All Business Management IB Terms to know
Topic 1 – Business organisation and environment
1.1 Intro to Business Management












Business
Transformation process of inputs to outputs
Functions of a business (HR, Finance, Marketing, Operations)
Sectors of business
o Primary, secondary, tertiary, quaternary (and quintenary)
o Horizontal/vertical integration in a sector
Nature of business activity in each sector
Industrialisation (growth of secondary sector)
Entrepreneur vs intrapreneur
Qualities of an entrepreneur:
o Innovative, problem solving, self-motivated, risk-taking, belief in self
Reasons for starting a business
o Rewards, independence, experience, necessity, market gap, sharing an idea
Steps in starting up a business
Problems that a new business might face
Elements of a business plan
o Exec. Summary
o Opportunity, aims, objectives, strategies
o All four functions
1.2 Types of Organisations




Public vs private sector distinction
For-profit commercial organisations
o Sole trader
o Partnership
o Private limited company
o Public limited company
For-profit social organisations
o Cooperatives
o Microfinance providers
o Public-private partnerships (PPP)
Non-profit social enterprises
o NGOs
o Charities
1.3 Organisational Objectives





Vision (future) and mission (now) statements
Aims
Objectives
o Strategies
o Tactics
o Operational objectives
Strategies and tactics evolved from aims and objectives
Internal (OH FLOP) and external (STEEPLE) environment changes result in changed objectives




Impact of implementing ethical objectives
Importance of CSR in modern context
SWOT analysis
o Growth strategies (SO)
o Re-orientation strategies (WO)
o Defusing strategies (ST)
o Defensive strategies (TW)
Ansoff matrix
o Market penetration
o Market development
o Product development
o Unrelated/related diversification
1.4 Stakeholders





"Stakeholders are any individual, groups of individuals, businesses or any other party who
have a direct interest or are impacted by the business and its decisions."
Interests of internal stakeholders
o Managers
o shareholders
o Employees
Interests of external stakeholders
o Suppliers
o Creditors
o Government
o Customers
o Pressure groups
o Unions
There can be areas of mutual benefit across many stakeholders
Stakeholders/individuals with high interest and high influence in the business should be
please preferentially (Johnson and Scholes power-interest model)
1.5 External Environment



STEEPLE Analysis
Changes in each external factor has implications for a business, depending on stage of
business cycle
Business cycle
o Expansion --> peak --> recession --> trough repeat
1.6 Growth and Evolution


Scale of operations: max output that can be achieved by utilising all available
resources/inputs
Economies of scale: the reduction of a firm's cost per unit as a result of an increase in scale
of operations whilst minimising costs, both internal and external (efficiency maximised)
o Internal: managerial, financial, purchasing, risk-bearing, marketing
 Lower costs achieved through buying power
o External: customers, employees
 From external factors







Diseconomies of scale: an increase in business costs per unit due to a larger scale of
operation beyond a certain size (inefficient)
Small (annual revenue less than $50 million) vs large organisations
Internal growth
o Selling more products, diversifying, new branches
External growth
o Mergers and acquisitions/takeovers
o Joint Ventures
o Strategic Alliance
o Franchising
Domestic businesses have increased competition, need for brand awareness, and
collaboration due to globalisation
Reasons to operate as an MNC and disadvantages
Impacts of MNCs on host countries
o New job opportunities, total output increase, but could exploit local workforce
1.7 Organisation Planning Tools (HL)

Decision Tree



Fishbone Diagram
Gantt Chart
Forcefield analysis
Topic 2 – Human Resource Management
2.1 Functions and evolution of HRM












HRM
Work force planning
Labour Turnover = (no. of staff leaving per year/avg. total staff employed) x 100
o Acceptable level dependent on industry standards
External factors which influence HRM
Stages in recruitment (first stage of HR plan)
o Identify need, define job, attract candidates, select best option
Elements of a contract
Types of training (second stage of HR plan)
o On the job
 Induction
 Mentoring
o Off the job
o Cognitive
o Behavioural
Appraisal Methods (third stage of HR Plan)
o 360 degree feedback
o Summative
o Formative
o Self-appraisal
Dismissal/redundancy (final stage of HR plan)
o Resignation. Dismissal, redundancy, retirement
Different work practices + impacts on employees/employers
o Part-time work
o Temporary employment
o Flexitime employment
o Teleworking
o Migration for work
Outsourcing, off-shoring and re-shoring (adv and disadv)
Impact of innovation, ethical practices and cultural differences on HRM
2.2 Organisational Structure


Terminology
o Delegation
o Span of control
o Levels of hierarchy
o Chain of command
o Bureaucracy
o (de)centralisation
o De-layering
Types of structures
o Tall/vertical
o Horizontal/flat
o Hierarchical
o By Region
o By product


o By function
Organisational Charts
o Project-based organisation
 Delegation by project
o Shamrock organisation
 Retain essential, skilled workforce, all other things outsourced
Impacts of cultural differences and innovation on communication in an organisation
2.3 Leadership and Management




Functions of management:
o Planning, organising, commanding, coordinating and controlling
Role of managers (handle logistics, best way to advance business aims and objectives) vs
leaders (deal with people, motivating and inspiring)
Leadership styles
o Autocratic
o Democratic
o Paternalistic
o Laissez-Faire
o Situational
Ethical and cultural considerations in leadership styles
2.4 Motivation




Why motivation is important
Indicators of poor motivation
Motivation Theories:
o Taylor's "Scientific Management" Theory
 Pursuit of the best, most efficient practice supersedes all else
o Maslow's Hierarchy of Needs
 Physical, safety, social, esteem, self-actualisation
 More motivation found higher in pyramid/hierarchy
o Herzberg Motivation and Hygiene Theory
 Motivators: achievement, recognition for work, job enrichment,
enlargement, empowerment (intrinsic, in the job)
 Hygiene factors: salary, working conditions, interactions with others,
administration, supervision (extrinsic, surround the job)
o Adam's Equity Theory
 Employees should be compensated fairly for the inputs they put in, and are
demotivated otherwise
 Inputs and outputs
o Pink Theory
 Autonomy
 Mastery
 Purpose
Financial rewards
o Salary
o Wages
o Commission
o Profit-related pay
o
o
o


Performance-related pay
Employee share ownership schemes
Fringe payments (perks) i.e. discounts/tax benefits
Non-financial rewards
o Job enrichment
o Job rotation
o Job enlargement
o Empowerment
o Purpose/opportunity to make a difference
o Teamwork
Mix of financial/non-financial rewards motivate employees differently in different cultures
2.5 Organisational Culture






Definition of organisation culture
How is it evident/experienced?
Types of organisation cultures
o Role culture
o Power culture
o Person culture
o Task culture
Edgar Schein’s Model of Organisational Culture
o Artefacts (spoken)
o Values
o Underlying assumptions (unspoken)
Culture clash
o Reasons for culture clash
o Consequences
Influence of individuals on culture and culture on individuals
2.6 Industrial/Employee Relationships





Employer/employee representatives
o Employees - trade union
o Management - employer representatives/associations
Methods used by employees (basically being as annoying as possible to make them listen)
o Collective bargaining
o Strike-action --> walkout
o Slowdowns/go-slow
o Work-to-rule
o Overtime work
Methods used by employers
o Lock-outs
o Negotiation/collective bargaining
o Threat of redundancies
o Threat of closure
o Changes to contracts
Sources of conflict in a workplace
o Communication issues, culture clashes, contrasting views, new changes, competition
Approaches to conflict resolution
o Arbitration
o
o
o
o


Conciliation
No-strike agreement
Single unions agreement
Employee participation and industrial democracy --> more engagement between
parties to improve relations
Reasons for resistance to change
o Inertia
o Fear of the unknown
o Self-interest
o Lack of trust of new changes
o Misinformed/misunderstood reason for change in the first place
Reducing impact of change and resistance to change
Topic 3 – Finance and Accounts
3.1 Sources of Finance







Capital Expenditure
Revenue Expenditure
Necessity for balance between the two
Internal Sources of Finance:
o Retained profit
o Sale of fixed assets
o Personal Funds
External Sources of Finance:
o Share Capital (equity (the value of shares issued by a company) finance)
o Debt factoring
o Loan Capital
o Business Angels
o Venture Capital
o Grants/Subsidiaries
o Overdrafts
o Leasing
o Trade credit
Short, medium and long-term finance
Adv and diadv of different sources of finance
3.2 Costs and Revenues






Fixed Costs
Variable Costs
Semi-variable costs
Direct costs
Overheads/Indirect Costs
TR includes many revenue streams
3.3 Break-even Analysis



Contribution per unit = selling price - variable costs
Total contribution = contribution x quantity = total revenue - total variable costs
Profit = total contribution - fixed costs





BEQ = fixed assets/contribution per unit, TR = TC
Break even revenue = BEQ x Quantity sold
Target profit output = (fixed costs + target profit)/(price - variable costs)
Effect of price or cost changes on BEA
Benefits and limitations of BEA
3.4 Final Accounts (some HL)






Why stakeholders are interest in accounts of a firm (managers, employees, customers,
governments, shareholders, media etc.)
Ethical principles in accounting: Integrity, objectivity, professionalism, competence,
confidentiality
Profit and Loss (Income) Statement
o Flow of business expenditure/revenue over a time period
o Trading account
 Revenue - COGS = Gross Profit
o Profit and Loss Account
 Gross profit - expenses - interest - tax = Net Profit
o Appropriation Account
 Retained Profit = Net Profit - Dividends
o Strengths and weaknesses
Balance Sheet
o Snapshot of organisation's financial position at a given time
o Total Assets = Total Liabilities + Equity
o Assets
 Fixed (>12 months) and current assets
o Liabilities
 Long-term (>12 months) and current
o Equity
 Share Capital and Retained Profit finances the net assets
o Working Capital (net current assets) = current assets - current liabilities
o Total assets less liabilities = fixed assts + current assets - current liabilities
o Capital Employed = fixed assets + working capital = total assets less liabilities
o Net assets = capital employed - long-term liabilities
Patents, copyright, trademarks, goodwill as intangible assets
Depreciation
o Straight-line method
o (Total depreciation)/Number of years = Annual depreciation
o Reducing-balance method
o Netbook valuen = netbook valuen-1 - (netbook valuen-1 x rate of depreciation
%)
o Final net book value = Initial(1 - rate)no of years
o Characteristics and advantages/disadvantages of both
3.5 Profitability and Liquidity Ratios


GPM, NPM and ROCE (given on formula sheet)
Ways to improve each:
o GPM
o Increase price/quantity sold
o More economies of scale --> more automation etc
o
o
o
o
Lower COGS, cheaper suppliers etc
NPM
Reduce expenses specific to business operations
ROCE
o
o

Reduce capital employed --> pay out long term liabilities
Reduce equity and retained profit --> invest more into assets
Current Ratio/Acid Test Ratio (given on formula sheet)
o Current Ratio
o Reduce short-term liabilities --> more long term
o Sell fixed assets to increase cash
o Negotiate longer credit terms with suppliers
o Encourage debtors to pay back quicker
o Acid Test
o Sell of stock through price specials --> reduces potential revenue
o Better stock management, JIT vs JIC
3.6 Efficiency Ratio Analysis (on formular sheet)





Efficiency ratios: assess utilisations of firm’s resources in terms of assets and liabilities
(solvency)
Inventory/Stock Turnover Ratio
Debtors Days
Creditor Days
Gearing Ratio
3.7 Cash Flow






Cash flow is different to profit, can have positive cash flow but a loss
Working capital cycle:
o Desirable to reduce credit length to increase current assets and maintain steady
cash flow
Cash flow forecast
o Prediction of firm's cash inflows and outflows over time period in a financial
document (based on past monthly trends)
o Opening cash balance
o Total cash inflows (receipts)
o Total cash outflows
o Net cash inflow
o Closing cash balance (net cash + opening) = opening cash balance of next
time interval
o Adv and disadv
Investment, profit and cash flow change as business advances in business cycle
Causes of cash flow issues
Dealing with problems:
o Reduce outflows
o Increase inflows
o Seek additional sources of finance
3.8 Investment Appraisal

Qualitative techniques to evaluate viability of a proposed investment for a business




Payback Period (PBP) = initial investment cost/annual net cash flow OR investment
cost/contribution per month
o Adv and disadv
Average Rate of Return (ARR) = profit (contribution)/years x 100/capital cost
Present Value (PV) = Cost x Discount Factor
Net Present Value = sum of present values - original cost
3.9 Budgets (HL)







Importance of budgeting
Cost centre
Profit centre
Roles of cost and profit centres
Adverse and Favourable variances
Strategic planning
Roles of budgets and variances in strategic planning
Topic 4 – Marketing
4.1 The Role of Marketing











Marketing, relation to HR, Finance and Operations
Tangible goods are marketed differently than services
Product Orientation
Market Orientation
Commercial Marketing
Social Marketing
Characteristics of a market:
Market Share
Market Leadership
Marketing objectives of for-profit vs non-profit businesses
Unethical marketing, impact of innovation and culture on marketing strategies/objectives
4.2 Marketing Planning









Marketing Plan and its role
Four P's, product, price, promotion, place
Appropriate marketing mix of the four for each business
Market Segmentation (demographic, geographic, psychographic)
Undifferentiated and differentiated targeting (target market)
Niche marketing --> micromarketing --> mass marketing
Consumer profiles of segmented market
Product perception/position map
Importance of USP
4.3 Sales Forecasting





Sales forecasting
Time series analysis
3-part moving averages, 4-part moving averages (8-part moving total)
Extrapolation
Average seasonal, cyclical variations
4.4 Market Research





Use of market research
Primary Research Methods:
o Surveying
o Interview
o Focus group
o Observation
Secondary Research Methods:
o Government publications
o Market Analysis
o Media Articles
o Academic Journals
Ethical considerations behind market research
Quantitative vs qualitative research


Methods of Sampling:
o Quota sampling
o Random sampling
o Stratified sampling
o Cluster sampling
o Snowball sampling
o Convenience sampling
Representations of results: tables, graphs, 5-point analysis (box plot)
4.5 The four Ps (product, price, promotion, place)
Product







Product life cycle: Development, introduction, growth, maturation, saturation,
extension/decline
Extension strategies for products
Relationship between investment, profit and cash flow in different stages of product life
cycle
Boston consulting group matrix (BCG), shows growth vs market share
o Products put into four categories, stars, cash cows, dogs and question marks
o Strategies to convert question marks into stars, sell off dogs to invest in cash cows
and harvest profits from stars (holding, building, divesting, harvesting strategies)
Aspects and importance of branding
Types of branding: family, product, company, own-label or manufacturer's branding
Importance of packaging
Price

Pricing strategies (adv and disadv)
o Cost plus (mark up)
o Penetration
o Skimming
o Psychological
o Loss Leader
o Price discrimination
o Price leadership
o Predatory
Promotion
 Promotion: Above the line and below the line
 Promotional mix between the two considering stage of business cycle
 Viral Marketing
 Social Media Marketing
 Social Networking because of technological advancement
 Innovative, guerrilla marketing as a strategy
Place





Place in the marketing mix
Zero-intermediary channels
One-intermediary channel
Two-intermediary channel
Industry considerations and adv/disadv for each
4.6 The Extended Marketing Mix of Seven Ps (HL)
People


Employee-consumer relationships, measurements of effectiveness
Impact of cultural environment on these
Processes
 The importance of delivery processes in services
o Payment methods, waiting times, customer assistance/service, after-sales care,
delivery
Physical Evidence
 The importance of tangible evidence in marketing a service
The seven Ps in a service-based market
4.7 International Marketing (HL)



Methods of entry into international markets
o Exporting
o International franchising
o Joint ventures
o Licensing
o Direct investments in subsidiaries
Opportunities and threats posed by entry into international markets
Implications of international marketing:
o Language and cultural differences
o Legal differences
o Political environment
o Economic environment
o Infrastructure


o And how they impact daily operations and marketing strategies
Cultural differences in marketing mix from international marketing
Implications of globalisation in international marketing
4.8 E-commerce




Ubiquity, personalisation, accessibility, interactivity, universal standards, integration, global,
features of E-commerce
The effect of changing technology and E-commerce on the marketing mix
B2B, B2C, C2C types of E-commerce
Costs and benefits of E-commerce
Topic 5 – Operations Management
5.1 - The Role of Operations Management





Operations
Production
Interconnection with other functions of business
Factors of production
Triple Bottom Line (people, planet and profit OR social, ecological and economic)
5.2 - Production Methods





Job Production
Batch Production
Mass (flow/line) Production
Cell Production
Best method determined by factors in and out of control
5.3 - Lean Production and Management (HL)





Lean production
o Waste
o Kaizen (continuous improvement)
o Just-in-time
o Kanban
o Andon
Cradle-to-cradle design
Quality control and assurance
Quality improvement
o Quality circles
o Benchmarking
o TQM
National and international quality standards
o ISO9000 to ISO9002
5.4 - Location



Can lead to a business's demise/success
External and internal factors impact a business's decision on its location
o Outsourcing/subcontracting
o Offshoring
o Reshoring
Social/environmental impacts of location, CSR must be maintained
5.5 - Production Planning (HL)




Supply chain management (SCM)
Physical flow to consumer, informative flow to supplier
JIT vs Just-in-case
Stock control costs
o Having too much vs not having enough





Economic order quantity (EOQ) is desired in these costs
Use of stock control charts
o Min/max stock, buffer stock, lead time, re-order level, re-order quantity, stockout
level
Capacity Utilisation Rate
Productivity Rate
o Labour productivity rate
CTB vs CTM, lower price is chosen by business, but also must consider qualitative factors
(e.g. lead time)
5.6 - Research Development (HL)









R&D
Requires strong teamwork, leadership, communication
Advantages a country, can be advantageous and disadvantageous for a business
Think of idea --> discuss concept --> research market --> budget the idea --> build prototype
--> test --> launch
Unmet needs of consumers, known and unknown should be met in R&D
Intellectual property protection
o Patents, Copyright, Trademarks
PPPP Innovation
o Product, process, position, paradigm
Innovative creativity vs adaptive creativity
Factors that affect R&D strategies and methods:
o Legal constraints, ethical concerns, organisation structure, pace of change, past
experience, competition
5.7 Crisis Management (HL)



Crisis
Crisis Management - Reactive
o Transparency, communication, speed, control
Contingency Planning - Proactive
o Cost, time, risks, safety