IB Business Management - Unit 1 TERMS

Primary sector

extraction and use of natural products (oil, coal, agriculture, fishing)

Secondary sector

production and manufacture of goods (using primary sector products)

Tertiary Sector

provides services (such as H&M and starbucks)

Quaternary Sector

Research and development (such as concultancy)

Factors of Production

Land, Labour, Capital and Enterprise

Four main functional areas within a business

HR, Finance and Accounts, Marketing, and Production

Finance & Accounting

- Preparation of cash flow forecasts and profit and loss accounts

- Account analysis and completing financial ratios including gross and net profit, ROCE, and gearing ratios

HR

- The practice of recruiting, hiring, deploying, and managing an organisation's employees

- The element of the workforce planning in ensuring the correct amount of workers are in the correct place at the right time

Production (operation)

- The elements of quality control and assurance systems

- The study of design and improvement of productions systems for efficiency and effectiveness.

Marketing

- Focus of use of below and above the line portion techniques in an attempt to gather customers' attention with the hope of increasing sales

- The process of planning executing and tracking the marketing strategy of an organisation

Entrapreneur

starts a business, organising, taking a risk

Decision Tree

1) Identify probabilities of success and failure, and prices of failure and success

2) Draw out flowchart

3) Determine Success and Failure outcomes

4) Calculate Net Gain

Public Sector

Goods and services provided by the government, all paid for by civilians via taxes. These include healthcare, police, binmen, public transport, schools, streetlamps etc.

Private sector

Run by entrepreneurs or businesses. Examples of this could be McDonald's, supermarkets, etc.

Unlimited liability

If your business fails and you cant pay your debt, all your possessions can and will be seized - Only Sole Traders and Partnerships suffer from this

Limited liability

If your business fails you will only lose the money invested in the business

Vision Statement

A declaration of the purpose and values and where it wants to be in the future

Mission Statement

A clear and concise declaration of the organisations purpose (A description of what it does in order to become what it wants to be)

Strategic Objectives

- Long term decisions

- Decisions made by upper management

Such as merging, entering new market, changing method of production, changing ownership

Tactical Objectives

- Short-mid term decisions

- Decisions made by employees and lower management

Such as changing product price, sales promotion, employee time off

STEEPLE

External forces of change on a firm

External Stakeholders

People who do not directly work with a company but are affected somehow by the actions and outcomes of the business.

Internal Stakeholders

People whose interest in a company comes through a direct relationship, such as employment, ownership, or investment.

Economies of Scale

As businesses grow and their output increases, they commonly benefit from a reduction in average costs of production.

Internal Economies of Scale

Purchasing, Marketing, Financial, Managerial and Production

Purchasing economies of scale

A reduction in unit costs as a result of buying in bulk

Financial economies of scale

larger businesses are seen by lenders as more reliable or worthy of credit due to their size, whereas smaller businesses will tend to pay higher rates of interest

Marketing economies of scale

An advantage of large firms, which have a lower unit cost for advertising and promotion than small firms

Managerial economies of scale

Reductions in average cost as a result of being able to employ specialist managers who are more productive

diseconomies of scale

as a business grows, the unit of cost increases

External economies of scale

A reduction in average costs for the whole industry in a particular geographical area (eg. silicon valley)

External diseconomies of scale

average costs rise for whole industry

Internal growth

growth using its own resources

Ansoff Matrix

Model which aims to help businesses grow via four different strategies, more specifically for developing new products or markets and existing products or markets.

Market penetration

existing markets, existing products

product development

existing markets, new products

market development

new markets, existing products

diversification

new markets, new products

External growth

growth is achieved through combining businesses through mergers, acquisitions, franchising, or strategic alliances.

mergers and acquisitions

Mergers - two companies become one

Acquisitions - one company buys another

strategic alliance

an arrangement between two companies to undertake a mutually beneficial project while each retains its independence

joint venture

a combination of two or more parties that seek the development of a single enterprise or project for profit, sharing the joint risk associated with its development

franchising

A method of distributing recognised products or services involving a franchisor, who establishes the brand's trademark, and a business system, and a franchisee, who pays a royalty and initial fee to do business under the franchisors name and system