IB Business Management Semester 2 Test

Made by Glen Coutinho - 24/May/2025

What is the primary goal of a business?

To satisfy customer needs and wants, often through providing goods or services.

Define "entrepreneur".

An individual who takes the financial risk of starting and managing a business.

Difference between private and public sector?

Private sector is owned by individuals/groups; public sector is government-owned.

What are business objectives?

Targets or goals set by a business to achieve its mission or vision.

Define a stakeholder.

Any individual or group affected by or affecting a business.Stakeholders include employees, customers, suppliers, and shareholders.

What is liquidity?

A firm’s ability to meet short-term debts.

Gross Profit Margin formula?

(Gross Profit ÷ Sales Revenue) × 100

Net Profit Margin formula?

(Net Profit ÷ Sales Revenue) × 100

What is a balance sheet?

A snapshot of a firm’s financial position at a specific point in time.

What is retained profit?

Net profit kept in the business after dividends are paid.

What is market segmentation?

Dividing a market into distinct groups with similar characteristics or needs.

Define the marketing mix.

The 7Ps: Product, Price, Place, Promotion, People, process and physical evidence

Difference between market and product orientation?

Market orientation focuses on customer needs; product orientation focuses on product development.

What is the Boston Matrix?

A portfolio analysis tool categorizing products into Stars, Cash Cows, Question Marks, and Dogs.

What is branding?

A form of product differentiation through name, logo, and identity.

What is break-even point?

The level of output at which total revenue equals total costs.

Contribution per unit formula?

• Selling Price – Variable Cost per Unit

Break-even quantity formula?

Fixed Costs ÷ Contribution per Unit

What is margin of safety?

Actual sales – Break-even sales.

One limitation of break-even analysis?

Assumes all units are sold; doesn’t account for changing costs or prices.

What does STEEPLE stand for?

Social, Technological, Economic, Environmental, Political, Legal, Ethical.

What is the "Social" factor in STEEPLE?

Trends in demographics, culture, and lifestyle that affect business operations.

What is the "Technological" factor in STEEPLE?

Innovations and advancements that influence production and communication.

What is the "Economic" factor in STEEPLE?

Factors like inflation, unemployment, and interest rates that affect purchasing power and costs.

What is the "Environmental" factor in STEEPLE?

Ecological and environmental issues like sustainability and climate change.

What is the "Political" factor in STEEPLE?

Government policies and political stability that affect business operations.

What is the "Legal" factor in STEEPLE?

Laws and regulations such as labor laws, safety standards, and consumer protection.

What is the "Ethical" factor in STEEPLE?

Moral principles and values guiding business behavior, like fair trade and corporate social responsibility.

What are economies of scale?

Cost advantages that a business obtains due to expansion, leading to lower average costs per unit.

Define internal economies of scale.

Cost savings that arise from the growth of the business itself (e.g. bulk buying, financial economies)

Define external economies of scale.

Cost savings that arise from the growth of the industry or location (e.g. improved infrastructure, skilled labor pool).

List two examples of internal economies of scale

Technical economies (efficient machinery), 2. Managerial economies (specialist managers).

What are diseconomies of scale?

The increase in average costs as a business becomes too large and inefficient (e.g. poor communication, low morale).

Technical economies of scale (IE)

Cost savings from more efficient production techniques, such as using advanced machinery. (IE)

Managerial economies of scale (IE)

Savings from employing specialist managers who improve efficiency and productivity. (IE)

Financial economies of scale (IE)

Larger firms get better loan terms and lower interest rates due to lower risk. (IE)

Marketing economies of scale (IE)

Cost savings by spreading advertising over a larger output (e.g. national campaigns) (IE)

Purchasing (bulk-buying) economies of scale (IE)

Discounts and lower unit costs from buying inputs in large quantities. (IE)

Risk-bearing economies of scale (IE)

Larger firms can spread risk across more products or markets, reducing the impact of failures. (IE)

Skilled labor pool (EE)

A growing industry attracts more qualified workers, reducing recruitment and training costs. (EE)

Infrastructure improvements (EE)

Government or private investment in roads, ports, or IT helps all local firms reduce costs. (EE)

Supplier specialization (EE)

Growth in the industry attracts specialized suppliers, lowering input costs and improving quality. (EE)

Research and development support (EE)

Firms benefit from shared R&D facilities or university partnerships in an industry cluster. (EE)