Introduction to Business Management PDF

Okay, please see the conversion of the provided text to markdown format below. # Chapter 1 ## Unit 1.1 - What is a business? *It does not take much strength to do things, but it requires a great deal of strength to decide what to do.* Elbert Green Hubbard (1856 - 1915), American author and philoso...

Okay, please see the conversion of the provided text to markdown format below. # Chapter 1 ## Unit 1.1 - What is a business? *It does not take much strength to do things, but it requires a great deal of strength to decide what to do.* Elbert Green Hubbard (1856 - 1915), American author and philosopher ### Contents **1.1 What is a business?** |SL/HL content | Depth of teaching | | --- | --- | |The nature of business | A01 | |Primary, secondary, tertiary and quaternary sectors | A02 | |Challenges and opportunities for starting a business | A02 | ©IBO, 2022 ### The nature of business (A01) A business is a decision-making organization involved in the process of using inputs to produce goods and/or to provide services (see Figure1.1). Inputs are the resources that a business uses in the production process, such as labour and raw materials. This process generates outputs(also known as products). Management guru Peter Drucker said that *“There is only one valid definition of business purpose: to create a customer”* by creating goods and services that meet the needs and wants of customers. The term **product** can refer to both goods and services. **Goods** are physical products, such as smartphones, clothes, books and food. **Services** are intangible products, such as haircuts, public transport, education, and healthcare. Businesses can also provide goods and services to other organizations, such as freight transportation, distribution, and insurance. Here's a description of Fig 1.1. **Figure 1.1. The production process** *Inputs that consist of examples such as raw materials, components, machinery, equipment and labour are processed and turned into manufactured goods to provide services which result in outputs such as provision of final goods and services. At the side is written core which refers to introduction to business management.* An **entrepreneur** is the individual who plans, organizes and manages a business and its operations, taking on financial risks in doing so. The term was coined by Richard Cantillon (1680-1734) an Irish-French economist. **Entrepreneurship** describes the trait of business leaders who tend to be distinctive in their temperament, attitude and outlook who drive the business to achieve its organizational goals. Successful entrepreneurs tend to be creative, innovative and highly passionate. They search for and exploit business opportunities by forecasting and/or responding to changes in the marketplace. 11 ## Topic 1: Introduction to Business Management ### Business Management Toolkit Examine the impact of changes in the external environment on non-governmental organizations. You may find it useful to refer to Chapter 46 (STEEPLE analysis) before attempting to answer this question. ### Types of business entities and the key concepts There are various factors that affect the strategic choice of business entity, including: * **Amount of finance** - Sole traders and partnerships need less start-up capital than a publicly held company. A change in the legal status of a business will usually require more finance (see Chapter 14). * **Size** - The larger and more complex the business operations, the more likely it is to be a limited liability company (corporation). Sole traders, for instance, find it unnecessary or unaffordable to hire a large workforce or to operate a tall hierarchical structure (see Chapter 8). * **Limited Liability** - The desire to have limited liability, in order to protect the personal possessions of the owners, can affect the choice of legal status of a business entity. * **Degree of ownership and control** - Those who wish to retain control and ownership of a business may prefer to stay relatively small as sole traders or even as privately held companies. * **The nature of business activity** - The type and scale of business activity can influence the legal status of an organization, eg mainstream aircraft and motor vehicle manufacturers rely on external sources of finance (see Chapter 14), so are likely to be formed as publicly held companies. * **Change** - As a business grows and evolves (see Chapter 6), it may need additional sources of finance and human resources. Thus, the type of organization and its legal status are likely to change. Here's a description of the image *Fig 2.7: is an image some business choose to remain small* ### Key concept With reference to an organization of your choice, examine how change has influenced its business strategy and choice of legal business entity. ### Key concept Discuss the role of creativity in creating sustainable competitive advantages for a business organization of your choice. MAKE THIS WORLD BETTER Figure 2.6 - NGOs strive to make the world a better place **Exam tip!** The term 'non-profit organization' does not mean that the business does not strive to earn a profit or surplus but that this money must be retained in the organization for its self-preservation and growth. Profit is the reward that is distributed to the owners or investors of a business in return for risking their money in the business. By contrast, non-profit organizations (NPO) retain this surplus in the business. For example, many private fee-paying schools are NPOs because any surplus that they make is reinvested in the schools to enhance their facilities and improve teaching and learning. ### Non-governmental organizations (NGOs) The United Nations (UN) defines non-governmental organizations (NGOs) as "Private organizations that pursue activities to relieve suffering, promote the interest of the poor, protect the environment, provide basic social services or undertake community development". They are private sector not-for-profit social enterprises that operate for the benefit of others rather than primarily aiming to earn a profit. Examples include Médecins Sans Frontières (Doctors Without Borders) and Friends of the Earth. The term 'non-governmental organization' was coined in Article 71 of the UN Charter that was formed in 1945. An NGO, sometimes referred to as a private voluntary organization (PVO), can be any kind of organization so long as: 1. it is independent of the government or direct public sector influence and 2. it is not-for-profit. ### 1.2 Types of business entities Many NGOs are very large organizations, such as Oxfam (global poverty alleviation), Greenpeace (environmental protection). Amnesty International (human rights) and the United Nations International Children's Fund or UNICEF (children's welfare). They are run by a group of senior managers and trustees, similar to a limited liability company’s board of directors. There are two main type of NGOs: * Operational NGOs are established from a given objective or purpose. These NGOs tend to be involved in relief-based and community projects, such as Oxfam and UNICEF. * Advocacy NGOs take a more aggressive approach to promote or defend a particular cause, striving to raise awareness and support through direct action (such as lobbying, public relations and mass demonstrations), such as Greenpeace and Amnesty International. ### Case study 2.6 - The Bill & Melinda Gates Foundation The Bill & Melinda Gates Foundation was set up in 2000 to enhance healthcare and reduce extreme poverty around the world. It is the largest non-profit private sector social enterprise in the world. The Foundation is controlled by its three trustees (the people at the top of the organization): Bill Gates, Melinda Gates and Warren Buffett - the three most generous philanthropists in the USA. According to CNBC, Bill and Melinda Gates have donated over $50billion to the Foundation. ### Theory of Knowledge (TOK) Can we 'know' if for-profit organizations do not care about society as much as non-profit social enterprises? **Table 2.4 - The advantages and disadvantages or cooperatives** |Advantages of cooperatives| Disadvantages of cooperatives| | --- | --- | |Incentives to work - Employees have a stake in the cooperative so are more interested in how it performs. This can enhance staff motivation and productivity.|Disincentive effects - There might be ineffective managers and employees as cooperatives do not pay high salaries and bonuses as incentives to work.| |Decision-making power - Employees have a say in how the business is run. There is a democratic system of members having equal voting rights. This can also improve the members' commitment and employee loyalty.|Limited sources of finance - Cooperatives might suffer from a lack of finance as most of them cannot raise funds through a stock exchange. Sources of finance are often limited to the amount contributed by their members.| |Social benefits - Cooperatives are run on socially responsible principles leading to gains for other members of society rather than only for the owners. Thus, cooperatives create social gains that can be enjoyed by the wider community.|Slower decision-making - Decisions are likely to be slowed down (delayed) as all members of the cooperative work in a democratic way and are involved in the decision-making process. Every member has a voice in the organization.| |Public Support - A key advantage of social enterprises such as cooperatives is that there tends to be public support, i.e. people (including customers) want to help them succeed because they believe in the cause the cooperative stands for.|Limited promotional - Opportunities - Cooperatives tend to have flatter organizational structures (see Chapter 8), so there are fewer opportunities for employees to progress in their professional careers.| Note: As cooperatives operate in the private sector, they are an example of private sector for-profit social enterprises. ### ATL Activity 2.2 (Research and Thinking skills) Investigate the various types of for-profit social enterprises such as co-operatives in your country. Choose one organization and research its mission and objectives and how it operates. Be prepared to share your finding with the rest of the class. ### Non-profit social enterprises (AO3) The main features of following types of non-profit social enterprises: Non-governmental organizations (NGOs) © IBO, 2022 Non-profit social enterprises are businesses run in a commercial-like manner but without profit being the main goal. Instead, non-profit organizations use their surplus revenues to achieve their social goals rather than distributing the surplus as dividends to its shareholders or owners. As former British Prime Minister Sir Winston Churchill (1874-1965) said, “We make a living by what we get but we make a life by what we give.”. Examples include public libraries, state schools, museums, government hospitals and social services. Well-known on-profit social enterprises include habitat for humanity, Oxfam, the red cross and world wide fund for nature. The main type of non-profit social enterprises is non-governmental organizations (NGOs), including international charitable organizations. ### Common mistake Do not confuse a publicly held company with a public corporation. The former is a limited liability company that operates in the private sector but offers its shares to the general public on a stock exchange. The latter is owned and operated by the government on behalf of the general public or society as a whole. **(iii) Cooperatives** Cooperatives are for-profit social enterprises owned and run by their members, such as employees or customers, with the common goal of creating value for their members by operating in a socially responsible way. All employees (member of the cooperative) have a vote, thus contribute to decision-making. Cooperatives share any profits earned between their members. Cooperatives operate in various industries, including retailing, financial services, childcare services, housing associations and agriculture (see Box 2.4). Canada, for example, has over 9,000 Cooperatives with more than 18 million members and employ more than 150,000 people (www.CooperativeDifference.coop/co-operatives-in-canada). The UK’s Cooperative Group is the world’s largest consumer-owned business with over 4.5 million members. There are three main types of Cooperative all of all which are democratically own is controlled: * Consumer cooperatives are owned by customer who buy the goods, and or services for cooperatives for personal use. Examples include food, credit unions (financial services), childcare, housing and healthcare cooperatives. In most cases, members get access to goods and services at lower prices than those charged by traditional commercial business. * Worker cooperatives are set up, owned and organised by their employee members. Examples include cooperatives involved in production manufacturing, printers, cafés, tourism and communications. By operating as as enterprise, members are also provided with opportunities. * Producer cooperatives are cooperatives that join and support each other to process and/or market their products. For example, a farmer cooperative might unite to buy equipment , fertilizers and seeds collectively, by pooling their funds. This enable all members to benefit from bulk purchase discounts. Farmer cooperatives are the most common examples of producer cooperatives. **box 2.4 - Example of cooperatives** * Associated press- a non profit multinational news are headquartered in the USA * Aurora Wine Cooperative is a producer cooperative in Brazil * Cooperative bank- a British commercial bank founded in 1872, with assets of £25.6 billion ($35.8bn) * Credit Agricole group is one France largest bank and credit unions * Mondragon Corporation is a Spanish worker cooperative that produced food industry products * Ocean Spray is a farmer based cooperative of the popular cranberry and grapefruit juice drinks. * Sunkist US farmer based producer cooperative that makes the famous bank of sun kiss fruit juices * Xinjiang Quanliang is a cooperative founded in 1980 for dairy farmers in China, with more than 2.6 million farmer members ### ATL activity 2.1 Cooperatives operate under the guidelines and. principles of the International Cooperative Alliance (ICA)founded in 1895. investigate the role of ica (http://ica.coop/) and how to support the cooperative movement around the world. ### Economic aims * to earn a profit (or surplus) and to reinvest this surplus back in the business for societal benefits. ### Social aims * to provide benefits to people in society, such as jobs opportunities in the local community and to support less-advantaged members of society. ### Environmental aims * to protect the planet, by operating in environmentally friendly and sustainably responsible ways. **(ii) Public sector companies** Public sector for-profit social enterprises are state-owned enterprises run in a commercial way. They are formed by the government through legal means and regulated as they participate in commercial business activities for financial gain. These public sector companies are owned by the government, whether wholly or partially. They help to raise much-needed government revenues yet provide essential services that may be inefficient and undesirable if left solely to the private sector. Examples of such business entities include some national airline carriers, airport authorities, transport operators, telecommunications companies and operators of postal services. Examples of public sector companies run as for-profit social Enterprise include : * Australia post is the Australian government business entity the provides postal services, with order 4330 outposts throughout Australia * Egyptian National railway and energy is the national railway Egypt operated by the state-owned enterprise Egyptian railway authority * Ontario Niagara parks commission managers the Canadian side of Niagara Falls with focus on reformed land use and sustainable tourism * Television Nacional de Chile(TVN) is the leading Chilean public service,television broadcaster, founded in 1969. * Temasek holdings is Singapore Singaporean state-owned enterprise that owns 56% of the share in Singapore airlines ### Case study 2.5 China mobile China Mobile is the world's largest mobile phone operator with over 945.5 million subscribers. Founded in 1997, China Mobile is a state on public sector company, with government of the Republic of China owning 74.25% share on company . China Mobile is listed on both the New York Stock Exchange and the Hong Kong stock exchange, with the government of the republic China holds over 74% of the public traded shared ### Hong Kong Disneyland Hong Kong Disneyland(HKDL) is the theme park with three on site hotels,. The theme park is jointly owned by the Hong Kong Special administrative region of the people’s republic of China . HKDL the the smallest of or Disneyland Theme Park,s , analysts estimated that theme park would generate $148 bn($19bn0 in need benefit to the economy over the 40-year period as a public sector company to extend its operations in Hong Kong **(a).** * define it shareholders (2 marks) * define the top public sector company (2 marks) **(b).** * Discuss the decisions the Hong Kong special Administrative region of the Hong Kong special administrative region of china to expand HKDL as a public sector company (10 marks) ### For-profit social enterprises AO3 The main features of the following types of the for-profit social enterprises * private sector companies * Public sector companies * Cooperative ©BO 2022 Social enterprises are revenue generating business with solid objectives it is that the company strives a support list for social gains the personal gains Social enterprises can be operate as a non profit organization. either way all social enterprises have to many goals To achieve solid objectives and To earn Revenue in excess of those costs After all social entrepreneur can deliver what desire if do not manage health to Success The main type of success * they use to finance it what is more Society beyond the company * They create emplotment Opportunities, by There are Three types of for -of enterprises private that Private sector the need of society Social in society in Dhaka bagadesh Social is the name the bank small can to to Self-sufficiency does require ### Case study 2.4 Grameen Bank Dr. Muhammad Yunus Nobel For-profit social enterprises operate in it will be a that apart for-profit enterprises. and create those This those earning to run To so business or for to services and that Are many also with there The three the three the the consists: Social Environmental Economic A DOA .2 = TO Apple - Google Samsung Phillips. - Banking That the stock Google. 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