IB Business Management Chapter 1

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Business Plan
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The document that sets out the business idea, its goals and objectives, and other details of how the business will operate (such as its marketing, operations, and finance). It is often a crucial part of an attempt to raise external sources of finance.
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Businesses
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Organizations involved in the production of goods and/or the provision of services.
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Consumers
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The people or organizations who actually use a product.
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Customers
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The people or organizations that buy the product.
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Entrepreneurs
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Owners or operators of an organization who manage, organize, and plan the other three factors of production. They are risk takers who exploit business opportunities in return for profits.
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Intrapreneurship
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The act of behaving as an entrepreneur but as an employee within a large business organization. They work in an entrepreneurial capacity, with authority to create innovative products or new processes for the organization.
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Needs
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The basic necessities that a person must have to survive, e.g. food, water, warmth, shelter, and clothing.
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Primary Sector
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Businesses involved in the cultivation or extraction of natural resources, e.g. farming, mining, quarrying, fishing, oil exploration, and forestry.
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Products
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Both goods and services. Goods are physical __________, e.g. cars, books, and food. Services are intangible __________, e.g. haircuts, bus rides, education, and health care.
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Quaternary Sector
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A subcategory of the tertiary sector, where businesses are involved in intellectual, knowledge-based activities that generate and share information, e.g. information communities technology and research organizations.
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Secondary Sector
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The section of the economy where business activity is concerned with the construction and manufacturing of products.
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Sectoral Change
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A shift in the relative share of gross domestic product (or national output) and employment that is attributed to each business sector.
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Tertiary Sector
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The section of the economy where business activity is concerned with the provision of services to customers.
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Wants
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People’s desires, i.e. the things they would like to have, e.g. a larger home, a new smartphone, or to go on an overseas holiday.
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Charities
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Non-profit social enterprises that provide voluntary support for good causes (from society’s point of view), such as protection of children, animals, and the natural environment.
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Cooperatives
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For-profit social enterprises set up, owned, and run by their members, who might be employees and/or customers.
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Company (or Corporation)
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A business that is owned by shareholders. It has been issued a certificate of incorporation, giving it a separate legal identity from its owners.
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Deed of Partnership
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The legal contract signed by the owners of a partnership. The formal deeds specify the name and responsibilities of each partner and their share of any profits or losses.
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Incorporation
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There is a legal difference between the owners of a company and the business itself. This ensures that the owners are protected by limited liability.
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Initial Public Offering (IPO)
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It occurs when a business sells all or part of its business to shareholders on a stock exchange for the first time.
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Limited Liability
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A restriction on the amount of money that owners can lose if their business goes bankrupt, i.e. shareholders cannot lose more than they invested in the company.
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Microfinance
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A type of financial service aimed at entrepreneurs of small businesses, especially females and those on low incomes.
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Non-Governmental Organizations (NGO)
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Private sector not-for-profit social enterprises that operate for the benefit of others rather than primarily aiming to make a profit, e.g. Oxfam and Friends of the Earth.
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Partnerships
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A type of private sector business owned by 2-20 people (known as partners). They share the responsibilities and burdens of running and owning the business.
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Private Limited Company
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A business owned by shareholders with limited liability but whose shares cannot be bought by or sold the general public.
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Aims
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The long-term goals of a business, often expressed in the firm’s mission statement. They are a general statement of a firm’s purpose or intentions and tend to be qualitative in nature.
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Ansoff Matrix
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An analytical tool to devise various product and market growth strategies, depending on whether businesses want to market new or existing products in either new or existing markets.
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Corporate Social Responsibility (CSR)
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The conscientious consideration of ethical and environmental practices related to business activity. A business that adopts ________ acts morally towards its various stakeholder groups and the well-being of society as a whole.
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Ethical Code of Practice
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The document of beliefs and philosophies of an organization.
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Ethics
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The moral principles that guide decision-making and strategy. Morals are concerned with what is considered to be right or wrong, from society’s point of view.
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Mission Statement
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The declaration of an organization’s overall purpose. It forms the foundation for setting the objectives of a business.
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Objectives
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The relatively short-term targets of an organization.
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SMART Objectives
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Target that are specific, measurable, achievable, realistic, and time constraint.
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Strategies
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Plans of action that businesses use to achieve their targets, i.e. The long-term plans of the whole organization.
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SWOT analysis
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An analytical tool used to assess the internal strengths and weaknesses and the external opportunities and threats of a business decision, issue, or problem.
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Tactics
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The short-term plans of action that firms use to achieve their objectives.
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Vision Statement
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And organizations long-term aspirations, i.e. Where It ultimately wants to be.
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Conflict
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Situations where stakeholders have disagreements are certain matters due to differences in their opinions. This can lead to arguments and tension between the various stakeholder groups.
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External Stakeholders
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A business or individuals and organizations not part of the organization but have a direct interest in its activities and performance, e.g. customers, suppliers, pressure groups, and the government.
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Internal Stakeholders
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A business are members of the organization, e.g. the employees, managers, directors, and shareholders of the organization.
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Pressure Groups
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This consists of individuals with a common concern ( such as Environmental Protection) speak to place demands on organisations to act in a particular way or to influence a change in their behavior.
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Shareholders (or Stockholders)
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The owners of a limited liability company. Shares in a company can be held by individuals and other organizations.
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Stakeholders
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Individuals or organizations with a direct interest in the activities and performance of a business, e.g. shareholders, employees, customers, and suppliers.
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Business Cycle
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The fluctuation in the level of business activity overtime. Countries tend to move through the cycle of booms, recessions, slumps, recovery, and growth.
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Deregulation
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The removal of government rules and regulations which constraining industry to enhance efficiency and encourage more competition within the industry.
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Economic Growth
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Changes in the gross domestic product of a country over time. It occurs if there is an increase in GDP for two consecutive quarters.
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Exchange Rate
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The value of a country’s currency in terms of other currencies.
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Inflation
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When the general price level in an economy continuously rises. It is measured by changes in the cost of living for the average household in a country.
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Interest Rate
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A measure of the price of money in terms of the amount charged for borrowed funds or how much is offered on money that is saved.
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Protectionist Measures
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Any measure taken by a government to safeguard its industries from overseas competitors. They are a threat to businesses trying to operate in foreign markets.
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STEEPLE Analysis
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And analytical framework used to examine the opportunities and threats of the external environment (social, technological, economic, environmental, political, legal, and ethical environments) on business activity.
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Unemployment
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The number of people in the workforce who are willing and able to work but cannot find employment.
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Backward Vertical Integration
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When a business amalgamates with the firm operating an earlier stage of production, e.g. a car manufacturer acquires A supplier of tires or other components.
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Conglomerates
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Businesses that provide a diversified range of products and operate in an array of different Industries.
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Diseconomies of Scale
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The cost disadvantages of growth. Unit costs are likely to eventually rise of the firm grows due to a lack of control, coordination, and communication.
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Diversification
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A high-risk row strategy that involved a business selling new products and new markets, i.e. spreading risk of a diverse variety of products and markets.
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Economies of Scale
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Lower average cost of production of the firm operates on a larger scale due to gains and productive efficiency, e.g. easier and cheaper access to finance.
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External Growth (or Inorganic Growth)
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It occurs when a business grows by collaborating with, buying up, or merging with another firm.
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Forward Vertical Integration
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A growth strategy that occurs with the amalgamation of a firm operating at a later stage in the production process, e.g. a book publisher merges with a book retailer.
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Franchise
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An agreement between a franchise or selling its rights to other businesses (franchisee) to allow them to sell products under its name and return for a fee and regular royalty payments.
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Globalization
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The growing integration and interdependence of the world’s economies, causing consumers around the globe to have increasingly similar habits and tastes.
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Horizontal Integration
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And external growth strategy that occurs when a business amalgamates with a firm operating in the same stage of production.
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Internal growth (or organic growth)
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It occurs when a business grows using its own capabilities and resources to increase the scale of its operations and sales revenue.
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Joint Venture
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A growth strategy that combines the contributions and responsibilities of two different organizations and a shared project by forming a separate legal Enterprise.
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Lateral Integration
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M&As Between firms that have similar operations but do not directly compete with each other, e.g. PepsiCo acquiring Quaker Oats Company.
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Merger
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A form of external growth whereby two (or more) firms agreed to form a new organization, thereby losing their original identities.
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Multinational Company (MNC)
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An organization that operates in two or more countries, with its head office usually based in the Home Country.
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Optimal Level of Output
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The most efficient scale of operation for a business which occurs at the level of output where average cost of production are minimized.

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