GUIA P1 MOCKS BUSSINESS.docx

**PAPER 1** **IB BUSINESS MANAGEMENT** **REVISION GUIDE** Source of finance Definition ------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------- Microfinance Provide small...

**PAPER 1** **IB BUSINESS MANAGEMENT** **REVISION GUIDE** Source of finance Definition ------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------- Microfinance Provide small loans and financial services to people who don\'t have access to traditional banking. Leasing Renting for a set period, in the end of the period you have the option to buy the item Share capital Share capital is the money a company gets from selling parts of itself (shares) to people. If you buy shares, you own a small part of the company. Sale of assets Getting rid of things a company owns, like equipment or property, to make money. Sale of assets ----------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------ Benefits Limitations **Quick Cash:** It provides immediate money that can be used for urgent needs or new opportunities. **Loss of Resources:** The company loses the use of the asset, which could be needed later. **Debt Reduction:** The cash from sales can help pay off existing debts. **Impact on Operations:** Selling important assets might disrupt the company's operations or productivity. Loan ----------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------- Benefits Limitations **Immediate Cash:** You get money right away to buy or invest in something you need. **Repayment:** You need to pay back the money you borrowed, usually with extra fees or interest, which means paying more than you borrowed. **Large Purchases:** Loans help you buy expensive items, like a house or a car, that you might not be able to afford all at once. **Interest Rates:** High interest rates can make loans more expensive and increase the total amount you owe. ORGANISATIONAL STRUCTURE --------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- Tall Flat Definition here: A tall organizational structure has many layers of management, with a clear hierarchy. Definition here: A flat organizational structure has fewer layers of management, with a more horizontal or level approach. Decision Tree -------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Benefits Limitations **Easy to Understand:** Decision trees are visual and straightforward, making it easy to see the possible outcomes of different decisions. **Complexity with Many Options:** As the number of choices or variables increases, the decision tree can become very large and complicated, making it harder to interpret. **Versatile:** Decision trees can be used for a variety of problems, from simple decisions to complex scenarios. **Bias to Larger Branches:** Decision trees might give more weight to options with more branches, which can skew the results. Term Definition ---------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------- Conglomerate A large company that owns several different businesses that aren't related to each other. Internal growth When a company expands by increasing its own operations or sales rather than buying other businesses. External growth When a company grows by merging with or buying other businesses. Multinational company A company that operates in multiple countries around the world. Franchising A way for a company to expand by allowing others to run businesses using its brand and system in exchange for fees. Joint venture A partnership where two or more businesses work together on a project or business opportunity, sharing the risks and rewards. Strategic Alliance A partnership between businesses to achieve goals that they couldn't easily reach alone, often involving collaboration on specific projects or resources. Product orientated approach to marketing Benefits Limitations **Focus on Quality:** The company concentrates on making the best product, which can lead to high-quality offerings. **Customer Needs Ignored:** Doesn't focus on what customers actually want or need, focusing more on the product itself. **Innovation:** Encourages creating new and improved products, which can set the company apart from competitors. **Limited Marketing:** Success depends on product quality alone, which might not be enough if marketing isn't strong or well-targeted. Market orientated approach to marketing -------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Benefits Limitations **Better Sales:** By aligning products with what people want, the company is more likely to sell more and be successful. **Cost:** It may require significant research and resources to understand and respond to customer needs. **Adaptability:** The company can quickly adjust to changes in customer preferences and market trends. **Complexity:** Managing and analyzing customer data can be complex and might overwhelm smaller businesses. CSR ----------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------- Benefits of implementing CSR Limitations of implementing CSR **Better Reputation:** Companies seen as socially responsible often have a better public image, which can attract customers and talent. **Cost:** Implementing CSR initiatives can be expensive and might affect the company\'s profits. **Customer Loyalty:** People are more likely to support and stay loyal to companies that care about social and environmental issues. **Complexity:** Managing and reporting on CSR activities can be complicated and time-consuming. Factor How can it affect cashflow? ----------------------------------- ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Overtrading This can lead to cash shortages because the company is spending more money on inventory and other costs than it's bringing in from sales. Purchasing fixed assets with cash Buying things like equipment or buildings with cash reduces the amount of money available for other needs. Giving credit When a company allows customers to pay later, it delays receiving cash. This can lead to cash flow problems if too much money is tied up Sale of assets Selling assets (like equipment or property) brings in cash immediately. This can improve cash flow by providing extra money that can be used for other needs or to cover short-term expenses. Private limited company ---------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------- Benefits Limitations **More organizable**: Limited shareholders mean more control of the company. **Growth Limits:** It can be harder to raise a lot of money for big growth because shares can't be sold publicly. **Limited Liability:** Owners are not personally responsible for the company's debts, which means their personal assets are protected. **Rules and Paperwork:** There are more rules and paperwork to follow compared to other business types. Public limited company ----------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Benefits Limitations **Easy to Buy/Sell Shares:** Shares can be bought or sold easily, making it simpler to transfer ownership. **Lots of Rules:** Must follow many rules and share financial details regularly, which can be a lot of work. **More Visibility:** Being on the stock market can make the company more well-known and attract more investors. **Less Control:** Management might have less control because of many shareholders and public attention. Sole trader ----------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------- Benefits Limitations **Full Control:** You make all the decisions and run the business exactly how you want. **Personal Risk:** You're personally responsible for any debts, so you could lose your personal assets. **Easy to Start:** It's simple and cheap to set up and run a sole trader business. **Harder to Raise Money:** It's often difficult to get big loans or investments. Joining a franchise --------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------- Benefits Limitations **Established Brand:** You get to use a well-known brand name, which can attract customers. **Cost:** There are often significant upfront fees and ongoing royalties to pay to the franchisor. **Lower Risk:** Following a tested business model reduces the risk of failure compared to starting a new business from scratch. **Shared Reputation:** Any problems with other franchise locations can affect your business, as you're linked to the overall brand. Market segmentation --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------ Benefits Limitations **Better Products:** Helps you create products or services that better match what different groups want. **Costly:** It can be expensive and take a lot of time to divide the market and create different plans for each group. **More Sales:** Attracts more customers by meeting their specific needs, which can boost sales. **Focused Marketing:** Lets you target specific groups of customers, making your ads and promotions more effective. Primary market research --------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------- Benefits Limitations Direct contact: If you have direct contact its easy to see how they express with the product and make a better conclusion of their opinion. Time consuming: Interviewing each person might take you a lot of time. **Up-to-Date:** Gives you the most current data, as it's collected firsthand. **Costly:** It can be expensive to conduct your own research, especially if you need surveys, interviews, or focus groups. Secondary market research --------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------- Benefits Limitations **Cost-Effective:** Usually cheaper because you're using data that has already been collected by others. **Quality Control:** You have less control over the quality and accuracy of the data, as it was collected by someone else. **Quick Access:** Data is readily available, so you can get insights quickly without having to conduct your own research. **Outdated Information:** The data might be old or not reflect the latest trends and developments. Online sources (for secondary research) Benefits Limitations **Easy Access:** Information is readily available and can be accessed from anywhere with an internet connection. **Quality Variability:** The accuracy and reliability of online information can vary, and some sources may not be credible. **Cost-Effective:** Often free or low-cost compared to other methods of obtaining research data. Media articles (for secondary research) ----------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------- Benefits Limitations **Recent Information:** Media articles provide the latest news and updates about industries and markets. **Possible Bias:** Some articles may be influenced by the writer\'s or publication\'s opinions, not always showing the full picture. **Public Opinion Insight:** They show what people are saying and thinking about companies, products, or trends. **Lack of Detailed Data:** Often, they don\'t include thorough statistics or detailed research needed for in-depth analysis. P from marketing Explanation ------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Process The procedures and policies pertaining to how and organizations product is provided and delivered Physical evidence Parts of your business that customers notice, like the look of your store, your website, how your staff behaves, and even the packaging of your products. These visible touch points help shape the customer\'s overall impression of your business. People **Human capital** refers to the skills, attitudes, and abilities that people bring to their jobs to help produce goods or provide services. Time rate (wages) system -------------------------------------------- ------------------------------------------------------------------------------------------------------------------------- Benefits Limitations the security of receiving a regular income Employees may work slowly since their pay is not based on results. the opportunity to receive overtime pay. Workers might not feel motivated to work faster or harder since they get paid the same no matter how much they produce. Salary payment system -------------------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- Benefits Limitations **Stable Income:** Employees know exactly how much they'll earn each month, which makes it easier to budget and plan. **No Extra Pay for Extra Work:** If employees work longer hours, they usually don't get paid extra, which might make them feel overworked. **No Overtime Worries:** Employees don't have to worry about clocking in extra hours to make more money since they receive a fixed salary. **Less Flexibility:** Some salaried workers might feel less control over their work hours because they're expected to get the job done, no matter how long it takes. Term Explanation ----------------- -------------------------------------------------------------------------------------- Job enlargement Giving an employee more tasks to do at the same level of responsibility Job enrichment Adding more challenging tasks to make the job more interesting. Job rotation Job rotation means moving employees between different jobs or tasks within a company Financial Term Explanation --------------------- --------------------------------------------------------------- Capital expenditure Money spent on long-term assets like buildings and equipment. Revenue expenditure Money spent on everyday costs like salaries and utilities. Financial Term Explanation ---------------- ------------------------------------------------------------------------------------- Cashflow Movement of money in and out of the business. Profit Money left after paying all expenses Investment Spending money to buy assets or improve the business with the hope of future gains. **IMPACT OF MULTINATIONAL COMPANIES ON HOST COUNTRIES** --------------------------------------------------------- --------------------------------------------- Advantages Disadvantages Create job opportunities Might push local business out of the market Bring new technology Cultural Changes Help local products reach global markets Environmental Damage **Low Labour turnover** --------------------------------------------- ---------------------------------------------------------------------------- Advantages Disadvantages Company spends less money on hiring Fewer workers bringing new ideas Long term employees know their job and role Replacement Issues, because someone might left a big mark, hard to replace Strong Relationships Company missing out on young talent with fresh skills