IBDP Business Management Unit 1

1.1 Business

aims to meet the needs and wants of individuals or organizations by combining human, physical, and financial resources (1.1)

1.1 business activity

Resource inputs (human, physical, financial, enterprise)--processes to add value (production)--Product outputs (goods and services) (1.1)

1.1 business functions

human resources, finance and accounts, marketing, operation (production) (1.1)

1.1 Role of Human resources

Ensure: appropriate people are employed to make the product or service and that the people are suitably rewarded. Recruitment, training, dismissal, determine compensation (1.1)

1.1 Role of Finance and accounts

Ensure: appropriate funds are available. forecast requirements, keep accurate records, procure financial resources from various providers, and ensure proper payment for operation (1.1)

1.1 Role of Marketing

Ensure: business offers a product/service that is desired by a sufficient # of people (operation is profitable) Appropriate strategies to promote, price, package, and distribute (1.1)

1.1 Role of Operations Management or Production

Ensure: appropriate processes are used to make product of desired quality. Control quantity and flow of stock, determine method of production, look for ways to produce more efficitently (1.1)

chain of production

the steps through the different sectors that must be made to turn raw materials into a consumer good that is marketed

corporate social responsibility

business practice that involves participating in initiatives that benefit society

horizontal integration

a business acquiring or merging with another business engaged in a more or less the same activity-->increased market share

vertical integration

involve in earlier or later stages in the chain of production either through acquiring other business or internal growth

benefit of vertical integration (6)

lower transaction cost, reliable supply, avoid regulation, increasing market power (gain flexibility in pricing), better promotion, eliminate other business

sectoral change

size of each sector changes, change in composition in economy--social technology (social context supporting certain sectors to grow)

impact of sectoral change (5)

factor substitution, some businesses are obsolete, strain on human resources, reallocation of finance, demand for physical resources, environmental impacts

business plan

set out how org will meet its objectives, applies to specific period, include long-term and short-term objectives, should be reviewed and updated, detailed budget planning

purpose of business plan (5)

support launch of new org or business idea; attract finance; support strategic planning, provide a focus for development, work as a measure of business success

element of business plan (6)

business idea, aims and objectives (set out the idea in a context: USP, how to develop idea);business organization (location, structure, type, decision-making, profit-sharing, legal requirement to set up);HR (HR plan, type of contract, responsibility and reward);finance (start-up capital, projected budgets, income statement, cash-flow forecasts);marketing (market research, sales forecast, 4P);operations (lead time, supply chain)

aspects of business types

the owner of the business, the runner of the business, no legal distinction/limited liability, close/less communication, access to finance, privacy and accountability, start-up paperwork and expense

benefit of sole trader (7)

complete control, flexible working hours and change, privacy, minimal formalities, close ties to customer, fast decision-making, responsive to change

disadvantage of sole trader (7)

100% liability, stress and responsibility, lack of continuity, limited growth, limited access to finance, challenging competition in market, false decision-making,

Partnerships

formed by 2~20 people, joint decision-making, owned and managed by more than one person, no legal distinction, more finance, sleeping partners, offer more varied service, greater accountability, maybe don't share profit equally

advantage of partnership (5)

creativity and innovation, specialization and division of labor, expertise, stability and lower risk, continuity, more access to finance

disadvantage of partnership (4)

slower decision-making and conflicts, not enough access to finance, profit it shared, unlimited liability

why become a company? (5)

limited liability, enhanced status and recognition, sell share to purchase capital, stability and continuity, access to finance

advantage of owning a share

share value may increase, receive dividend, limited liability

disadvantage of owning a share

share value may decrease, may not receive dividend, share can be diluted

Company

shareholders own, do not run; separate legal entity, business record are public (Memorandum of Association, Articles of Association), greater finance available, more accountability (Annual General Meeting, Extraordinary General Meeting)

advantages of company (6)

stability and continuity, access to finance, limited liability, enhanced status, possibility for growth, established organizational structure

disadvantages of company

set-up difficult and costly, sell shares may not be successful (risk), only partial control, loss of privacy, no control over stock market and buyer of shares, decision-making slow and irresponsive

for-profit social enterprise

business that has a social purpose, profit not priority (not maximized), aims to improve human, social, or environmental well-being, no compromise

Cooperative

form of partnership whereby the business in owned and run by all the "members", member participate actively

types of cooperatives (5)

financial; housing; worker's; producer; consumer

financial cooperative

social aim takes precedence over profit, lower interest rate, provide cheaper service, lower the standard to give loans

housing cooperatives

provide housing for members, surplus reinvested, social harmony, member follow rules

worker's cooperatives

no salary to managers, employment of workers is priority, often no dividend

producer cooperatives

collaborate in stage of production,maximize utilization of capital, enjoy economy of scale

consumer cooperatives

consumer pay lower price as members

Public Private Partnership

collaboration between business and community, greater democracy and transparency, same function, profit not priority

advantage of PPP (3)

favorable legal status, strong communal identity, benefits to stakeholder community

Disadvantage of PPP (3)

decision making is complex and slow, insufficient capital for growth, insufficient financial strength

non-profit social enterprise

generate surplus; NGO and charities

charities

rely on donations, unclear ownership and control, exempt from tax

advantage of NPOs (4)

CSR, foster philanthropic spirit in community, foster informed discussion, innovation

disadvantage of NPOs (3)

lack of control but intense lobbying, employees may act inappropriately for good means, irregular funding

disadvantage of owning a share (3)

share value decrease, no dividend, share diluted

disadvantage of owning a share (3)

share value increases, dividend, limited liability (security)

vision statement

forward looking, speak to long-term aims and highest aspirations, less specific, guiding principle

mission statement

more grounds in the aims of accomplishing objectives to achieve the mission

difference between vision and mission statement

concept, purpose (future or present) audience (inspire internally, bind external stakeholders;define accountability, measure success), no change

three types of objectives

strategic, tactical, operational

strategic obj

medium- and long-term objective set by senior managers to guide company

tactical obj

medium- and short-term objectives set by middle managers to achieve strategic objectives

operational

day-to-day objectives set by managers or workers to reach tactical objectives

hierarchy of objectives

increasingly specific in content, increasing quantity, follow the organizational hierarchy,

SMART

specific, measurable, achievable, relevant, time-specific

business strategy

plan to achieve a !strategic objective! in order to work towards the aims of the business (when, what, where, why)

business strategy involves? (4)

where, planning, implementation, evaluation of process

business tactic

plan to achieve tactical objective to work towards the strategies of the business, short-term, changeable, achieve measurable target,

reason to change objectives (6+7)

internal: leadership, HR, organization, product, finance, STEEPLE

why set ethical objectives

building up customer loyalty, create positive image, positive working environment, reduce risk of legal redress, satisfy customer's ethical expectations, increasing profits (access to finance)

impact of implementing ethical objectives

business itself (reaction or resistance to change), competitors, suppliers, customers, local community, government

why SWOT analysis

help business set objective through identification of SWOT

4 strategies using SWOT

S+O growing, W+T defensive, W+O re-orientation, S+T defusing

why Ansoff Matrix

help business plan and set objectives

what do aims do?

direct, control, review

how to enforce aims (3)

appropriate strategies, resource used correctly, review constantly

common objectives (5)

profit maximization, growth, increasing market share, CSR, maximizing shareholder value

market penetration

e+e, increase market share, 4P and marketing

key factor to succeed in market penetration (3)

growth potential of the market, strength of customer loyalty, power and ability of competitors

market development

look for new markets for existing product, identify clientele base, e-commerce

to success in market development (3)

effective market research, local knowledge, effective distribution

to reduce the risk of product development (3)

market research, strong R&D system, first mover advantage

risk of diversification (2)

lack of familiarity in market, untestedness of products

to succeed in diversification (4)

market research, diligent testing (both the market and the cost of entry), recognition from existing business, possible tie-ups

economies of scale

reduction in average unit cost as a business increases in size

diseconomies of scale

increase in average unit cost as a business increases in size

internal economies of scale (6)

technical, managerial, financial, marketing, purchasing, risk-bearing

external economies of scale (2)

consumers, employees

internal diseconomies of scale

technical, managerial, financial , marketing, purchasing, risk-bearing

external diseconomies of scale

employees

advantages of being a small business (5)

greater focus, greater cachet, motivation, competitive advantage (personalized service), less competition

advantages of being a big business (5)

survival, economies of scale, higher status, market leader status, increased market share

entrepreneurship and intrapreneurship

entre: an individual who demonstrates enterprise and initiatives in order to make a profit; intra: an individual employed by a large org who demonstrates entrepreneurial thinking in the development of new products or service

innovation

1. market reading; 2. need seeking; 3. technology driving

stakeholders

an individual or group who has an interest, often financial, in the activities and success of an organization

internal stakeholders include

shareholders, CEO, senior managers, middle managers, foreman and supervisors, employees and unions

external shareholders include

government, suppliers, customers, local community, financiers, pressure groups, media

stakeholder analysis

in: owners, managers; middle: suppliers, employees, consumers, financiers; outer: gov, community, media, pressure groups

power-interest model

minimal effort, keep informed, keep satisfied, key players

Micro-financier

idea by Muhammad Yunis: provide small amount of finance to those who traditionally don't have access to.

vision statement definition

a philosophy, vision, or set of principles which steers the direction and behavior of an organization

primary sector

engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms

secondary sector

firms that manufacture and process products from natural resources, including computers, brewing, baking, clothing and construction

tertiary sector

provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications

Quaternary sector

subsector of tertiary sector: focused on information technology (IT) businesses and information service providers

Reasons to start up a business

rewards, independence, necessity, challenge, interest, finding a gap, sharing an idea

steps of starting up a business

organize the basics->researching the market->plan the business->establish legal requirement->raise finance->test the market

problems that a new business may face

organization (eg. bad location, registered name, unsuitable structure); market research (eg. inappropriate target, too optimistic, weak channel of communication); bad business plan; vague goal, finance...

NGO

social enterprises aiming to support a socially desirable cause; not organized by government

charity

a specific form of NGO whose aim is to provide as much relief as possible for those in need; focus on philanthropy