IB Business Management Standard Level (SL) Study Guide

Comprehensive vocabulary flashcards covering the core concepts, theories, definitions, formulas, and visual diagrams across Units 1 through 5 of the IB Business Management Standard Level syllabus.

Value added

The selling price of a finished good or service minus the cost of the bought-in inputs.

Primary sector

The business sector that extracts natural resources (e.g., farming cotton, fishing, oil drilling).

Secondary sector

The business sector that turns raw materials into finished products (e.g., textile factory, car assembly, construction).

Tertiary sector

The business sector that provides services to consumers and businesses (e.g., banks, shops, hospitals, transport).

Quaternary sector

The business sector focused on knowledge-based services, including IT, research, and consultancy (e.g., software firms, R&D labs).

Intrapreneur

An individual who acts entrepreneurially inside an existing company as an employee, while the company carries the financial risk.

Unlimited liability

A legal condition where the business owner is personally responsible for all business debts, meaning personal assets can be seized to pay debts.

Limited liability

A legal protection where owners can lose only what they invested because the company is a separate legal person (incorporated).

Sole trader

An unincorporated business entity with one owner who has unlimited liability, keeps all profit, has full control, and keeps accounts private.

Privately held company

An incorporated business with limited liability whose shares are sold privately (e.g., to family and friends) and not on a public stock exchange.

Publicly held company

A private-sector incorporated business whose shares are traded on a stock exchange, separating owners (shareholders) from managers (directors).

Cooperative (for-profit)

A social enterprise owned and run by members (workers, customers, or producers), operating on a 'one member, one vote' principle with profit shared among members.

Non-governmental organization (NGO)

A non-profit social enterprise funded by donations, grants, and trading, where all financial surplus goes directly toward its social cause.

Vision statement

A statement answering 'Where do we want to be in the future?' that inspires staff and investors by providing long-term direction.

Mission statement

A statement defining what a business does now, for whom, and why, guiding daily decisions and providing operational clarity for employees.

Hierarchy of objectives

The organizational goal structure flowing downward from vision to mission, aims, strategic objectives, strategies, tactical objectives, and tactics.

Strategic objective

A long-term, whole-firm, measurable target set by senior managers to fulfill corporate aims.

Tactical objective

A short- or medium-term departmental target designed to support the achievement of the strategic objective.

Corporate social responsibility (CSR)

A business voluntarily taking responsibility for its impact on society and the environment beyond what the law strictly requires.

Stakeholder

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

Economies and diseconomies of scale curve

The U-shaped average cost curve demonstrating that as output increases, average cost per unit falls due to economies of scale until the most efficient scale is reached, after which diseconomies push unit costs back up.

Technical economies of scale

A fall in average cost per unit achieved by using large, efficient machines whose capital costs are spread over high volumes of output.

Internal (organic) growth

A business growing using its own resources (e.g., increasing sales, opening new branches), typically funded by retained profit.

External (inorganic) growth

A business growing quickly by joining with or taking over other firms through mergers, acquisitions, takeovers, joint ventures, or strategic alliances.

Joint venture

An arrangement where two or more businesses agree to create a new, separate legal business entity together, sharing costs, risks, and profits.

Strategic alliance

An arrangement where firms agree to cooperate on a specific project or objective, but no new separate legal business entity is created.

Franchise

A growth method where a franchisor sells the right to use its brand name and business model to a franchisee in exchange for an upfront fee and regular royalties.

Multinational company (MNC)

A corporation that has its headquarters in one (home) country and operational facilities (factories, offices, outlets), not merely sales, in at least one other (host) country.

SWOT analysis

A strategic planning tool that assesses a firm's internal strengths and weaknesses alongside external opportunities and threats.

STEEPLE analysis

A framework used to scan the firm's external macro-environment across Social, Technological, Economic, Ethical, Political, Legal, and Environmental factors.

Ansoff matrix

A strategic marketing tool that outlines four growth strategies based on whether products and markets are new or existing: market penetration, product development, market development, and diversification.

Labour turnover

The percentage of a firm's workforce that leaves over a given year, calculated as: $\text{Labour turnover (\%)} = \left(\frac{\text{number of staff leaving in a year}}{\text{average number of staff}}\right) \times 100$

Job description

A formal document that outlines the specific tasks, duties, and responsibilities associated with a given job role.

Person specification

A profile detailing the skills, qualifications, experience, and personal qualities required in the ideal candidate for a job vacancy.

Induction training

Training given to introduce new employees to the business, its culture, organizational rules, health and safety practices, and coworkers.

Tall vs. flat organizational structure

A diagram comparing organizational designs: a tall structure features many levels of hierarchy with narrow spans of control, whereas a flat structure features few levels of hierarchy with wide spans of control.

Span of control

The number of subordinates working directly under and reporting to a single manager.

Delegation

The process of passing authority for specific tasks down to subordinates, while the delegating manager retains ultimate accountability.

Delayering

The removal of one or more levels of hierarchy from an organizational structure to shorten communication lines and reduce management costs.

Matrix structure

A flexible organizational structure where employees report simultaneously to both a functional line manager and a project manager.

Autocratic leadership

A leadership style where the leader makes decisions independently without consulting subordinates and issues directives.

Democratic leadership

A leadership style where employees are actively consulted and take part in the business decision-making process.

Situational leadership

A leadership approach where the leader alters their leadership style depending on the specific task, workforce skills, and urgency.

Maslow's hierarchy of needs

A motivation theory showing that human needs progress through five levels from lower physiological and safety needs to social, esteem, and self-actualization needs, where a satisfied need no longer motivates.

Hygiene factors

Aspects of the work environment in Herzberg's theory (e.g., pay, job security, company policy) that prevent worker dissatisfaction if adequate, but do not motivate.

Motivators

Intrinsic job factors in Herzberg's theory (e.g., achievement, recognition, responsibility, advancement) that directly motivate employees and improve performance.

Job enrichment

A non-financial reward method giving employees more challenging, responsible, and meaningful tasks (deeper work).

Job enlargement

A non-financial method increasing the scope of a job by adding more tasks of a similar level of complexity (wider work).

Capital expenditure

Spending by a business on fixed or non-current assets intended to be used for more than one year (e.g., machinery, premises, vehicles).

Revenue expenditure

Spending on day-to-day operational running costs that are fully consumed within the year (e.g., wages, raw materials, electricity, rent).

Retained profit

The profit kept inside the business after corporation tax and dividends have been paid, used to finance reinvestment.

Share capital

Long-term external finance raised by an incorporated company through the sale of shares to private investors or the public.

Overdraft

A flexible, short-term bank arrangement allowing a business account to withdraw more money than it holds up to a negotiated limit, paying interest only on the borrowed amount.

Trade credit

A credit arrangement where a supplier delivers goods or materials immediately but allows the buying firm to pay at an agreed later date.

Business angel

A wealthy individual who invests their personal capital into early-stage, high-growth businesses in exchange for an equity share and management involvement.

Cost of sales (COGS)

The direct cost of goods sold during an accounting period, calculated as: $\text{Cost of sales} = \text{Opening inventory} + \text{Purchases} - \text{Closing inventory}$

Statement of financial position

An accounting snapshot showing the book value of what a business owns (assets), what it owes (liabilities), and its owners' equity on a specific date.

Gross profit margin (GPM)

A profitability ratio measuring gross profit earned as a percentage of revenue: $\text{GPM} = \left(\frac{\text{Gross profit}}{\text{Sales revenue}}\right) \times 100$

Profit margin

A profitability ratio measuring profit before interest and tax relative to sales: $\text{Profit margin} = \left(\frac{\text{Profit before interest and tax}}{\text{Sales revenue}}\right) \times 100$

Return on capital employed (ROCE)

A profitability ratio indicating the efficiency with which total long-term capital generates operating profit: $\text{ROCE} = \left(\frac{\text{Profit before interest and tax}}{\text{Capital employed}}\right) \times 100$

Current ratio

A liquidity ratio comparing current assets to short-term obligations: $\text{Current ratio} = \frac{\text{Current assets}}{\text{Current liabilities}}$ expressed as a ratio to 1.

Acid test (quick) ratio

A strict liquidity ratio measuring short-term debt coverage excluding illiquid inventory: $\text{Acid test ratio} = \frac{\text{Current assets} - \text{Inventory}}{\text{Current liabilities}}$ expressed as a ratio to 1.

Working capital

The net funds available to finance day-to-day trading operations, calculated as: $\text{Working capital} = \text{Current assets} - \text{Current liabilities}$

Payback period

The length of time required for the net cash inflows of an investment project to recover the initial capital outlay.

Average rate of return (ARR)

A capital investment appraisal metric measuring average annual profit as a percentage of initial cost: $\text{ARR} = \frac{(\text{Total returns} - \text{Capital cost}) \div \text{Years of usage}}{\text{Capital cost}} \times 100$

Market orientation

An outbound marketing approach where customer needs and desires are researched first before developing and producing the product.

Product orientation

An inward-looking marketing approach focused on developing high-quality or innovative goods first and finding buyers afterward.

Unique selling point (USP)

A distinctive, desirable feature that sets a product apart from rival products in the minds of consumers.

Stratified sampling

A probability sampling technique where a population is split into sub-segments and respondents are chosen completely at random in proportion to the population segments.

Cost-plus pricing

A pricing strategy where a specified percentage markup is added to the unit average cost to determine the selling price.

Penetration pricing

Setting a deliberately low initial price for a new product to quickly gain widespread market share, with prices raised later.

Loss leader pricing

Pricing a product below its cost of production to entice customers into the store to buy other profitable products.

Above the line (ATL) promotion

Paid mass-media promotional campaigns (e.g., television, radio, billboards, newspapers) where the business does not communicate directly with an individual consumer.

Below the line (BTL) promotion

Direct, non-mass media promotional techniques over which the firm retains immediate control (e.g., direct mail, coupons, BOGOF, trade fairs).

Mass customization

The use of flexible, computer-aided production systems to make goods or services that are tailored to each individual customer's requirements, while keeping the low unit costs of mass production.

Job production

The manufacturing of an individual, unique, customized product from start to finish based on a client's specific order.

Batch production

A production method where identical items are produced in groups before equipment is adjusted to manufacture a different group of products.

Mass (flow) production

The continuous, capital-intensive manufacturing of high volumes of standardized, identical products along an assembly line.

Outsourcing

When a business transfers an activity it used to do internally to an external firm, which carries it out on its behalf, usually to cut costs or to use that firm's specialist expertise.

Offshoring

The relocation of a business process or manufacturing operation to an overseas country, typically to reduce operating or labour costs.

Reshoring

The practice of transferring business operations that were previously moved overseas back to the country of origin.

Contribution per unit

The amount each unit sold contributes towards covering total fixed costs, calculated as: $\text{Contribution per unit} = \text{Price} - \text{Variable cost per unit}$

Break-even quantity (BEQ)

The level of output where total revenue equals total costs and profit is zero, calculated as: $\text{BEQ} = \frac{\text{Fixed costs}}{\text{Contribution per unit}}$ expressed in units.

Margin of safety

The difference between the actual or planned output level and the break-even output, representing how much output can drop before a loss occurs: $\text{Margin of safety} = \text{Actual output} - \text{Break-even quantity}$

Decision tree

A quantitative tool diagramming alternatives under uncertainty using decision nodes (squares) and chance nodes (circles) to calculate net expected monetary values.

Circular economy

An economic production model aimed at eliminating waste by keeping resources and products in use for as long as possible through recycling, repair, and refurbishment.