IB BM Unit 1

Business

decision-making organization involved in process of using inputs to produce G&S that satisfy consumer needs and wants.

Product

a G/S created to meet consumer needs/wants, resulting from business’s production process

Entrepreneur

individual who plans, organizes, and manages a business and its operations, and takes on (financial) risks

• drive business to achieve organizational goals

• successul entrepreneurs= creative, innovative, passion

• search for/exploit business opportunities

Customer vs Consumer

customer- ppl who purchase the product from business

consumer- ppl who acc use the product

Ex: parents buy toy for kids. Parents

Adding Value

practice of producing G&S that is worth more than the cost of the resources used in the production process

HR Management

managing personnel of organization

• planning, organizational structures, management and leadership, motivation/demotivation, industrial/employee relations

Finance and Accounts

managing org’s money, ensuring compliance with legal requirements (tax filing), informing those interested in financial position of business

Marketing

identifying and satisfying needs/wants of customers

• making sure business’s products sell well

• market research, promotion, pricing, branding, distribution

Operations

prices of converting raw materials into finished goods

• Ex: extraction of crude oil, car manufacturing, provision of travel services

Primary Sector

involved with extraction, harvesting, conversion of natural resources

• Ex: agriculture, fishing, mining, forestry, oil extraction

• tend to act for big % of output & employment in low-income countries

• high-income countries use automation

Secondary Sector

manufacturing and construction

• Ex: clothing manufacturers, publishing firms, brewers, construction firms

• economists argue this is wealth creating scot cuz manufactured goods can be exported worldwide and earn country revenue

• value added to nat resources during production process

Tertiary Sector

providing services to general population

• Ex: retailing, transportation, distributions

• physical goods can be transformed in process of providing service

  • in restaurant, ingredients (goods) are used to make food (good)- but focus is on the service (like the cooking, the waiting, etc)

• most substantial sector in high-income countries (employment and output in GDP)

Quaternary Sector

intellectual knowledge based activities that generate and share info

• IT, R&D, consultancy services, scientific research

Challenges of Starting a Business

• lack of finance

• unestablished customer base

• cash flow problems

• marketing problems

• ppl managing problems

• production problems

• legalities

• high production costs

• poor location

• external influences

Potential Opportunities for Starting up a Business (GET CASH)

• growth

• earnings

• transference/inheritance

• challenge

• autonomy

• security

• hobbies

Private Sector

organized and owned by private individuals and businesses that aim to earn profit

Public Sector

organizations owned and controlled by the government that provide essential goods and services that would be underprovided if produced by priv sector

• ensure everyone has access to basic services, avoid wasteful competition, protect citizens and businesses, create employment opportunities, stabilize economy

Sole Trader

a person who owns, runs, and controls their own business

• most common type of business ownership

• starting capital usually from personal savings or loans

• unincorporated- owner = legal entity of business

Partnership

a for-profit business owned by two or more people

• financed mainly through personal funds

• (not legally needed) but most create legal document between each other

Deed of Partnership

a legal contract specifying partners' financial contributions, roles, and responsibilities

• amount of finance contributed

• roles and responsibilities

• how profits/losses are split

• conditions for introducing new partners

• clauses for withdrawal

• procedures for ending partnership

Silent Partner

an investor who provides capital and receives profits but does not actively manage the business

Company

a separate legal entity owned by shareholders

Privately Held Company

a company whose shares are sold privately and cannot be traded by the general public

Publicly Held Company (PLC)

a company whose shares are sold to the public through a stock exchange

Memorandum of Association

a legal document required to establish a company

• outlines details of company like trading name, main purpose, registered address, amount of share capital invested

Articles of Association

a legal document outlining how a company will be governed

• rights, roles, power of BOD and shareholders

• administrative issues also covered

Certificate of Incorporation

a company’s “legal birth certificate”

• recognizes it as separate legal entity from shareholders

Social Enterprise

a revenue-generating business with social objectives at its core

Triple Bottom Line

measuring business success through economic, social, and environmental performance

Cooperative

a business owned and run by its members, who each have voting rights

Consumer Cooperative

a cooperative owned by customers to obtain lower prices

Worker Cooperative

a cooperative owned by employees to provide work opportunities

Producer Cooperative

a cooperative where producers work together to process or market products

NGO (Non-Governmental Organization)

a private organization independent of government

Operational NGO

an NGO focused on relief work and community projects

Advocacy NGO

an NGO that promotes a cause through campaigning and direct action

Vision Statement

a statement outlining an organization's long-term aspirations

Mission Statement

a statement describing an organization's purpose and core values

Growth

an increase in the scale of business operations and sales revenue over time

Profit

the financial gain earned after deducting costs from revenue

Dividend

the portion of company profits distributed to shareholders

Protecting Shareholder Value

creating sustainable long-term value for business owners

Ethical Objectives

business goals based on society's principles of right and wrong

Business Ethics

morally acceptable actions taken by an organization

Ethical Code of Practice

a documented set of beliefs and guidelines for acceptable workplace behavior

CSR (Corporate Social Responsibility)

a business's commitment to ethical and environmentally responsible practices

Strategic Objectives

medium- to long-term goals for the entire organization

Market Standing

the extent of a business's presence or dominance in an industry

Image and Reputation

how positively a business is perceived by customers and other stakeholders

Market Share

a firm's sales as a percentage of total industry sales

Tactical Objectives

short-term goals for specific departments or areas of a business

Survival

maintaining business operations, especially during difficult conditions

Sales Revenue Maximization

increasing total sales revenue, often a priority for new businesses

Corporate Culture

the shared values, beliefs, and behaviors within an organization

Stakeholder

any individual, group, or organization with an interest in a business and its performance

Employee

a stakeholder who works for the business and seeks fair pay, good conditions, and job security

Manager

a person responsible for overseeing the daily operations of a business

Director

a senior executive elected by shareholders to manage the company

Shareholder

an individual or organization that owns shares in a company

Capital Gain

an increase in the value of an investment, such as shares

Customer

a stakeholder who purchases goods or services from a business

Supplier

a business or individual providing raw materials or components

Financier

an individual or institution providing financial resources to a business

Pressure Group

a group seeking to influence business behavior in support of a common cause

Competitor

a rival business operating in the same market

Local Community

people living near a business who are affected by its activities

Stakeholder Conflict

differences in the interests and priorities of stakeholder groups

Stakeholder Mapping

a model that prioritizes stakeholders based on their power and level of interest

Optimal Level of Output

the most efficient level of production where average cost is minimized

Average Cost

total cost divided by the quantity produced

Economies of Scale

reductions in average production costs as a business increases in size

Internal Economies of Scale

cost savings achieved through improvements within the business

Technical Economies

cost savings from using advanced machinery and mass production

Financial Economies

lower borrowing costs available to larger firms

Managerial Economies

productivity gains from employing specialist managers

Marketing Economies

lower advertising costs per unit due to larger output

Purchasing Economies

discounts gained from buying inputs in bulk

Risk-Bearing Economies

spreading fixed costs and risks across multiple products

External Economies of Scale

cost savings resulting from industry growth or favorable external conditions

Technological Progress

advances in technology that improve business efficiency

Regional Specialization

concentration of skilled labor and specialist suppliers in one area

Diseconomies of Scale

increases in average costs when a business grows beyond its optimal size

Internal Diseconomies of Scale

inefficiencies caused by poor management within the business

External Diseconomies of Scale

increased costs caused by external factors such as congestion or rising rents

Internal (Organic) Growth

business expansion using its own resources and capabilities

External (Inorganic) Growth

business expansion through combining or working with other organizations

Merger

when two firms combine to form a new company

Acquisition

when one company purchases a controlling stake in another with board approval

Takeover

gaining control of another company without board approval (hostile takeover)

Joint Venture

a partnership where firms create a separate business to complete a specific project

Strategic Alliance

cooperation between businesses while each remains legally independent

Franchising

an agreement allowing a franchisee to operate under a franchisor's brand in exchange for fees and royalties

Horizontal Integration

combining businesses operating at the same stage of production in the same industry

Vertical Integration

combining businesses at different stages of production

Forward Vertical Integration

expanding towards the final stage of production or distribution

Backward Vertical Integration

expanding towards earlier stages of production

Lateral Integration

combining businesses with similar operations but no direct competition

Conglomerate Integration

combining businesses operating in completely different industries

MNC (Multinational Company)

a business that operates in two or more countries while maintaining headquarters in its home country

Brand Acquisition

purchasing a specific brand from another company instead of the entire business