Unit 1: Business Organization and Environment
|Subtopic||Subtopic Number||IB Points to Understand|
|Introduction to Business management||1.1||Any decision-making organization that is involved in the process of using inputs to produce output that has the power to satisfy the demands of its customers is called a business.
Functions of business: Human resource management, Finance and accounts, Marketing, Operations and management
Businesses can be classified into four interdependent sectors based on the stage of production
An entrepreneur is a person who plans, organizes, and manages the resources while undertaking the financial and operational risks involved.
An Intrapreneur is an employee of the organization who thinks and acts as an entrepreneur, but within the organization.
Steps involved in starting a new business
Problems faced by a new business or a startup: Lack of finance, Shortage of working capital, Marketing problem, etc
A business plan: A detailed report on the goals and objectives of a business organization. It acts as a planning tool to set the targets after considering the available resources to get an idea of how the activities are to be performed to reach the defined objectives.
|Types of organizations||1.2||Profit- based organizations– Businesses that aim to make profit.
For profit social enterprises – These are revenue generating enterprises which aim for maximizing social impact along with the profits.
Non- profit social enterprises – These are the commercial enterprises which use their surplus revenues to achieve social goals.
Main features of for-profit and non-profit social enterprises
Sole Proprietorship – Any profit-making enterprise that is owned and run by a single person
Partnership – A profit-making business owned together by 2 or more individuals. There is a legal agreement among the partners known as “partnership deed” which specifies the terms of contract
Corporations – corporations are separate legal entities distinct from its owners. Board of directors (BOD) are elected by the shareholders of the company to manage the company and
Private vs Public limited companies
|Organizational Objectives||1.3||Mission statement: Short/medium term interpretation of the vision of an organization
Vision statement: Focuses on the accomplishment of the long term aim
Aims are defined as the long-term goals of an organization which are expressed in unquantifiable terms.
Objectives on the other hand, are the short- to- medium term targets set by the organization for the achievement of aims.
Strategies are the action plans sketched to achieve the strategic objectives of an organization.
Tactics are the short-term approaches identified to accomplish the organization’s tactical objectives.
Internal and external factors that cause the aims and objectives of organization to change
Ethics are the moral principles that act as guidelines while outlining strategies/plans.
Corporate Social Responsibility: It is defined as the act of taking responsibility for its actions and considering the impact of its decisions on the society, while making any decisions in the favor of the organization’s objectives.
An audit simply means the inspection of accounts of an organization’s accounts by an independent body.
SWOT Analysis: It is a quite simple and effective tool for analysis of the internal and external factors.
Ansoff Matrix: It is an analytical tool for the use of senior managers, directors, and other decision-makers to devise product and market-oriented strategies for future growth.
|Stakeholders||1.4||Any person/organization/group that has a stake in a particular business organization and is affected by its activities and performance is counted as a stakeholder for that company.
Internal stakeholders: Employees, Shareholders, Managers and directors
External stakeholders: Customers, Suppliers, Pressure groups, competitors, government
Shareholders: Primary stakeholders that have a share in the profits/losses of the company and the portion of profit which is distributed among them is known as dividend.
A best-fit theoretical solution to address the interests of stakeholders, available in the form of a model known as Stakeholder Mapping.
Conflicts due to varying interests between internal and external stakeholders
|External Environment||1.5||External environment is the business environment that is composed of the factors which influence the operations of the organization but are beyond the control of the business organization.
STEEPLE analysis is an analytical tool used by the managers of the organization to identify and assess the opportunities and threats in the external environment of the business.
Consequences of changing any of the STEEPLE factors in the businesses objectives
|Growth and evolution||1.6||The reductions in the average cost of production of a firm that results from the increase in the scale of operations is called as economies of scale.
The cost-saving benefits that arise because of the internal factors that are within the control of the organization are called internal economies of scale.
The cost-saving benefits that arise because of the external factors that are beyond the control of the organization are called external economies of scale.
Diseconomies of scale refer to the increase in average costs of production as the business continues to increase its size and becomes inefficient.
Small organization versus large organizations
Business growth refers to the stage where the business reaches the point of optimal utilization of resources and aims to expand further to increase profitability and market share. There is internal and external growth
Globalization is the integration and interdependence of the local and national economies of the world into a single global economy
Importance of globalization and impact of it on growth and evolution of business
An organization that operates in more than one country is termed as a multinational company (MNC)
|Organizational planning tools||1.7 (HL ONLY)||Organizational planning is the identification of the clear and attainable objectives of the organization and the formulation of the plans of action and strategies to achieve them.
Unit 2: Human Resources
|Subtopic||Subtopic Number||IB Points to Understand|
|Functions and Evolution of human resource management||2.1||Human resource planning (workforce planning): Analyzing and forecasting the number of workers and the skills of those workers that will be required by the organization to achieve its objectives
Internal (Level of Growth, Use of Technology) and External factors (Available Labor Pool, Government Regulations) that influence human resource planning
Types of training: On the job, off the job, cognitive, behavioral
Appraisal: Analysis of the performance of an individual, which usually includes assessment of the individual’s current and past work performance
Types of appraisal: formative, summative, 360-degree feedback, self appraisal
Human resource strategies: Outsourcing, offshoring and re- shoring
|Organizational Structure||2.2||Organizational structure is the formal framework within a business organization which identifies the roles/ job functions of different people in an organization
The five key elements in the organizational chart are different departments, chain of command, span of control, channels of communication and the levels of hierarchy.
The formal line of authority through which the orders/ instructions are passed down the levels of hierarchy is called chain of command.
Delayering is the process of removal of one or more layers/ levels from the hierarchical structure of the organization.
Downsizing implies reduction in the workforce due to mass redundancies.
Types of organization charts: flat, tall, hierarchical, by product, by function, by region
A project-based organization is an organization in which the human resources are structured on the basis of projects of different departments.
|Leadership and management||2.3||The roles and responsibilities of a manager are defined as the functions of management.
Henri Fayol says there are 5 functions of management
Charles Handy defined 3 key roles of management
Peter Drucker says there are 5 functions of management
A leader motivates and inspires an individual/ group of individuals to get the things done.
Leadership: Process of influencing and inspiring others to achieve goals (usually with broad goals and no time frame)
Management: Process of problem solving and decision making as well as planning, organizing, budgeting, and controlling (usually with specific goals and definite time frame)
Kinds of leadership styles: autocratic, paternalistic, democratic, situational, laissez-faire
|Motivation||2.4||Motivation: Desire, effort, and passion to achieve something. It can be classified as intrinsic or extrinsic
Motivation theories: Taylor, Maslow, Herzberg, Adams, Pink
Types of financial rewards: Salary, Wages, Commission, Profit related pay, Performance related pay, Employee share ownership schemes, Fringe payments
Types of non-financial rewards: Job enrichment, Job rotation, Job enlargement, Empowerment, Purpose/Opportunity to make a difference, Teamwork
|Organizational (corporate) culture||2.5 (HL ONLY)||Organizational culture: A company’s employees’ values, attitudes, and beliefs that govern how they engage with each other and with external stakeholder groups
Elements of organizational culture:
Types of organizational culture: Power, Task, Role, Person, Entrepreneurial
Culture clashes occur when there is conflict between subcultures in an organization. This may lead to lowered productivity, staff walkouts, losses
Culture gaps can cause major problems since individuals affect culture as much as the other way around
Influence of humans on organizational culture
|Industrial/employee relations||2.6 (HL ONLY)||Role and responsibility of employee and employer representatives: Good relationships are necessary as poor working relationships lead to low morale, conflict, and perhaps even strike action/rioting
Employee relation method: collective bargaining, slowdowns/go- slows, work-to-rule, overtime bans and strike action
Employer relation method: collective bargaining, threats of
Source of conflict in the workplace:
Approaches to conflict resolution:
According to John Kotter, there are 4 main reasons:
Unit 3: Account and Finance
|Subtopic||Subtopic Number||IB Points to Understand|
|Sources of finance||3.1||Finance is the management of money pertaining to organizations, companies, or the government.
Finance plays a role in the business in terms of capital and revenue expenditure
Internal sources of finance – Finance/ Capital generated internally by the business which does not put any liability on the business’s head. Examples: Personal funds, sale of assets, etc
External sources of finance – External sources of finance refer to money that comes from outside a business. Share capital, loan capital, overdrafts, subsidies, venture capital
Short, medium and long-term finance
|Costs and revenues||3.2||Cost/ cost of production refers to the total amount spent by an organization in the process of production of output.
Fixed Costs: Cost of production that must be paid by the business organization even if there is no production.
Variable Costs: Variable costs are the costs that change in proportion with the change in output.
Direct costs – Direct costs are the costs that are directly related to the production of output
Indirect costs – The costs that cannot be traced to the production of any single output
Sales Revenue refers to the amount of money that acts as income for the business.
Other revenue includes the revenue items generated from other sources, not from the sale of goods/ services.
|Break even analysis||3.3||Contribution refers to the amount of money that remains after the total variable costs associated with the production are deducted from the total sales revenue.
Contribution analysis helps a business organization to set the correct prices of the product to ensure that there is sufficient contribution towards the payment of fixed costs.
Break-even analysis is a management decision-making tool drawn on the basis of expected sales and cost.
Advantages and disadvantages of a breakeven analysis
|Final accounts||3.4 (some HL ONLY)||The various stakeholders in a business look at the accounts for different reasons: Managers use the ‘numbers’ to analyze performance against targets. Employees look for security of employment. Shareholders analyze the accounts to check management’s performance and efficiencies.
Final accounts: Profit and Loss accounts, Balance Sheet
Intangible assets: Intangible Assets are non-physical Fixed Assets that have the ability to earn revenue for a business
Depreciation: It is a technique used by businesses to account for the cost of a decrease in the value of fixed assets. Ex: by straight line method, reducing/declining balance method (HL)
|Profitability and Liquidity ratio analysis||3.5||Profitability Ratios: Profitability is therefore determined through the use of profitability ratios. These types of ratios serve to illustrate the performance success of the business since they focus on sales revenue, profit and cost of sales.
Liquidity ratios: Liquidity ratios measure a company’s ability to pay debt obligations and its margin of safety through the calculation of metrics
Efficiency ratios: The measure of the ability of management to successfully use the assets at their disposal through is the purpose of these ratios.
|Efficiency ratio analysis||3.6 (HL ONLY)||Further efficiency ratios:
|Cash flow||3.7||Profit: Indicates the amount of money left over after all expenses have been paid
Cash flow: Indicates the net flow of cash into and out of a business.
Working capital cycle: It is the length of time it takes to convert the total net working capital into cash
Cash Flow forecasts: Cash flow forecasting is a business management tool used to monitor an organization’s cash flows so that it can operate without liquidity problems.
Strategies to deal with cash flow problems: Reducing cash outflow, improving cash inflows, looking for additional finance
|Investment appraisal||3.8 (some HL ONLY)||The average rate of return (ARR) is a method of investment appraisal that measures the annual income of a project as a percentage of the total investment cost, which payback does not. It measures average profit, expressed as a percentage.
The payback period is a method of investment appraisal that estimates the time taken to recover the initial cash outlay on an investment.
NPV (Net Present Value) takes into account discounted cash flow and finds value of an investment in today’s money. (HL)
|Budgets||3.9 (HL ONLY)||Budgets and its Importance: A budget helps create financial stability. A budget is a financial plan for the future concerning the revenues and costs of a business.
A cost center is a subunit of a company that takes care of the costs of that unit.
A profit center is a subunit of a company that is responsible for revenues, profits, and costs.
Budgets and variance analysis enhance performance and efficiency and improve financial control
You have to work on the business first before it works for you. ― Idowu Koyenikan
Unit 4: Marketing
|Subtopic||Subtopic Number||IB Points to Understand|
|The role of marketing||4.1||Marketing: The management process involved in identifying, anticipating and satisfying consumer requirements profitably.
Marketing goods: Tangible products are often easier to market as they can be shown, demonstrated, touched, displayed and are easier for your audience to understand in terms of value or whether they are needed.
Marketing services: Services, being intangible, is harder to show value. You can’t see or touch a service. Often, then, the goal of marketing services is to create good relationships with your target audience, developing and building trust.
Social marketing focuses to reach the target audience and change the behavior whereas commercial marketing focuses on physical products or services
A market is a place where the customers and the suppliers come together for the trade of goods and services.
Market share refers to the firm’s portion of the total sales revenue of the industry and the mportance of market leadership
|Marketing Planning||4.2||A marketing plan is a document or a report that outlines the marketing strategies to be used to achieve the marketing objectives of the organization.
Marketing mix is the combination of the marketing strategies pertaining to the seven key elements.
A market segment refers to the group of customers (part of the whole market) with similar characteristics/ requirements.
Targeting refers to the process of identifying the target markets for the business and effectively marketing the product to that market segment with the use of appropriate marketing strategy.
Positioning is the process that is used by the marketers to establish their product or brand in the minds of target customers at a distinctive position to receive competitive advantage.
Unique selling point or proposition is the differentiating aspect of a business, brand or product which makes that product or brand unique and gives it a competitive advantage.
The act of distinguishing a business or its products from its rivals or competitors in the industry is called as differentiation.
|Sales Forecasting||4.3 (HL ONLY)||Up to four-part moving average, sales trends and forecast (including seasonal, cyclical and random variation) using given data
Sales forecasting: Sales forecasting is the process of estimating future revenue by predicting the amount of product or services a sales unit will sell in the next week, month, quarter, or year.
The benefits and limitations of sales forecasting
|Market Research||4.4||Market research allows companies to understand the demand and viability of their product and to see how it might perform in the real world. Market research is conducted either through primary information or secondary information, both providing unique insights into a company’s offering.
Methods of primary market research: Surveys, Interviews, Focus groups, Observations
Methods of secondary market research: Market analyses, Academic Journals, Government publications, Media articles
Qualitative research: Qualitative research asks why customers buy and gathers information about the strength of demand.
Quantitative research: Quantitative research asks questions about who buys the product and how much they buy, which is easier to graph and present visually.
Methods of sampling: Quota, random, stratified, cluster, snowballing, convenience
|The 4 P’s (product, price, promotion, place)||4.5||Price
|The extended marketing mix of seven P’s||4.6 (HL ONLY)||People
|International marketing||4.7 (HL ONLY)||Methods of entry into international markets: Exporting, Franchising, Licensing, Joint venture, etc
Opportunities and threats posed by entry into international markets
Strategic and Operational implication of international marketing
Globalization has led to an increase of competition between companies in the market.
|E-commerce||4.8||Electronic commerce is a term that defines the trading of goods and services through electronic systems and computer networks via use of the internet.
Types of e-commerce: Business to business, Business to consumer, Consumer to consumer
Features of e-commerce
Unit 5: Operation Management
|Subtopic||Subtopic Number||IB Points to Understand|
|The role of operations management||5.1||Operations management is an area of management that is concerned with the administration, coordination and control of the activities pertaining to the production of output.
It is practiced in all the four sectors of the economy
Operations management plays an important role in creating a balance between the social, ecological, and economic needs of people today and for the future generations.
Ecological sustainability refers to the ability and capacity of the natural environment to meet the needs of the current generation.
Social sustainability refers to the ability of the society to develop in a way that it can meet the societal needs of the current and future generations.
Economic sustainability refers to the ability of the country’s economy to support production and long-term economic growth without impacting the social and environmental aspects of the community.
|Production methods||5.2||Job Production – This production method is used for the production of one-off items that are designed/tailored from top to toe to meet customer requirements.
Batch production – This method of production is used by the business organizations that produce a wide range of products.
Flow Production – This is a capital-intensive method of production where the workers are primarily employed to control the functioning of automated machines.
Mass Production – This production method is almost the same as flow production.
Cellular Production – Cellular production method is a replacement for the conventional mass and flow production methods.
Factors that determine which production method is apt
|Lean production and quality management||5.3 (HL ONLY)||Lean production is when all forms of wastage are eliminated to pull down the financial costs of wastage to achieve greater production efficiency
Features of lean production
Methods of lean production – Kaizen, Just-in-time, Kanban, Andon, C2C Design and manufacturing
Quality management refers to the function of controlling and management of the business activities and production processes in a way that products can meet the expectations of the customers
Methods to measure quality
Quality management methods
Best practice benchmarking is the practice of comparing the business’s products, operations and processes with the market leaders in the same industry.
The organizations which meet or exceed the set quality standards are awarded with quality symbols/logos on their products that assist them in the promotion of the product
|Location||5.4||Reasons for a specific location of production
Ways of reorganizing production nationally and internationally: Outsourcing, offshoring, insourcing
|Production Planning||5.5 (HL ONLY)||Supply chain process: A supply chain is a system of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer.
Difference between JIT and JIC (just in-case)
Stock control charts based on: lead time, buffer stock, re-order level and reorder quantity
Capacity utilization rate: Capacity utilization rate measures the percentage of an organization’s potential output that is actually being realized.
Productivity rate: Productivity is a measure of economic performance that compares the amount of goods and services produced (output) with the amount of inputs used to produce those goods and services.
Cost to buy (CTB) and Cost to Make (CTM)
|Research and development||5.6 (HL ONLY)||Research – A detailed investigation/ study of the unknown process, product, issue, or any concept
Development – The insights or findings of research are used to develop the new product/ process or incorporate improvements in the existing product/ process.
R&D is important for businesses because it provides powerful knowledge and insights, and leads to improvements to existing processes where efficiency can be increased and costs reduced.
Innovation – It is a process of continuous improvement in the existing product/ process or launching of new products, with the use of new ideas and creativity.
Types of innovation – Product, Process, Positioning, Paradigm
Factors affecting innovation
|Crisis management and contingency planning||5.7 (HL ONLY)||Any unpredictable/ unexpected event that puts a business into a major problem is called a crisis.
Crisis management – the response and reaction of an organization towards contingent situations.
Factors affecting effective crisis management
Contingency planning can be defined as the proactive approach of dealing with a crisis in advance