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IB Business > 1 - Business organization and environment > Flashcards

1 - Business organization and environment Flashcards

1
Q

Business

A

An organization that provides a good (tangible) or service (intangible) to a market.

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2
Q

Tangible

A

Something you can physically touch (good)

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3
Q

Intangible

A

Something you can’t physically touch (service)

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4
Q

The functional areas of a business:

A

1) Marketing
- Product - ensuring goods and services meet customers demand
- Place - distributing goods to the right market
- Price - Strategic prices to maximize profit
- Promotion - communicating with customers and sales promoters

2) Finance
- Monitoring cash flow
- Paying creditors back
- Investment appraisal
- Tax issues
- Budgeting
- Recording data

3) Human resources

  • Recruitment of employees
  • Terms and conditions of employment
  • Workplace issues
  • Health and safety
  • Ensures employee treatment follows laws
  • Training

4) Operations management

  • Designing manufacturing process
  • Stock management
  • Quality control
  • Distribution
  • Planning time scale
  • Research and development
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5
Q

The business sectors:

A

1) Primary - extracting raw materials
2) Secondary - Turning raw materials into semi-finished goods
3) Tertiary - Services such as education
4) Quaternary - Services that involve development and use of data information

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6
Q

Industrialization

A

Changing from the primary sector to the secondary one

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7
Q

Factors that determine the development of a country:

A

1) Human resources
2) Raw materials
3) Capital formation
4) Technological development
5) Social and political factors

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8
Q

Chain of production

A

The steps involved in producing finished goods

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9
Q

Integrated companies

A

Companies whose activities span over two or more sectors

Furniture maker and seller - involved in both primary and secondary sector

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10
Q

Entrepreneur

A

A person who sets up a business, taking on financial risks in the hopes for profit

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11
Q

Entrepreneurship

A

Is the process of setting up a new business

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12
Q

Characteristics of an entrepreneur

A

Risk takers
Self motivated
Confident
Innovative

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13
Q

Intrapreneurs

A

An individual encouraged by their employees to take risks to develop their new products, processes and services while maintaining their status as an employee

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14
Q

Intrapreneurship

A

The activity of entrepreneurship when it takes place within an organization

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15
Q

Advantages and disadvantages for Entrepreneurs and Intrapreneurs

A

Entrepreneurs

Advantages:

  • Full control of project
  • Business ownership
  • 100% commitment

Disadvantages:

  • Start from scratch
  • High risk
  • Stake everything on one card

Intrapreneurs

Advantages:

  • Controlled risk
  • Multiple career opportunities
  • Job security
  • Resource access due to large corporations

Disadvantages:

  • 100% commitment
  • no business ownership
  • Dont have full control
  • No freedom
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16
Q

Concepts of a business:

A

1) Globalisation - a concept businesses react to…
2) Ethics
3) Culture
4) Change
5) Innovation
6) strategy

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17
Q

Culture

A
  • Refers to common beliefs, social norms and specific characteristics of a group of people.

OR.

Set of shared characteristics, attitudes, values and practices that dominate within an organization.

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18
Q

What are the two cultures:

A

1) Organizational culture:
- Individual values and behaviors that contribute to social and psychological environment of a business

Eg. Law firms wearing suits vs Google wearing anything they want

2) National culture
- How a business develops its management practice to fit with the national culture they operate in.

Eg. Maccas changing the 1dhs ice cream to green tea flavor in Japan

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19
Q

Innovation

A
  • The process of creating something new or improving an existing idea/ product

How does it affect the business:
improves products / efficiency / profitability

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20
Q

Change

A
  • When something becomes different or undergoes a certain transformation from its initial condition
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21
Q

Two types of change:

A

1) Organizational change
There are three levels: Individual, team, organizational

2) External change - outside factors that influence a businesses ability to achieve its goals

  • Politics
  • Ethics
  • Social
  • Technological
  • Environmental
  • Law
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22
Q

Ethics

A

Refer to moral values which determine the behavior of an individual or group

Good…Toms
Bad…Volkswagen

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23
Q

Globalisation

A

Is the process of increase integration of national economies.

OR

The process by which businesses or other organizations start operating on an internal scale.

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24
Q

Advantages and disadvantages of Globalisation:

A

Advantages:

  • Cheap labour
  • Access to a large market
  • Cheaper resources
  • More expertise

Disadvantages:

  • Exploiting labour
  • Bad brand image
  • Breaking laws
  • Increased transport costs
  • International law/ tax
  • Language barrier
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25
Q

Strategy

A

is a business’s long term plan to achieve its objective

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26
Q

The role of a business

A
  • Businesses exist to create value

How do they do this?
- They do this by taking in inputs using them to create outputs that are worth more than the inputs employed

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27
Q

The resources used by a business:

A

1) Physical resources
- Raw materials
- semi finished goods

2) Financial resources
- Funds needed to invest in the business

3) Human resources
- people needed to run a business

or

  • land
  • labour
  • Capital
  • enterprise
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28
Q

Business outputs:

A

1) Goods: physical products, tangible

2) Services: Intangible products

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29
Q

Reasons for starting a business:

A
  • Earning a living
  • Financial reward
  • Control
  • Work life balance
  • New technology
  • Unfilled niche market
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30
Q

Problems a new business will face:

A
  • Existing strong competition
  • Recruiting qualified personal
  • Lack of management
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31
Q

Business plan

A

Is usually written a written document hat describes the aspects of a new business idea,marketing,finance,operations and human resources.

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32
Q

What would be included in a business plan?

A
  • Intro about the business
  • Aims and legal objectives
  • Legal status
  • Raising finance
  • the product
  • The market
  • Financial forecast
  • operations
  • Corporate social social responsibility
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33
Q

How would want to see a business plan?

A
  • A bank

- Shareholders

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34
Q

Public sector

A

Includes all those organizations that are owned and operated by local or state government agencies.

Hospitals
Transport

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35
Q

Private sector

A

Organizations that are owned by individuals or groups of individuals

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36
Q

Free market economy

A

Is an economy that allows the market to decide the prices of goods and services by reflecting on supply and demand

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37
Q

Command economy

A

Controlled by the government and they decide what happens in the market

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38
Q

Mixed economy

A

An economic system that combines both private and state enterprise

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39
Q

Unlimited liability

A

The owner is responsible for all the debts of the business.

EG. Sole traders

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40
Q

Limited liability

A

The investor can only lose their initial investment in the business.

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41
Q

Sole trader

A

A for profit business owned by a single individual.

Unlimited liability

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42
Q

Partnership

A

Is a for profit business owned by 2 or more individuals

Unlimited liability

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43
Q

Corporation / companies

A

Owned by numerous shareholders.

Limited liability

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44
Q

Private limited companies

A
  • Owned by a relatively small group of shareholders: families
  • More control
  • No takeovers
  • Harder to raise capital
  • Shares cannot be sold on the stock exchange
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45
Q

Public limited companies

A
  • Large amounts of shareholders
  • Less control
  • Take overs
  • Easier to raise capital
  • Shares can be sold on the stock exchange
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46
Q

Non governmental organizations (NGOs)

A

Non profit organizations that usually state their purpose as benefiting society or environment

Characteristics:

  • No criminal activities
  • Not a political party
  • Controlled by the environment
  • Non profit organization.
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47
Q

Charities (NGO)

A

Non profit organizations that exist to benefit the public. Enjoy tax advantages.

Water 4 Ethiopia
bottles sold for 50p and 25p goes towards supplying water in Ethiopia.

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48
Q

Cooperative

A

organization that is owned by its members who come together to work towards a common interest. Democratic.

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49
Q

Microfinance provider

A

Makes financial services available for individuals whose needs would otherwise not meet traditional financial institutions like banks.

Helps poor populations

50
Q

Microcredit

A

Lending very small amounts of money

51
Q

Public - private partnerships (ppps)

A

defined as a long-term contract between a private party and a government agency for providing a public asset or service, in which the private party bears significant risk and management responsibility

transport infrastructure such as highways, airports, railroads, bridges, and tunnels. Examples of municipal and environmental infrastructure include water and wastewater facilities.

52
Q

Social enterprises

A

Organizations that engage in business activity but that also set themselves important goals in terms of improving society. Cn be profit or non profit organizations.

All 3 for profit organizations can be social enterprises (sole traders,partnerships and corporations)

53
Q

Businesses become social enterprises for 3 reasons:

A

1) Business sells products / services that benefit both customer and society
2) sourced sustainability or profits are set aside to support something
3) staffed by employees that might have a hard time finding a job

54
Q

Pressure groups

A

A group that tries to influence public policy in the interest of a particular cause.

Eg. Greenpeace

55
Q

Privatization

A

Transfer of a business, industry or service from public to private ownership and control.

56
Q

A mission statement

A

A written expression of an organizations purpose and reason for being.

who are we?
What do we do?

57
Q

A visson statment

A

A written expression of an organizations long term ambitions that it hopes to realize in the future.

What would be like to become?
What would be like to accomplish?

58
Q

Aims

A

Goals an organization would like to accomplish. Optimistic and broad.

59
Q

Objectives

A

Concrete target an organization sets for itself.Acronym SMART.

60
Q

Strategic objectives

A

Long term goals

61
Q

Tactical objectives

A

Medium to short goals

62
Q

Operational objectives

A

day to day goals

63
Q

Strategy

A

Is a plan,approach or scheme for achieving an aim or objective. More important decisions that may be more risky.

64
Q

Tactic

A

An approach for achieving objectives. Involve fewer resources and less risky.

65
Q

Corporate social responsibility (CSR)

A

s a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.

CSR policies involve:

  • Labour regulations
  • Environment
  • Community
  • Supplier relations

also

  • Develop talented and productive workforce
  • Improving marketing
  • Preparing for the future
  • Avoid damaging publicity

= creates shared value

66
Q

Stakeholder

A

A person with an interest or concern in a business.The business actions affect them.

67
Q

SWOT analysis definition

A

Assesses the STRENGTHS, WEAKNESSES, OPPORTUNITIES and THREATS a business has.

  • A brand cannot control the opportunities and threats as they are EXTERNAL
68
Q

SWOT analysis breakdown

A

Strengths:

  • unique selling point
  • reputation
  • brand
  • customer loyalty
  • skilled employees
  • market share
  • location
  • good management
  • modern facilities
  • strong finances

Weakness:

  • location
  • demotivated staff
  • high price compared to competitors
  • high costs
  • poor reputation
  • seasonal products
  • reliant on one customer
  • poor management
  • outdated facilities

Opportunities:

  • boom in trade cycle
  • increasing customer spending
  • new/growing markets
  • expansion
  • mergers
  • technological developments
  • government subsidies
  • low cost financing
  • availability of skilled labour

Threats:

  • competitors
  • pressure groups
  • natural disasters
  • disease
  • tax
  • recessions
  • government instability
  • high cost inputs
  • lack of availability of skilled labour
  • changing consumer tastes
69
Q

SWOT analysis advantages and disadvantages

A

Advantages:

  • understand business
  • capitalize on opportunities
  • develop business goals
  • take advantage of strengths

Disadvantage:

  • doesn’t provide solutions or alternatives
  • could be a waste of time if done wrong
  • can generate too many ideas
70
Q

STEEPLE analysis definition

what does it stand for?

A

used to evaluate a firms external environment (opportunities and threats)

Does not look at internal strengths and weaknesses

  • Socioculture (the way people live and what they value)
  • Technological
  • Economic
  • Environmental
  • Political
  • Legal
  • Ethical
71
Q

Gross domestic product (GDP) - economic

A

the total value of goods produced and services provided in a country during one year.

72
Q

GDP per capita definition

Calculation

A

Used to measure the relative wealth or poverty of a nation.

Total GDP / population of the country

73
Q

Recession

A

GDP decreases for two or more quarters

74
Q

Depression

A

used to describe a prolonged or severe recession

75
Q

Inflation

A

increase in prices calculated as annual rate increase

76
Q

Deflation

A

decrease in prices

77
Q

Interest rate

A

Cost of borrowing money

78
Q

Unemployment rate

A

% of labour force that is out of work but actively seeking employment

79
Q

Exchange rates

A

the value of one currency for the purpose of conversion to another.

80
Q

shareholder

A

An owner of shares in the company

81
Q

Franchise

A

The legal right to trade under the name of a registered business

82
Q

Franchisor

A

A franchisor sells a franchise to a franchisee

83
Q

Franchisee

A

Will pay an initial fee to use the brands name and logo and they also have to pay royalties which is an ongoing fee.Fixed % of sales revenue goes back to franchiser.

84
Q

The Ansoff Matrix (AM)

A

A management tool used to make decisions on growth strategies.Shows various strategies businesses can take to access new markets or release new products.

  • Market penetration
  • Product development
  • Market development
  • Diversification
85
Q

Market penetration (AM)

A

Strategy involves selling more of the same products and services to pretty much the same customers.

Can be done by:

  • changing prices
  • extending hours
  • increasing promotion
  • buy a competitor in the same market, making market saturated

Adv:

  • changes can be made quickly
  • low risk
  • no investment needed

Dis:

  • Limited growth available
  • Customers cannot be induced to buying more product
  • many competitors in market
86
Q

Product development (AM)

A

selling new products in the organizations existing market.

Can be done by:

  • investing in research and development
  • acquiring a competitors product and merging resources to create a new product
  • Strategic partnership that opens new distribution channels

Adv:

  • customer loyalty
  • brand image helps the release of new product
  • business has prior knowledge of the market and competition

Dis:

  • Medium risk
  • cost associated with new products
  • limited potential for growth
  • involves investment
  • investment in storage
87
Q

Market development

A

involves selling existing products to new customers

ways that this can be done:

  • new market
  • opening new locations
  • entering foreign market

Adv:

  • large growth potential
  • increased revenue

Dis:

  • expenses due to contracts
  • lots of advertising will be needed
  • research and development
88
Q

Diversification

A

Involves selling new products to a new market, riskiest growth strategy.

Advantages:

  • lots of new customers
  • unlimited growth
Disadvantages:
- high costs
- very risky
- lots of advertising needed
lots of research and development
89
Q

Two types of diversification:

A

1) Related diversification - there are potential similarities to be realized between existing business and the new products / market
2) Unrelated diversification - There are no potential similarities between the existing business and new market/product.

90
Q

A merger

A

A combination of two things, companies

91
Q

A takeover / acquisition

A

is the purchase of one company by another

92
Q

A strategic alliance

A

Is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organization.

93
Q

Joint venture

A

Commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identity.

94
Q

Stakeholder

A

An individual or group that affects an organization or is affected by it.

95
Q

List internal and external stakeholders

A

Internal stakeholder:

  • employees
  • owners/shareholders
  • managers
External stakeholders:
-pressure groups/unions
-suppliers
-government
-bank
-media
-competition
customers
96
Q

Internal (organic) growth

A

Businesses use their own resources to expand

  • retained profit
  • borrowing
  • selling shares
97
Q

External (inorganic) growth

A

Businesses work with other organizations to expand usually through:

-merger

98
Q

Types of takeovers and definitions:

A

1) Horizontal - Businesses at the same stage of production
2) Vertical - Businesses at different stage in production
3) Conglomerate - Business in a different market

99
Q

Fixed costs

A

Costs that do not changed with output

  • utilities
  • production
  • location
  • employee salary
  • advertising
  • research and development
100
Q

Variable costs

A

Output directly affects costs

  • materials
  • when it is payed my time or piece rate
101
Q

Total costs calculation

A

Fixed + Variable costs

102
Q

Average cost calculation

A

Total cost / output

103
Q

Economies of scale

A

As output increases the average cost per unit decreases

104
Q

Diseconomies of scale

A

As output increases the average cost per unit increases

105
Q

Multinational corporations (MNC’s) / transactional corporations

A

A company which operates in two or more countries.

106
Q

Trade barriers

A

Regulatory obstacles that limit trade between countries.Include tariffs and quotas.

107
Q

Tariffs

A

Taxes that are placed on goods imported into the country

108
Q

Quotas

A

Limits placed on the number or volume of goods imported into a country.

109
Q

Trading blocs

A

Include a variety of agreements between countries with the aim to reduce barriers between trade members.

-Includes the EU, SADC

110
Q

Causes of globalization

A

1) Trade liberalization
2) Technology
3) Communication
4) Transport
5) Language
6) Increased cultural awareness

111
Q

Trade liberalization

A

The removal of trade barriers to encourage international trade

112
Q

Fishbone model

  • visual tool
A

A decision making framework based on identifying the root causes of a problem.

113
Q

Force field analysis

  • visual tool
A

Intended to study resistance and change.

Make sure to use the terms driving and restraining forces.

Number 5 = powerful
Number 1 = weak

114
Q

Gantt chart

  • visual tool
A

Used to facilitate and project management.

115
Q

Decision tree / probability tree

A

used to help make decisions in the face of uncertainty.

square- decision is made

circle- outcome is uncertain

crossed out line- option is rejected

116
Q

Inquiry

A

Increase in a companies sales and profits that is a result of buying other companies or of forming a business relationship of them.

117
Q

A merger

A

In other words, a merger is the combination of two companies into a single legal entity.

118
Q

A takeover

A

A takeover or acquisition is the purchase of one company by another

119
Q

A strategic alliance / partnership

A

Agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organization.

120
Q

A joint venture

A

business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

121
Q

Advantages or disadvantages of external growth:

A

Disadvantages:

  • shortage of cash
  • compromised quality
  • loss of control
  • increased capital requirements
  • increased staff turnover

Advantages:

  • faster speed on access to new product or market areas
  • increased market share
  • Access internal economies of scale
122
Q

common steps taken when starting a business

A
  • refine the idea
  • prepare a business plan
  • decide on the legal structure
  • take care of administrative tasks
  • find a location
  • hire employees
  • seek financing

IB Business (6 decks)

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