IB Business Management Key Terms & Toolkit Flashcards

Comprehensive vocabulary flashcards generated from the IB Business Management study guide, covering Units 1–5, essential financial formulas, and the Business Management Toolkit (BMT).

Stakeholder

Any individual or group with an interest in, or affected by, the activities/decisions of a business.

Mission statement

A statement of an organisation’s core purpose and values — why it exists.

Entrepreneur

An individual who identifies a business opportunity and takes on the risk of organising resources to exploit it.

Sole trader

A business owned and run by one person, with unlimited liability.

Partnership

A business owned by 2+ people who share control, profit and (usually) unlimited liability.

Privately held company (Ltd)

A company whose shares are not traded on a public stock exchange; owned by a small group of shareholders.

Publicly held company (plc)

A company whose shares are traded on a public stock exchange, open to the public to buy.

Corporate Social Responsibility (CSR)

A business’s voluntary commitment to operate in an economically, socially and environmentally sustainable way, beyond legal requirements.

Non-governmental organization (NGO)

A non-profit organisation, independent of government, working toward a social/humanitarian/environmental goal.

Economies of scale

The cost advantages a business gains as output increases, lowering average cost per unit.

Diseconomies of scale

Rising average costs that occur when a business grows too large to manage efficiently.

Merger

Two firms combine to form a new, single entity by mutual agreement.

Acquisition (takeover)

One firm buys a controlling stake in another firm.

Joint venture

Business cooperation that creates a brand-new, separate legal company owned together by the partner businesses

Strategic alliance

An agreement between businesses to cooperate (e.g. share technology or distribution) without creating a jointly owned entity.

Franchising

A business (franchisor) grants another party (franchisee) the right to trade using its name, systems and branding, usually for a fee/royalty.

Multinational company (MNC)

A business that owns or controls production/service operations in more than one country.

Delegation

The passing down of authority (not ultimate responsibility) from a manager to a subordinate to complete a task.

Span of control

The number of subordinates directly supervised by one manager.

Chain of command

The line of authority/communication running from the top to the bottom of an organisation.

Delayering

The removal of one or more levels of hierarchy from an organisational structure.

Centralization

Decision-making power concentrated at the top of an organisation.

Decentralization

Decision-making power spread to lower levels or branches of an organisation.

Matrix structure [HL]

A structure combining functional and project-based reporting lines, so employees report to more than one manager.

Maslow’s Hierarchy of Needs

Theory that people are motivated by satisfying needs in order: physiological, safety, social, esteem, and self-actualisation.

Herzberg’s Motivation-Hygiene Theory

Distinguishes hygiene factors (pay, conditions — prevent dissatisfaction) from motivators (recognition, responsibility, growth — actually motivate).

Taylor (Scientific Management)

Theory that workers are motivated purely by money and should be closely supervised, with tasks broken into simple, repetitive steps and pay linked to output.

McClelland’s Acquired Needs Theory [HL]

Theory that people are driven by varying degrees of three needs: achievement, affiliation and power, shaped by life experience.

Equity theory [HL]

Motivation theory stating that motivation depends on perceived fairness of rewards versus effort, relative to others.

Victor Vroom’s Expectancy theory [HL]

Motivation theory stating that motivation depends on the belief that effort will lead to performance and a valued reward.

Job enrichment

Adding more meaningful or challenging tasks (vertical expansion) to a job.

Job enlargement

Adding more tasks at the same level (horizontal expansion) to a job.

Organizational culture [HL]

The shared values, attitudes and ways of working that characterise an organisation.

Capital expenditure

Spending on long-term (non-current) assets that will be used for more than one year, such as machinery or buildings.

Revenue expenditure

Spending on the day-to-day running costs of a business, such as wages, rent, and utilities.

Statement of profit or loss (income statement)

A financial statement showing revenue, costs and profit over a period of time.

Statement of financial position (balance sheet)

A financial statement showing a business’s assets, liabilities and equity at a single point in time.

Gross profit margin

Calculated as $\left( \frac{\text{Gross profit}}{\text{Sales revenue}} \right) \times 100$ to measure the profitability of trading activity before overheads.

Profit margin

Calculated as $\left( \frac{\text{Profit before interest and tax}}{\text{Sales revenue}} \right) \times 100$.

ROCE (Return on Capital Employed)

Calculated as $\left( \frac{\text{Profit before interest and tax}}{\text{Capital employed}} \right) \times 100$.

Current ratio

A liquidity ratio calculated as $\frac{\text{Current assets}}{\text{Current liabilities}}$.

Acid test ratio

A liquidity ratio calculated as $\frac{\text{Current assets} - \text{Stock}}{\text{Current liabilities}}$.

Working capital

Current assets minus current liabilities — the cash available for day-to-day operations.

Insolvency

A financial state where a business cannot pay its debts when due.

Bankruptcy

The legal process or status declared once a person or business is formally unable to pay debts.

Market orientation

An approach where business decisions are driven by customer needs and market research.

Product orientation

An approach where business decisions are driven by what the business is good at producing.

Market share

Calculated as $\left( \frac{\text{Business's sales}}{\text{Total market sales}} \right) \times 100$.

Unique selling point (USP)

A feature that differentiates a product or business from competitors.

Primary market research

New, first-hand data collected directly for a specific purpose (e.g. surveys, interviews, focus groups, observation).

Secondary market research

Existing data already published (e.g. market reports, journals, government stats).

Product life cycle

The stages a product passes through: introduction, growth, maturity, and decline.

Extension strategies

Actions taken to prolong a product’s life cycle before it declines, such as rebranding, new packaging, or entering new markets.

Lean production [HL]

A production philosophy focused on minimising waste while maintaining quality, including kaizen and JIT.

Just-in-time (JIT) [HL]

A stock control strategy where stock and materials arrive exactly when needed, keeping stockholding minimal.

Just-in-case (JIC) [HL]

A stock control strategy where businesses hold buffer stock as a safety margin.

Quality control [HL]

The process of checking output after production for defects.

Quality assurance [HL]

The process of building quality into the production process throughout to prevent defects.

Total Quality Management (TQM) [HL]

A management approach where every employee is responsible for quality at every stage of production.

Break-even analysis

The point at which total revenue equals total costs (no profit, no loss).

Contribution

Selling price per unit minus variable cost per unit.

Capacity utilization rate [HL]

Calculated as $\left( \frac{\text{Actual output}}{\text{Maximum possible output}} \right) \times 100$.

Critical path analysis (CPA) [HL]

A planning tool identifying the sequence of dependent tasks that determines the shortest possible project completion time.

Crisis management [HL]

The response and actions taken after an unexpected event occurs.

Contingency planning [HL]

Preparation in advance for possible future crises.

SWOT Analysis

A situational analysis tool examining internal Strengths and Weaknesses alongside external Opportunities and Threats.

STEEPLE Analysis

A framework assessing Social, Technological, Economic, Environmental, Political, Legal, and Ethical external factors.

Ansoff Matrix

A growth strategy grid featuring Market penetration, Product development, Market development, and Diversification.

Boston Consulting Group (BCG) Matrix

A portfolio tool plotting Market growth against Relative market share into Stars, Cash cows, Question marks/Problem children, and Dogs.

Porter’s Generic Strategies [HL]

A strategic framework outlining Cost leadership and Differentiation strategies pursued broadly or focused on a niche.

Force Field Analysis [HL]

A change management tool that lists driving forces supporting change against restraining forces resisting change.

Hofstede’s Cultural Dimensions [HL]

A tool comparing national cultures on dimensions such as individualism vs. collectivism, power distance, uncertainty avoidance, and long- vs. short-term orientation.

Gantt chart [HL]

A bar chart scheduling project tasks against time, showing which tasks can run in parallel and which are sequential.

Business plan

A formal document outlining a business’s objectives, market, operations, and finance, used to secure funding and guide strategy.