Units 1.1-1.3 Flashcards
This deck aligns with the textbook "Business Management for the IB Diploma Exam Preparation Guide" by Alex Smith.
[1.1] Business
An organization that brings together resources to produce goods and services that are sold to customers.
[1.1] Resources (human, financial, physical)
- Human resources: the people aspect of the business i.e. direct labor, indirect labor, managers
- Financial resources: the funds that a business has to facilitate its organizations
i. e. day-to-day funds, long-term finance, recordings of business profits and asset value - Physical resources: the capital of the business
i. e. buildings, equipment, fixtures and fittings
[1.1] Business functions
The different aspects of business operations (four areas).
[1.1] Human resource management
One of the four main business functions.
It is the way in which a business manages people in its organization.
[1.1] Finance
One of the four main business functions.
It is the department of an organization that has to make sure the business has the funds to operate on a day-to-day basis as well as having the finance to invest in its future operations.
[1.1] Marketing
One of the four main business functions.
It is the department of an organization that is responsible for discovering, predicting and satisfying the needs and desires of consumers in a profitable way.
[1.1] Operations
One of the four main business functions.
It is the way that organizations manage physical resources.
[1.1] Primary business sector
Businesses that are involved in agriculture, forestry, fishing and mining.
- The goods produced in this sector are sold to manufacturing firms in the secondary sector.
i. e. mining company
[1.1] Secondary business sector
Manufacturing organizations that make goods (out of the goods produced in the primary sector) to sell to other businesses and final consumers.
i.e. car manufacturer
[1.1] Tertiary business sector
Firms that provide services to consumers and other businesses.
i.e. restaurant
[1.1] Quaternary business sector
Businesses that are focused on information technology.
i. e. social media company
- The quaternary sector is often included with, or is considered part of, the tertiary sector.
[1.1] Factors of production
The collective term for the resources used in the production process.
i.e. land, labour, capital and entrepreneurship
[1.1] Value added
The numerical difference between the cost of factor inputs in the production process and the price that the final output is sold for.
[1.1] Entrepreneur
An individual that sees a business opportunity in the form of consumer want and then brings together human, physical and financial resources to produce a product to satisfy that want.
[1.1] Intrapreneur
An individual who works within a business in an entrepreneurial way to develop a firm’s products to attract new consumers.
[1.1] Business plan
A formal document that describes the business, sets out its objectives and strategy, identifies its market and provides its financial forecasts.
[1.2] Private sector
Businesses and organizations owned and controlled by individuals or groups of individuals that are not under state control; they usually aim to earn a profit.
i.e. for-profit organizations and not-for-profit organizations
[1.2] For-profit organization
Commerical organization where the profits made by the business go to its owners or shareholders.
[1.2] Not-for-profit organization
Organization that uses its surplus revenue over cost to finance its objectives or mission.
[1.2] Public sector
Organizations that are primarily financed and controlled by a country’s government, with the main aim being to provide essential goods and services for the general public.
[1.2] National organization
An organization in which the central government appoints managers and directors to run the organization.
- Often funded through government tax revenue.
[1.2] Local organization
An organization often controlled and funded by regional governments.
[1.2] Sole trader/sole proprietor
A for-profit organization owned and controlled by a single person.
[1.2] Unlimited liability
Refers to the full legal responsibility that sole traders and (sometimes) partners assume for all business debts.
[1.2] Partnership
A for-profit business where two or more individuals jointly own and take responsibility for the enterprise.
- In a general partnership each partner has unlimited liability for all of the partnership’s debts.
- In a limited partnership, limited partners have limited liability.
Different types of partners:
- Ordinary partnerships have 2 to 20 partners.
- Silent/sleeping partners are inactive owners of a partnership business, who provide additional capital without having any role in the actual running of the organization.
[1.2] Deed of Partnership
A formal partnership agreement or contract between the owners, which includes legal agreements such as the formal responsibilities of each owner, their voting rights, and how profits are to be shared between the partners.
[1.2] Company/Corporation
Any business organisation that is owned by its shareholders, who have limited liability.
[1.2] Private company
A for-profit business that has shareholders who are invited to buy shares in the business by existing owners.
[1.2] Public limited company
A private sector, for-profit business that sells its shares on a stock exchange to private investors.
[1.2] Stock exchange
Any marketplace where the general public and other companies can buy and/or sell shares.
[1.2] Cooperative
For-profit social enterprise jointly owned by its members who democratically run the organization to meet the needs and aspirations of its members.
[1.2] Social enterprise
A revenue-generating businesses with community (social) objectives at the core of its operations in order to benefit the general public, rather than private shareholders.
[1.2] Microfinance
Financial organizations that provide financial services to poor and low-income customers who do not have access to normal banking services.
[1.2] Public-private partnership
An organization that is jointly established by a public sector and private sector organization (with a contract) to support the provision of a public service.
[1.2] Non-governmental organization
A legally constituted, not-for-profit organization that supports issues in the public good.
[1.2] Charity
A not-for-profit organization (usually operating in the private sector) set up to provide money and support to people in need.
[1.3] Mission statement
A succinct and motivating declaration of an organization’s purpose of existence, who they are, and what they do; it formally sets out its core objectives.
[1.3] Vision statement
An inspiring declaration of what an organization ultimately strives to be, or to achieve, in the distant future (long-term); based on its values.
[1.3] Corporate aims
The long-term goals that a business wants to achieve in the future.
[1.3] Objective
A target set by an organization to achieve its corporate aims.
Often set using SMART criteria:
- Specific
- Measurable
- Achievable
- Relevant
- Time
[1.3] Strategy
The long-term plan that sets out the ways a business is going to achieve its corporate aims.
[1.3] Tactics
The specific techniques used by a business to achieve its objectives.
[1.3] Ethical objectives
Business objectives influenced by moral values.
[1.3] Corporate social responsibility
An organization’s decisions and actions that impact society (which includes their customers, employees communities and the environment) in a positive way.
[1.3] SWOT analysis
A strategic analysis tool that allows managers to assess the current situation facing an organization, including both internal factors and the external business environments.
It considers the following of a business:
- Strengths
- Weaknesses
- Opportunities
- Threats
[1.3] Ansoff’s matrix
This is a strategic management tool, used to devise product and market growth strategies for an organization.
[1.3] Market penetration
A growth strategy in the Ansoff matrix that focuses on developing existing markets with existing products to increase sales revenue and market share.
[1.3] Market development
A growth strategy in the Ansoff matrix which focuses on marketing an existing product in a new market.
[1.3] Product development
This growth strategy in the Ansoff matrix that involves introducing new products to existing customers by developing or replacing current products.
[1.3] Diversification
A growth strategy in the Ansoff matrix, which involves a business launching new products in new markets.