Ib Business Hl Topic 1

Topics: Strategic management, Corporation, SWOT analysis Pages: 10 (2424 words) Published: June 5, 2013
Topic 1- Exam Style Notes
1.1 Nature of Business Activity
What is a business?
* Business- decision making organisation using inputs to produce goods and services which satisfy the needs and wants of a customer * Factors of production- “CELL”
1. Capital- used to produce goods (non natural, eg machinery) 2. Enterprise- management/planning of factors of production 3. Land- natural resources; renewable and non renewable
4. Labour- physical and mental efforts of people
Business functions
* “Funky HOM”
1. Finance- managing and organising money
2. Human Resources- managing personnel eg training, motivation 3. Operations- process of turning inputs to outputs
4. Marketing- identifying & satisfying wants through 4 P’s. Product, price, promotion, place Primary, Secondary & Tertiary Sectors
* Primary- conversion of land as a factor of products. Not much value added eg agriculture * Secondary- Using raw materials and capital to manufacture goods eg toys * Tertiary- service sector eg accounting, education

* Developed country- more tertiary business- more focus on relations with customer and more reliance customers on support services * Developing country- more primary & secondary
1.2 Types of Organisation
Private & Public Sector
* Private- run and owned by private individuals or businesses (not owned by govt); main aim is profit * Public sector- run & controlled by govt. Main aim is providing goods and services to public, no profit Starting a business

Reasons for setting up a business
1. Growth
2. Earnings
3. Transferance (inheritance)
4. Challenge
5. Authority
6. Security (job security)
7. Hobbies
Identifying a market Opportunity
* “I can make dough”
1. Identify a need
2. Create an idea
3. Market research
4. Develop entrepreneurial skills
Problems to business start ups
1. High costs of production
2. External Influences- more vulnerable to losing out
3. Legalities- inexperience
4. Production problems
5. Poor location
6. Unestablished customer based
7. Marketing problems
8. People management problems
9. Cash flow problems
10. Lack of finance capital
Profit based Organisations
* Sole trader: Individual owner for business, responsible for success or failure. Adv= 100% profits, do it your way, don’t have to publicise your own records; Disadv= unlimited liability, limited sources of finance, high risk, high stress * Partnership: owned by 2-20 people. Adv= more financial strength, don’t have to publicise records, benefit from specialization; Disadv= unlimited liability, less power individually, decision making takes longer * Companies: owned by shareholders and issued with a certificate of incorporation meaning a separate legal identity from its owners. 2 types. 1. Private limited Company- shares sold by invite/private. Directors maintain control of business 2. Public limited company- shares are sold to general public. Weakens control of owners as more people have a say 3. Adv= benefit from economies of scale, more sources of finance, limited liability 4. Disadv= communication problems, more bureaucracy, financial information must be provided to all shareholders- time consuming and no privacy

Non Profit And Non Government Organisations
* Aim of NPO is to provide a service not to make a profit. It is run professionally by the government eg libraries, schools * Aim of NGO is to benefit society and not for profit either. It is run in the private sector and not owned by the government eg charities Public- Private Enterprise

* Public supply merit goods where goods yield higher benefits socially * Private organisations supply demerit goods where only benefits are to profit owners, better efficiency than public * Public- Private enterprise- when govt creates a partnership with the private sector in...
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