Summary IB Business Management Unit 1 - Introduction to Business Management (SL & HL)

Business Management 1.1 – INTRODUCTION TO B&M


BUSINESS – An organization that uses resources to meet the needs of customers by providing
a product or service that they demand. They add value to the resources and make them
more desirable to the final purchaser.
Revenues (sells) (Cost of production) + Profit - Loss


CLASSIFICATION:

 consumer goods (tangible) durable consumer goods (car) and non-durable consumer
goods (food)
 consumer services (intangible)
 capital goods (physical): aid in the production of other goods and services (machines)

FACTORS OF PRODUCTION (INPUTS)

 Land – Resources of nature and site for building
 Labour – Manual and skilled labour. Temporary/Permanent
 Capital – Finance to set up a business and pay for its continuing operations and man-
made resources
 Enterprise – Individuals that use the 3 inputs in order to produce goods and services. Risk-
taker, decision-maker and coordinators.

FUNCTIONS

 HR Management: identify workface needs, recruits, selects and trains employees and
provide motivational systems to improve productivity. Manage employees so as the
business achieve his objectives
 Finance and accounts: monitor the flow into and out, keep and analyze accounts and
provide financial information to the departments and senior management.
 Marketing: market research to identify consumers’ wants. Decision of price, promotion,
sells and distribution. Ensure products are sold
 Operations management: controlling resources for production, maintaining production
and quality levels and achieving high levels of productive efficiency. In service industries
the delivery of the services is okay, specific and understood by employees.

ECONOMIC SECTOR / BUSINESS ACTIVITY

 Primary: extractive (raw materials)
 Secondary: manufacture (construction) and process products. ADDS VALUE
 Tertiary: services
 Quaternary: IT (information technology)


STARTING A BUSINESS  Challenge
 Interest
 Necessity - Losing a job
 Finding a gap
 Independence, flexibility and control
 Sharing an idea
 Business opportunity
 Money

, Business Management 1.1 – INTRODUCTION TO B&M


Entrepreneur Intrapreneur
Ideated a new business, invested capital, Do not risk their own capital, the
accepted the responsibility of managing / of organization accepts the risks. Works in a
risks large corporation
 Innovative: looks for a gap in the market, attract consumers and present the business
as different.
 Commitment and self-motivation: work hard, ambition to succeed, energy and focus
 Multi-skilled: technic, ability in HR, good at handling money and keeping accounting
records
 Leadership skills
 Believe in oneself: failures do not discourage them
 Risk-taker
ENTERPRISE IMPACT
 Employment creation: self-employment and other people
 Economic growth: increase the gross domestic product, living standards, output and
consumption and, tax revenues.
 Firms´ survival and growth: maybe they will take the place of declining businesses
 Innovation and technological change: adds dynamism to an economy, increase in
application of IT, so now the population is more competent and creative.

STEPS IN STARTING A BUSINESS
1. Identifying market opportunities: own skills and hobbies, previous employment experience,
franchising conferences and exhibitions, small-budget market research.
2. Sourcing capital (finance): the entrepreneur will almost have to use some of his savings, as well
as friends and family. Finance from banks, investors (venture capitalists) or government grants
(to reduce unemployment, merit)
3. Determining a location: because of the costs, many people work from home, but it have its
consequences.
4. Building a customer base: encourage customers to return by offering them a personal
customer service, knowledgeable pre- and after-sales service and providing for one-off
customers´ requests. They need to gain customers from the competitors

Merit goods: beneficial for community Demerit goods: e.g. cigarettes, alcohol…

PROBLEMS WITH START-UPS
 Competition: new business vs. old, established business with cost and prices advantages
 Lack of record-keeping: important to pay taxes and bills and chase up debtors
 Lack of finance and working capital: not having enough money to continue, and do not have a
trading record so as the bank can trust on you and lend you money, having an incomplete
business plan may not convince the investors, not having working capital (day-to-day cash,
trade credit to customers, holding of stocks).
To avoid lack of working capital
 Construct and update a cash flow forecast
 Have enough capital at the beginning
 Overdraft from the bank
 Control the debtors
 Poor management skills: lack of management skills (leadership, cash handling, planning and
coordinating, decision-making, communication, marketing, promotion and selling)
 Changes in business environment: due to new competitors, legal / economic / technological
changes

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, Business Management 1.1 – INTRODUCTION TO B&M


BUSINESS PLAN: document that describes the business, its objectives and its strategies, the market it
is in and financial forecast. To know the direction of the business, and to convince investors to lend
you money.

 Executive summary (overview of the business and its strategies)
 Description of the business opportunity (business idea, aims and objectives, entrepreneur,
product, why that product and to whom)
 Marketing and sales strategy (why will customers buy the product and how would they sell
them)
 HR - Management team and personnel (skills and experience of the entrepreneur and staff)
 Operations (premises to be used, production facilities and IT systems)
 Financial forecast (sales, profit and cash flow)

Name of the business Price Location
Type of organization Market aimed for Main equipment required
Details of business owners Market research and results Forecast profit (revenue –
cost), Necessity for break even
Business aim Human resources plan Cash flow forecast (- or +)
Product Production details and finance
business costs




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