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Study guide for IB Business Management

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This is a study guide for the IB Business Management course. It includes all chapters (including HL topics). I am an IB student and obtained excellent results studying solely by this study guide (doing practice exercises as well).

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  • September 20, 2021
  • 42
  • 2021/2022
  • Interview
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1.1 Introduction to business management

- Business: decision making organization involved in the process of using inputs to produce goods
and or to provide services.

- Business sectors:

1. Primary sector: involved with the extraction, harvesting and conversion of natural resources e.g.
agriculture, fishing, mining, forestry and oil extraction
2. Secondary sector: involved in the manufacturing and construction of products, e.g. clothes
manufacturers, publishing firms, breweries and bottlers, etc.
3. Tertiary sector: specialize in providing services to the general population e.g. retailing,
transportation and distribution, banking, finance, insurance, etc.
4. Quaternary sector: subcategory of the tertiary sector e.g. communication technology, research
and development, etc.

- Entrepreneurs and intrepreneurs

- Entrepreneur: individual who plans, organize and manages a business, taking financial risks in
doing so.
- Entrepreneurship: describes trait of business leaders we tend to be distinctive in their
temperament, attitude and outlook who drive the business.
- Intrapreneur: employee who thinks and acts as an entrepreneur within the section of the
organization.
- Intrapreneurship: act of being an entrepreneur, but as an employee with a large organization.

- Problems a new business may face:

- Lack of finance
- Cash flow problems
- Marketing issues
- Unestablished customer base
- People management problems
- Legalities
- Production problems
- High production costs
- Poor location
- External influences.




1




, 1.2 Types of organizations

- Private sector organizations: owned and controlled by private individuals and businesses,
rather than by the government. Generally profit-seeking organizations.
- Public sector organizations: under the ownership and control of the government. Traditionally
provide essential goods and services to the population.


For-proft organizations:


Type of organization De nition Advantages De nition

- Individual who runs - Few legal formalities - Unlimited liability
and owns a personal - Pro t-taking - Limited source of
business. Start-up - Self-boss nance
Sole-trader capital is usually - Privacy - High risks
obtained from personal - Limited economies of
savings and borrowings. scale
- Too much workload
- Pro t-seeking - Financial strength - Unlimited liability
business owned by two - Specialisation and - Lack of continuity
Partnership or more partners. Mainly division of labour - Prolonged decision-
nanced from personal - Financial privacy making
funds. - Cost-e ective - Lack of harmony
- Businesses owned by - Raising nance - Communications
their shareholders - Limited liability issues
(individuals or other - Continuity - Added complexities
businesses that have - Economies of scale - Compliance costs
Companies invested money to - Productivity - Disclosure of
(corporations) provide capital to a - Tax bene ts information
company). Can be - Loss of control
private limited - Bureaucracy
company or public
limited company.

- For-pro t social - Incentives to work - Disincentive e ects
enterprises owned and - Decision-making - Limited sources of
run by their members (i.e power nance
Cooperatives employees, customers). - Social bene ts - Slower decision-
- Public support making
- Limited promotional
opportunities

- Financial service aimed - Accessibility - Immorality
Micro nance providers at entrepreneurs small - Job creation - Limited nance
business on low income. - Social wellbeing - Limited eligibility
- When the government
works together with the
Public-private
private sector to jointly
partnerships
provide certain goods or
services




2


fi fifi fififffifi fi ff

, Non-profit organizations:


Type of organization De nition Advantages De nition

- Non-pro t social - Social bene ts - Bureaucracy
enterprise that provides - Tax exemptions - Disincentive e ects
voluntary support for - Tax incentives for - Charity fraud
Charities -
good causes. donors Ine ciencies
- Limited liability - Limited sources of
nance

- Non-pro t social
enterprise that operates
Non-governmental
in the private sector. Run
organizations
for the bene t of others
in society.



1.3 Organizational objectives

- Vision statement: outlines and organization’s aspirations in the distant future—“What do we
want to become?”.
- Mission statement: simple declaration of the underlying purpose of an organization’s existence
and its core value—“What is our business?”.

- Aims: general and long-term goals of an organization. Broadly expressed as vague and
unquantifiable statements.
- Objectives: short to medium-term and specific targets an organization sets in order to achieve its
aims. They are specific and quantifiable.
- Strategies: medium to long-term plans of action to achieve strategic objectives of an
organization.
- Profit maximisation
- Growth
- Market standing
- Image and reputation
- Tactics: short-term methods used to achieve an organization’s tactical objectives.
- Survival
- Sales revenue maximization

There are various factors that can cause the aims and objectives of an organization to change.

- Internal factors:
- Corporate culture
- Types and size of organization
- Private vs. public sector organizations

3


fi fiffi fi fifi ff

, - Age of business
- Finance
- Risk profile
- Crisis management

- External factors:
- State of the economy
- Government constraints
- Presence of power and pressure groups
- New technologies

- SWOT analysis: acronym for Strengths, Weaknesses, Opportunities and threats. Used to assess
the current situation of a business organization through the relevant internal and external factors.

- Strengths: internal factors that our favourable compared with competitors.
- Weaknesses: internal factors that are unfavorable when compared with rivals.
- Opportunities: external possibilities for future development.
- Threats: external factors that hinder the prospect for an organization.

- Ansoff Matrix: analytical tool that helps managers to choose and devise various product and
market growth strategies.

- Market penetration: low-risk growth strategy—as businesses choose to focus on selling
existing products in existing markets to increase market share.
- Product development: medium-risk growth strategy that involves selling new products in
existing markets.
- Market development: medium risk growth strategy that involves selling existing products in
new markets.
- Diversification: high-risk growth strategy that involves selling new products in new markets.


1.4 Stakeholders

- Stakeholder: any individual, group or organization with a direct interest in, and is affected by
the activities and performance of a business.

- Internal stakeholders: members of the organization.
- Employees: staff of a business will have a stake (interest) in the organizations they work for.
- Managers and directors: individuals who oversee the daily operations of a business. Directors
are senior executives who have been elected by the company’s shareholders to direct business
operations on behalf of their owners.

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