IB Business Management HL - Flashcards

Flashcards of key vocabulary and concepts from the IB Business Management HL course.

Business

An organization that provides products (goods/services) to satisfy customer needs and wants in a profitable/non-profitable way

Factors of Production

INPUT: Land, Labor, Capital, Entrepreneurship

Added Value

PROCESS: Manufacturing (production of goods) + Provision of services

Product

OUTPUT: Goods (tangible) OR Services (intangible)

Economic Sectors

Businesses within an economy involved in similar activity. Primary, Secondary, Tertiary, Quaternary

Entrepreneurship

The process of setting up a new business, a skillset that allows to combine FoPs to form an organization

Entrepreneur

A (visionary) individual who is willing to take the risk to create a new business (risk-takers)

Intrapreneur

An entrepreneur but within a business (not necessarily risk-takers)

Business Plans (BP)

Outline the potential development of a business: Idea, Vision + Mission + Goal, 4 business functions, Sustainability, CSR

Private Sector

Owned by individuals or groups of individuals. Earns profits to compensate owners

Public Sector

Owned by government (everything run by or funded by government). Created by Gov to provide public services + provide protection to citizens

Liability

The extent to which you risk losing your personal possessions in case of business failure: Limited OR Unlimited

Sole Traders (sole proprietor)

The most common type: One owner, No legal identity, Unincorporated, Unlimited liability

Partnerships

2+ owners (usually 2-20), Deed of partnership, Unlimited liability

Companies (All)

Unlimited # of owners (shareholders), Limited liability, Incorporated

Privately held companies

Small number of shareholders, Difficult to cash out, Usually owned by families, Control not lost to outsiders

Publicly held companies

Privately held that 'goes public' (making shares available to the public >> Stock Exchange), IPO, Greatest access to capital

Social Enterprise

An organization that has social wellbeing as its main goal, instead of making profits.

Cooperatives

An autonomous association of persons (members) united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise

NGOs

"Not-for profit voluntary citizen’s group that is organised on a local, national or international level to address issues in support of the public good"

Vision Statement

Statement that a business makes in order to prioritize objectives and let stakeholders know what the business is about.

Mission Statement

Statement that a business makes in order to prioritize objectives and let stakeholders know what the business is about.

Goals

What businesses want to achieve in the long-term (the what)

Objectives

Clearly defined short- or medium-term tasks that a business sets in order to achieve goals (most important concept)

Strategies

Medium- or Long-term plans, methods, approaches, and schemes that are used to achieve objectives - and hence goals (the how)

Tactics

Short- or medium-term actions (methods) that need to be taken in order to achieve objectives (day-to-day actions)

Strategic Objectives

Determines the market in which the business operates (senior mgt)

Tactical Objectives

Determines methods of achieving competitive edge (middle mgt)

Operational Objectives

Determines what the company needs to do on a day-to-day routine level and how to make generic and corporate strategies happen (junior mgt)

Corporate Social Responsibility (CSR)

Commitment to benefiting (or at least not harming) the society and environment that is achieved through setting ethical objectives.

Stakeholders

People/organizations who affect or are affected by business decisions or/and have an interest in the operation of a particular business (“interest holders”)

Economies of Scale (EOS)

Decreasing average cost (AC) of production as an organization increases the scale of operation and improves its production efficiency

Diseconomies of Scale (DOS)

Increasing average cost (AC) of production as an organization increases the scale of operation and decreases its production efficiency

Internal Growth

Business growth is the increase in the size of the business in terms of market share, revenue, profit, workforce, or capital employed.

Mergers & Acquisitions (M&A)

Merger = Two or more companies form one larger company. Acquisition = One company takes ownership of another

Horizontal Integration

M&A within same sector; primary, secondary etc

Vertical Integration

M&A with a higher sector (forwards) or lower sector (backwards)

Conglomerate merger/diversification/integration

When different/unrelated sectors join forces through M&A

Joint Venture (JV)

When companies create a 3rd company for mutual benefit

Strategic Alliances (SA)

Cooperation of two or more companies in certain aspects for their mutual benefit. New business entity is NOT created

Franchising

Franchise company allows other companies (franchisees) to sell their products or trade under its brand (franchise) in exchange for royalty payments and franchise fee

Multinational Company (MNC)

A company that operates in two or more countries = Transnational company

Globalization

The integration of local economies into one global economy, whereby companies, organizations, and people think globally but act locally

Human Resource Management (HRM)

One of the 4 business functions. The process of organizing people and maximizing their efficiency.

HR Planning (HRP)

Systematic process of anticipating the staffing needs of the organization; Expansion, downsizing

Delegation

The passing on and entrusting of certain tasks from managers to subordinates.

Span of control

The number of subordinates (employees) who are directly accountable to a manager.

Levels of hierarchy

Organizational system that is based on ranking

Chain of command

A system by which orders and instructions are passed down in an organization. The more levels of hierarchy, the longer the chain.

Bureaucracy

The execution of tasks that are guided by excessively complicated administrative rules and procedures.

Centralized Organizations

The concentration of power and decision-making in a single authority

Decentralized Organizations

The transfer of power and decision-making from a single authority to several people/groups

Delayering

The process of removing one or more levels in the hierarchy

Matrix Structure

A system whereby employees report to several managers and work in cross-departmental teams.

Hierarchical Structure

Many levels within the organization

Organizational Chart

A picture that represents the structure of an organization showing the relationships of accountability and responsibility

Shamrock Organization

Org.structures that divide the workforce into 3 “leafs” depending on how essential they are: Core, Outsourced, Temporary

Management

The process of dealing with or controlling people and making sure tasks are accomplished

Leadership

The process of leading people

Autocratic Leadership

Leader makes all decisions independently

Paternalistic Leadership

Leader expresses superiority: “I know what’s good for you”

Democratic Leadership

Leader involves employees in decision-making (before decision)

Laissez-faire Leadership

Leader has minimal interference with the work or subordinates

Situational Leadership

Leader chooses the most appropriate style in the given situation

Scientific management

Based on data & logic, Rational, methodical, Systematic, Quantitative, Takes account of objective data

Intuitive management

Based on gut feeling and instincts, Irrational, emotional, unsystematic, Qualitative, Takes account of people’s feelings

Motivation

The desire, effort and passion to achieve something. It is the willingness to complete a task or job with intent and purpose

Organizational Culture

Ideas, behavior, values and other attributes of a group of people

Communication

The process of sharing different ideas or thoughts using a variety of channels

Formal communication

Official channels

Informal communication

Un Official channels

Industrial Conflict

An argument/disagreement between employers and employees

Collective Bargaining

Mgt + Employees have representatives who negotiates terms & conditions on their behalf >> trade unions, lawyers, agents etc.

Work-to-rule

Employees strictly follow rules + contractual obligations and refuse to do anything beyond them

Threats of redundancies

Mgt warns employees that positions might no longer be required

Change of contract

Unilateral alteration of the terms and conditions (if allowed by law)

Lockout

"Visa versa strike" when employers temporarily exclude employees from workplace

Finance

To set up, run and expand a business

Capital expenditure (CAPEX)

Finance spent on fixed assets (land, buildings, equipment, vehicles etc.), Long term (>1 yr)

Operational expenditure (OPEX)

Payment for the daily running of business (wages, raw materials, electricity etc), Short term (<1 yr)

Personal Funds

Personal savings or money provided by family or friends, Works for unlimited liability businesses

Retained Profits

Profits that remain within a company after all costs and dividends are paid, Works for limited liability organizations (companies)

Sale of Assets

Selling unnecessary equipment and/or premises (buildings/land), Works for any business about to shut downs or relocate some of its parts

Share Capital

Funds raised through the sale of shares, Works for limited liability organizations that have shares (companies)

Loan Capital

Finance obtained from commercial lenders (banks), Works when large sums are needed without dilution of control

Overdrafts

Taking more money than a business has on its accounts, Works as a solution to minor cash flow problems

Trade Credit

"Buy now, pay later" within the credit period, Works for purchasing materials from suppliers that a business has good relationships with

Crowdfunding

Obtaining a small amount of money from a large group of people (usually on a platform), Works for small businesses with great ideas

Leasing

Lessee hires an asset from the lessor, Works for businesses that need an asset but cannot afford its purchase

Microfinance Providers

Providers of microcredit to low-income individuals/businesses, Works in less developed economies

Business Angels

Wealthy individuals investing into high-risk business in exchange for ownership, Works for businesses with a high growth potential

Costs

The amount that has to be spent to purchase the resources that are necessary to produce or sell a product

Fixed Costs

Costs that a business has to pay regardless of how much it produces/sells (rent, interest, salaries etc)

Variable Costs

Costs that change in proportion with the level of output (raw materials, piece-rate wages)

Revenue

Money coming in from product sales (goods or service)

Revenue Streams

Means - other than trading activity - used to generate income for the organisation

Profit & Loss Account (P&L)

Financial statement of an organization’s trading activities over one year. Purpose is to show profit (for-profit) or surplus (non-profit) or loss.

Balance Sheet

Financial statement of an organization’s assets, liabilities and capital at a particular point in time. Purpose is to provide a “snapshot”.

Asset

Items of property owned by entity

Liability

Money owed by entity to suppliers and lenders