Unit 1 IB Business Management

Businesses are systems

Complex networks that feature inputs, processes, outputs, and feedback.

Systems

Entities found everywhere that follow specific, structured steps to function.

Input

The resources used by a business to create a product or service.

Physical resources

Raw materials, semi-finished goods, and capital equipment required for production.

Examples of raw materials

Corn, timber, sodium, metals, crude oil, and steel.

Capital goods

Machines and equipment used to build other products, such as computers and manufacturing robots.

Financial resources

The funds needed to set up and run a business.

Medium-term and long-term financing

Large sums of money borrowed over a lengthy period, often used for major assets like buildings.

Small-term financing

Short-term funds used to pay for immediate inputs that will quickly be turned into products.

Stock

The specific finished inventory held by a business to sell directly to customers.

Inventory

The total combination of raw materials, in-progress items, and goods available for sale.

Human resources

The people needed to run a business, encompassing both managers and employees.

Enterprise

The act of taking risks to combine human, physical, and financial resources to create a good or service.

Land

The natural resources utilized by a business.

Labor

The human resources utilized by a business.

Capital

The physical and financial resources utilized by a business.

Entrepreneurship

The management and risk-taking function that coordinates land, labor, and capital.

Processes

The methods a business uses to combine its inputs to create finished products.

Factors influencing business processes

Product type, sales location, employee skills, available financing, and the nature of the work.

Adaptability of processes

The way a business adjusts its operations to react to internal and external changes.

Human Resources Management (HRM)

The process of ensuring the business employs the correct number of skilled workers while treating them legally and ethically.

Finance and accounts

The processes that ensure a business has enough money to carry out its activities over time.

Marketing

The process of selling the right product, at the right price, at the right time, to the right customers.

Operations

The core business process focused on planning how and in what quantity goods and services are produced.

Outputs

The final products or results generated by a system, divided into goods and services.

Goods

Tangible outputs with physical characteristics that can be seen, touched, and measured.

Examples of goods

Cupcakes, paper, tables, and bicycles.

Services

Intangible outputs that cannot be physically touched or described by physical traits.

Examples of services

Education, healthcare, and music concerts.

Feedback loop

Occurs when the output of a system turns back into an input within the same system to allow for future improvements.

Negative feedback

Moves a system in the opposite direction of a change to stabilize it and correct errors.

Positive feedback

Moves a system further in the same direction to reinforce and amplify a trend.

Sustainability

Meeting the needs of the present generation without putting the needs of future generations at risk.

Triple Bottom Line

The three areas a sustainable business must consider: earth (planet), people, and profit.

Sociocultural sustainability

Providing for human needs while actively supporting the welfare of all stakeholders.

Environmental sustainability

Improving the natural environment rather than just limiting the damage done to it.

Economic sustainability

Making a profit while simultaneously helping the community and economy over the long run.

Doughnut Economics Model

An economic model focused on respecting the earth's health while satisfying core human needs.

Planetary boundaries

The ecological limits of the Earth's system which can cause permanent damage if exceeded.

Human needs foundation

Core societal requirements including food, water, housing, equity, work, and social interactions.

Safe and just space

The target area in Doughnut Economics where human needs are met without overshooting planetary boundaries.

Economy

A structured system for fabricating, manufacturing, and distributing goods and services.

Pencil complexity

The concept that everyday objects involve highly complex, globally interconnected inputs and processes.

Embedded Economy Model

Visualizes the economy as dependent on and nested inside human society and the natural environment.

Household sector

A part of the embedded economy where people perform unpaid care services based on strong relationships.

State sector

A system where essential goods and services are funded by taxes and made accessible to everyone.

The Commons

Shared cultural or natural resources provided within a society without any monetary payment.

Market sector

A system where goods and services are directly exchanged for money.

Primary sector

The business sector focused on the extraction and collection of natural raw materials.

Examples of primary sector

Agriculture, fishing, forestry, and mining.

Secondary sector

The business sector focused on manufacturing and turning raw materials into finished products.

Tertiary sector

The business sector focused on selling intangible services to consumers or commercial clients.

Examples of tertiary sector

Retail, banking, education, and healthcare.

Quaternary sector

A sub-category of the tertiary sector focused on knowledge-based services and data collection.

Supply chain

The sequence of processes and multiple sectors a product passes through from raw material to end consumer.

Integrated business

A single company that operates across two or more different sectors of industry.

New business failure rate

The statistical trend showing that newly started businesses have the highest rate of failure.

Key features of business success

A skilled team, sufficient finances, well-researched marketing, and efficient operations.

External success factors

Forces outside a business's control, such as social, technological, economic, environmental, political, legal, and ethical factors.

Analytical business tools

Frameworks like SWOT and STEEPLE used to evaluate internal strengths and external conditions.

Entrepreneur mindset

A combination of creativity, passion, and a willingness to take calculated structural risks.

Core entrepreneurial skills

Understanding community problems, creating solutions, taking action, and communicating ideas.

Reasons to start a business

Financial rewards, market needs, pursuing a new idea, gaining work-life balance, and wanting social change.

Lack of funds

A primary challenge where new businesses fail because they run out of cash during unpredictable conditions.

High market competition

A challenge where new businesses struggle because established rivals already hold a favorable market position.

Lack of market demand

A mistake where business owners focus too heavily on developing a product without checking if a market exists.

Unskilled or uncollaborative employees

The difficulty new businesses face in attracting top talent due to high risks and small team dynamics.

Bad management skills

A challenge where new founders struggle with the daily complexities of organizing people and processes.

External shocks

Economic, political, or environmental disruptions that new businesses struggle to survive due to lack of experience.

Refining the idea

The first step of starting a business, involving market research and gathering feedback to ensure ideas are sound.

Business plan

A written guide and roadmap that assists entrepreneurs in successfully starting and running their company.

Legal structure

The formal framework chosen by an entrepreneur based on ownership type and value to society.

Registering the business

The step of completing government paperwork and filing documents to legally establish a company.

SWOT Analysis

A tool analyzing internal Strengths and Weaknesses alongside external Opportunities and Threats.

Frequency of SWOT analysis

A process that should be done consistently to adapt to changing internal and external conditions.

Change

The ongoing process by which internal or external business conditions become different.

Internal factors in SWOT

Unique organizational elements classified as strengths or weaknesses, organized by business function.

External factors in SWOT

Conditions outside the organization's control, classified as opportunities or threats, affecting all competitors.

STEEPLE Analysis

An analytical framework used to review Sociocultural, Technological, Economic, Environmental, Political, Legal, and Ethical external factors.

Sociocultural factors

Social characteristics, demographics, and cultural shifts that affect consumer choices and needs.

Technological factors

Innovations affecting product delivery, operations, and physical infrastructure like roads and communication nets.

Economic factors

Market conditions, economic expansion, and recessions that dictate consumer purchasing power and product demand.

Environmental factors

Ecological influences, such as climate change and air pollution, that directly impact modern business practices.

Political factors

The influence of government stability, political parties, and state policies on corporate decision-making.

Legal factors

The laws and business regulations a company must comply with as part of its legal and ethical responsibilities.

Ethical factors

The moral responsibilities of a business to serve human needs and protect the planet without compromising integrity.

Purpose of a business plan

To outline business goals, provide operational clarity, reduce risk, and secure credibility with investors.

Evidence in a business plan

Validated facts and projections gathered through targeted primary and secondary market research.

The Golden Circle

A management framework detailing the core structure of an organization's purpose: Why, How, and What.

The 'Why' in the Golden Circle

The underlying core purpose, cause, or belief that drives the business forward.

The 'How' in the Golden Circle

The specific processes and production methods used to realize the organization's purpose.

The 'What' in the Golden Circle

The actual tangible products or intangible services that the company offers.

Public universities

Government-owned educational institutions funded by taxes, often featuring lower tuition fees for residents.

Private universities

Educational institutions that rely heavily on student tuition fees rather than state funding.

For-profit private universities

Private educational institutions that distribute a portion of their tuition earnings to shareholders.

Non-profit private universities

Educational institutions that reinvest surpluses and donations directly into professors and facilities.

International mindedness in structure

Acknowledging that regulations and cultural expectations vary globally and dictate business structures.

Ethical behavior pillars

Adhering strictly to legal compliance and fulfilling mutual responsibilities among all core stakeholders.

Private sector

The part of the economy owned, funded, and managed by private individuals or commercial enterprises.

Public sector

The part of the economy owned, funded, and controlled by the government to deliver essential public services.