IB Business Management SL
Terms in this set (118)
Any organization that uses resources to meet the needs of individuals or organizations through the following: producing/extracting raw materials (primary sector), creating articles of consumption (secondary sector), providing a service (tertiary sector), or providing technological/knowledge-based skills/services (quaternary sector).
Human, physical, financial, enterprise/entrepreneurship
Uses a large proportion of land or machinery relative to other inputs, especially labor. More expensive.
Uses a large proportion of labor relative to other inputs, especially land/machinery. Usually involves low-skill workers. Less expensive.
Tangible final products of consumption.
Intangible; actions, events, or experiences offered to the consumer.
4 Business Functions
Marketing, Finance, Human Resources (HR), and Operations Management (production).
Ensuring the business offers a G/S that is desired by a sufficient number of people or businesses for profitable operations. Incorporates 4 Ps: price, promotion, placement, product.
Ensuring the appropriate funds are available to manufacture and distribute the G/S. Involves forecast requirements, keeping
accurate records, procuring financial resources from various providers, & ensuring proper payment for G/S acquired to operate the business.
Human Resources (HR)
Ensuring the appropriate personnel are employed to make the G/S and that they are appropriately compensated for work. Involves recruitment, dismissal, training, and planning compensation.
Operations Management (Production)
Ensuring that appropriate and efficient processes are used to manufacture the G/S. Involves controlling stock quantities and
production methods and streamlining efficiency.
Chain of Production
The entire process used to produce and sell a G/S.
Growth through acquisition of other businesses.
A business merging with or acquiring another business in the same sector and in a similar market.
A business merging with or acquiring another business involved in earlier or later stages of the production chain.
An individual who takes risks and demonstrates creativity and initiative in order to earn a profit.
An individual employed by a large organization who demonstrates entrepreneurial thinking in the development and sale of a new product.
Market reading innovation
Observing customers and competitors and offering similar products with small changes.
Need seeking innovation
Communicating with current and potential customers to determine their needs.
Technology driving innovation
Investing in research and development and following the resulting opportunities with product offerings incorporating new technologies.
A document proposing a startup's business idea, aims, and objectives; business organization; HR plan; financial plan; marketing plan; and operations plan.
Profit-based private sector business
Any business owned by an individual or group of individuals that aims to ultimately earn a profit.
Types of profit-based private sector businesses
Sole traders; partnerships; limited companies; co-operatives; for-profit social enterprises
All income received by a business within a specific time period.
All expenditures incurred by a business within a specific time period. Fixed costs plus variable costs.
Total revenues minus total costs.
A business in which one person provides permanent finance, has full control of the business, and can keep all profits. Unlimited liability, meaning that the owner's possessions and net worth are liable to be used to pay off incurred business debt. No legal distinction between business and owner. The owner has privacy and limited accountability.
A business formed by two or more people to carry on a business together with shared capital investment and, usually, shared responsibilities. Decisions are made jointly.
The only liability - or potential loss - a shareholder has if the company
fails is the amount invested in the company, not the total wealth of the shareholder. A company is legally separate from its shareholders.
Small units of ownership a company is divided into.
Individuals that own shares in a business; part owners of the business.
A portion of a business's profits distributed to its shareholders.
Private Limited Company (PLC)
A limited liability company in which shares can only be sold/offered in the company privately to
the people known to the owners as friends, family and associates.
Public Limited Company (LLC)
A limited liability company that offers shares publicly in one of the world's stock exchanges (NYSE, LSE, etc.).
For-profit social enterprise
A business that has a social purpose. Social purpose generally means that the firm
aims to improve human, social or environmental well-being. These businesses
do not want to maximize profits if doing so compromises their social purpose.
A form of partnership whereby the business is owned and run by all the "members".
Firms that specialize in providing small amounts of finance to those who traditionally would not have
access to it. Money is lent with specified conditions of use and scheduled
Public-private partnership (PPP)
A business created by agreement between the public and private sectors. Usually focus on construction of facilities with a social aim (schools, hospitals). Governments act as financiers, private directors as managers.
Non-profit social enterprise
A private sector business that does not open with the aim of turning a profit, but rather in ameliorating or contributing to fixing a social problem. Any profits earned are called "surpluses" and must be re-invested into the firm. 2 main types: charities and NGOs.
Non-governmental organization (NGO)
A non-profit business that aims to support a social cause.
A specific form of NGO which focuses on providing aid and support to the less fortunate or impoverished. Usually has a philanthropic goal and operates in LDCs, war zones, etc.
A firm's statement of the ideal it strives to achieve in the future. Aims. Should never change, as it represents a "utopian" view of the business.
A firm's statement of the way it will go about achieving its vision statement. Goals. Will change sometimes, depending on external and internal factors.
Long-term goals. Summarized by the vision statement.
Medium- to short-term goals that clarify how a business will achieve its aims and reach its vision. Summarized by the mission statement.
A system of testing for objective strength. Objectives should be Specific, Measurable, Achievable, Relevant, and Time-specific.
A plan to achieve objectives in order to
work toward the aims of the business.
Medium-long term and require managers to make decisions.
A plan to achieve a tactical objective to work
towards the strategies of the business, which
themselves are the path to reaching the aims of the business. Short-term and require middle managers to change. Easily changed.
Framework for analyzing the effects of external changes on a business. Social; Technological; Economic; Ethical; Legal; and Environmental factors.
Objectives that allow the business to provide some social or environmental benefits while turning a profit.
Corporate Social Responsibility (CSR)
The company acts as an upstanding "corporate citizen," which entails obeying laws, ethically interacting with customers, and preserving the environment.
A framework for setting business objectives. Strengths; Weaknesses; Opportunities; Threats.
A model used to show the degree of risk associated with the four growth strategies of market penetration, market development, product development and diversification.
The objective of achieving higher market shares in existing markets with existing products. Focuses mostly on brand loyalty and promotion. This is the least risky of all the four Ansoff strategies in that there are fewer 'unknowns' - the market and product
parameters remain the same.
The development and sale of new products to be sold in an existing market. Medium-risk Ansoff strategy.
The sale of existing products in a new market. Medium-risk Ansoff strategy.
Expansion into a new market, along with the sale of new products. Riskiest Ansoff strategy.
Any individual or group of individual that has a direct interest in a business because the actions of the business will affect them directly. Can be internal (working within the company) or external (not affiliated with the company). Competitors are NOT stakeholders.
The interests of the various stakeholders will differ. Interests might include return on investment, the impact on the local area, working conditions and the quality of
the product produced. Businesses should decide which interest to value based on the stakeholder's interest in, value to, and power over the company.
Economy of scale
Reductions in a firm's unit (average) costs of production that result from an increase in the scale of operations.
Total costs divided by quantity produced. FC + VC / Q.
Purchasing economies of scale
Also known as bulk-buying. Suppliers offer discounts on larger orders. It is cheaper for suppliers to process and ship one large order than multiple small ones.
Technical economies of scale
Firms with more capital can invest in higher tech physical capital (long-term assets), such as computer systems and production lines.
Financial economies of scale
The firm can secure financial capital more easily from banks due to its proven track record and/or large market cap. Additionally, IPOs and public stock offerings are proportionally less expensive to larger companies.
Marketing economies of scale
Firms with more capital can reach a larger demographic through marketing due to the restrictively high prices of popular advertising spots, e.g. Super Bowl ads.
Managerial economies of scale
As a firm expands, it accrues enough capital to hire efficient managers for every business process/function occurring in the firm.
Diseconomies of scale
Factors that cause the average cost of production to increase when the scale of operation is increased.
Communication problems (diseconomy)
Large-scale operations will often lead to poor feedback to workers, excessive use of non-personal communication media, communication overload with the volume of messages being sent, and distortion of
messages caused by the long chain of command. Poor feedback reduces
Workforce alienation (diseconomy)
The bigger the organization, the more difficult it is to directly involve every
worker and to give them a sense of purpose and achievement. They may
feel insignificant in the overall business plan and become demotivated, failing to do their best. Especially a problem with repetitive jobs, such as on production lines.
Poor co-ordination and slow decision making (diseconomy)
Business expansion often leads to many departments, divisions and products. The number of countries a firm operates in often increases too. The problems for senior management are to co-ordinate these operations and take rapid decisions in such a complex organization. Smaller businesses
with much tighter control over operations and much quicker and more flexible decision-making may benefit from lower average production costs
as a result.
Internal growth (organic growth)
The expansion of a business by means of opening new branches, shops, or factories.
The expansion of a business by means of acquisition of or merger with other businesses.
A merger with or takeover of a business in another industry.
An agreement between two or more businesses to work together closely on a particular project and to create a separate business division to do so.
Agreements between firms in which each agrees to commit resources towards the achievement of a specific objective. Can incorporate many different stakeholder groups.
The practice of selling branches of an established business to individual owners that make managerial decisions but must abide by the rules and regulations of the corporation. E.g. McDonald's, Burger King
In terms of intensity, speed, scale, and economic value of goods, global
interdependence is on a scale never seen before in human history.
Multi-national corporation (MNC)
A firm that conducts business operations in more than one country.
Human resource management (HRM)
A strategic approach to the effective management of an organization's workers that aims to help the business gain a competitive advantage in personnel quality.
The analysis and forecasting of the numbers of workers and the skills required of them that will enable an organization to achieve its objectives.
Occupational labor mobility
The extent to which workers are willing and able to move to different jobs requiring different skills.
Geographical labor mobility
The extent to which workers are willing and able to geographically move in order to take up new jobs.
Refers to the movement of employees into and out of a business in a given time period. Can be used as an indicator of business stability.
A check on the skills and qualifications of all existing employees.
A document that establishes the number and skills of the workforce required by the business. Similar to business plan.
Information and communications technology.
Not coming in to set place to work, e.g. working from home rather than at an office.
Hiring; taking on new workers to fit the objectives of the business.
A detailed list of the key tasks and responsibilities associated with a job.
A detailed list of the qualities, skills, and qualifications that a successful hire will need to have.
Training that focuses on making a new employee familiar with the way a business functions through orientation.
Employees are trained through doing their normal job by the side of a mentor.
Employees are given time off work to attend training away from the job.
A review of an employees performance on the job.
When an employer decides to terminate an employee's contract.
When an employee decides to terminate a contract and leave a job.
When a worker is let go because the business has no need for him, e.g. the business may be going bankrupt or cutting costs. May be voluntary or involuntary.
When a business cuts back on operations and hires third parties to carry them out while the business focuses on core activities.
When a business outsources to companies outside of its home country.
The extent to which a society accepts inequality in power. Calculated for every nation in the PDI.
A diagram that outlines formal roles, reporting lines, and responsibilities.
Levels of hierarchy
The amount of levels of responsibility in a business. Each level represents a different level of seniority in the business.
Chain of command
The formal way a decision must travel through an organization. In a traditional organization, the decisions travel from the top down and are referred to as commands.
Span of control
The number of subordinates (or people) who are directly under the authority of a manager and who the manager is responsible for.
Flat organizational structure
Small spans of control, fewer managers with employees possessing more autonomy.
Tall organizational structure
Larger spans of control, more managers with employees possessing less autonomy.
Also known as matrix structure, this organization is designed to be responsive to market demands. Human resources are organized to focus on individual projects.
Suggested by Charles Handy, this model structures employees into 3 groups: core employees, sub-contractors, temporary workforce. Graphically represented by a shamrock.
5 key functions of management
Planning, organizing, commanding, coordinating, controlling
A manager is responsible for planning and overseeing the work of a group, monitoring the group's
progress, and ensuring that the plan is put into effect.
Inspiring people to follow one voluntarily. Involves spending a great amount of time and energy into building relationships.
Leadership styles (list)
Autocratic, paternalistic, democratic, laissez-faire, situational
Leaders hold as much power and decision-making influence as possible. They do not consult employees. Orders must be obeyed. Best used with unskilled or inexperienced workers.
While similar to autocratic leadership, leaders view employees as "family." This involves instilling values of loyalty, commitment, and pride in work.
The leader involves employees in decision making and informs them about issues that affect them. Employees feel empowered due to having a say in the decision-making process.
Employees have a high degree of autonomy, set their own goals, and resolve problems as they fit. Best used with highly skilled and experienced workers.
The idea that different situations require different leadership styles; there isn't a single 'best' style of leadership.
Five cultural dimensions
Developed by Geert Hofstede.
Power distance, individualism, uncertainty avoidance, masculinity, long-term orientation.