Introduction to Business Managment

Question 1

economic sustainability

Answer 1

Meeting the needs of the present without compromising the ability of future generations to meet their own needs.

Question 2

2. System

Answer 2

a set of interconnected parts that work together to make a more complex whole to achieve a purpose. Systems have inputs, processes, outputs and feedback.
A business is an example of a system.

Question 3

3. Inputs

Answer 3

First step in a business system.

inputs in a business are all the resources needed to create a product. These resources belong to one of three categories:

physical
financial
human

Question 4

4. Capital Goods

Answer 4

The physical equipment and machines that are used to produce other goods. Are part of physical resources.

Question 4

5. Physical Resources

Answer 4

are part of inputs in the business system.

include the raw materials (agricultural products) and semi-finished goods ( goods have already been produced or processed in some way but are not consumer products) that a business needs to produce its product.

Physical resources also include capital goods such as equipment and machines that will be used to produce other goods.

Question 5

6. Financial Resources

Answer 5

are part of inputs in the business system.

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

Question 6

7. Long-term financing

Answer 6

Large-scale funds needed to finance expensive equipment and facilities that a business needs to operate. usually involves large sums of money borrowed for a longer time, may be used to purchase the business’s physical building, like a factory, shop, or office space.

Question 7

8. Short-term financing

Answer 7

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.

This would include stock/inventory.

Could also be used for ongoing expenses like paying for electricity and employee salaries if the business is not yet earning enough money through selling its products.

Question 8

9. Stock

Answer 8

The inventory held by a business to sell to customers.

Question 9

10 . Inventory

Answer 9

The raw materials used in production, as well as the goods produced that are available for sale.

Question 10

11. Human resources

Answer 10

are part of inputs in the business system.

The people needed to run the business.

They include managers and employees, as well as a more abstract element, called ‘enterprise’

Question 11

12. Enterprise

Answer 11

the process of taking risks to combine the other resources to create a good or service.

Question 12

13. Processes

Answer 12

Second step in business system.

Businesses will combine their inputs in different ways to produce products. The process that a business uses to create its product will depend on the type of product, how and where it is sold, the number and skills of employees, the financing used, and the physical or intellectual work needed.

In general, most businesses have four broad types of processes. They are sometimes called business functions.

Question 13

14. Business functions/processes

Answer 13

• Human resources management
  -Finance and accounts
  -Marketing
  -Accounting

Question 14

15. Human Resources Managment

Answer 14

Human resources management is the process that makes sure the business employs the correct number of skilled employees to produce and deliver its products. This process also involves ensuring that employees are treated ethically and in line with laws.

Ex. Strengths *SWOT : Highly trained, skilled and educated staff; loyal, collaborative employees.

Ex. Weaknesses *SWOT : Poor management; unskilled, unqualified or unmotivated employees; conflict between employees.

Question 15

16. Finance and Accounts

Answer 15

Financing and accounting processes ensure that the business has enough money to carry out its business activity over time

Ex. Strengths *SWOT : Enough money for running and expanding the business; good relations with banks; strong growth of sales and profits.

Ex. Weaknesses *SWOT : Lack of money for running and expanding the business; declining revenues and profitability

Question 16

17. Marketing

Answer 16

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

Ex. Strengths *SWOT : Strong brands; loyal customers; unique products or services.

Ex. Weaknesses *SWOT : Low brand awareness and brand loyalty; products similar to those of competitors.

Question 17

18. Operations

Answer 17

All businesses have a core business process (making a product, constructing houses, selling clothes, growing crops, etc.). Operations refers to how this core activity is carried out. Operations must plan how and in what quantity goods and services are to be produced.

Ex. Strengths *SWOT : Modern facilities; efficient, low-cost production; high-quality products.

Ex. Weaknesses *SWOT : Outdated facilities; inefficient, high-cost production; poor quality products.

Question 18

19. Goods

Answer 18

part of business outputs

tangible, meaning they have physical characteristics and can be measured

Question 19

20. Outputs

Answer 19

Third step in business system

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

2 main categories of business outputs : goods & services

Question 20

21. Services

Answer 20

part of business outputs

Intangible, meaning they cannot be touched or described by physical characteristics. Services include things like education, health care, and music concerts.

Question 21

22. Feedback

Answer 21

Fourth/final step of business system

Also called feedback loops

Process by which the output of a system becomes an input to the same system.

2 types : negative feedback & positive feedback

Question 22

23. Negative Feedback

Answer 22

When the output feeds back into the inputs in a way that moves the system in the opposite direction.

Negative feedback helps keep systems stable and businesses use feedback from customers, suppliers, employees and the community to make improvements to the product or organisation. This can take processes in a new direction.

Question 23

24. Positive Feedback

Answer 23

Occurs when the output feeds back into the inputs in a way that moves systems and processes in the same direction.

is reinforcing, contrary to negative feedback.

Example : In business, a positive feedback loop may occur when a business has poor financial results, like losses. As a result, the business may decide to lower spending on new equipment. This can cause a decline in the quality of the product and lower revenue, making the losses worse. Of course, the positive feedback loop can also move in the other direction: good financial results, more spending on equipment, more revenue leading to better results.

Question 24

25. Revenue

Answer 24

The income that a business generates.

Question 25

26. Doughnut Economics Model

Answer 25

A model that outlines the social foundation (human needs) and ecological ceiling (planetary boundaries) that economic activity needs to respect to find the ‘safe and just space for humanity’.

The goal is to meet human needs while respecting the health of the planet. It means getting into the safe space in the green area of the DEM.

Globally we are not meeting human needs AND we are not respecting the health of the planet

If you would like to hear more about the Doughnut Economics Model, the creator of the Model, Kate Raworth, explains it in a TED Talk.

Question 26

27. Planetary boundaries / Ecological ceiling

Answer 26

The outer ring of the Doughnut Economics Model is focused on the natural environment.

Planetary boundaries / Ecological ceiling: The limits of planetary systems; the outer ring of the Doughnut Economics model.

Context : There are important natural systems that work together to keep the planet stable for life. These include fresh water, land and atmospheric systems, which you can see in the outer ring of the model. But humans are constantly disturbing these systems. If we disturb Earth’s systems too much, we can cause permanent damage. This damage can make the planet unfit for life. The limits of these systems are called planetary boundaries/ ecological ceiling

we are already putting too much pressure on several of Earth’s systems. These are in climate change, biodiversity, land use and nitrogen and phosphorus flows from fertiliser use in agriculture.

Question 27

28 .Human needs / Social foundation

Answer 27

Human needs, also called the social foundation, are represented by the inner ring of the Doughnut Economics Model.

These include obvious needs such as food, water, and housing. But there are also human needs related to social interactions such as human networks, social equity, political voice, and work. The red areas of the inner circle in the Doughnut Economic Model show where we are not meeting human needs globally.

This ring in the DEM overlaps a lot with the social elements of United Nations Sustainable Development Goals (SDGs)

Question 28

29. economy

Answer 28

A system for producing and provisioning or distributing goods and services among a group of people.

Business are part of this system

Question 29

30. embedded economy model

Answer 29

A model that shows the economy embedded in nature, with inputs of energy from the Sun and outputs of waste; provisioning occurs through markets, households, the state and the commons.

This model represents Earth’s natural environment, powered by the Sun’s energy, encompassing all life and human activity. Society and the economy use Earth’s resources to meet human needs and wants, underscoring our complete dependence on these resources.

At the center of the model are systems and groups that distribute goods and services:
- household
-state
-commons
-markets

Question 30

31. Households

Answer 30

part of the economy within the inner circle of the embedded economy model.

important care services are provided between people with strong relationships. These goods and services are produced mainly with unpaid work

Question 31

32. State

Answer 31

part of the economy within the inner circle of the embedded economy model.

provides fundamental goods and services that everyone can access. These goods and services are provided often at no or a low price. They are funded mainly through taxes;

Question 32

33. Commons

Answer 32

part of the economy within the inner circle of the embedded economy model.

provides shared goods and services produced by society, or provides resources from Nature. People use and distribute goods, services and resources through self-organised systems. There is no payment

Question 33

34. Markets

Answer 33

part of the economy within the inner circle of the embedded economy model.

provides goods and services produced by businesses. Businesses produce and sell goods and services in exchange for money, for a price.

Question 34

35. Sectors of the economy

Answer 34

Economists identify four main sectors, or parts, of the economy.

• Primary
  -Secondary
  -Tertiary
  -Quaternary

Many businesses are only involved in a single sector.

Question 35

36. Primary Sector

Answer 35

A section of an economy that extracts materials (minerals, oil, etc.) or harvests products from the Earth.

includes agriculture, fishing, forestry, mining and drilling

Question 36

37. Secondary Sector

Answer 36

The area of economic activity that produces finished goods through manufacturing.

The secondary sector refers to manufacturing and processing, where raw materials are made into products for sale. The biggest manufacturing businesses in the world include carmakers, food processing companies, chemical businesses, etc.

Question 37

38. Tertiary Sector

Answer 37

refers to any business that sells a service. The tertiary sector includes businesses that sell clothing and food, as well as education, healthcare, legal services, travel and transportation.

Many, but not all, businesses in the tertiary sector are small. Large businesses in the tertiary sector include companies like Walmart, which sells a variety of goods, and bank

Question 38

39. Quaternary Sector

Answer 38

The area of economic activity involved with knowledge and the movement of information.

• Relatively new sector

The quaternary sector also includes businesses that provide web-based services and many new kinds of media.

Experts do not completely agree on exactly which activities are included in the quaternary sector. Some experts still classify these activities as a part of the tertiary sector.

Question 39

40. Supply Chain

Answer 39

The steps involved in creating finished goods.

For example, the supply chain for producing a chair includes harvesting the timber (primary sector), using computer software to design the chair (quaternary sector), transforming the wood into the chair (secondary sector) and selling the chair in a shop (tertiary sector).

Question 40

41. ntegrated Sectors

Answer 40

Businesses whose activities involve two or more sectors are described as integrated businesses.

Question 41

42. Outsourced

Answer 41

When a business takes an internal function and has it performed externally by another person or business.

Question 42

43. Business has a good chance of success when…

Answer 42

-there is a skilled and collaborative team of employees in place;
-there is enough funding to run the business;
-the marketing has been researched well; and
-the operations are efficient and resilient.

However even if a business has strong internal factors, the business can fail when external conditions are very poor

Question 43

44. Entrepreneur

Answer 43

A person who organizes human, physical and financial resources to start a business.

Entrepreneurship requires creativity and passion to make change. Entrepreneurs seek out change and are willing to take risks.

The work of entrepreneurs and other changemakers involves:

• understanding communities and their problems;
• designing and planning solutions;
  taking action; and
• sharing and growing actions and ideas to increase impact.

Question 44

45. Intrapreneur

Answer 44

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

Question 45

46. Reasons for starting a new business

Answer 45

-new business idea
-passion to make change
-market need
-earning a living
-greater financial reward
-control
-work-life balance

Question 46

47. Challenges faced by new businesses

Answer 46

-lack of needs
-strong competition
-market too small/no market
-unskilled employees or lack of collaboration
-poor management skills
-economic, environmental or political shocks

Question 47

48. Steps to start a new business

Answer 47

1. Refine the Idea
2. Prepare a business plan
3. Decide on a legal structure
4. Register the business/administrative tasks
5. Find a location
6. Hire employees
7. Get funding

Question 48

49. SWOT

Answer 48

A business management tool that analyses the internal strengths and weaknesses as well as the external opportunities and threats for a business.

SWOT analysis can help a business understand its current position and identify strategies to improve the business.

Internal Factors : 4 business functions

S– Strengths
W– Weaknesses

External Factors : STEEPLE

O– Opportunities
T– Threats

Exam tip
When using the SWOT/STEEPLE tool, it is important to remember to clearly distinguish between internal factors and external factors.

The strengths and weaknesses part of the SWOT only refer to internal factors. The opportunities and threats part of the SWOT only refer to external factors.

It is a common mistake for students to confuse strengths and opportunities, as well as weaknesses and threats, so you need to be aware of this.

Question 49

50. Internal Factors

Answer 49

Strengths & Weaknesses

(check flashcards 15-18)

Question 50

51. External Factors

Answer 50

Opportunities & Threats

External opportunities and threats refer to factors that are outside the organisation that it cannot control. Usually, external factors will be the same for a business and its competitors in the same industry and location.

The STEEPLE framework provides a useful way to remember factors to consider in your external factors analysis.

Question 51

52. Opportunity

Answer 51

Any favourable external condition or trend that might be beneficial for a business.

Ex. an opportunity for a business could be cultural changes that increase demand for a business’s product.

Exam tip:
The word ‘opportunities’ in SWOT is used differently than you may be used to.
For example, an opportunity for a business could be cultural changes that increase demand for a business’s product.

Here you are not discussing strategies for the business like ’the business has an opportunity to develop a new product.’ In the SWOT analysis, an opportunity refers to an external condition or situation that is favourable for the business.

Question 52

53. Threat

Answer 52

Any unfavourable external condition or trend that might harm a business.

Ex. international climate agreements that require countries to reduce CO2 emissions are a threat to oil companies who cannot change their business quickly.

Question 53

54. STEEPLE

Answer 53

A business management tool that analyses the external conditions that may be opportunities or threats for a business.

-Sociocultural
-Technological
-Economic
-Environmental
-Political
-Legal
-Ethical

Question 54

55. Sociocultural Factors

Answer 54

Steeple
Sociocultural factors are all the social and cultural characteristics of a region or country. These can include factors like the age structure (demographics) of the population, the way people live, like the health status and education of the population.

Beliefs and values are also part of sociocultural factors. These factors will affect what people choose to buy and how they spend their time.

Businesses need to be aware of current and changing sociocultural conditions, so they can create products and solutions needed by people.

Question 55

56. Technological Factors

Answer 55

sTeeple
The state of current technology will affect what products a business offers its customers. Technology will also affect how a business operates. Businesses are constantly offering new products based on new technologies. Some of these products improve human wellbeing,

The technological factor in STEEPLE also includes a country’s infrastructure, which encompasses essential goods that enable business, like ports, transportation networks, water, communication, and electricity systems. Well-developed infrastructure offers business opportunities, while poor infrastructure threatens efficient production and distribution.

Question 56

57. Economic Factos

Answer 56

stEeple
Economic conditions in countries and regions impact demand for goods and services. As incomes rise, demand increases, presenting opportunities, though consumers may also seek different products. These shifts can be opportunities for some businesses and threats for others.

There are cycles of GDP growth and decline. When GDP is growing, there is an expansion in the economy. A recession is when the GDP declines for a period of time, usually six months or more. These cycles of expansion and recession are called the business cycle.

During recessions, when the overall value of everything that is produced declines, businesses may see weaker demand because of falling incomes and higher unemployment. Businesses need to be aware of these income changes to respond to the changing needs and wants of consumers.

Question 57

58. Gross domestic product (GDP)

Answer 57

divides total GDP by the population of a country

Question 58

59. Expansion

Answer 58

when the total value of all goods and services produced within the borders of a country (GDP) is increasing

Question 59

60. Recession

Answer 59

when the total value of all goods and services produced within the borders of a country is decreasing, usually for six or more months

Question 60

61. Inflation

Answer 60

an increase in the general price level, usually expressed as percentage change

Question 61

62. Deflation

Answer 61

decrease in the general price level, usually expressed as percentage change

Question 62

63. Interest rate

Answer 62

the cost of borrowing money; important for businesses because they may need to borrow money for business investments

Question 63

64. Unemployment rate

Answer 63

the percentage of the labour force that is out of work but actively seeking employment at a given time

Question 64

65. Import

Answer 64

goods brought into a country

Question 65

66. Export

Answer 65

goods manufactured in a country and sold abroad

Question 66

67. Exchange rate

Answer 66

the price of one country’s currency in terms of another country’s currency

Question 67

68. Subsidy

Answer 67

government payment to businesses

Question 68

69. Tax

Answer 68

payment from individuals or businesses to government

Question 69

70. Environmental Factors

Answer 69

steEple
natural environment. Many businesses rely on natural resources as inputs and changes in the natural environment can have a large impact on businesses.

Climate change is impacting businesses worldwide. Changing weather patterns, increased frequency of storms, floods, forest fires and droughts can all affect businesses.

Many countries are trying to protect biodiversity and respect planetary boundaries. These efforts may make it harder for businesses to get the resources they need to produce their products and may be a threat. Other businesses, may find this as an opportunity.

Question 70

71. Political Factors

Answer 70

steePle
Politics greatly impacts business decisions. Political parties vary in their views on government regulation and may quickly change laws, affecting operations. New parties in power can shift business expectations, and an unstable government increases business risk.

The growing popularity of Green parties, which support stronger environmental protection, can be an opportunity or a threat for businesses, depending on their products and practices. Businesses focused on sustainability view this shift as an opportunity, while those with environmentally harmful practices may see it as a threat.

Question 71

72. Legal Factors

Answer 71

steepLe
Businesses must comply with laws and regulations at national, regional, and local levels. Multinationals must follow laws both in their home country and abroad. Staying aware of legal changes helps businesses adjust their products and operations. Some businesses attempt to influence laws in their favor through lobbying, which raises ethical concerns.

Businesses must understand and comply with laws relevant to their activities, as this is both a legal and ethical responsibility. They risk lawsuits from individuals or groups, and government prosecution, if they harm stakeholders or break laws. Violating the law can even lead to a business’s closure.

Question 72

73. Ethical Factors

Answer 72

steeplE
Many businesses have conflicts between the goals of business growth and profit and their social and/or environmental responsibilities.

Pressure from shareholders or owners to boost profits can lead businesses to make unethical choices, sometimes even promoting harmful products.

Companies producing harmful products—like cigarettes, sugary cereals, addictive apps, or tax-avoidance financial advice—often have ethical issues central to their business models. Even when their core business is not harmful, they may face ethical conflicts over environmental impact or employee treatment, including poor working conditions, low wages, and discrimination.

Multinational companies often face ethical conflicts due to their complex supplier networks, where labor practices may not be fully transparent. Some companies also classify workers as freelancers in the gig economy, bypassing certain labor laws and avoiding social security taxes.

Question 73

74. Business Plan

Answer 73

A business plan is a tool that describes a new or existing business undergoing significant changes. It helps entrepreneurs think through key operational aspects, enhances their credibility, reduces risk, and inspires others to join their venture.

– must consider its purpose and audience.
–plans range from very informal to very formal depending on what the entrepreneur wants to achieve and who the audience is (their interests and expectations)
–Successful business plans tell a story that connects with the audience on an intuitive or emotional level, tapping into human nature to engage them effectively.
– entrepreneurs need to provide both a story and evidence to win over their audience

There are various ways to gather evidence for your business plan. Secondary research can save time and often includes expert analysis relevant to your business.

However, entrepreneurs should also conduct primary research.

The evidence in your business plan can be presented in several forms. Complex quantitative data is best shown through simple graphics like line graphs, bar charts, or pie charts. Qualitative data from interviews or surveys can sometimes be quantified for graphic presentation, and anecdotes or quotes from your research can support your ideas.

Good research can reduce risks. Market research is important. However, other types of research must also be done. This includes researching legal structures for the business, product and operations research, costs, labour conditions and competition.

Question 74

75. Secondary Research/Desk Research

Answer 74

Research that involves using evidence (about a market) gathered by others.

This information can be found in news articles, research journals, company and market reports, and other reliable sources.

Question 75

76. Primary Research

Answer 75

Research (in a market) that involves creating new information that is gathered through surveys, interviews, observations, focus groups, camera studies or other methods.

Primary research can be more specific for a particular product or market. It is a good complement to secondary research.

Question 76

77. Elements of a business plan/The Golden Circle

Answer 76

a good way of thinking about the basic elements of a business plan. The Golden Circle includes the Why, How and What of the business.

The Why always comes first. But the presentation of the What and the How is flexible in the business plan.

Question 77

78. • Why - Business plan/ Golden Circle

Answer 77

the inner circle, the ‘Why’ of the business
This is the purpose of the business. The purpose is crucial for motivating those involved in starting the business and for building a supportive network. The “Why” of the business fulfills the human need for stories, providing a clear and shared understanding of the goal.

To articulate this “Why,” a business plan typically includes:
-a vision and/or mission statement, which can also be framed as a guiding question
-a description of the problem the product aims to solve.

Question 78

79. -How & What- Business plan/ Golden Circle

Answer 78

The ‘How’ elements of a business plan address the way you will produce your product. This could include information on the production processes. It will also include information on how the business will be set up and run.

The ‘What’ element of a business plan is about your product itself. What are the characteristics of the product you are offering?

Typically, the How and What of your business will be combined in several parts of a business plan :

-Description of the solution to the problem:
-Product description
-Legal structure of the business
-Human resources needed
-Location and facilities
-Value your product will bring and its
positive effects on stakeholders and
the environment
-Consideration of positive
impacts on local and global
scales in social and
environmental domains
-Description of the market and competition or partners (social business)
-Marketing plan
-SWOT Analysis
-Cash flow forecast and budget
-Sources of finance or request for financing if appropriate

there is no one structure or format for a business plan. You should choose a structure that makes sense for your business, its purpose and the audience.

Question 79

The Private Sector

Answer 79

The portion of an economy not owned or directed by the government.

Decisions about the business are taken by its owners; the government rarely takes part in decision-making

• vary in size

They can be small businesses, owned and run by one person, or they can be huge multinational companies operating globally and run by shareholders.

Private sector businesses provide many goods and services that people need (such as cars, mobile phones, food or insurance) at a market price

-profit for owner

All in all features are :
-Private ownership & control
- Profits can be earned by owners
-Little or no government involvement
-Largely Privately funded

Question 80

Multinational companies

Answer 80

A company that operates in at least two countries, one of which is not the company’s home country.

Question 81

Profit

Answer 81

Total revenue - total costs