IB Business Unit 1

Business

An organization that combines resources to produce goods and/or services to satisfy the needs and wants of customers.

Business activity

The process of producing goods and/or providing services to satisfy the needs and wants of consumers.

Needs

Essential goods or services necessary for survival and basic well-being.

Wants

Goods or services desired by consumers but not essential for survival.

Goods

Physical products that satisfy consumer needs or wants.

Services

Non-physical products or activities provided to satisfy consumer needs or wants.

Added value

The difference between the selling price of a product and the cost of the inputs used to produce it.

Opportunity cost

The value of the next best alternative forgone when a choice is made.

Specialization

When an individual, business or economy concentrates on producing a particular good, service or task.

Division of labour

When production is divided into separate tasks, with workers specializing in particular tasks.

Primary sector

The sector of the economy concerned with the extraction of raw materials from natural resources.

Secondary sector

The sector of the economy concerned with manufacturing and processing raw materials into finished or semi-finished goods.

Tertiary sector

The sector of the economy that provides services to consumers and other businesses.

Quaternary sector

The sector of the economy concerned with knowledge-based activities such as research, information technology and consultancy.

Entrepreneurship

The process of identifying a business opportunity, organizing resources and taking risks to establish and operate a business.

Entrepreneur

A person who identifies a business opportunity, organizes resources, takes risks and makes decisions to establish and operate a business.

Start-up

A newly established business.

Business opportunity

A situation in which an entrepreneur identifies a potential market need that could be satisfied by a business.

Risk

The possibility that an actual outcome will differ from the expected outcome.

Uncertainty

A situation in which future outcomes cannot be predicted with certainty because there is insufficient information.

Innovation

The introduction of new or significantly improved products, processes or methods.

Start-up capital

The finance required to establish and begin operating a new business.

Private sector

The part of the economy made up of organizations owned and controlled by private individuals or organizations.

Public sector

The part of the economy made up of organizations owned and controlled by the government.

For-profit organization

An organization that aims to generate profit for its owners.

Social enterprise

An organization that uses commercial activities to achieve social or environmental objectives while generating revenue.

Sole trader

A business owned and controlled by one person.

Unlimited liability

A legal situation in which the owner is personally responsible for all the debts of the business.

Partnership

A business owned and controlled by two or more people who share responsibility for the business.

Partnership agreement

A legal agreement that sets out the rights, responsibilities and arrangements between the partners of a business.

Privately held company

A company owned by shareholders whose shares are not available for purchase by the general public on a stock exchange.

Publicly held company

A company whose shares are available for purchase and sale by the general public, usually through a stock exchange.

Limited liability

A legal situation in which the owners' financial liability is limited to the amount they have invested in the business.

Shareholder

A person or organization that owns shares in a company.

Share

A unit of ownership in a company.

Dividend

A payment made by a company to its shareholders from its profits.

Cooperative

A business owned and controlled by its members, who work together to achieve shared economic or social objectives.

Non-profit organization

An organization that exists primarily to achieve social, environmental or community objectives rather than to distribute profits to owners.

Non-governmental organization (NGO)

An independent organization that operates to achieve social, environmental, humanitarian or other objectives rather than to make profits for owners.

Vision statement

A statement describing what an organization ultimately wants to become or achieve in the future.

Mission statement

A statement describing an organization's fundamental purpose and what it does.

Aim

A general statement of what an organization wants to achieve.

Objective

A specific and measurable target that an organization aims to achieve.

Strategy

A long-term plan of action designed to achieve an organization's objectives.

Tactic

A specific short-term action used to implement a strategy.

Strategic objective

A long-term objective that determines the overall direction of an organization.

Tactical objective

A medium-term objective that helps an organization achieve its strategic objectives.

Operational objective

A short-term objective concerned with the day-to-day activities of an organization.

Profit

The amount remaining after total costs are subtracted from total revenue.

Profit maximization

The objective of achieving the highest possible level of profit.

Profit satisficing

The objective of achieving a satisfactory level of profit rather than the maximum possible profit.

Survival

The objective of continuing to operate and avoiding business failure.

Growth

The objective of increasing the size or scale of a business.

Market share

The percentage of total market sales accounted for by a particular business.

Market leadership

The position of having the largest market share in a particular market.

Social objective

An objective aimed at achieving a positive social outcome.

Environmental objective

An objective aimed at reducing environmental harm or improving environmental sustainability.

Ethical objective

An objective based on moral principles and responsible business behaviour.

Corporate social responsibility (CSR)

The responsibility of a business to consider the social, environmental and ethical effects of its decisions and actions.

SMART objectives

Objectives that are specific, measurable, achievable, relevant and time-bound.

Stakeholder

An individual, group or organization with a direct interest in the operations and performance of a business.

Internal stakeholder

A stakeholder who is part of the organization, such as an employee, manager or shareholder.

External stakeholder

A stakeholder who is outside the organization but has an interest in its operations and performance.

Employee

A person who works for a business in return for payment.

Manager

A person responsible for planning, organizing and controlling the activities and resources of a business or part of a business.

Customer

An individual or organization that purchases goods or services from a business.

Supplier

An individual or organization that provides goods, materials or services to a business.

Competitor

A business that operates in the same market and competes for customers.

Financier

An individual or organization that provides finance to a business, such as a bank or other lender.

Government

The public authority that creates laws, regulations and policies affecting businesses.

Pressure group

An organized group that attempts to influence business decisions or government policy in order to achieve a particular objective.

Local community

The people living in the area affected by a business's activities.

Stakeholder conflict

A situation in which the interests or objectives of different stakeholders are incompatible.

Stakeholder cooperation

A situation in which different stakeholders have compatible interests and work toward mutually beneficial outcomes.

External environment

The factors outside a business that can influence its decisions, operations and performance.

STEEPLE analysis

A framework used to analyse the social, technological, economic, environmental, political, legal and ethical factors affecting a business.

Social factors

Changes in society, demographics, lifestyles, attitudes, values and consumer behaviour that affect a business.

Technological factors

Changes in technology that create opportunities or threats for a business.

Economic factors

Changes in economic conditions, such as inflation, interest rates, unemployment and economic growth, that affect a business.

Environmental factors

Natural and ecological factors that affect business activities and sustainability.

Political factors

Government policies, political conditions and decisions that affect businesses.

Legal factors

Laws and regulations that businesses must follow.

Ethical factors

Moral principles and values that influence whether business decisions and actions are considered right or wrong.

Change

A modification in the internal or external environment of a business that may require the business to adapt.

Business growth

An increase in the size or scale of a business, such as an increase in sales, output, market share or number of employees.

Internal growth

Growth achieved using a business's own resources, such as increasing sales, opening new branches or developing new products.

External growth

Growth achieved by combining with or taking control of another business.

Merger

An agreement in which two businesses combine to form one organization.

Takeover

When one business gains control of another business, usually by purchasing a controlling amount of its shares.

Acquisition

When one business purchases another business and gains control of it.

Joint venture

A business arrangement in which two or more organizations create and jointly own a separate business or project.

Strategic alliance

A cooperative agreement between two or more businesses that work together toward shared objectives while remaining independent organizations.

Franchising

A method of business expansion in which a franchisor gives a franchisee the right to use its brand, products and business model in return for fees or royalties.

Franchisor

The business that grants another party the right to use its brand and business model.

Franchisee

The individual or business that receives the right to operate using the franchisor's brand and business model.

Economies of scale

Reductions in average cost per unit resulting from an increase in the scale of production.

Diseconomies of scale

Increases in average cost per unit resulting from a business becoming too large to operate efficiently.

Internal economies of scale

Cost advantages resulting from the growth of an individual business.

External economies of scale

Cost advantages resulting from the growth of the industry in which a business operates.

Globalization

The increasing integration and interdependence of economies, markets and businesses around the world.