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Business Management IB > Unit 1 - Introduction to Business Management > Flashcards

Unit 1 - Introduction to Business Management Flashcards

1
Q

Why do businesses exist?

A

To meet the needs/wants of individuals/organizations, usually in return for a profit.

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2
Q

What do businesses do?

A

Combine factors of production to produce goods and services.

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3
Q

What are the factors of production?

A

Labour, Land, Capital, Entrepreneurship.

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4
Q

What is the role of Human Resources in a business?

A

Selecting, hiring, training, compensating, and firing employees. It ensures employees are organized to achieve business objectives and determines the appropriate organizational culture.

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5
Q

Give an example of a Human Resources function.

A

Recruitment of staff.

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6
Q

What is the role of Finance in a business?

A

Managing and reporting on the economic sustainability of the business, handling funds, records, payments, and balance sheets.

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7
Q

Provide an example related to Finance.

A

Allocating resources to purchase capital equipment.

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8
Q

What is the role of Marketing in a business?

A

Satisfying the needs/wants of customers through market research, advertising, and branding (4Ps).

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9
Q

Give an example related to Marketing.

A

Setting prices of products.

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10
Q

What is the role of Operations Management in a business?

A

Handling the manufacturing of products (goods) and the delivery/execution of services, focusing on processes, quantity, efficiency, and production.

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11
Q

Provide an example related to Operations Management

A

Establishing quality management processes.

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12
Q

What activities are involved in the Primary sector?

A

Activities with the end purpose of exploiting natural resources.

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13
Q

Give examples of activities in the Primary sector.

A

Agricultural farming, Extraction of oil and gas, mining, fishing/hunting.

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14
Q

What characterizes the Secondary sector?

A

Activities consisting in varying degrees of processing raw materials.

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15
Q

Provide examples of activities in the Secondary sector.

A

Car manufacturing, construction, energy production, carpentry.

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16
Q

What characterizes the Tertiary sector?

A

Industries that provide services rather than produce goods.

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17
Q

Give examples of activities in the Tertiary sector.

A

Advertising, banking, education, communications, healthcare.

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18
Q

What activities are part of the Quaternary sector?

A

Activities involving the creation/sharing of knowledge using computer and digital information technologies.

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19
Q

Give examples of activities in the Quaternary sector.

A

Software and app development, management consultancy, Tertiary and higher education.

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20
Q

Define Entrepreneurship.

A

The trait of individuals who run their own business(es) and are described as visionaries.

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21
Q

What challenges do entrepreneurs face?

A

Lack of finance, lack of market research, poor marketing strategy, limited HR, long hours, lack of knowledge/experience/skills.

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22
Q

What does a Mission Statement declare?

A

The purpose of the organization, core purpose, identity, and focus.

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23
Q

What does a Vision Statement represent?

A

The ultimate dream and core values of the organization, providing a clear guide for stakeholders.

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24
Q

What are Strategic Objectives?

A

Long-term goals that an organization continually strives to achieve, often related to the owner’s focus, requiring a greater level of human/financial investment.

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25
Q

What are Tactical Objectives?

A

Short-term/specific goals with definitive timelines, often delegated to lower levels in the organizational hierarchy.

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26
Q

Define CSR.

A

An organization using ethical objectives to commit to behaving in a socially responsible way towards its internal & external stakeholders.

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27
Q

Who are Stakeholders?

A

People or small groups with the power to respond to, negotiate with, or change the strategic future of the organization.

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28
Q

How are businesses classified by sector?

A

Private or Public.

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29
Q

What characterizes the Private Sector?

A

Owned and run by private individuals or organizations, usually aiming to earn a profit independently of the government.

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30
Q

Provide examples of Private Sector entities.

A

Sole traders, Partnerships, Privately traded companies, Publicly traded companies, Social enterprises.

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31
Q

What characterizes the Public Sector?

A

Controlled by regional or national government, aiming to provide essential goods/services for the general public.

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32
Q

Examples of activities in the Public Sector.

A

Infrastructure, housing, health care, education, national defense, emergency services.

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33
Q

How are businesses classified by the nature of business (purpose)?

A

For Profit, For Profit Socials, Non-for-Profit (NGOs).

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34
Q

What characterizes a Sole Trader?

A

Minimal legal procedures, owner as the sole owner, privacy in financial statements, unlimited liability.

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35
Q

What characterizes Partnerships?

A

Partners sign a deal, 2-20 owners, financial statements elaborated but not presented to the commercial register.

36
Q

What characterizes a Private Held Company?

A

Separate legal entities from owners, lower fees to form than public held company, owned by shareholders.

37
Q

What characterizes a Public Held Company?

A

Separate legal entities from owners, shares available to the public, detailed financial statements published for the public.

38
Q

What characterizes Cooperatives?

A

All member shareholders expected to run the cooperative, owned by members, elected board of directors.

39
Q

Who are considered Internal Stakeholders?

A

Individuals or groups that are part of the organization, such as employees, managers, directors, shareholders.

40
Q

Who are considered External Stakeholders?

A

Those not part of the business but have a direct interest in its decisions, actions, and performance, such as customers, competitors, financiers, trade unions.

41
Q

What are the interests of Employees as Internal Stakeholders?

A

Improved terms & conditions, better pay, equal opportunities, improved job satisfaction, improved job security, wider career opportunities.

42
Q

What are the interests of Managers as Internal Stakeholders?

A

Improve operational efficiency, productivity, profits, customer relations, and their own salaries and bonuses.

43
Q

What are the interests of Directors as Internal Stakeholders?

A

Improve share ownership rights, performance-related bonuses, organization’s RoI for shareholders, competitiveness.

44
Q

What are the interests of Customers/Consumers as External Stakeholders?

A

Looking for the best product that meets their needs (price, quality, convenience), and the business must carefully listen to their opinions.

45
Q

What are the interests of Suppliers as External Stakeholders?

A

Maintaining stable relationships, competitive prices, and ensuring bills are paid on time.

46
Q

What are the interests of Pressure Groups as External Stakeholders?

A

Placing demands on the organization to act in particular ways or influence change in behavior.

47
Q

What are the interests of Government as External Stakeholders?

A

Concerned with how the business operates in the legal and responsible business environment

48
Q

What are the interests of the Local Community as External Stakeholders?

A

Concerned with the impact of the business on jobs, corporate social responsibility (CSR), and financial support.

49
Q

What are the interests of Competitors as External Stakeholders?

A

Gathering information, financial performance, benchmark data to measure their own performance, reputation, and sales.

50
Q

What are the interests of Financiers as External Stakeholders?

A

Regular payment, positive return on investment (RoI).

51
Q

What are the interests of Trade Unions as External Stakeholders?

A

Improving rights, labor conditions, salaries, and reducing working hours.

52
Q

What is a Merger in the context of business?

A

When two or more companies agree to form a single, larger company and operate at a larger scale.

53
Q

What is the difference between a Merger and an Acquisition?

A

In a merger, companies agree to form a single entity, while in an acquisition, one company buys a controlling interest in another.

54
Q

What is Horizontal Integration in the context of M&A?

A

M&A between two or more companies operating within the same industry.

55
Q

What is Vertical Integration in the context of M&A?

A

Involves buying up the value chain, either backward (buying a supplier) or forward (expanding into the primary sector).

56
Q

What is Conglomerate M&A (Diversification)?

A

M&A between businesses in unrelated industries.

57
Q

What is a Takeover in the context of business?

A

When a company purchases a controlling interest (majority stake) in another, almost always hostile (against the wishes of the owner).

58
Q

What are the advantages of M&A and Takeovers?

A

Quick entry into new markets, operating at a larger scale, spreading fixed costs and risks, synergies, opportunities to diversify.

59
Q

What are the disadvantages of M&A and Takeovers?

A

Expensive (in terms of money and time), loss of management control, resistance to change, cultural conflicts, requires reorganization.

60
Q

What is a Joint Venture?

A

When two or more organizations join to create a new business entity for a finite period of time

61
Q

What are the advantages of Joint Ventures?

A

Can be dissolved easily without compromising parent companies’ operations, combined expertise increases chances of success, cheaper and quicker than M&A.

62
Q

What are the disadvantages of Joint Ventures?

A

Conflicts between parent companies, more difficult to terminate than strategic alliances, usually short-lived.

63
Q

What is a Strategic Alliance?

A

When two or more organizations join without setting up a separate entity or making major changes to their business models.

64
Q

What are the advantages of Strategic Alliances?

A

Benefit from pooling resources, businesses retain individual corporate identities, cheaper and quicker than Joint Ventures, fosters cooperation and less competition.

65
Q

What are the disadvantages of Strategic Alliances?

A

Easier for members to pull out, limits options for external growth, potential mistakes/misconduct from other members.

66
Q

What is Franchising?

A

A franchisor sells licensing rights to franchisees to sell goods/services using the franchisor’s name.

67
Q

What are the advantages for the Franchisor in Franchising?

A

Faster than internal growth, receives royalties + initial upfront fee, benefits from a motivated franchisee, gains local knowledge.

68
Q

What are the advantages for the Franchisee in Franchising?

A

High success rate, access to a tested business model, brand recognition, ongoing support, gains from purchasing economies of scale.

69
Q

What are the disadvantages for the Franchisor in Franchising?

A

Corporate image at risk, breaking agreements can be costly, franchisee keeps profits, not applicable to all businesses.

70
Q

What are the disadvantages for the Franchisee in Franchising?

A

Expensive and time-consuming initially, constrained by standards, risk of damaged reputation, not applicable to all businesses.

71
Q

Define Economies of Scale.

A

Businesses benefit from lower average costs as the size of operations increases, leading to cost-saving benefits.

72
Q

Define Diseconomies of Scale.

A

When a firm grows beyond its ability to perform efficiently, and the average cost of production increases.

73
Q

What is the Optimal Output Level?

A

The level of output where economies of scale are fully exploited, and profits are maximized

74
Q

What is the formula for Average Cost of Production?

A

Total Cost = Total Fixed Costs + Total Variable Costs.

75
Q

How do businesses benefit from Internal Economies of Scale?

A

Financial: Lower interest rates on loans, Marketing: Spreading fixed costs by promoting a greater range of brands/products, Managerial: Improved efficiency with specialist managers, Technical: Cost-saving through

76
Q

What are examples of External Economies of Scale related to location?

A

Reduction in unit costs for all firms in an area due to improvements in location infrastructure.

77
Q

What is the role of Specialist Labor in External Economies of Scale?

A

It helps cut recruitment costs and increases labor productivity, such as relocation of suppliers, specialist R&D facilities, and new production processes

78
Q

What problems can lead to Internal Diseconomies of Scale?

A

Problems within the organization causing productivity to fall and inefficiencies to occur.

79
Q

What are examples of External Diseconomies of Scale related to problems outside the business?

A

Traffic congestion, increasing cost of rent due to high demand for land, higher labor costs due to shortages.

80
Q

What is a Multinational Company (MNC)?

A

A business that operates in two or more countries, with its headquarters in one country and operations in others.

81
Q

What is Foreign Direct Investment (FDI)?

A

Cross-border investment where a foreign company establishes an ongoing and significant stake in its operations in another country.

82
Q

What are the positive impacts of MNCs on host countries?

A

Employment opportunities, support for the workforce, support for local businesses, choice and quality for consumers, efficiency gains, tax revenues for the host country.

83
Q

What are the negative impacts of MNCs on host countries?

A

Negative impact on local businesses, repatriation of profits, exploitative business practices, loss of cultural identity.

84
Q

How do MNCs impact local businesses negatively?

A

Local firms may lose customers, experience a fall in market share and profits, potentially leading to bankruptcies and job losses.

85
Q

What is repatriation of profits in the context of MNCs?

A

Profits declared at interest and tax payments may be repatriated to the home country rather than being reinvested in the host country.

86
Q

What are exploitative business practices by MNCs?

A

MNCs may be socially irresponsible, exploiting workers with poor pay and working conditions, and causing environmental damage.

87
Q

How do MNCs contribute to the loss of cultural identity?

A

The growing presence of MNCs may lead to a depletion of local cultures, causing a cultural shift in how people live.

Business Management IB (8 decks)

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