IB Business Management Key Terms

360-degree appraisal

A type of appraisal system that provides feedback from a range of people who work with or interact with the appraisee, such as their line manager, co-workers, subordinates, and even customers.

Above the line (ATL) promotion

Form of promotion that refers to any form of paid-for promotional technique through independent consumer media.

Academic journals

Also known as scholarly journals, these are publications that contain the latest educational research and academic theory.

Accountability

The extent to which a person is held responsible for the success or failure of a task, job, or project. It allows senior managers to have better control over the running of their organizations.

Accounting rate of return (ARR)

Also referred to as the average rate of return, this method of investment appraisal calculates the average annual profit of an investment project expressed as a percentage of the amount of invested.

Acid test ratio

Also known as the quick ratio, this short-term liquidity ratio measures an organization's ability to pay its short-term debts without having to sell any stock (inventories).

Accumulated depreciation

This refers to the accrued value of non-current assets, most of which fall in value over time due to depreciation.

Acquisition

When a company purchases the majority or all the shares of another company.

Acquired needs theory (HL only)

D. McClelland's theory of motivation, based on three types of needs that must be satisfied in order to improve motivation: the need for achievement, power, and affiliation.

Ad-hoc market research

Market research conducted as and when required for a specific problem that the organization is facing.

Adding value

The process of producing a particular good or service that is worth more than the cost of the resources used to produce it.

Adaptive cultures

A type of organizational culture that exists in organizations that are responsive and receptive to change. Organizations with adaptive cultures tend to be highly creative and embrace, rather than resist, change.

Adaptive innovation

Where an existing product or process is adapted. A gradual and incremental improvement

Adverse variance

This discrepancy in the budget occurs when profit is lower than expected, due to costs being higher than expected and/or revenues being lower than predicted.

Advertising

A form of visual and/or audio marketing communication used to inform and persuade people to buy a certain good or service.

Ageing population

A higher mean (average) age of the population.

Agents

Also known as brokers, these independent intermediaries help to sell a vendor's products in return for commission, e.g., real estate agents.

Appraisal

Also known as a performance review, this is the formal procedure of assessing the performance and effectiveness of an employee, in relation to his/her job description.

Arbitration

Method of stakeholder conflict resolution with all stakeholder groups in conflict agreeing to accept the decision or judgment of the independent arbitrator.

Artificial intelligence (AI)

This is an area of computer science that develops the ability of smart machines to perform tasks rather than natural or human intelligence, e.g., voice-activated commands on smart devices.

Artificial neural networks (ANN)

These are a feature of critical infrastructure and refer to the use of learning algorithms that can learn things, solve problems, and make decisions independently by processing new data as these are received.

Assets

The possessions owned by a business, which have a monetary value, e.g., buildings, land, machinery, equipment, inventories, and cash.

Average revenue

This is the amount a business receives from its customers per unit of a good or service sold.

Autocratic management (leadership)

Management style that involves centralized and autonomous decision-making, without input from others in the organization.

Average costs

This is the cost per unit of output.

Batch production

Operations method that involves producing a set of identical products, with work on each batch being fully completed before production switches to another batch, which may have slightly different specifications.

Backwards vertical integration

A method of external growth that involves a company buying another company that is further away from the consumer in the chain of production.

Bad debt

This occurs when a debtor is unable to pay outstanding invoices to the business. The result is it reduces the cash inflows for the vendor (seller).

Balance sheet

Also known as the statement of financial position, this set of final accounts shows the value of a firm's assets, liabilities, and the owners' investment (or equity) in the business, at a particular point in time.

Bankruptcy

Sometimes referred to receivership or corporate liquidation, this means a situation when a person or business declares that they can no longer pay back their debts, so the entity collapses (fails).

Bargain products

Goods or services that are those perceived by customers to be of high quality but sold at a low price.

Barriers to communication

Refers to the various factors that can prevent information being transferred effectively or accurately.

Below the line (BTL) promotion

Form of promotion that refers to all forms of advertising or promotion that do not use external media agents.

Benchmarking

The routine process of an organization comparing its products, processes (operations), and performance to that of its competitors or its own historical standards.

Big data

This refers to access to extensive amounts of unprocessed (raw) and processed (structured) data from a broad range of sources.

Break-even

This condition exists when a firm's sales revenues cover all of its production costs.

Break-even analysis

This is a business management tool used to determine the level of sales volume needed to cover all the costs associated with the output of a particular good or service.

Break-even chart

This is a graphical illustration of an organization's production costs, sales revenues, and profits (or loss) at given levels of output.

Break-even point (BEP)

This is the point on a break-even chart where the firm's total costs equal its total revenue.

Break-even quantity (BEQ)

The quantity of sales (sales volume) required for a firm to reach break-even.

Break-even revenue

This is the value of the output needed to break-even.

Brand

A brand is the registered name used to identify a product of a particular business organization.

Branding

This is the practice of using an exclusive name (brand), symbol, or design which identifies a specific product or business.

Brand awareness

The degree of customer knowledge and recognition of a particular brand in order to gain more customers.

Brand development

Part of a firm's marketing strategy in communicating the value of a brand and what the brand stands for.

Brand loyalty

The degree of customer devotion to a particular brand.

Brand switching

This is the opposite of brand loyalty and occurs when consumers turn to alternative brands, mainly because the original brand has lost some of its former appeal.

Brand value

The expected earning potential of a brand, i.e., the likely future earning potential (value) of a particular brand.

Budget

A detailed financial plan for the future, usually involving the expected costs and revenues or a cash flow forecast, for a pre-determined period of time.

Budgetary control

The financial methods used to attempt to balance actual outcomes with budgeted outcomes. This is achieved by systematic observations and corrective measures to minimize variances.

Bulk-increasing industries

Describes the businesses that need to be located near to their customer as the final product (such as hand-made home furniture) is bulkier and heavier than the raw materials used to make it.

Bulk-reducing industries

Describes the businesses that need to be located near to the raw materials needed to produce a certain good.

Business

A decision-making organization established to produce goods and/or provide services.

Business angels

Wealthy and successful private individuals who risk their own money in a business venture that has high growth potential.

Business etiquette

This refers to the mannerisms and customs by which business is conducted in different parts of the world.

Bureaucracy

The administrative systems within an organization, such as the formal policies and procedures of the business. It includes the formal rules, regulations, and procedures of the organization.

Capacity utilization

Refers to the extent to which an organization operates at its maximum level (known as the firm's productive capacity).

Capacity utilization rate

Measures a firm's actual output as a percentage of its capacity (maximum potential output), at a particular point in time.

Capital employed

The value of the funds used to operate the business and to generate a financial return for the organization.

Capital expenditure

An organization's spending on the purchase or acquisition of non-current assets or capital equipment.

Capital intensive production

This refers to the manufacturing of a good or provision of a service that relies mainly on the use of machinery and capital equipment.

Capital productivity

This measures how efficiently an organization's non-current assets are used to generate output for the business.

Cash

This refers to the money an organization has either "in hand" (at its premises) and/or "at bank" (i.e., in its bank account).

Cash flow

The movement of an organization's cash inflows (cash received from the sale of goods and services) and cash outflows (used to pay for the costs of running the business).

Cash flow forecasting

A quantitative technique used to predict how cash is likely to flow into and out of the business for a particular period of time.

Cash flow problems

These are liquidity issues that arise when an organization has insufficient funds to run its business, i.e., when net cash flow is negative.

Cash inflow

Refers to the money coming into a business from earnings (sales revenue) and other sources of finance, such as crowdfunding.

Cash outflow

Refers to the money going out of a business to pay for its costs, such as the purchase of raw materials or the payment of wages and salaries.

Centralization

The situation where decision-making is predominantly made by a very small group of senior managers at the top of the organizational hierarchy.

Chain of command

The formal lines of authority in an organization. It can be seen via an organizational chart, which shows the formal path through which commands and decisions are communicated from senior managers to subordinates.

Change management

Refers to processes and techniques used to plan, implement, and evaluate changes in business operations.

Circular business models (CBMs)

Strategies and approaches that prioritize sustainability and environmental responsibility by minimizing waste and maximizing resource efficiency.

Cloud computing

A virtual, computer-generated online space that enables businesses to store, organize, manage, process, and retrieve data in safe and efficient ways.

Closure

This occurs when employers temporarily shut the business in response to extreme industrial action of its employee (such as strike action).

Closing balance

Found in a cash flow forecast, this refers to the value of cash held by a business at the end of a trading period (usually on the last trading day of the month).

Clustering

This occurs when businesses choose to locate near other firms operating in related industries in order to benefit from passing trade and demand for products in complementary markets.

Cost centre

A section or division of a business that has responsibility for its own operational costs. It is held accountable for its departmental expenditure.

Cost to buy (CTB)

In a 'make or buy decision', this method calculates the total cost of subcontracting production to a third-party supplier.

Cost of living

A measure of how expensive it is for people to live in a particular geographical location.

Cost to make (CTM)

In a 'make or buy decision', this method calculates the total cost of producing the product in-house, instead of using a third-party provider.

Collateral

Refers to the financial guarantee, using a firm's non-current assets, for the purpose of securing loan capital.

Collective bargaining

The process of negotiation of working conditions and pay between employer and employees, or their representatives.

Communication

The transfer of information from one entity to another. It is vital to how a business operates.

Competitive pricing

This pricing method involves a business setting the price of its products at the same or similar level charged by competitors in the market.

Conciliation

This is the process of using a mediator to help facilitate negotiations during the conflict resolution process.

Consumer goods

These are products bought for personal consumption, rather than for business use.

Continuous market research

A type of market research that is conducted on an ongoing basis, rather than a one-off basis.

Contribution pricing

A pricing method that involves setting the price of a product at a level higher than the direct costs.

Convenience sampling

Sampling method that refers to the practice of using people that are within easy reach, in an unplanned way, to conduct market research.

Consumer panel

A focus group comprised of people who belong to the firm's target segment(s), referred to in order to gather their expert feedback.

Consumer profiles

The demographic and psychographic characteristics of consumers in different market segments.

Copyrights

These intangible assets give the registered owner the legal rights to creative pieces of work.

Conflict

This is a situation of friction or mutually exclusive goals between two or more parties.

Conflict resolution

The approaches or methods taken by employers and employees to oversee and handle conflict in the workplace.

Consumers

The individuals or organizations that actually use a product.

Companies (corporations)

This refers to any business organisation that is owned by its shareholders, who have limited liability.

Correlation

The relationship between two sets of numbers or variables.

Corporate social responsibility (CSR)

This is an organization's decisions and actions that impact society in a positive way. It is the view that businesses, rather than focusing solely on increasing shareholder value, should focus on the needs and behaving responsibly to all stakeholders

Competitors

The firm's rivals, which operate in the same industry and contest for the same customers.

Conciliation

Method of stakeholder conflict resolution which aims to align the incompatible interests of different stakeholder groups.