IB Business Management Unit 1

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1.1 business

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137 Terms

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1.1 business

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

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1.1 business activity

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

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1.1 business functions

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

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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)

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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)

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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)

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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)

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chain of production

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

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corporate social responsibility

business practice that involves participating in initiatives that benefit society

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horizontal integration

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

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vertical integration

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

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benefit of vertical integration (6)

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

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sectoral change

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

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impact of sectoral change (5)

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

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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

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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

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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)

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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

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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

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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,

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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

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advantage of partnership (5)

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

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disadvantage of partnership (4)

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

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why become a company? (5)

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

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advantage of owning a share

share value may increase, receive dividend, limited liability

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disadvantage of owning a share

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

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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)

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advantages of company (6)

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

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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

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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

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Cooperative

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

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types of cooperatives (5)

financial; housing; worker's; producer; consumer

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financial cooperative

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

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housing cooperatives

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

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worker's cooperatives

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

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producer cooperatives

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

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consumer cooperatives

consumer pay lower price as members

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Public Private Partnership

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

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advantage of PPP (3)

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

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Disadvantage of PPP (3)

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

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non-profit social enterprise

generate surplus; NGO and charities

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charities

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

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advantage of NPOs (4)

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

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disadvantage of NPOs (3)

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

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disadvantage of owning a share (3)

share value decrease, no dividend, share diluted

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disadvantage of owning a share (3)

share value increases, dividend, limited liability (security)

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vision statement

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

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mission statement

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

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difference between vision and mission statement

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

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three types of objectives

strategic, tactical, operational

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strategic obj

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

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tactical obj

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

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operational

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

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hierarchy of objectives

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

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SMART

specific, measurable, achievable, relevant, time-specific

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business strategy

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

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business strategy involves? (4)

where, planning, implementation, evaluation of process

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business tactic

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

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reason to change objectives (6+7)

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

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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)

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impact of implementing ethical objectives

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

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why SWOT analysis

help business set objective through identification of SWOT

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4 strategies using SWOT

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

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why Ansoff Matrix

help business plan and set objectives

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what do aims do?

direct, control, review

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how to enforce aims (3)

appropriate strategies, resource used correctly, review constantly

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common objectives (5)

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

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market penetration

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

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key factor to succeed in market penetration (3)

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

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market development

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

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to success in market development (3)

effective market research, local knowledge, effective distribution

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to reduce the risk of product development (3)

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

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risk of diversification (2)

lack of familiarity in market, untestedness of products

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to succeed in diversification (4)

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

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economies of scale

reduction in average unit cost as a business increases in size

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diseconomies of scale

increase in average unit cost as a business increases in size

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internal economies of scale (6)

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

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external economies of scale (2)

consumers, employees

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internal diseconomies of scale

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

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external diseconomies of scale

employees

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advantages of being a small business (5)

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

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advantages of being a big business (5)

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

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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

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innovation

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

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stakeholders

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

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internal stakeholders include

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

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external shareholders include

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

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stakeholder analysis

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

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power-interest model

minimal effort, keep informed, keep satisfied, key players

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Micro-financier

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

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vision statement definition

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

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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

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secondary sector

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

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tertiary sector

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

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Quaternary sector

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

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Reasons to start up a business

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

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steps of starting up a business

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

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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...

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NGO

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

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charity

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

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