a single business project for mutual benefit without the creation of a new entity.

  • Franchising: Entity buys liscence to trade under the image of another company, in which the franchisor company recieves a royalty and the franchisor must follow specific regulations outlined in a sales agreement.

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31

Define and give reasons for the growth of Multi-National Corporations (MNCs).

A MNC is a company that operates in 2+ countries. MNC’s grow significantly due to the benefits of supersized businesses, including increased customer base, reduced risk, and economies of scale.

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32

Define a tariff.

A tariff is a tax imposed on imported goods.

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33

Distinguish between horizontal and vertical external growth.

  • Horizontal external growth involves acquiring/merging with a company at the same stage of production (usually a direct competitor).

  • Vertical external growth involves acquiring/merging with a company in a different stage of production.

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34

Distinguish between forwards and backwards integration as a form of vertical external growth.

Integration as a form of growth involves a company growing into other stages of their current chain of production.

  • Backwards integration is when a busines acquires/merges with a supplier that is earlier in their current chain of production.

  • Forwards integration is when a business acquires/merges with a business further forward in their chain of production, usually to distribution.

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