Business Management SL, Unit 1: Intro to BM | Quizlet

What is a business?

A Business is a decision making organization involved in the process of using inputs to produce goods and/provide services

What is a system

A system is a group of interrelated parts working together for a purpose. A business is a system that transforms inputs into outputs. Systems thinking helps managers spot interdependencies and risks, like supply chain bottlenecks.

What are the inputs of a business

The human, physical and financial resources that a business uses in the production process.

Define the physical resources of the inputs of a business & state 3 parts of it

Physical resources are the materials and equipment a business needs for production:

raw materials (like crops), semi-finished goods (like steel), and capital goods (like machinery).

Shortages or rising costs can disrupt production and raise risks.

Define the financial resources of the inputs of a business

The funds needed to set up and invest in a business and keep it running; can be short-term, medium-term and long-term.

Define the human resources of the inputs of a business

Human resources are the people who run the business, such as managers and employees. A skilled, motivated workforce drives productivity and innovation, while poor HR management can increase turnover and costs.

Define long-term financing.

Large-scale funds needed to finance expensive equipment and facilities that a business needs to operate.

Define short term financing

Small-scale funds needed to pay for inputs that will soon be processed and sold by the business; used to cover short-term working capital needs.

Whats another word for resources in IB ECON & BUSINESS

Factors of Production(land, labour, capital, entrepreneurship)

What are the 4 broad types of processes or functions and briefly define the process part

HR: Manages recruitment, training, motivation.

Finance: Handles budgeting, investment, reporting.

Marketing: Identifies and satisfies customer needs profitably.

Operations: Converts inputs into goods/services.

Note: Interdependent for success.

What is an entrepreneur?

The individual who is willing and able to plan, organize and manage a business and its operations, taking on financial risks in doing so.

Define the business process/function of HR management

HR management handles recruitment, training, motivation, and employee wellbeing. Strong HR policies improve morale and retention, while poor HR increases staff turnover and long-term costs.

Define the business process/function of Finance & Resources

Finance is responsible for managing money, including budgeting, investment, and financial reporting. Strong finance ensures stability and growth, but poor management risks liquidity crises and even business failure.

Define the business process/function of Marketing

Process of identifying, anticipating & satisfying customer needs & wants in a profitable way.

Define the business process/function of Operations Management

The process of designing, controlling and improving the business activities that produce the goods & services. Responsible for converting raw materials and components into finished goods, ready for sale and delivery to customers.

What are outputs in a business

What a business produces; can be physical products, services, solutions or waste.

What are goods in a business

A type of product: Goods

are tangible, meaning they have physical characteristics and can be measured.

What are services in a business

A type of product: Services

are intangible, meaning they cannot be touched or described by physical characteristics.

What are needs?

Basic necessities that people must have to survive.

What are wants

People desires

Whats the difference between customer & consumer

Customers are the people and organizations who purchase a product whereas consumers are the ones who actually use the product. they might be the same like someone buying mcdonalds for themselves but not necesarily like parents buying gifts for their kids.

What is the economy

The economy is a system for producing and distributing goods and services.

Business opportunities depend on its strength — in a boom firms can expand, while in a recession survival becomes the focus.

Businesses can be classified according to the stage of production that they are engaged in. These stages are

Primary, secondary, tertiary & quatnery

Explain the sector of the economy (primary sector)

A sector of the economy that is involved with the extraction, harvesting and conversion of natural resources.

Explain the sector of the economy (secondary sector)

A sector of the economy that is involved with producing finished goods through manufacturing or construction.

Explain the sector of the economy (tertiary sector)

A sector of the economy that provides services to the general population and other organizations.

Explain the sector of the economy (quaternary sector)

A sector of the economy involved in intellectual and knowledge based activities that generate and share information.

What is the purpose of business activity.

The purpose of business is to organise resources to produce goods and services that meet customer needs while adding value. Long-term survival depends on consistently creating value and adapting to change.

How does meeting customer needs benefit a business?

Builds loyalty, strengthens brand, and increases revenue. Failure to adapt risks losing market share

How does adding value benefit a business?

Differentiates products via unique features.

Boosts customer satisfaction and USP.

Risks higher costs and overpricing.

What does add value mean to products in business.

Is the difference between the price that is charged to the customer and the cost of the inputs required to create the product / and or service.

What is the chain of production.

Links the 4 sectors (primary to quaternary) to track a product's journey from raw material extraction to final consumer goods.

What is a integrated business.

A business who's activities span 2 or more sectors of the economy.

Why is it that when economies grow & develop, many firms within the economy will change their sector of operation.

- In each SUBSEQUENT sector, there are HIGHER levels of profit that can be made.

- This is because each sector adds more value that previous sector

- Higher added value means more profits

What is a intrapreneur?

A person who develops new ideas, processes or products for a business in which they already work.

What do entrepreneurs do?

- Organise resources necessary to start & operate a business.

- Make business decisions that determine success or failure of business

- Take risks(financial, personal or professional) or they might take risks by introducing new products or entering markets. - CAN BE OF HIGH REWARD but also HIGH FAILURE

What are reasons for starting a business (name 4 with small explanation)

New idea: Unique product motivates entrepreneurship.

Market need: Fulfills unmet demand (e.g., local gym).

Financial reward: Earns higher income (e.g., lawyers).

Control: Offers autonomy as own boss.

What are challenges of starting a new business?

Lack of funds: Hard to secure startup capital.

Competition: Difficult to enter markets with loyal customers.

No demand: Products may lack market need.

Talent: Hard to hire/retain skilled staff.

What is a business plan

Formal document that details how an organization intends to meet its objectives.

What are the 4 general classifications of a firm.

1. Public vs Private Sector

2. Legal Ownership

3. Sector of Industry

4. For-profit vs Non-Profit

What are characteristics for businesses in the private sector

- Not owned or directed by Gov hence private ownership & control.

- Most organisations want profit maximisation

- More efficient than public sector bc higher levels of productivity.

- Various types of ownership.

- Largely Privately funded

What are characteristics for businesses in the public sector

- Owned and controlled by the government

- Main goal usually to provide essential goods and services

- Funded through taxation

What is privatisation

Occurs when government owned firms are sold to the private sector.

what are the 4 main types of ownership for for-profit commercial business

sole traders

partnerships

private limited companies

publicly limited companies

What is a for profit commercial enterprise & whats the aim.

A type of business that earns profit which are distributed to owners and shareholders. Main aim is to generate revenue and reward shareholders and grow business

Define a sole trader

A business owned and run by 1 person: there is no legal separation between the owner and the business hence the person has unlimited liability and also retains all profits

Advantages of Sole Trader (5)

1. Easy to set up, as there are few legal formalities & paperwork

2. Profitable as all profits go to the sole trader

3. Fast decision making as they dont need to consult with other people

4. Personalized service as the small size of the business can cater to individual customer needs

5. Financial records remain private hence the owners enjoy confidentiality.

Disadvantages of Sole Traders (theres 6 but say 5)

Unlimited liability: Personal assets at risk.

Limited finance: Relies on personal savings, slowing growth.

High risk: Faces competition from larger firms.

High workload: Owner handles all tasks, causing stress.

No continuity: Business may end if owner is ill/dies.

Explain the situation of unlimited liability

A situation where the owners of a business are personally responsible for all the debts of the business if it fails; the owners and the business are the same entity.

Define partnership

A business owned by 2-20 people, who share the responsibility for the business and the profits; no legal separation between business and the owners.

What are the advantages of a partnership(4)

Easy setup: Few legal formalities.

More finance: Multiple partners invest.

Higher efficiency: Partners specialize, reducing costs.

Private records: Financial confidentiality maintained.

What are the disadvantages of a partnership(4)

Unlimited liability: Partners liable for debts.

Slow decisions: Consultation causes delays/conflicts.

No continuity: Partnership may dissolve if a partner leaves.

Shared responsibility: One partner's errors affect all.

What is a company?

A business owned by multiple shareholders who have limited liability; can be privately held or publicly held.

See entire glossary

What is a shareholder?

Someone who owns part of a business

What is limited liability?

A situation in which the owners of the business are not personally responsible for the debts of the business if it fails; the owners and the businesses are separate legal entities.

Define a privately limited company.

A company that is privately owned and often has family or friends as the shareholders; the shares are not sold to the wider public and are not traded on a stock exchange. CAN ALSO BE SOLD TO VENTURE CAPITALISTS

Define venture capitalist

VENTURE CAPITALISTS are financial investors who provide capital to startups and small businesses with high growth potential, in exchange for equity and a return on investment, often taking an active role in the company's management.

what are the 2 documents needed for a private limited company & whats in them.

the Memorandum of Association, which states the details of the company

the Articles of Association, which states the internal roles and responsibilities of the board of directors and shareholders

What is a stock exchange?

A stock exchange is a marketplace for trading stocks and shares of public limited companies.

What are the advantages for a private limited companies?

Limited liability: Protects shareholders' personal assets.

More finance: Attracts investors/external funding.

Economies of scale: Growth lowers costs.

Private records: Enables long-term planning.

What are the disadvantages for a private limited companies?

Shared profits: Reduces individual returns.

Slow decisions: Larger size delays communication.

Limited share trading: Can't raise funds publicly.

Complex setup: Higher costs/legal requirements.

What are the 2 documents required for a private or public limited company to operate & trade

the Memorandum of Association, which states the details of the company

the Articles of Association, which states the internal roles and responsibilities of the board of directors and shareholders

What is the initial public offering also known as..

A situation where a company sells all or part of the business to external shareholders for the first time.

ALSO KNOWN AS FLOTATION

Define a public limited company.

A company that is publicly owned and and has many shareholders who can buy and sell their shares through a stock exchange.

Define a dividend

A portion of a business's profits distributed to the owners/shareholders.

What are advantages of a public limited company

1. Finances. Money (capital) can be raised through selling of shares to the public.

2. Risks. The risks are shared among a large number of shareholders.

3. Separate legal identity. If one shareholder dies, the business continues to operate.

4. Limited liability. If the business fails or suffers losses, the personal assets of shareholders are not at risk.

What are disadvantages of a public limited company

1. Shared profits. Profits are shared between many shareholders.

2. High costs. It is expensive and a time-consuming process to set up a publicly held company.

3. Loss of control. Outsiders can get control of the business by becoming the largest shareholder.

4. Accounts are publicly available to be viewed.

Define a social enterprise.

A business with social or environmental objectives that reinvests profits into the cause or community, rather than maximizing returns for owners or shareholders. Can be for profit or non profit.

Whats a for profit social enterprise.

A profit-driven business with social or environmental goals, but it prioritizes generating profit while still making a positive impact, often distributing profits to owners and investors.

What are the 3 types of for profit social enterprises.

private sector enterprises, public sector enterprises and cooperatives.

Define a private sector for profit social enterprise (state features)

A type of social enterprise that produces goods and services that are typically sold in markets for a price by for-profit businesses. A privately owned business with a social or environmental mission, aiming to generate profit while making a positive impact.

Define a public sector for profit social enterprise (state features)

A type of social enterprise that produces goods and services that are typically provided by the public sector. A government-owned or supported business with a social mission, designed to generate profit alongside providing public services or benefits.

Define a cooperative (state features 4)

Cooperatives are a type of forprofitsocialenterprise that are owned and run by their members with the principle that working together means more power.

Features include:

1. Owners of cooperatives are called members

members own and run the cooperatives

2. All employees have a vote to contribute to decision making

3. Any profits earned are shared between members

4. Their aim is to create values for members but operating in a socially responsible way.

Advantages of cooperatives(4)

Work incentives: Members' stake boosts effort.

Democratic decisions: Employee input increases loyalty.

Social benefits: Community gains from responsible principles.

Public support: Customers back the mission.

Disadvantages of cooperatives(4)

Disincentives: Lower salaries reduce motivation.

Limited finance: Restricted to member contributions.

Slow decisions: Democratic voting delays actions.

Few promotions: Flat structures limit advancement.

Advantages of For profit social enterprises(4)

Financial sustainability: Generates revenue, less reliant on grants.

Scalable impact: Reinvests profits for growth.

Attracts investment: Appeals to impact-focused investors.

Innovative culture: Drives creative social solutions.

Disadvantages of For profit social enterprises(4)

Mission drift: Profit pressure may weaken social goals.

Limited profits: Balancing investor/social aims is tough.

Higher costs: Ethical practices increase expenses.

Complex management: Balancing multiple goals is demanding.

Define a Non-Profit Social Enterprise:

A business with a social or environmental mission that generates revenue through commercial activities but reinvests all profits into achieving its cause, rather than distributing them to owners or shareholders.

Key Features of Non-Profit Social Enterprises(3):

Mission-driven: Primary goal is social impact, not profit maximization.

Profit reinvestment: All profits go towards supporting the social/environmental cause.

Self-sustaining: Earns income through sales of goods/services rather than relying entirely on donations.

Advantages of Non-Profit Social Enterprises(4):

1. Clear social impact: Focuses entirely on benefiting society or the environment.

2. Public trust: Often viewed as more ethical, which can attract supporters and funding.

3. Tax benefits: May qualify for grants, subsidies, and tax exemptions.

4. Mission alignment: Less pressure to prioritize profit over purpose.

Disadvantages of Non-Profit Social Enterprises:

Limited capital: Hard to attract investors without profits.

Financial vulnerability: Revenue fluctuations risk sustainability.

Operational constraints: Balancing income and charitable status.

Grant dependency: Relies on external funding.

Define a charity:

A type of non profit social enterprise. A voluntary organization set up to provide help or raise money for those in need, often registered with legal authorities to gain tax-exempt status.

What are the 2 types of non profit social enterprise

Charities & NGO's

Key Features of Charities (2):

Mission-driven: Focuses on philanthropy and providing direct aid.

Funding: Primarily relies on donations, grants, and fundraising.

Tax-exempt: Often legally recognized and enjoys tax benefits.

Advantages of Charities(3):

1. Public trust: Strong reputation for helping those in need, attracting donations.

2. Tax relief: Donations are often tax-deductible for donors.

3. Grants and funding: Access to government and private grants.

Disadvantages of Charities(3):

1. Financial dependency: Vulnerable to fluctuations in donations.

2. Limited innovation: Focus on aid rather than long-term sustainability.

3. Accountability: Strict regulations and reporting requirements.

Define a NGO

A type of non profit social enterprise,. An independent organization that works to address social, environmental, or political issues, often on a regional or global scale.

Key features of a NGO

1. Advocacy and activism: Focuses on systemic change, education, and policy influence.

2. Funding: Mix of donations, grants, and sometimes service fees.

3. International reach: Many NGOs operate across borders, tackling global issues.

Advantages of NGOs(3):

1. Systemic impact: Addresses root causes through education, advocacy, and policy work.

2. Global reach: Can coordinate international efforts for large-scale change.

3. Independent voice: Not controlled by governments, allowing for impartial advocacy.

Disadvantages of NGOs(3):

1. Financial insecurity: Grant-based funding can be unstable.

2. Limited local impact: May struggle to provide direct aid compared to charities.

3. Operational complexity: Managing global projects requires significant resources and coordination.

State how the hierarchy of objectives looks like and how it changes from when you go from top to bottom.

1. Vision.

2. Mission.

3. Strategies.

4. Tactics.

As you go from the top to the bottom the time changes. At the top its very longterm while at the bottom its short term.

Also the specificity is different. At the top its very broadly expressed ideals, while at the bottom its very specific.

What do aims and objectives do?

Serve a s guide for a businesses overall strategy and direction helping to focus efforts & resources to a common purpose. THEY MEASURE & CONTROL, THEY MOTIVATE & THEY DIRECT

Whats the difference between aims and objectives

Aims are long term aspirations of a business/

Objectives are specific, measurable, achievable, relevant and time bound targets (SMART) that must be achieved to reach the aspirations.

Define the vision statment

A long-term, inspirational aspiration that outlines what a business aims to become in the future, providing direction and purpose.

Define the mission statment

A short-term, actionable goal that defines a business's core purpose, identifying what it does, who it serves, and how it delivers value.

Define strategies

A long-term plan of action designed to achieve the organization's vision, involving major decisions about resource allocation and competitive positioning.

Define tactics

A short-term, specific action used to implement the company's strategy, focusing on day-to-day operations and achieving immediate goals.

Define value:

All the benefits that a business creates for the stakeholders involved.

What are the 4 common business objectives

Growth, Profit, Protecting shareholder value & Ethical Objectives

Explain the business objective growth

Measured by an increase in sale revenues or market share.

Essential for survival competitive world

Lack of growth can lead to declining competitiveness and sustainability risks