Business IB
UNIT 1-Introduction to business management
1.1 What is a business?
A business creates a product
Provides a service
Extracts raw material from earth
Tangible product/good
a product that can be taken home and is physical
(ex. An iPhone, a MacBook, a suit)
intangible product/service
it’s not a physical product and cannot be taken home
(ex. A doctor’s appointment, a Yoga class)
What is the role of a business?
To meet the needs and wants of individuals or organizations
Production
Transformation process that creates value
INPUT: Land, Labour, Capital, Enterprise
OUTPUT: Goods, Service
What is an entrepreneur
an individual who develops and runs a business but takes all the
risks and rewards of that given business
can see opportunities which others can’t
Someone who has the skills to take good new ideas to the market
Can make the right decisions that lead to profitability
What is an intrapreneur
an employee who is given the authority and support to create a new
product
although he doesn’t have to be concerned about whether the
product will be a source of revenue
an intrapreneur will continue to receive a salary even if the product
fails to make production
Functional areas
, teams of employees within a business who have familiar skills &
expertise
Different functional areas
Human resources
recruitment
dismissal
redundancy
motivation
training staff
health & safety and conditions at work
Sales and Marketing
Market research
Product (advice on new product development, product
improvement, extension strategies, target market)
Promotion strategies
Pricing strategies
Sales strategies
The sales team
Finance and accounts
Cash flow
Monitoring costs
Preparing accounts
Raising finance (shares, loans)
Links with all other functional areas
Operation Management
Getting resources
Planning labor
Monitoring costs
Efficiency and time keeping
Best method of production
Control quantity & flow of stock
Adding value
, Businesses may also introduce new goods or services or adapt
existing products to fill gaps in the market
Customers are willing to buy certain goods & service because the
production process adds value to the final product
Adding value is the process of producing a particular good or service
that is worth more than the cost of the resources used to produce it
Sectors of the economy
Primary sector
Business activity involved with the extraction of natural resources
Secondary sector
Business activity involved with the manufacturing or construction of
finished product
Tertiary sector
Business activity that involved providing service to customers
Quaternary sector
Business activity involving the creating or sharing of knowledge &
information
Typical challenges for starting a business
Lack of finance
Lack of market research
Limited human resources
Long hour
Lack of knowledge, skills, experience
Typical opportunity for starting a business
Money
Autonomy
The challenge itself
Passion
Family ties
Unfilled market opportunities
1.2 introduction to business management
, Private and Public Sector Organisations
• The public sector comprises of organisations accountable to and
controlled by central or local government (the state).
• The private sector comprises of businesses owned by and controlled by
individuals or groups of individuals.
Sole Trader
Advantages
• The owner has complete control over the business
• The owner has close contact with customers
• Incentives to work hard i.e. he keeps all the retain profits
• The owner can choose his holidays, pay, breaks etc.
Disadvantages
• No one to discuss business matters with
• The business has unlimited liability
• The business is likely to remain small
• There will be a lack of specialist skills due to the businesses size
• Lack of continuity in event of death, sickness and holidays
For-profit Partnership
Advantages
• Share expenses, responsibility and decision making
• The owners have complete control over the business
• More CAPITAL is available to invest
• Individual partners can offer specialisms
• Continuity – partners can cover each other’s absence
Disadvantages
• Disagreement between partners
• The business has UNLIMITED LIABILITY
• One partner could be unreliable or dishonest
Key terms
• Share: a certificate confirming part ownership of a company and entitling
the shareolder to dividends and certain shareholders right.
UNIT 1-Introduction to business management
1.1 What is a business?
A business creates a product
Provides a service
Extracts raw material from earth
Tangible product/good
a product that can be taken home and is physical
(ex. An iPhone, a MacBook, a suit)
intangible product/service
it’s not a physical product and cannot be taken home
(ex. A doctor’s appointment, a Yoga class)
What is the role of a business?
To meet the needs and wants of individuals or organizations
Production
Transformation process that creates value
INPUT: Land, Labour, Capital, Enterprise
OUTPUT: Goods, Service
What is an entrepreneur
an individual who develops and runs a business but takes all the
risks and rewards of that given business
can see opportunities which others can’t
Someone who has the skills to take good new ideas to the market
Can make the right decisions that lead to profitability
What is an intrapreneur
an employee who is given the authority and support to create a new
product
although he doesn’t have to be concerned about whether the
product will be a source of revenue
an intrapreneur will continue to receive a salary even if the product
fails to make production
Functional areas
, teams of employees within a business who have familiar skills &
expertise
Different functional areas
Human resources
recruitment
dismissal
redundancy
motivation
training staff
health & safety and conditions at work
Sales and Marketing
Market research
Product (advice on new product development, product
improvement, extension strategies, target market)
Promotion strategies
Pricing strategies
Sales strategies
The sales team
Finance and accounts
Cash flow
Monitoring costs
Preparing accounts
Raising finance (shares, loans)
Links with all other functional areas
Operation Management
Getting resources
Planning labor
Monitoring costs
Efficiency and time keeping
Best method of production
Control quantity & flow of stock
Adding value
, Businesses may also introduce new goods or services or adapt
existing products to fill gaps in the market
Customers are willing to buy certain goods & service because the
production process adds value to the final product
Adding value is the process of producing a particular good or service
that is worth more than the cost of the resources used to produce it
Sectors of the economy
Primary sector
Business activity involved with the extraction of natural resources
Secondary sector
Business activity involved with the manufacturing or construction of
finished product
Tertiary sector
Business activity that involved providing service to customers
Quaternary sector
Business activity involving the creating or sharing of knowledge &
information
Typical challenges for starting a business
Lack of finance
Lack of market research
Limited human resources
Long hour
Lack of knowledge, skills, experience
Typical opportunity for starting a business
Money
Autonomy
The challenge itself
Passion
Family ties
Unfilled market opportunities
1.2 introduction to business management
, Private and Public Sector Organisations
• The public sector comprises of organisations accountable to and
controlled by central or local government (the state).
• The private sector comprises of businesses owned by and controlled by
individuals or groups of individuals.
Sole Trader
Advantages
• The owner has complete control over the business
• The owner has close contact with customers
• Incentives to work hard i.e. he keeps all the retain profits
• The owner can choose his holidays, pay, breaks etc.
Disadvantages
• No one to discuss business matters with
• The business has unlimited liability
• The business is likely to remain small
• There will be a lack of specialist skills due to the businesses size
• Lack of continuity in event of death, sickness and holidays
For-profit Partnership
Advantages
• Share expenses, responsibility and decision making
• The owners have complete control over the business
• More CAPITAL is available to invest
• Individual partners can offer specialisms
• Continuity – partners can cover each other’s absence
Disadvantages
• Disagreement between partners
• The business has UNLIMITED LIABILITY
• One partner could be unreliable or dishonest
Key terms
• Share: a certificate confirming part ownership of a company and entitling
the shareolder to dividends and certain shareholders right.
