FOR THE
IB DIPLOMA
Business
IVlanagement
Study and Revision Guide
{y HODDER
L}
AT '!
T
, llI!I!ll!!ll!ll
Business
IVlanagement
Study and Revision Guide
j\\\\ Paul Hoang
{; HODDER
AN HACHETTE UK COMPANY
,Dedication
This book is dedicated to Mrs Smith, my wonderful primary school teacher who taught at
Fonthill Junior School, Bristol, UK.
Acknowledgements
My deepest thanks and love to Kin, Jake and Luke for always being there for me.
My heartfelt thanks to So-Shan Au, my Publisher and a fellow Arsenal fan, for her dedication,
support and guidance throughout the many projects we have worked on.
Finally, my sincere gratitude also goes to Anson Miu and Joyce Tong, outstanding students
who provided me with invaluable feedback from the perspective of IB learners.
The Publishers would like to thank the following for permission to reproduce copyright
material:
Photo credits
p.11 ® Sean Gallup/Getty Images; p.24 @ Yu/Thinkstock/iStock/Getty Images;
p.28 © Graham Oliver/Alamy Stock Photo; p.44 @ Monkey Business — Fotolia;
p.55 ©® Monkey Business — Fotolia; p.64 Photo from Pixabay.com, CCO Public Domain;
p.73 © Global Integration Ltd (www.global-integration.com); p.75 © xPACIFIC A/Alamy
Stock Photo; p.76 © Carsten Reisinger/Fotolia; p.85 © Steve Rosset/iStockphoto.com;
p.134 © karandaev - Fotolia.com; p.151 @ Imagestate Media (John Foxx);
p.167 © iStockphoto/silkwayrain; p.172 © Aleksandr Kurganov — Fotolia.
Text credits
pp.vi-vii, p.87, p.B9 From Business Management Guide © International Baccalaureate
Organization 2014, p.38 Business Review, February 2013, © Philip Allan Publisher Ltd 2013.
This work has been developed independently from and is not endorsed by the International
Baccalaureate (IB).
All brand names are protected by their respective trademarks and are acknowledged.
Every effort has been made to trace all copyright holders, but if any have been inadvertently
overlooked, the Publishers will be pleased to make the necessary arrangements at the first
opportunity.
Although every effort has been made to ensure that website addresses are correct at time of
going to press, Hodder Education cannot be held responsible for the content of any website
mentioned in this book. It is sometimes possible to find a relocated web page by typing in the
address of the home page for a website in the URL window of your browser.
Hachette UK's policy is to use papers that are natural, renewable and recyclable products and
made from wood grown in sustainable forests. The logging and manufacturing processes are
expected to conform to the environmental regulations of the country of origin.
Orders: please contact Bookpoint Ltd, 130 Park Drive, Milton Park, Abingdon, Oxon. OX14 45E.
Telephone: (44) 01235 827720. Fax: (44) 01235 400454, Email .
Lines are open from 9 a.m. to 5 p.m., Monday to Saturday, with a 24-hour message answering
service. You can also order through our website: www.hoddereducation.com
@ Paul Hoang 2016
First published in 2016 by
Hodder Education,
An Hachette UK Company
Carmelite House
50 Victoria Embankment
Lendon EC4Y 0DZ
www.hoddereducation.com
Impression number 10 9 8 76 54 3 2 1
Year 2019 20M& 2017 201&
All rights reserved. Apart from any use permitted under UK copyright law, no part of this
publication may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopying and recording, or held within any information storage
and retrieval system, without permission in writing from the publisher or under licence from
the Copyright Licensing Agency Limited. Further details of such licences (for reprographic
reproduction) may be obtained from the Copyright Licensing Agency Limited, Saffron House,
6-10 Kirby Street, London ECIN &T5.
Cover photo @ Pavlinafistockphoto.com
Hlustrations by Aptara
Typeset in GoudyStd, 10/12 pts by Aptara Inc.
Printed in Spain
A catalogue record for this title is available from the British Library.
ISBN: 978 147 186842 9
, Contents
How to use this study and revision guide
Getting to know the exam Vi
Assessment objectives and command terms Vi
Countdown to the exams viil
Unit 1 Business organization and environment
1.1 Introduction to business management
1.2 Types of organization
1.3 Organizational objectives 12
1.4 Stakeholders 18
1.5 External environment 21
1.6 Growth and evolution 25
1.7 Organizational planning tools (HL only) 31
Unit 2 Human resource management
2.1 Functions and evolution of human resource management 36
2.2 Organizational structure 45
2.3 Leadership and management 52
24 Motivation 56
2.5 Organizational (corporate) culture (HL only) 65
2.6 Industrialfemployee relations (HL only) 67
Unit 3 Finance and accounts
3.1 Sources of finance 74
3.2 Costs and revenues 79
3.3 Break-even analysis 82
3.4 Final accounts (some HL only) 86
3.5 Profitability and liquidity ratio analysis 92
3.6 Efficiency ratio analysis (HL only) 94
3.7 Cash flow 97
3.8 Investment appraisal (some HL only) 101
3.9 Budgets (HL only) 105
,iv Contents
Unit 4 Marketing
4.1 The role of marketing 108
4.1 Marketing planning (including introduction to the 4 Ps) 114
4.3 Sales forecasting (HL only) 119
44 Market research 122
4.5a The 4 Ps: Product 130
4.5b The 4 Ps: Price 135
4.5¢ The 4 Ps: Promotion 138
4.5d The 4 Ps: Place 143
4.6 The extended marketing mix (7 Ps) (HL only) 146
4.7 International marketing (HL only) 148
4.8 E-commerce 152
U nit 5 Operations management
= 5.1 The role of operations management 157
m 5.2 Production methods 160
m 5.3 Lean production and quality management (HL only) 162
m 54 Location 167
2 5.5 Production planning (HL only) 169
B 5.6 Research and development (HL only) 174
o 5.7 Crisis management and contingency planning (HL only) 176
G lossary 179
, How to use this study
and revision guide
Welcome to the Business Management for the IB Diploma Revision and Study Guide!
This book will help you plan your revision and work through it in a
methodological way. The guide follows the Business Management syllabus topic
by topic, with revision and exam practice questions to help you check your
understanding.
M Features to help you succeed
CUEGIS CONCEPTS SRe e Expert tip
These provide you with activities Exam practice is given for both These tips give advice that will help
and essay questions to help prepare Papers and for the type of you boost your final grade.
you for the Paper 2 Section C guestions you might get — short
component of the final examination. data guestions, definitions, and
Have a go at these to consolidate mathematical calculations, and Keyword definitions
your understanding and application extended response questions, with The definitions of essential key
of the conceptual lenses used in suggested answers online. Use
terms are provided on the page
Business Management — change, these to consolidate your revision
culture, ethics, globalization, and to practise your exam skills.
where they appear. These are
innovation and strategy. words that you can be expected to
define in exams,
You can keep track of your revision by ticking off each topic heading in the book.
Use a checklist to record progress as you revise. Tick each box when you have:
® revised and understood a topic
® used the Exam practice questions and gone online to check your answers.
Use this book as the cornerstone of your revision. Don't hesitate to write in it and
personalize your notes. Use a highlighter to identify areas that need further work.
You may find it helpful to add your own notes as you work through each topic.
Good luck!
,vi How to use this study and revision guide
Getting to know the exam
Exam paper Duration Format Topics Weighting Total marks
Paper 1 (SL) 1 hour 15 mins Pre-release case study All 30 40
Paper2 (SL) 1 hour 45 mins Structured questions All 45 50
Paper 1 (HL) 2 hours 15 mins Pre-release case study All 35 60
Paper 2 (HL) 2 hours 15 mins Structured questions All 40 70
At the end of your Business Management course you will sit two papers — Paper 1
and Paper 2. The external exams (Paper 1 and Paper 2) account for 75% of the
final marks. The other assessed part of the course (25%) is the Internal Assessment SL students must include
documentary evidence of their three
(IA) which is marked by your teacher, but externally moderated by an examiner.
to five supporting documents in the
Here is some general advice for the exams: IA, otherwise you will score zero
marks in Criteria A and C.
m Make sure you have learnt the command terms (e.g. evaluate, explain, outline,
etc.); there is a tendency to focus on the content in the question rather than
the command term, but if you do not address what the command term is (ST R ]
asking of you, then you will not be awarded full marks. Command terms are Spend time learning the key terms
covered below. featured in the case study as definition
® If you run out of room on the page, use continuation sheets and indicate guestions will appear in the Paper 1
examination. Also, use the Business
clearly that you have done this on the cover sheet.
Management syllabus to guide you in
® The fact that the question continues on another sheet of paper needs to be determining the topics that are likely to
clearly indicated in the text box provided. be tested in your Paper 1 examination.
® Plan your time carefully before the exams.
(ST R T
Assessment objectives Students do get a formulae sheet in
the final exams, but it is still worth
and command terms spending revision time learning the
formulae for all quantitative elements
To successfully complete the course, you have to achieve certain assessment of the syllabus, such as ratio analysis
(Unit 3.5 and 3.6). For HL students,
objectives. The following table shows all of the command terms, with an
the relevant discount factors will be
indication of the depth required from your written answers. provided in the final examination if
an investment appraisal question
Define AD1 Assessment objective 1 These command terms
(see Unit 3.8) is asked.
Desiiilia AO1 Demonstrate knowledge require students to learn
outl A0 and understanding and comprehend the
e meaning of information.
State A1
Apply AD2 Assessment objective 2 These command terms
Comment AD2 Demonstrate application ~ Tequire students to use
and analysis their knowledge and skills
Demonstrate AO2 to break down ideas into
Distinguish AD2 simpler parts and to see
Explain AO? how the parts relate
Interpret AQ2
Suggest AD2
Compare AO3 Assessment objective 3 These command terms
Compare and AO3 Demonstrate synthesis require students to
coitiast Gidcaliaban rearrange component
ideas into a new whole
Contrast AO3 and make judgements
Discuss AO3 based on evidence or a
- AO3 set of criteria
Examine AQD3
Justify AO3
Recommend A03
To what extent AD3
, How to use this study and revision guide vii
Annotate AD4 Assessment objective 4 These command terms
Calculate AD4 Demonstrate a variety of :lequire studefi tfll ;
Complete A0 g skl Jid ok sl ey
Construct AD4 skills and techniques.
Determine AD4
Draw AD4
Identify AD4
Label AD4
Plot AD4
Prepare AD4
Source: IB Diploma Business Management Guide 2014
Each section in this study and revision guide starts with the syllabus content and
the relevant assessment objectives (AO1 to AO4). Use these as a guideline to the
level of depth needed when studying and revising the various components of the
Business Management Guide.
Command terms indicate the depth of treatment required for a given assessment
statement. Assessment objectives 1 and 2 address simpler skills, assessment
objective 3 relates to higher-order skills, whilst assessment objective 4 refers to the
skills of selecting, using and applying Business Management skills and techniques.
It is essential that you are tamiliar with these terms, so that you are able to
recognize the type of response you are expected to provide as well as the depth
your response should be.
,viii How to use this study and revision guide
Countdown to the exams
Four to eight weeks to go My exams
Start by looking at the Business Management syllabus and make sure
you know exactly what you need to revise. Paper 1
Work out a realistic revision plan that breaks down the material
you need to revise into manageable pieces. Each session should be
around 25-40 minutes with breaks in between. The plan should
include time for relaxation.
Read through the relevant sections of this book and refer to the
expert tips, CUEGIS concepts boxes, key definitions and worked
examples.
Tick off the topics that you feel confident about, and highlight the
ones that need further work.
Look at past papers. They are one of the best ways to check
knowledge and practise exam skills. They will help you identify areas
that need further work.
Try different revision methods, e.g. summary notes, mind maps and
flash cards.
Test your understanding of each topic by working through the exam
practice questions.
Make notes of any problem areas as you revise, and ask a teacher to
go over them in class.
One week to go
Aim to fit in at least one more timed practice of entire past papers,
comparing your work closely with the mark scheme.
Examine the contents list of this revision guide carefully to make sure
you haven’t missed any of the topics.
Tackle any final problems by getting help from your teacher or
talking them over with a friend.
The day before the examination
Look through this book one final time. Look carefully through
the information about each exam paper to remind yourself what
to expect, including timings and the number of questions to be
answered in each section of the examination paper.
Check the exact time and place of your exams.
Make sure you have all the equipment you need (e.g. extra pens,
pencil and ruler for diagrams, a watch, tissues and water). Make sure
you have a GDC calculator (or a simple four-function calculator) for
both examination papers.
Allow some time to relax and have an early night so you are rested
and ready for the exams. There is a huge opportunity cost if you are
not refreshed!
, Business organization
and environment
1.1 Introduction to business management
The role of businesses in combining human,
physical and financial resources to create goods
and services (A02)
® A business is any organization set up to provide goods and/or services.
= Businesses aim to satisfy the needs and desires of their customers by selling a
good or providing a service,
® To produce goods and services, a business needs to combine human, physical,
financial, and entrepreneurial resources. These resources are referred to as the
factors of production, comprising land, labour, capital and enterprise:
0 Land — Natural resources used in the production process, e.g. wood, water,
physical land, fish, water, metal ores and minerals.
] Labour — Physical human effort and psychological intellect used in the
production process.
1 Capital — Non-natural (manufactured) resources used to further the
production process, e.g. tools, equipment, machinery, vehicles and buildings.
[0 Enterprise — An individual with the necessary skills and ability to take
risks in organizing the other factors of production to generate output in a
profitable way.
® The production process adds value to the final goods and services sold to
customers. Value added is the process of creating a product that is worth more
than the cost of the inputs used to produce it, e.g. bottled orange juice is worth
more than the original oranges grown on a farm.
Expert tip
= Businesses strive to add value to a good or service so that the product better
Consumers are the people who use
meets the needs and wants of their customers. peop
a good or service. Customers are the
® Value added is measured as the difference between the cost of the inputs in buyers of a good or sgwice. Buyers and
the production process and the price of the final output. users are not necessarily the same.
The main business functions and their roles (A02) =
~ Human resources
® Human resource management oversees staffing (personnel) within an
organization.
® It handles human resource (HR) issues such as recruitment, dismissal, training
and development, redundancies, appraisals, performance management, career
planning and the general welfare (wellbeing) of the firm’s employees.
® The HR department must comply with employment legislation (labour
laws), e.g. minimum wage legislation, regulations about working hours, equal
opportunities laws, and anti-discrimination acts.
IB DIPLOMA
Business
IVlanagement
Study and Revision Guide
{y HODDER
L}
AT '!
T
, llI!I!ll!!ll!ll
Business
IVlanagement
Study and Revision Guide
j\\\\ Paul Hoang
{; HODDER
AN HACHETTE UK COMPANY
,Dedication
This book is dedicated to Mrs Smith, my wonderful primary school teacher who taught at
Fonthill Junior School, Bristol, UK.
Acknowledgements
My deepest thanks and love to Kin, Jake and Luke for always being there for me.
My heartfelt thanks to So-Shan Au, my Publisher and a fellow Arsenal fan, for her dedication,
support and guidance throughout the many projects we have worked on.
Finally, my sincere gratitude also goes to Anson Miu and Joyce Tong, outstanding students
who provided me with invaluable feedback from the perspective of IB learners.
The Publishers would like to thank the following for permission to reproduce copyright
material:
Photo credits
p.11 ® Sean Gallup/Getty Images; p.24 @ Yu/Thinkstock/iStock/Getty Images;
p.28 © Graham Oliver/Alamy Stock Photo; p.44 @ Monkey Business — Fotolia;
p.55 ©® Monkey Business — Fotolia; p.64 Photo from Pixabay.com, CCO Public Domain;
p.73 © Global Integration Ltd (www.global-integration.com); p.75 © xPACIFIC A/Alamy
Stock Photo; p.76 © Carsten Reisinger/Fotolia; p.85 © Steve Rosset/iStockphoto.com;
p.134 © karandaev - Fotolia.com; p.151 @ Imagestate Media (John Foxx);
p.167 © iStockphoto/silkwayrain; p.172 © Aleksandr Kurganov — Fotolia.
Text credits
pp.vi-vii, p.87, p.B9 From Business Management Guide © International Baccalaureate
Organization 2014, p.38 Business Review, February 2013, © Philip Allan Publisher Ltd 2013.
This work has been developed independently from and is not endorsed by the International
Baccalaureate (IB).
All brand names are protected by their respective trademarks and are acknowledged.
Every effort has been made to trace all copyright holders, but if any have been inadvertently
overlooked, the Publishers will be pleased to make the necessary arrangements at the first
opportunity.
Although every effort has been made to ensure that website addresses are correct at time of
going to press, Hodder Education cannot be held responsible for the content of any website
mentioned in this book. It is sometimes possible to find a relocated web page by typing in the
address of the home page for a website in the URL window of your browser.
Hachette UK's policy is to use papers that are natural, renewable and recyclable products and
made from wood grown in sustainable forests. The logging and manufacturing processes are
expected to conform to the environmental regulations of the country of origin.
Orders: please contact Bookpoint Ltd, 130 Park Drive, Milton Park, Abingdon, Oxon. OX14 45E.
Telephone: (44) 01235 827720. Fax: (44) 01235 400454, Email .
Lines are open from 9 a.m. to 5 p.m., Monday to Saturday, with a 24-hour message answering
service. You can also order through our website: www.hoddereducation.com
@ Paul Hoang 2016
First published in 2016 by
Hodder Education,
An Hachette UK Company
Carmelite House
50 Victoria Embankment
Lendon EC4Y 0DZ
www.hoddereducation.com
Impression number 10 9 8 76 54 3 2 1
Year 2019 20M& 2017 201&
All rights reserved. Apart from any use permitted under UK copyright law, no part of this
publication may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopying and recording, or held within any information storage
and retrieval system, without permission in writing from the publisher or under licence from
the Copyright Licensing Agency Limited. Further details of such licences (for reprographic
reproduction) may be obtained from the Copyright Licensing Agency Limited, Saffron House,
6-10 Kirby Street, London ECIN &T5.
Cover photo @ Pavlinafistockphoto.com
Hlustrations by Aptara
Typeset in GoudyStd, 10/12 pts by Aptara Inc.
Printed in Spain
A catalogue record for this title is available from the British Library.
ISBN: 978 147 186842 9
, Contents
How to use this study and revision guide
Getting to know the exam Vi
Assessment objectives and command terms Vi
Countdown to the exams viil
Unit 1 Business organization and environment
1.1 Introduction to business management
1.2 Types of organization
1.3 Organizational objectives 12
1.4 Stakeholders 18
1.5 External environment 21
1.6 Growth and evolution 25
1.7 Organizational planning tools (HL only) 31
Unit 2 Human resource management
2.1 Functions and evolution of human resource management 36
2.2 Organizational structure 45
2.3 Leadership and management 52
24 Motivation 56
2.5 Organizational (corporate) culture (HL only) 65
2.6 Industrialfemployee relations (HL only) 67
Unit 3 Finance and accounts
3.1 Sources of finance 74
3.2 Costs and revenues 79
3.3 Break-even analysis 82
3.4 Final accounts (some HL only) 86
3.5 Profitability and liquidity ratio analysis 92
3.6 Efficiency ratio analysis (HL only) 94
3.7 Cash flow 97
3.8 Investment appraisal (some HL only) 101
3.9 Budgets (HL only) 105
,iv Contents
Unit 4 Marketing
4.1 The role of marketing 108
4.1 Marketing planning (including introduction to the 4 Ps) 114
4.3 Sales forecasting (HL only) 119
44 Market research 122
4.5a The 4 Ps: Product 130
4.5b The 4 Ps: Price 135
4.5¢ The 4 Ps: Promotion 138
4.5d The 4 Ps: Place 143
4.6 The extended marketing mix (7 Ps) (HL only) 146
4.7 International marketing (HL only) 148
4.8 E-commerce 152
U nit 5 Operations management
= 5.1 The role of operations management 157
m 5.2 Production methods 160
m 5.3 Lean production and quality management (HL only) 162
m 54 Location 167
2 5.5 Production planning (HL only) 169
B 5.6 Research and development (HL only) 174
o 5.7 Crisis management and contingency planning (HL only) 176
G lossary 179
, How to use this study
and revision guide
Welcome to the Business Management for the IB Diploma Revision and Study Guide!
This book will help you plan your revision and work through it in a
methodological way. The guide follows the Business Management syllabus topic
by topic, with revision and exam practice questions to help you check your
understanding.
M Features to help you succeed
CUEGIS CONCEPTS SRe e Expert tip
These provide you with activities Exam practice is given for both These tips give advice that will help
and essay questions to help prepare Papers and for the type of you boost your final grade.
you for the Paper 2 Section C guestions you might get — short
component of the final examination. data guestions, definitions, and
Have a go at these to consolidate mathematical calculations, and Keyword definitions
your understanding and application extended response questions, with The definitions of essential key
of the conceptual lenses used in suggested answers online. Use
terms are provided on the page
Business Management — change, these to consolidate your revision
culture, ethics, globalization, and to practise your exam skills.
where they appear. These are
innovation and strategy. words that you can be expected to
define in exams,
You can keep track of your revision by ticking off each topic heading in the book.
Use a checklist to record progress as you revise. Tick each box when you have:
® revised and understood a topic
® used the Exam practice questions and gone online to check your answers.
Use this book as the cornerstone of your revision. Don't hesitate to write in it and
personalize your notes. Use a highlighter to identify areas that need further work.
You may find it helpful to add your own notes as you work through each topic.
Good luck!
,vi How to use this study and revision guide
Getting to know the exam
Exam paper Duration Format Topics Weighting Total marks
Paper 1 (SL) 1 hour 15 mins Pre-release case study All 30 40
Paper2 (SL) 1 hour 45 mins Structured questions All 45 50
Paper 1 (HL) 2 hours 15 mins Pre-release case study All 35 60
Paper 2 (HL) 2 hours 15 mins Structured questions All 40 70
At the end of your Business Management course you will sit two papers — Paper 1
and Paper 2. The external exams (Paper 1 and Paper 2) account for 75% of the
final marks. The other assessed part of the course (25%) is the Internal Assessment SL students must include
documentary evidence of their three
(IA) which is marked by your teacher, but externally moderated by an examiner.
to five supporting documents in the
Here is some general advice for the exams: IA, otherwise you will score zero
marks in Criteria A and C.
m Make sure you have learnt the command terms (e.g. evaluate, explain, outline,
etc.); there is a tendency to focus on the content in the question rather than
the command term, but if you do not address what the command term is (ST R ]
asking of you, then you will not be awarded full marks. Command terms are Spend time learning the key terms
covered below. featured in the case study as definition
® If you run out of room on the page, use continuation sheets and indicate guestions will appear in the Paper 1
examination. Also, use the Business
clearly that you have done this on the cover sheet.
Management syllabus to guide you in
® The fact that the question continues on another sheet of paper needs to be determining the topics that are likely to
clearly indicated in the text box provided. be tested in your Paper 1 examination.
® Plan your time carefully before the exams.
(ST R T
Assessment objectives Students do get a formulae sheet in
the final exams, but it is still worth
and command terms spending revision time learning the
formulae for all quantitative elements
To successfully complete the course, you have to achieve certain assessment of the syllabus, such as ratio analysis
(Unit 3.5 and 3.6). For HL students,
objectives. The following table shows all of the command terms, with an
the relevant discount factors will be
indication of the depth required from your written answers. provided in the final examination if
an investment appraisal question
Define AD1 Assessment objective 1 These command terms
(see Unit 3.8) is asked.
Desiiilia AO1 Demonstrate knowledge require students to learn
outl A0 and understanding and comprehend the
e meaning of information.
State A1
Apply AD2 Assessment objective 2 These command terms
Comment AD2 Demonstrate application ~ Tequire students to use
and analysis their knowledge and skills
Demonstrate AO2 to break down ideas into
Distinguish AD2 simpler parts and to see
Explain AO? how the parts relate
Interpret AQ2
Suggest AD2
Compare AO3 Assessment objective 3 These command terms
Compare and AO3 Demonstrate synthesis require students to
coitiast Gidcaliaban rearrange component
ideas into a new whole
Contrast AO3 and make judgements
Discuss AO3 based on evidence or a
- AO3 set of criteria
Examine AQD3
Justify AO3
Recommend A03
To what extent AD3
, How to use this study and revision guide vii
Annotate AD4 Assessment objective 4 These command terms
Calculate AD4 Demonstrate a variety of :lequire studefi tfll ;
Complete A0 g skl Jid ok sl ey
Construct AD4 skills and techniques.
Determine AD4
Draw AD4
Identify AD4
Label AD4
Plot AD4
Prepare AD4
Source: IB Diploma Business Management Guide 2014
Each section in this study and revision guide starts with the syllabus content and
the relevant assessment objectives (AO1 to AO4). Use these as a guideline to the
level of depth needed when studying and revising the various components of the
Business Management Guide.
Command terms indicate the depth of treatment required for a given assessment
statement. Assessment objectives 1 and 2 address simpler skills, assessment
objective 3 relates to higher-order skills, whilst assessment objective 4 refers to the
skills of selecting, using and applying Business Management skills and techniques.
It is essential that you are tamiliar with these terms, so that you are able to
recognize the type of response you are expected to provide as well as the depth
your response should be.
,viii How to use this study and revision guide
Countdown to the exams
Four to eight weeks to go My exams
Start by looking at the Business Management syllabus and make sure
you know exactly what you need to revise. Paper 1
Work out a realistic revision plan that breaks down the material
you need to revise into manageable pieces. Each session should be
around 25-40 minutes with breaks in between. The plan should
include time for relaxation.
Read through the relevant sections of this book and refer to the
expert tips, CUEGIS concepts boxes, key definitions and worked
examples.
Tick off the topics that you feel confident about, and highlight the
ones that need further work.
Look at past papers. They are one of the best ways to check
knowledge and practise exam skills. They will help you identify areas
that need further work.
Try different revision methods, e.g. summary notes, mind maps and
flash cards.
Test your understanding of each topic by working through the exam
practice questions.
Make notes of any problem areas as you revise, and ask a teacher to
go over them in class.
One week to go
Aim to fit in at least one more timed practice of entire past papers,
comparing your work closely with the mark scheme.
Examine the contents list of this revision guide carefully to make sure
you haven’t missed any of the topics.
Tackle any final problems by getting help from your teacher or
talking them over with a friend.
The day before the examination
Look through this book one final time. Look carefully through
the information about each exam paper to remind yourself what
to expect, including timings and the number of questions to be
answered in each section of the examination paper.
Check the exact time and place of your exams.
Make sure you have all the equipment you need (e.g. extra pens,
pencil and ruler for diagrams, a watch, tissues and water). Make sure
you have a GDC calculator (or a simple four-function calculator) for
both examination papers.
Allow some time to relax and have an early night so you are rested
and ready for the exams. There is a huge opportunity cost if you are
not refreshed!
, Business organization
and environment
1.1 Introduction to business management
The role of businesses in combining human,
physical and financial resources to create goods
and services (A02)
® A business is any organization set up to provide goods and/or services.
= Businesses aim to satisfy the needs and desires of their customers by selling a
good or providing a service,
® To produce goods and services, a business needs to combine human, physical,
financial, and entrepreneurial resources. These resources are referred to as the
factors of production, comprising land, labour, capital and enterprise:
0 Land — Natural resources used in the production process, e.g. wood, water,
physical land, fish, water, metal ores and minerals.
] Labour — Physical human effort and psychological intellect used in the
production process.
1 Capital — Non-natural (manufactured) resources used to further the
production process, e.g. tools, equipment, machinery, vehicles and buildings.
[0 Enterprise — An individual with the necessary skills and ability to take
risks in organizing the other factors of production to generate output in a
profitable way.
® The production process adds value to the final goods and services sold to
customers. Value added is the process of creating a product that is worth more
than the cost of the inputs used to produce it, e.g. bottled orange juice is worth
more than the original oranges grown on a farm.
Expert tip
= Businesses strive to add value to a good or service so that the product better
Consumers are the people who use
meets the needs and wants of their customers. peop
a good or service. Customers are the
® Value added is measured as the difference between the cost of the inputs in buyers of a good or sgwice. Buyers and
the production process and the price of the final output. users are not necessarily the same.
The main business functions and their roles (A02) =
~ Human resources
® Human resource management oversees staffing (personnel) within an
organization.
® It handles human resource (HR) issues such as recruitment, dismissal, training
and development, redundancies, appraisals, performance management, career
planning and the general welfare (wellbeing) of the firm’s employees.
® The HR department must comply with employment legislation (labour
laws), e.g. minimum wage legislation, regulations about working hours, equal
opportunities laws, and anti-discrimination acts.
