IB BM Unit 1 Knowledge

List Stages of Chain of Production

Extraction → Manufacturing → Services → Consumers

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)

Entrepeneur

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

Intrapeneur

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

Challenges with entrepeneurship

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

Business opportunities

GETCASH

• Growth 

• Earnings 

• Transfer 

• Challenge 

• Autonomy 

• Security 

• Hobbies 

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.

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.

Unlimited liability

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

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.

IPO / floating

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

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.

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.

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.

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.

Benefits and drawbacks of ethical business practices

Benefits:

• Increase CSR

• Customer loyalty

• Staff motivation

Weaknesses

• Compliance costs

• Stakeholder conflics (subjectivity)

Corporate Social Responsibility

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

What is a stakeholder?

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

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.

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

What is stakeholder conflict?

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

What are the external environmental factors that affect a business?

STEEPLE

• Socio-cultural

• Technological

• Ethical

• Environmental

• Political

• Legal

• Economical

What is an economy of scale?

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

What is a diseconomy of scale?

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

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

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.

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

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

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.

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.

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.

Define a tariff.

A tariff is a tax imposed on imported goods.

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.

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.