IB Business Management

Business Plan

The document that sets out the business idea, its goals and objectives, and other details of how the business will operate (such as its marketing, operations, and finance). It is often a crucial part of an attempt to raise external sources of finance.

Businesses

Organizations involved in the production of goods and/or the provision of services.

Consumers

The people or organizations who actually use a product.

Customers

The people or organizations that buy the product.

Entrepreneurs

Owners or operators of an organization who manage, organize, and plan the other three factors of production. They are risk takers who exploit business opportunities in return for profits.

Intrapreneurship

The act of behaving as an entrepreneur but as an employee within a large business organization. They work in an entrepreneurial capacity, with authority to create innovative products or new processes for the organization.

Needs

The basic necessities that a person must have to survive, e.g. food, water, warmth, shelter, and clothing.

Primary Sector

Businesses involved in the cultivation or extraction of natural resources, e.g. farming, mining, quarrying, fishing, oil exploration, and forestry.

Product

Both goods and services. Goods are physical __________, e.g. cars, books, and food. Services are intangible __________, e.g. haircuts, bus rides, education, and health care.

Quaternary Sector

A subcategory of the tertiary sector, where businesses are involved in intellectual, knowledge-based activities that generate and share information, e.g. information communities technology and research organizations.

Secondary Sector

The section of the economy where business activity is concerned with the construction and manufacturing of products.

Sectoral Change

A shift in the relative share of gross domestic product (or national output) and employment that is attributed to each business sector.

Tertiary Sector

The section of the economy where business activity is concerned with the provision of services to customers.

Wants

People's desires, i.e. the things they would like to have, e.g. a larger home, a new smartphone, or to go on an overseas holiday.

Charities

Non-profit social enterprises that provide voluntary support for good causes (from society's point of view), such as protection of children, animals, and the natural environment.

Cooperatives

For-profit social enterprises set up, owned, and run by their members, who might be employees and/or customers.

Company (or Corporation)

A business that is owned by shareholders. It has been issued a certificate of incorporation, giving it a separate legal identity from its owners.

Deed of Partnership

The legal contract signed by the owners of a partnership. The formal deeds specify the name and responsibilities of each partner and their share of any profits or losses.

Incorporation

There is a legal difference between the owners of a company and the business itself. This ensures that the owners are protected by limited liability.

Initial Public Offering (IPO)

It occurs when a business sells all or part of its business to shareholders on a stock exchange for the first time.

Limited Liability

A restriction on the amount of money that owners can lose if their business goes bankrupt, i.e. shareholders cannot lose more than they invested in the company.

Microfinance

A type of financial service aimed at entrepreneurs of small businesses, especially females and those on low incomes.

Non-Governmental Organizations (NGO)

Private sector not-for-profit social enterprises that operate for the benefit of others rather than primarily aiming to make a profit, e.g. Oxfam and Friends of the Earth.

Partnerships

A type of private sector business owned by 2-20 people (known as partners). They share the responsibilities and burdens of running and owning the business.

Private Limited Company

A business owned by shareholders with limited liability but whose shares cannot be bought by or sold the general public.

Aims

The long-term goals of a business, often expressed in the firm's mission statement. They are a general statement of a firm's purpose or intentions and tend to be qualitative in nature.

Ansoff Matrix

An analytical tool to devise various product and market growth strategies, depending on whether businesses want to market new or existing products in either new or existing markets.

Corporate Social Responsibility (CSR)

The conscientious consideration of ethical and environmental practices related to business activity. A business that adopts ________ acts morally towards its various stakeholder groups and the well-being of society as a whole.

Ethical Code of Practice

The document of beliefs and philosophies of an organization.

Ethics

The moral principles that guide decision-making and strategy. Morals are concerned with what is considered to be right or wrong, from society's point of view.

Mission Statement

The declaration of an organization's overall purpose. It forms the foundation for setting the objectives of a business.

Objectives

The relatively short-term targets of an organization.

SMART Objectives

Target that are specific, measurable, achievable, realistic, and time constraint.

Strategies

Plans of action that businesses use to achieve their targets, i.e. The long-term plans of the whole organization.

SWOT analysis

An analytical tool used to assess the internal strengths and weaknesses and the external opportunities and threats of a business decision, issue, or problem.

Tactics

The short-term plans of action that firms use to achieve their objectives.

Vision Statement

And organizations long-term aspirations, i.e. Where It ultimately wants to be.

Conflict

Situations where stakeholders have disagreements are certain matters due to differences in their opinions. This can lead to arguments and tension between the various stakeholder groups.

External Stakeholders

A business or individuals and organizations not part of the organization but have a direct interest in its activities and performance, e.g. customers, suppliers, pressure groups, and the government.

Internal Stakeholders

A business are members of the organization, e.g. the employees, managers, directors, and shareholders of the organization.

Pressure Groups

This consists of individuals with a common concern ( such as Environmental Protection) speak to place demands on organisations to act in a particular way or to influence a change in their behavior.

Shareholders (or Stockholders)

The owners of a limited liability company. Shares in a company can be held by individuals and other organizations.

Stakeholders

Individuals or organizations with a direct interest (known as a stake) in the activities and performance of a business, e.g. shareholders, employees, customers, and suppliers.

Business Cycle

The fluctuation in the level of business activity overtime. Countries tend to move through the cycle of booms, recessions, slumps, recovery, and growth.

Deregulation

The removal of government rules and regulations which constraining industry to enhance efficiency and encourage more competition within the industry.

Economic Growth

Changes in the gross domestic product of a country over time. It occurs if there is an increase in GDP for two consecutive quarters.

Exchange Rate

The value of a country's currency in terms of other currencies.

Inflation

When the general price level in an economy continuously rises. It is measured by changes in the cost of living for the average household in a country.

Interest Rate

A measure of the price of money in terms of the amount charged for borrowed funds or how much is offered on money that is saved.

Protectionist Measures

Any measure taken by a government to safeguard its industries from overseas competitors. They are a threat to businesses trying to operate in foreign markets.

STEEPLE Analysis

And analytical framework used to examine the opportunities and threats of the external environment (social, technological, economic, environmental, political, legal, and ethical environments) on business activity.

Unemployment

The number of people in the workforce who are willing and able to work but cannot find employment.

Backward Vertical Integration

When a business amalgamates with the firm operating an earlier stage of production, e.g. a car manufacturer acquires A supplier of tires or other components.

Conglomerates

Businesses that provide a diversified range of products and operate in an array of different Industries.

Diseconomies of Scale

The cost disadvantages of growth. Unit costs are likely to eventually rise of the firm grows due to a lack of control, coordination, and communication.

Diversification

A high-risk row strategy that involved a business selling new products and new markets, i.e. spreading risk of a diverse variety of products and markets.

Economies of Scale

Lower average cost of production of the firm operates on a larger scale due to gains and productive efficiency, e.g. easier and cheaper access to finance.

External Growth (or Inorganic Growth)

It occurs when a business Grows by collaborating with, buying up, or merging with another firm.

Forward Vertical Integration

A growth strategy that occurs with the amalgamation of a firm operating at a later stage in the production process, e.g. a book publisher merges with a book retailer.

Franchise

An agreement between a franchise or selling its rights to other businesses (franchisee) to allow them to sell products under its name and return for a fee and regular royalty payments.

Globalization

The growing integration and interdependence of the world's economies, causing consumers around the globe to have increasingly similar habits and tastes.

Horizontal Integration

And external growth strategy that occurs when a business amalgamates with a firm operating in the same stage of production.

Internal growth (or organic growth)

It occurs when a business grows using its own capabilities and resources to increase the scale of its operations and sales revenue.

Joint Venture

A growth strategy that combines the contributions and responsibilities of two different organizations and a shared project by forming a separate legal Enterprise.

Lateral Integration

M&As Between firms that have similar operations but do not directly compete with each other, e.g. PepsiCo acquiring Quaker Oats Company.

Merger

A form of external growth whereby two (or more) firms agreed to form a new organization, thereby losing their original identities.

Multinational Company (MNC)

An organization that operates in two or more countries, with its head office usually based in the Home Country.

Optimal Level of Output

The most efficient scale of operation for a business which occurs at the level of output where average cost of production are minimized.

Commercial Marketing

The use of marketing strategies to meet the needs and wants of customers in a profitable way.

Ethical Code of Practice

Guidelines that help businesses to act in a moral way by considering what is ethically right or wrong (from society's point of view).

Market

A place or process whereby customers and suppliers trade. It exists where there is demand for a particular product and where there is a willingness from businesses to supply these products.

Market Concentration

The degree of competition that exists within a market by calculating the market share of the largest few firms in the industry.

Market Leadership

Firms with the largest market share in a particular market.

Market Orientation

A marketing approach adopted by businesses that are outward looking by focusing on making products that they can sell, rather than selling products that they can make.

Market Share

The value of a firm's sales revenues as a percentage of the total sales revenue in the industry.

Market Size

The magnitude of an industry, usually measured in terms of the value of sales revenue from all the businesses in a particular market, per time period.

Marketing

The management process of predicting, identifying, and meeting the needs and wants of customers in a profitable manner.

Marketing Objectives

The specific marketing goals of an organization. The marketing objectives of for-profit (profit-seeking) organizations include increased sales revenue, market leadership, and greater market share.

Marketing Strategies

The medium to long term plan to achieve a firm's marketing objectives.

Needs

The essential necessities that humans must have to survive, i.e. food, shelter, warmth, and water.

Product Orientation

A marketing approach used by businesses that are inward looking as they focus on selling products they can make, rather than making products that they can sell.

Social Marketing

Any activity that seeks to influence social behavior to benefit the target audience and society as a whole.

Wants

Human desires, i.e. things that people would like to have. Irrespective of a person's income or wealth, all people have infinite wants.

Consumer Profiles

The demographic and psycho-graphic characteristics of consumers in different markets, e.g. their age, gender, occupation, income level, religion, marital status, and purchasing habits.

Differentiation

The act of distinguishing a business or its products from rivals in the industry. It tries to create the perception among customers that the firm's product is different (unique or special) compared with substitute products from rival businesses.

Ethical Marketing

The moral aspects of an organization's marketing strategies. It can be encouraged by the use of moral codes of practice.

Market Segmentation

The process of categorizing customers into distinct groups with similar characteristics (such as age or gender) and similar wants and needs.

Marketing Mix

The combination of various elements needed to successfully market a product. It is used to review and develop marketing strategies and is at the heart of marketing planning. Traditionally, it consists of the 4 Ps: product, price, promotion, and place.

Marketing objectives

The targets that the marketing department wishes to achieve, e.g. sales growth or increased market share. It should derive from the organizations's overall objectives.

Marketing Plan

The document outlining a firm's marketing objectives and strategies for a specified time period.

Marketing Planning

The systematic process of devising marketing objectives and appropriate marketing strategies to achieve these goals. It requires the collection and analysis of information about a particular market, e.g. market research data or existing and potential customers.

Mass Marketing

Undifferentiated Marketing. This is a strategy that ignores targeting individual market segments.

Niche Marketing

It targets a specific and well-defined market segment, e.g. some businesses provide high-end specialty goods in niche markets.

Packaging

A form of non-price competition that focuses on the ways in which a product is presented to the consumer. Psychologists argue that people's moods are affected by aspects of packaging such as color and texture.

Physical evidence

The image portrayed by a business regarding its observable and tangible features, e.g. the cleanliness and physical attributes of an organization.

Place

The methods of distributing products to customers, e.g. Coca-Cola distributes its drinks to customers via wholesalers, retailers, and vending machines.

Position map (or perception map)

A visual aid that shows customer perceptions of a product or brand in relation to others in the market, often by comparing perceptions about price and quality.

Price

The amount that customers pay for a particular good or service.

Process

Part of the extended marketing mix which refers to the methods and procedures used to give clients the best possible experience.

Product

A physical good or an intangible service, such as a computer or a haircut. Businesses sell products to fulfill the needs and wants of their customers.