1.1 Business

• Business


  An organization that provides goods and services satisfying the needs and wants in a profitable or non-profitable way
• Businesses


  • Can be non-profit and still be considered a business
  • The updated IB Business Management syllabus emphasizes social enterprises and non-profit businesses
• Input-Output Model


  1. Inputs (factors of production: land, labor, capital, entrepreneurship)

  2. Processes (adding value through manufacturing or service provision)

  3. Outputs (products - goods or services)
• Capital-intensive production


  Production that relies heavily on machinery
• Labor-intensive production


  Production that relies heavily on labor
• Producer goods/services


  Goods/services sold from one business to another (B2B)
• Consumer goods/services


  Goods/services sold from a business to a consumer (B2C)
• Business Functions


  • Human Resource Management
  • Finance and Accounts
  • Marketing
  • Operations Management
• All business functions are equally important and should work together towards the same goal (interdependence)
• Economic Sector


  A category of businesses within an economy involved in similar activities
• Economic Sectors


  • Primary (extracting raw materials)
  • Secondary (manufacturing)
  • Tertiary (services)
  • Quaternary (knowledge-based services)
• The route that consumer goods take from raw materials to finished products on store shelves is called the chain of production
• Knowledge of economic sectors is important for business management students and potential entrepreneurs
• Tertiary sector activity


  Selling consumer goods in retail stores
• Chain of production


  Raw materials transformed into finished consumer goods on supermarket shelves
• Primary sector


  Businesses that harvest crops
• Secondary sector


  Businesses that transform crops into products like bread
• Tertiary sector


  Businesses that sell products to consumers
• Knowing about economic sectors is useful for business management students and potential entrepreneurs
• Clark's sector model


  Economies go through stages of development with changing importance of economic sectors over time
• De-industrialization


  Period when the importance of the secondary sector decreases
• Quaternary sector


  Sector focused on IT, data and knowledge
• Measuring the importance of economic sectors

  1. By employment numbers

  2. By contribution to GDP
• Low income/less developed economy


  Primary sector dominates
• Middle income/developing economy


  Secondary sector dominates
• High income/developed economy


  Tertiary and quaternary sectors dominate
• Entrepreneurs combine factors of production to start a new business
• Intrapreneurs


  Entrepreneurs who work within a company
• Reasons to start a business

  • Financial rewards
  • Innovation
  • Work-life balance
  • Identifying market gaps
  • Independence
  • Sense of responsibility
  • Commercializing personal interests
• Process of starting a business

  1. Have a business idea

  2. Write a business plan

  3. Choose a business identity

  4. Seek finance

  5. Start trading
• Business plan


  Document outlining potential business development, including idea, vision, mission, goals, and plans for the 4 business functions
• Pitching is a presentation of the business plan to potential investors or shareholders
• Challenges for startups


  • Limited finance
  • Lack of business know-how
  • Recruitment issues
  • Lack of expertise
  • Intense competition
• Chain of Production


  The sequence of processes involved in transforming raw materials into finished products within a single organization
• Supply Chain


  All activities involved in the production and delivery of a product or service to the end consumer, including multiple organizations and stakeholders
• Globalization


  The increasing interconnectedness of economies and societies around the world, driven by advances in technology, transportation, and communication
• De-industrialization


  A period when the importance of the secondary sector (manufacturing and industry) decreases in an economy
• Agriculture


  Economic activities involved in producing food, fiber, and other agricultural products. Includes cultivation of crops and raising of animals for food, fuel, and other uses.
• Service provision


  Economic activities that create value by providing intangible goods or services to consumers. Examples include healthcare, education, finance, and hospitality.
• Outputs


  The products that are created through the use of inputs and processes. Can be goods or services.