IB HL
BUSINESS MANAGEMENT
____
NOTE:
● Definitions are in yellow highlighting
● Analytical tools are in blue highlighting
● Benefits/Limitations are in green highlighting (table format)
,UNIT 1: BUSINESS ORGANISATION &
ENVIRONMENT
1.1: Introduction to business management
Business activity refers to the production of goods and services. Businesses by nature create
value/benefits to society through the satisfaction of consumer’s needs and wants. The purpose of a
business is to take inputs (labour, capital, enterprise and raw material) to process them into usable
outputs to create either goods or services.
4 Main Business Functions
Human Resources: responsible for managing the personnel of an organisation
Finance and Accounts: in charge of managing the organisation’s money
Marketing: responsible for identifying and satisfying the needs and wants of customers
Operations Management: responsible for the process of converting inputs to outputs that are ready for
sale and delivery to customers.
Sectors and Sectoral Change
Businesses can be classified in 4 different sectors:
Primary: businesses involved with collecting natural resources and raw material
Secondary: businesses processing raw materials into finished or semi-finished products
Tertiary: businesses providing a service or selling products
Quaternary: services that involve the transfer and processing of information and knowledge.
There have been large sectoral employment changes occurring in many different countries over time/
Shifts from primary sector majority to secondary sector majorities is called industrialization. Shifts from
secondary to tertiary sectors are due to automation. This is due to:
- Higher household incomes - as living standards increase, consumers spend more on services.
- More leisure time - as living standards increase, people have more time for leisure and
recreational activities.
- Greater focus on customer service in developed countries for greater competitive advantage
- Increasing reliance on support services.
Entrepreneurship vs Intrapreneurship
Entrepreneurs are people who take financial risk Intrapreneurs are people who turn ideas into
to start and manage a new venture or business. profitable products within a large business.
- owners/operator of organisation - Employees of organisation
- Takes substantial risks - Takes medium/high risks
, - Visionary - Innovative
- Rewarded with profits - Rewarded with pay and remunerations
- Responsibility for the workforce(labour) - Accountability to the owner and/or
- Failure incurs personal risks operator
- Failure is absorbed by the organisation.
Reasons for Starting Business
- Growth: benefit personally when there is an appreciation in value of assets such as property and land,
which tends to increase overtime. This is called capital growth.
- Earnings: potential returns from setting up your own business easily outweigh the costs, even
through risks are high
- Transference & Inheritance: Pass on assets, including business to the next generation; give a sense of
security to children.
- Challenge: Opening a business challenges people and drives them to perform, gives personal
satisfaction and boosts self-esteem.
- Autonomy: being self employed means there is autonomy (independence) in how things are done in
the business.
- Security: more job security for someone who is their own boss while making it easier to accumulate
personal wealth from earlier retirement.
- Hobbies: some people want to pursue their passion or turn a hobby to business. Interest in their
hobby/business allows for an easier business journey.
Steps to Starting Business
1. Write a business plan: once entrepreneurship has a feasible business plan, an outline of goals and
objectives for the new business and how these objectives can be achieved is officially formulated.
2. Obtain start-up capital: starting a business requires money. In small businesses, this could
include savings or loans. Loans take many months to complete with the lender requesting a business
plan beforehand.
3. Obtain business registration: the owner must register their organisation (eg. partnership, limited
liability partner) before starting trade or hiring workers.
4. Open a business bank account: To facilitate financial operations of the business, a separate bank
account must be opened. This allows for all financial/money related aspects of the business (eg.
operations, payments from customers, transfers or credit card payments)
5. Marketing: potential customers need to know about the business and products, done through
marketing activities, advertising or promotional material.
Problems New Businesses Face
- Lack of Finance - most owners of new/small businesses don’t have credentials for major/minor loans
without difficulties or don’t have sufficient business income to pay off loans & increased interest.
, - Cash flow problems - it is common for a new business to produce a cashflow forecast in a business
plan so provisions can be made to cover shortfalls as businesses need to pay costs such as wages, rent,
tax, utility bills, stock/materials, interest, etc.
- Marketing problems - businesses fall to meet customer needs, resulting in poor sales. Supplying the
right products at a good ideal price is key to success. However, many new business owners do not
know how to achieve this.
- Unestablished customer base - new businesses have trouble attracting customers, which is further
intensified by rival business or competition. Customer loyalty is built over a long time.
- People hiring problems - Newer businesses have trouble hiring staff or the right staff with necessary
skill sets. This can lead to bad customer service, and the need to rehire and retain staff which can be
expensive.
- Legalities - Businesses must comply with legislation (copyright, business registration, insurance, etc.)
which can be confusing or tedious to newer business owners.
- Production problems - Inaccuracies in forecasting levels of demand which can result in
overproduction and stockpiling which can lose businesses money, or underproduction which can lead
to loss of sales and dissatisfied customers.
- High production costs - New businesses experience high production costs due to the large amount of
money needed to pay for equipment, machinery, stock, rent, advertising, insurance, etc.
- Poor location - Businesses face a dilemma of whether to choose high traffic locations with higher
costs of lower traffic locations with lower cost.This is why businesses such as Amazon or Apple began
in their CEO’s garage.
- External influences - All businesses are prone to sudden shocks which can create a difficult trading
environment (eg. COVID-19 pandemic, oil crisis, economic recessions, etc.)
Contents of a Business Plan
Business:
- Name and address of proposed business
- Cost of premises and start-up money
- Owner’s details and past business experience
- Type of business organisation(eg. Sole trader, partnership)
- Quantifiable goals/objectives of business
Product:
- Details of goods and/or services provided
- Supporting evidence of why customers will pay for goods/services provided
- where/how will production take place
- Details of suppliers and resources (raw material components)
- Cost of production (predicted)
- Pricing strategies to be used
Market:
- Expected number of customers and sales
- Nature of market (customer profiles, market segmentation)
BUSINESS MANAGEMENT
____
NOTE:
● Definitions are in yellow highlighting
● Analytical tools are in blue highlighting
● Benefits/Limitations are in green highlighting (table format)
,UNIT 1: BUSINESS ORGANISATION &
ENVIRONMENT
1.1: Introduction to business management
Business activity refers to the production of goods and services. Businesses by nature create
value/benefits to society through the satisfaction of consumer’s needs and wants. The purpose of a
business is to take inputs (labour, capital, enterprise and raw material) to process them into usable
outputs to create either goods or services.
4 Main Business Functions
Human Resources: responsible for managing the personnel of an organisation
Finance and Accounts: in charge of managing the organisation’s money
Marketing: responsible for identifying and satisfying the needs and wants of customers
Operations Management: responsible for the process of converting inputs to outputs that are ready for
sale and delivery to customers.
Sectors and Sectoral Change
Businesses can be classified in 4 different sectors:
Primary: businesses involved with collecting natural resources and raw material
Secondary: businesses processing raw materials into finished or semi-finished products
Tertiary: businesses providing a service or selling products
Quaternary: services that involve the transfer and processing of information and knowledge.
There have been large sectoral employment changes occurring in many different countries over time/
Shifts from primary sector majority to secondary sector majorities is called industrialization. Shifts from
secondary to tertiary sectors are due to automation. This is due to:
- Higher household incomes - as living standards increase, consumers spend more on services.
- More leisure time - as living standards increase, people have more time for leisure and
recreational activities.
- Greater focus on customer service in developed countries for greater competitive advantage
- Increasing reliance on support services.
Entrepreneurship vs Intrapreneurship
Entrepreneurs are people who take financial risk Intrapreneurs are people who turn ideas into
to start and manage a new venture or business. profitable products within a large business.
- owners/operator of organisation - Employees of organisation
- Takes substantial risks - Takes medium/high risks
, - Visionary - Innovative
- Rewarded with profits - Rewarded with pay and remunerations
- Responsibility for the workforce(labour) - Accountability to the owner and/or
- Failure incurs personal risks operator
- Failure is absorbed by the organisation.
Reasons for Starting Business
- Growth: benefit personally when there is an appreciation in value of assets such as property and land,
which tends to increase overtime. This is called capital growth.
- Earnings: potential returns from setting up your own business easily outweigh the costs, even
through risks are high
- Transference & Inheritance: Pass on assets, including business to the next generation; give a sense of
security to children.
- Challenge: Opening a business challenges people and drives them to perform, gives personal
satisfaction and boosts self-esteem.
- Autonomy: being self employed means there is autonomy (independence) in how things are done in
the business.
- Security: more job security for someone who is their own boss while making it easier to accumulate
personal wealth from earlier retirement.
- Hobbies: some people want to pursue their passion or turn a hobby to business. Interest in their
hobby/business allows for an easier business journey.
Steps to Starting Business
1. Write a business plan: once entrepreneurship has a feasible business plan, an outline of goals and
objectives for the new business and how these objectives can be achieved is officially formulated.
2. Obtain start-up capital: starting a business requires money. In small businesses, this could
include savings or loans. Loans take many months to complete with the lender requesting a business
plan beforehand.
3. Obtain business registration: the owner must register their organisation (eg. partnership, limited
liability partner) before starting trade or hiring workers.
4. Open a business bank account: To facilitate financial operations of the business, a separate bank
account must be opened. This allows for all financial/money related aspects of the business (eg.
operations, payments from customers, transfers or credit card payments)
5. Marketing: potential customers need to know about the business and products, done through
marketing activities, advertising or promotional material.
Problems New Businesses Face
- Lack of Finance - most owners of new/small businesses don’t have credentials for major/minor loans
without difficulties or don’t have sufficient business income to pay off loans & increased interest.
, - Cash flow problems - it is common for a new business to produce a cashflow forecast in a business
plan so provisions can be made to cover shortfalls as businesses need to pay costs such as wages, rent,
tax, utility bills, stock/materials, interest, etc.
- Marketing problems - businesses fall to meet customer needs, resulting in poor sales. Supplying the
right products at a good ideal price is key to success. However, many new business owners do not
know how to achieve this.
- Unestablished customer base - new businesses have trouble attracting customers, which is further
intensified by rival business or competition. Customer loyalty is built over a long time.
- People hiring problems - Newer businesses have trouble hiring staff or the right staff with necessary
skill sets. This can lead to bad customer service, and the need to rehire and retain staff which can be
expensive.
- Legalities - Businesses must comply with legislation (copyright, business registration, insurance, etc.)
which can be confusing or tedious to newer business owners.
- Production problems - Inaccuracies in forecasting levels of demand which can result in
overproduction and stockpiling which can lose businesses money, or underproduction which can lead
to loss of sales and dissatisfied customers.
- High production costs - New businesses experience high production costs due to the large amount of
money needed to pay for equipment, machinery, stock, rent, advertising, insurance, etc.
- Poor location - Businesses face a dilemma of whether to choose high traffic locations with higher
costs of lower traffic locations with lower cost.This is why businesses such as Amazon or Apple began
in their CEO’s garage.
- External influences - All businesses are prone to sudden shocks which can create a difficult trading
environment (eg. COVID-19 pandemic, oil crisis, economic recessions, etc.)
Contents of a Business Plan
Business:
- Name and address of proposed business
- Cost of premises and start-up money
- Owner’s details and past business experience
- Type of business organisation(eg. Sole trader, partnership)
- Quantifiable goals/objectives of business
Product:
- Details of goods and/or services provided
- Supporting evidence of why customers will pay for goods/services provided
- where/how will production take place
- Details of suppliers and resources (raw material components)
- Cost of production (predicted)
- Pricing strategies to be used
Market:
- Expected number of customers and sales
- Nature of market (customer profiles, market segmentation)
